By Chris Seepe

Just about everyone believes that residential rental property owners pay the property tax as part of their operating costs. It’s a universal misperception that politicians and municipalities exploit to the detriment of landlords.

Every tenant in every municipality in Ontario pays property tax as part of their rent. These property taxes are a “hidden” part of each tenant’s living expense obligation to their municipality, which provides them with education, police, fire, garbage collection, roads and more.



That means that many residential rental tenants, especially the vulnerable fixed-income and affordable-housing tenants, are paying taxes that are upwards of two times more than the owners of a single-family home or condo.

The misperception derives from the landlord’s obligation to collect and remit this tax on the tenant’s behalf, much like every retail outlet collects GST/HST on behalf of the consumer.

In Ontario, a rent reduction is allowed under section 131 of the Residential Tenancies Act (RTA) when the municipal property taxes for the residential complex have decreased by more than 2.49 per cent from one year to the next. But like many things, this does not apply to public housing.

To calculate the total rent reduction, subtract the current year’s lower property tax amount from the previous year’s higher tax amount and then divide the result into the previous year’s amount. Then multiply that by 20 per cent (seven+ units, or 15per cent for six or less). Multiply the tenant’s monthly rent by this percentage to determine the new reduced rent amount. For example, the 2018 property tax was $19,833.72 and $17,867.59 for 2019. Dividing the difference of $1,966.13 by $19,833.72 = 9.91% x 20% = 1.98%. The tenant’s monthly rent of $1,115.50 x 1.98% = $22.12/month rent reduction.

It doesn’t matter what the property tax rate is. The RTA assumes that the average amount of property tax a landlord pays in a building with seven or more units is 20 per cent of the total rent revenue and 15 per cent for six or fewer units. However, the apartment building tax rate in many municipalities is often notably less than that. The rent reduction is applied almost immediately.

All municipalities then send out a letter (as required by the RTA) directly to every tenant in a building providing legal advice that they are entitled to a rent decrease, and that no permission is required from the Landlord and Tenant Board (LTB).

A landlord can pass on an extraordinary increase, which occurs when the increase is greater than the current rent increase guideline plus 50 per cent of the same guideline. For example, this year the guideline is 1.8 per cent so an extraordinary increase would be 1.8% + 0.9% (50% of 1.8%) = 2.7%. The landlord must then undertake a grueling and complex LTB application called a Rent Increase Above the Guideline (AGI). It takes an average six months to set an LTB hearing date after the application has been submitted, and another six months for the LTB to render its decision. The decision isn’t automatic like it is for tenants, despite the subject matter being exactly the same.

And, although the landlord paid the tenant’s property tax up-front, the landlord must give the tenant a minimum of 90 days’ advance written notice of the rent increase.

And the rent increase cannot occur until the next anniversary date of each tenant’s annual rent increase.

And the tenant has the right to challenge the AGI application at the LTB hearing.

The Municipal Housing Assessment Corporation (MPAC) reassesses a property’s value from time to time, most often when it changes ownership. MPAC doesn’t set the tax rate. It only establishes property value, on which the tax amount is determined. The municipality then sets the property tax rate for each building type. In the City of Oshawa, for example, the rate for single-family homes and condos is 1.41 per cent. Oshawa taxes apartment buildings at 2.48 per cent (2018), almost double.

Based on research conducted in May 2017, all the municipalities of the Region of Durham were in the top 20 “worst offenders” of this tax policy. Oshawa appears to be the third highest in the province, next to Hamilton and Orangeville. Clarington is No. 5, followed by Whitby, Ajax, Pickering and Scugog.

Some municipalities make no distinction between apartment buildings and single-family homes including Barrie, Markham, Vaughan (apartment building property taxes are lower than single-family homes there), Stouffville, Newmarket and Aurora.

It’s unlikely you’ll find any government documentation that explicitly states that residential rental tenants pay property taxes even though it’s common knowledge that every commercial tenant pays their prorated share of the commercial property tax via TMI – taxes, maintenance and insurance.

Do residential rental property tenants pay property tax? Of course they do. It’s built into the RTA. It’s just cleverly disguised to shield government from direct accountability to, and the ire of, residential tenants when property tax negatively impacts tenants.

5 COMMENTS

  1. The assumption that tenants pay property taxes is a fairy story world. I owned a six plex and an 8 plex side by side. The taxes on the 8 were 2.3 times higher than the lower taxed 6 plex. The rents were virtually the same and taxes of $9000. for 8 and $3500. for 6 units. What part of the tenants pay the taxes does this reflect. On the record you can say the tenants pay the utilities in an all inclusive rent but the LTB says if the costs go up the Landlord cannot consider these as every day expenses and must absorb the difference on continued tenancy. You can call it what you want but having to pay 50.17% tax on income sure gets cut down on less and less income with the LTB rules as recently stated. What part of the tenant paying the taxes comes out when the LTB says the tenant can stay when in arrears because of extending circumstances and nobody is paying the rent. Reality is the Landlord must pay all the expenses to keep their building and taxes are a component of his total.

  2. I suspect that the City of Windsor is well up in the top 5 with a residential tax rate of 1.814 % and Multi-Res rate of 3.346%! But if you convert to condominium the multi rate equals single family! No sense whatsoever, just penalizing the lowest income brackets. Wait until 2020 when MPAC catches up with all of the value increases and the cities fail to lower the tax rates to compensate. All you will hear is that it is MPAC’s fault! Crushing taxation in this country!

    • I had a nasty habit of getting top dollar for my seller’s, often substantially higher than the next nearest quasi-comp.

      The list price was supportable in some sense and often it came down to location, location, location, (specific) and often brought multiple offers even in a down market. Sometimes customized properties are difficult to arrive at a price; they can look like cookie-cutter footprints from the street. And appropriate adjustments need to be taken into consideration. Of course appraisals have to support what transpired and did. I always was sure to include certain high-powered remarks on a listing that an appraiser could use.

      I often was blessed with having unique, custom (you could read “odd” even in certain cases), or vacant listings, estate sales, and corp relo. I couldn’t begin to say how often I heard: “that will never sell at that price.” But each time it did. And a collection of such sales will actually impact the next round of taxes.

      Then seeing what a great sale price was had, neighbours who sometimes said “they’ll never get that price,” guess what… Called me to list.

      But I sometimes joked with my seller that if they had friend-neighbours, the friendship might be affected due to more than three local sales needed to raise next years’ taxes (is what I was told by the City at the time), and I certainly had produced more than three high-priced sales in each of my farm areas.

      Naturally neighbours not interested in moving were not impressed but many never put two and two together. Or if they did I never heard about it.

      Naturally “improvements” do not bring back dollar for dollar invested, in any sale. And sometimes it takes a lot of explaining to get that across.

      Owners are mostly proud of how much money they spent on improvements. Sometimes the city cares, other times, not. In the area at certain times it was like a real estate war zone. The City sent out registered mail to each brokerage and the Board office stating that a unilateral decision had been made by the city regarding finished basements with separate entrances even if they weren’t rented out. Agents must report such findings to the city or be subject to fines as the city had hired extra staff to check new real estate listings.

      I actually wrote a consumer education article on my corp website at the time.

      I was so fortunate not to have ever been involved with the sale of such a property. And I had no intentions of being a quasi city bylaw enforcement officer. The program was largely about property taxes, operated under the guise of safety. The program was soon disbanded.

      I was showing a beautiful multi-level finished lower level ravine property to a buyer and as I was leaving there was a knock on the door. The seller was not home and I had used the ordinary lockbox.

      The man at the door insisted I let him inside as he was a city employee who produced a badge. I refused. I did not own the property. I suggested he make a proper appointment with the owner. He was very insistent that I step back and let him in, as I locked the door and reset the lock box. He kept asking if the house had a finished basement. Of course it said on the listing that it did, and clearly he was there to confirm. He could have been anybody up to no good. I was glad I had witness clients with me.

      I reported him to the city but they didn’t care; I forewarned the listing office but reception didn’t seem to care. I had done my duty. And more than fulfilled my industry obligation.

      Carolyne L 🍁

  3. Nice Job!!

    When a real estate brokerage stays within the confines of their expertise and when they rely on hard data instead of opinions or guesses, the public’s interest is protected.

    There is no question any Tenancy Agreement should include a clearly defined TMI portion attached to any Lease not just Commercial but also Residential.

    That said should the Health Care Portion we all submit in Income Taxes not be clearly itemized each year on our April 30th filing? Should those in our society who pay zero net tax when all benefits are properly cited ( CCB, Health Care, etc) not see that in writing?

    Disclosure of all facts and realities only serve to better both sides of a conversation. Mr. Seepe has simply demonstrated the power of facts here today.

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