Canadian Tax Lawyers at Taxpage.com Save Resident with Two Legitimate Homes from Wrongful Vacant Home Tax (VHT) Assessment by City of Toronto

Case Overview:

Jill (real name withheld due to solicitor – client confidentiality) is a resident of Ontario and owned one condo in downtown Toronto, and a bigger and more expensive home in the affluent community of Oakville, southwest of Toronto.

In 2022, Jill bought the condo and began actively splitting her time between the condo and her Oakville home. Jill, among various other reasons, used the condo to be closer to her friends and family, attend live entertainment including the ballet, watch local plays, and support her favourite hockey team at Scotiabank Arena.

The Problems & Our Approach:

1st Issue: Jill’s First Mistake

Jill filed the Vacant Home Tax Declaration (‘VHT Declaration’) in time and avoided having to pay the Vacant Home Tax (‘VHT’) for 2022. Inadvertently, she missed the deadline of February 29, 2024, to file her VHT Declaration for 2023. This was her first mistake.

In March of 2024, Jill sold the condo to Mr. and Mrs. Purchaser, who were both arm’s length purchasers from her. In the same month, the condo was deemed vacant by the City of Toronto (‘Toronto’) due to the failure of Jill to file a VHT Declaration for the 2023; and Toronto issued VHT assessment to Jill for a total amount of about $16,000.

In an effort to correct her omission, in April of, 2024, Jill filed a Notice of Complaint with Toronto (‘the complaint’) in order to have the Condo declared as occupied for the 2023 calendar year.

2nd Issue: Jill’s Second Mistake

Jill filed the complaint online through Toronto’s application portal. This complaint simply read as follows:

To whom it may concern

I recently filed in my vacancy tax form incorrectly. I lived there. I just have residences and go back and forth due to family issues. 

Thank you, 

Jill 

Jill, in a hurry and thinking that this issue would be resolved quickly and easily, wrote and submitted this simple and short letter without providing proper details of her living situation and without any supporting documentation.

Worse, Jill decided against getting the help of skilled Canadian tax lawyers believing her problem was a trivial issue.

3rd Issue: Unconstitutional approach taken by the City of Toronto in handling this situation

In July 2024, Toronto Revenue Services Division, instead of issuing the letter to Jill who filed the complaint and who owned the condo in 2023, issued the decision letter addressed to Mr. and Mrs. Purchaser, current owners of the condo, notifying them that the complaint had been filed. The letter also asked Mr. and Mrs. Purchaser for additional supporting documents to confirm the occupancy status of the condo during the 2023 calendar year.

Further, the July letter also indicated that, as the condo had been purchased by Mr. and Mrs. Purchaser in 2024, that the new owners would not be eligible to file a notice of complaint themselves, but would be liable for the VHT assessed. This made Jill vulnerable to a potential civil lawsuit by Mr. and Mrs. Purchaser for the complete VHT.

4th Issue: Jill’s Third Mistake

When Jill received the July letter from Mr. and Mrs. Smith’s lawyer, Jill, once again wrote to the Toronto Revenue Services Division in August of 2024 stating that although the condo was not her ‘primary residence’, she lived there at least half of the year, if not longer.

Jill further stated that she has family in Toronto, her ex-partner, and friends and therefore, owned a second property. Finally, Jill stated that she did not rent the apartment nor was it vacant. To support her letter and her position, Jill attached her (1) property tax bill from Toronto and (2) Toronto hydro (electricity) bills for the condo for 2023.

Taxpage, after having a consultation with Jill, found out that when Jill wrote to the City of Toronto stating that the condo was not her ‘primary residence’, Jill was thinking in terms of her persoanfederal income tax exemption for her primary residence. Her obligations related to this new (VHT) municipal tax did not cross her mind.

Jill did not declare her condo as her principal residence in her income tax return for her principal residence exemption. She saved that for her Oakville house, which is much more valuable, but this did not negate the fact that she primarily stayed in the Toronto condo.

Furthermore, the property tax bills and electricity bills, although addressed to Jill, were delivered to Jill’s Oakville residence.

Lastly, in the eyes of the City of Toronto, Jill would have incurred property tax and bare minimum electricity bills even if she did not reside at her condo.

Because of lack of prima facie evidence, in September of 2024, Toronto rejected Jill’s second complaint and therefore decided that she was still liable for VHT. Once again, the City of Toronto provided no reasons to Jill and the decision letter was again delivered to Mr. and Mrs. Purchaser who had absolutely nothing to do with the filing of the complaint.

Jill Finally Seeks the Help of Canadian Tax Lawyers at Taxpage

In November of 2024, Jill hired Taxpage to help her out. Taxpage immediately filed a Freedom of Information request with the City of Toronto to obtain (1) all evidence and complaints submitted by Jill and; (2) internal notes of the city of Toronto, so that we could find out why Toronto was refusing to waive the VHT. No rationale was ever provided by the City of Toronto to Jill for their determination that she was liable for VHT.

By the beginning of December of 2024, we received the Freedom of Information package from the City of Toronto which provided Taxpage with some insight.

Now, because the deadline to file an administrative appeal was 90 days from the issuance of appeal and time was running out, the Canadian Tax Lawyers at Taxpage used the information package from the Toronto to immediately prepare and submit an appeal to Toronto and explained (1) why Jill stated that Condo is not her primary residence (2) and why the usage of Condo by Jill was enough in the eyes of the Toronto municipal law for it to consider the Condo as ‘ordinarily occupied’ in the eyes of the bylaw of Toronto.

Steps Taken by Taxpage to Resolve the Vacant Home Tax on Jill’s Condo

For supporting documents, Taxpage, in addition to electricity bills, attached:

1. Home Internet and TV Bill
2. Home Insurance Bill
3. Email correspondence between Jill and her friends to coordinate gatherings at the condo
4. Email correspondence between Jill and her property manager for general repair and upkeep of the condo
5. Sales receipts for catering delivery to the condo
6. Affidavits of Jill and her ex-partner attesting to Appellant’s use of the condo.

Despite submitting a detailed appeal and supporting documents, the City of Toronto still refused to waive the VHT. Furthermore, the City of Toronto, in all its wisdom, once again issued its decision letter in response to our appeal to the Real Estate Lawyer of Mr. and Mrs. Purchaser, which was forwarded to us after a month.

And to make matters worse, the City of Toronto once again provided no rationale for its determination and simply replied that Jill did not have enough evidence to prove her residence at the condo.

Taxpage Lawyers Talk to the City of Toronto’s Lawyers

Jill, on recommendation by Taxpage, decided to have us file a judicial review application of the City of Toronto’s decision with the Superior Court of Justice (Divisional Court) of Ontario (‘Div. Crt.’) as we had exhausted all administrative options to challenge the decision.

After filing the judicial review application, the Litigation Lawyer acting for the City of Toronto responded to our application and during the appeals process, Taxpage lawyersspoke directly to the City of Toronto’s lawyer, as is normal during litigation.

We explained our complete case to Toronto’s lawyer; that is, why Jill stated that condo is not her ‘primary residence’; provided valuation of Jill’s Oakville home to the lawyer (and to the Div. Crt. as well) and explained to him that because her Oakville home was way more expensive than the condo, it made sense for Jill to list her Oakville as her principal residence to claim her Personal Residence Exemption when filling her federal income tax.

We also explained to the City of Toronto Lawyer that their refusal to provide rationale for their decision made it hard for Jill (and for us at the Taxpage) to provide a proper submission to support her claim.

Result

Finally, the City of Toronto lawyer, well-versed in administrative law and constitutional law (unlike the Toronto Revenue Services Division), understood the complete issue (and foresaw the likely defeat of the City of Toronto at the judicial review hearing). He wisely decided to drop the $16,000 VHT levied against Jill’s condo just weeks before the application was scheduled to be heard in court.

Lessons Learned

Canadian taxpayers often make the wrong assumption that government officials on the other side, whether at the federal level (such as CRA) or provincial and municipal level, will be unbiased and well-versed in tax law. But the Canadian tax lawyers at Taxpage, often find that this is seldom the case.

Therefore, we always recommend that taxpayers get the experts involved to defend their rights from the very onset. As we see in this case, had Jill sought expert legal help in the beginning, the confusion of ‘primary residence’ would have never occurred. Moreover, Taxpage would have attached all important supporting documents from the very first submission.

Disclaimer: This case study provides information of a general nature only. It is only current at the posting date. It is not updated, and it may no longer be current. It does not provide legal advice, nor can it be relied upon. All tax situations are specific to their facts and will differ from the situations in the articles. If you have specific legal questions, you should consult an experienced Canadian Tax Lawyer.