Property taxes for business and landlords

Residential Rent Reductions

Under the Residential Tenancies Act, rents are automatically reduced if the municipal property taxes paid by the landlord for the residential complex have decreased by 2.5 per cent or more from the previous year's taxes.

Although the rent reductions apply to all residential complexes in these cases, the municipality is required to notify only those landlords and tenants of residential complexes with seven or more units.

Timing of rent reductions

Automatic rent reductions take effect on December 31 of the year the property taxes for the property decreased.

How are rent reductions calculated?

1. In calculating automatic rent reductions, the property taxes for the current year are compared to the property taxes for the previous year to determine the percentage that taxes have decreased. The rent reduction must be calculated if the percentage decrease in taxes is more than 2.49 per cent.
2. The actual property taxes levied for the rental property are used to calculate the rent reductions. Special levies, penalty charges, user fees, etc. are not included in calculating the rent reduction.
3. The provincial factor used for property tax assessments in large rental buildings with seven units and more is 20 per cent, while a 15 per cent factor will be used for smaller rental buildings with 6 units or less. These percentages are, on average, the amount that taxes represent of a landlord's total rent revenue. To determine the percentage rent reduction in large buildings (seven units or more), the percentage decrease in taxes for the building is multiplied by 20 per cent.

Municipalities must send rent reduction notices to landlords between June 1 and September 15, and to tenants between October 1 and December 15.

The automatic rent reductions do not apply to commercial, industrial or recreational properties. Some residential properties, including public housing, non-profit housing projects and co-operatives, vacation homes and some housing owned by educational institutions are also exempt.

If landlords or tenants feel the rent reduction is too high or too low, they can apply to the Landlord and Tenant Board to have the amount of the rent reduction varied.

Applications must be made to the Board by March 31 of the year following the effective date of the rent reduction. A landlord or tenant can apply if any of the following circumstances applies:

• The landlord paid certain charges that were not included when the municipality calculated the percentage rent reduction.
• The amount the landlord pays in property taxes is not equal to 20% or 15% of the landlord’s total rent revenue (depending on the number of units in the complex).
• The amount of the tax reduction or rent reduction in the municipality's notice is wrong.
• The property taxes for the year under consideration increased or decreased after the notice of rent reduction was sent to landlords and tenants.

The Landlord and Tenant Board has 20 offices across Ontario and can be reached 24-hours-a-day by calling this toll free number, 1-888-332-3234. The Eastern District Office in Ottawa can be reached at 1-888-377-8805. The Landlord and Tenant Board’s Web site offers information brochures and applications for rent reduction. The same website also offers information on the automatic rent reductions process.

Commercial, industrial and multi-residential properties

Change in reassessment

Annual reassessments were effectively replaced  in the province of Ontario with a four-year phase-in program. The changes between the valuation dates of January 1, 2012 and January 1, 2016 were phased in over the taxation years 2017 to 2020. The next property valuation update had been scheduled to be completed in 2020 for the 2021-2024 taxation years. To provide continued stability, the Government of Ontario had postponed the reassessment in 2020 and is implementing a further postponement of the property tax reassessment. This means that assessments for the 2022 and 2023 taxation years will continue to be based on the same valuation that was in effect for the 2020 taxation year. Assessment decreases are recognized in the first year.

Limits on tax increases for 2001 and beyond

In 2000, the Province extended the mandatory limit on reform-related property tax increases for commercial, industrial and multi-residential classes by passing Bill 140 (Continued Protection for Property Taxpayers Act, 2000) for the taxation year 2001 and beyond.

This is accomplished by limiting the reform-related property tax increases on these types of properties to a set maximum (refer to the Capping program parameters found below) based on the previous year’s annualized or CVA taxes (i.e. current value assessment times the applicable tax rates).

Please note that any annual budgetary municipal levy increases and/or decreases are applied over and above this limit. 

City of Ottawa capping program

Since 2006, the municipality has selected several new options made available to accelerate the progress towards CVA taxes, which is the ultimate goal of the capping program. Since 2009, the Province has made available a new municipal option, which will help municipalities in reaching the elusive goal of all property owners paying taxes at their CVA tax level. Properties that have reached CVA in the previous year or would cross-over from the clawed back category to the capped category or would exit the program and remain at CVA taxes. Properties that cost over the capped category to the clawed back category remain subject to claw back adjustments.

Since 2009, only properties receiving capping protection in the previous year will still be eligible to a reform related increase protection over the 10 per cent limit or five per cent of the previous year's CVA. These capping adjustment credits are funded by clawing back some of the reform-related reductions within these classes as is mandated by Provincial legislation. A clawback per cent is calculated for each of the commercial, industrial, and multi-residential classes.

Please note that in special circumstances, the information required to do the capping analysis is not available at the time the tax bills are generated. New properties or properties experiencing a change of class or use, etc. may be subject to a recalculation of the capping adjustment. Once more information is made available for a specific property, a recalculation will be performed to establish if a capping adjustment is required and a notification and/or a revised tax bill will be issued.

Capping program parameters

Since 2006, Council has approved the following parameters: 

• 100 per cent of CVA taxes for new construction.
• Capping parameter to 10 per cent of the previous year's annualized taxes.
• Capping parameter of 5 per cent of prior year CVA taxes.
• $250 threshold within CVA taxes moves the property to its CVA tax level.
• New exit plan for properties having reached or crossing over (clawed back to capped) the CVA tax level (such properties to thereby remain at CVA taxes in such instances).

Property assessment changes

The City now has the flexibility to make the necessary changes to correct and adjust assessment on the final billing. If all information was available, property tax bills have been modified to reflect these latest changes due to Assessment Review Board decisions, reconsiderations, etc.

Explanation of property tax calculations

Schedule 3, on the reverse side of your capped property tax bill, summarizes how your current taxes have been derived from previous year's annualized taxes. The Tax Cap Amount reflects either the increase up to 10 per cent applicable to your property or the retained amount of your reduction both subject to the new $250 threshold if the property is within $250 of CVA taxes. The difference between CVA taxes and the adjusted taxes represents the Tax Cap Adjustment which is your capping protection or clawback which is reflected on the tax bill summary, following the detailed tax rates and assessment calculation. See the following example:

Effective 2018, the City of Ottawa no longer provides a rebate program for property tax relief on vacant commercial and industrial buildings. However, a recalculation of the vacancy rebate may be required if the property receives a decision to adjust the assessed value or classification of a property.