The City of Toronto has implemented a new Vacant Home Tax (VHT) which takes effect on January 1, 2023. This new tax will impact real estate transactions in Toronto. The new legislation requires all residential property owners to declare the property’s occupancy status for the previous year. For the 2022 year, all owners are required to submit a declaration by February 2, 2023. Property owners may be able to submit the declaration by visiting https://www.toronto.ca/services-payments/property-taxes-utilities/vacant-home-tax/vacant-home-tax-declaration-of-occupancy-status/
Residential properties which are vacant more than six (6) months in any year or failure of a homeowner to file the declaration by the required date, may be subject to the Vacant Home Tax based on one (1) per cent of the property’s 2022 Current Value Assessment as well as a fine between $250.00 and $10,000.00. A unit is classified as vacant if, for more than six (6) months in the previous taxation year, it was not the principal residence of the owner or another occupant, or if it is not occupied by a residential tenant under a written lease for at least six (6) months of the year. If the property was vacant, the tax will get added to the property tax bill. If the property is sold, the new owner could unknowingly be faced with being responsible for paying the tax following closing.
Not all vacant properties are subject to the VHT. The VHT will be exempt when one of the following criteria is met:
- The registered owner died in the prior year;
- The unit is undergoing renovations or repairs (with several conditions that must be met);
- The principal resident of the vacant property is in hospital or a care facility during the taxation year, with the exemption capped at two consecutive years;
- The property was purchased in the previous year and the sale involved a 100% transfer of legal ownership to an unrelated individual or corporation;
- The vacant property is required for occupation for employment purposes for a total of at least six months in the taxation year, by its owner who has a principal residence outside the GTA;
- There is a court order in force which prohibits occupancy of the property for at least six months of the taxation year.
However, please be aware that the VHT declaration is still mandatory regardless of the occupancy status.
If you are a realtor representing a Buyer who is buying a a property in the City of Toronto, we recommend that you speak with an experienced real estate lawyer to include an appropriate clause in the Agreement of Purchase and Sale that will protect the Buyer from the risks of having to pay the Seller’s VHT.
Should you and your clients have any questions regarding the Vacant Home Tax, we recommend that you contact the City of Toronto website for more information.