MPAC Working Papers – Should They Be Used or Not?

Author:Mr Stephen Posen, Stephen Messinger and Christina Kobi
Profession:Minden Gross LLP

In 1998, Ontario revamped its property tax assessment system and legislation eliminated the requirement to create separate tenant assessments on the assessment roll. Although the Municipal Property Assessment Corporation (MPAC) no longer prepares separate tax bills or assessments for each tenant of a commercial building, multitenant properties are valued by assessors using the Capitalization of Income approach. An assessor prepares a valuation summary that lists the tenancies at the property and then each tenancy is ascribed a market rent (not actual rent) that is capitalized. These valuation records are often referred to as the "assessor's records" or "working papers".

There have been many attempts by landlords and tenants to rely on the assessor's records as a basis for allocating taxes. In Orlando Corporation v. Zellers Inc., the Ontario Court of Appeal held that the assessor's records do not constitute separate assessments. In Sophisticated Investments Ltd. v. Trouncy Inc., the court held that the assessor's records do not constitute assessed values. In 658425 Ontario Inc. v. Loeb Inc., which affirmed Orlando Corporation v. Zellers Inc., the Court ruled that assessor's records do not constitute a separate value of the Tenant's premises for property tax purposes.

At issue in Indigo Books & Music Inc. v. Manufacturers Life Insurance Co., was the reliability of using MPAC working papers as a basis to determine a tenant's contribution to property taxes. The Court in Indigo Books noted that (i) the calculations in the working papers are informal and discretionary, (ii) they are not governed by legislation, and (iii) working papers are not intended to apply to individual premises; rather they demonstrate a value for the entire property. The Ontario Court of Appeal concluded that working papers could not be considered accurate or reliable on an individual basis. Based on the precise wording in that Lease (which provided that if the Landlord was unable to obtain "other information deemed sufficient by the Landlord to make the calculations of Additional Rent," then the Tenant's contribution would be determined on a proportionate share basis) and concluded that it was within the Landlord's discretion to deem the information in the working papers insufficient to complete the calculation of additional rent and allocate the Tenant's realty taxes on a proportionate share basis.

Given the recent trend of cases, a few recent decisions come as a...

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