The City of Ottawa’s Finance and Economic Development committee has approved a new vacant unit tax. The new tax is set to apply in 2022 and form part of final tax bills as of June 2023.
How does it work?
The tax is set to apply to residential buildings with up to six (6) units. The unit is considered “vacant” if it is not occupied by an owner or renter as a principal residence for more than 184 days (more than 6 months) for the previous calendar year.
Every owner of a building to which the tax applies will have to declare whether the property is considered vacant or not vacant based on the above definition. If vacant, there is a one percent (1%) tax payable on the assessed value of the property in the current year.
When does a property owner make the Declaration?
From the beginning of January to about the 3rd week of March, owners of applicable buildings are required to make the declaration, primarily through the City of Ottawa’s website. Failing to complete the declaration could result in a fine of $250.00. If no declaration is made by the end of April in the current year, the tax will apply.
Does the tax always apply if a unit is considered “vacant”?
There may be practical explanations as to why a unit is vacant. For example, a landlord may be renovating the property for a new tenant. Or, the property is being sold and the owner or tenant has already moved out. Another reason may be that the owner is unable to care for the property due to personal/medical reasons. These situations would likely exempt a property owner from paying the tax. If an owner is of the opinion that the tax was wrongfully applied, an audit and appeals period will open following the issuance of the final tax bill for the previous year.
How will the City validate the Declaration?
The City intends to confirm declarations made by owners through annual audits. Specific criteria will guide City staff to assist property owners in confirming the occupancy status of units.
Why is the tax being imposed?
The idea of a vacant unit tax is to change the mindset of owners who are holding property with no plan(s) of either living in the unit or permitting someone else to live in the unit. The goal is to increase supply of affordable living options in a competitive real estate market and use revenue from the tax to support affordable housing initiatives.
More information can be found at the City of Ottawa’s website.
This blog post was written by Brandon Doughty, a member of the Real Estate and Wills and Estates teams. He can be reached at 613-369-0364 or at brandon.doughty@mannlawyers.com.
