What is the test to meet in Ontario when only a portion of a commercial building is vacant? Does the space have to be separated by walls? Does it have to be empty? Not necessarily on both counts. It all depends on the facts and, a word of advice, take photos to document the vacant state.

Vacant unit rebate applications for the 2013 tax year are due February 28, 2014. The vacant unit rebate program is found under Section 364 of the Municipal Act, 2001, S.O. 2001, c.25 and Section 331 of the City of Toronto Act, 2006, S.O. 2006, c.11. To qualify, the vacant space must be "eligible property".

What is "eligible property"? Section 1(2) of O.Reg 325/01 under the Municipal Act, 2001 and Section 38 (2) of the O. Reg. 121/01 under the City of Toronto Act, 2006 defines what is "eligible". In the case of a partially vacant commercial building. These sections provide that:

"a portion of a building on property that is classified in one of the commercial classes is prescribed to be eligible property under section 364/[or 331] of the Act for a period of time if the period of time is at least 90 consecutive days and through the period of time:

  1. the portion of the building was not used and was clearly delineated or separated by physical barriers form the portion of the building that was used; and
  2. the portion of the building

    1. was capable of being leased for immediate occupation,
    2. was capable of being leased but not for immediate occupation because it was in need of or undergoing repairs or renovations or was under construction, or
    3. was unfit for occupation."

The phrase "clearly delineated" was addressed in the 2008 Ontario Assessment Review Board ("Board") decision in L. Corso (Audia Court) Investments Ltd. v. Municipal Property Assessment Corp., Region No. 14, [2008] O.A.R.B.D. No. 292. The Board found that where two industrial plants were within the same building but not separated by walls, Plant A and Plant B, they were clearly delineated by the design, layout, column sizes and number of bays. In this case the photos and architectural plans in evidence showed a clearly delineated space between the occupied Plant A and vacant Plan B. The architectural plans showed a narrow space or dividing line between the 17 inch columns of Plant A and the 10 inch columns of Plant B, which clearly outlined each plant. The Board found that the narrow "space (or dividing line) starts from the wall of the office at the front and runs all the way back to the back of the plant, clearly differentiating the two plants and supporting the definition of 'delineate'..."

The matter of whether or not space was capable of being leased was considered by the Board in 2013 in Manheim Auto Auctions Ltd. v. Municipal Property Assessment Corp., Region No. 19, [2013] O.A.R.B.D. No. 178 where workstations were dispersed here and there through the administrative offices. The Board found that "the appellant failed to prove ... that the vacant space is available or eligible for lease" and that while "making a good case that the space was empty and unused, failed to persuade that there was a real opportunity to lease the space to anyone". At para. 23 the Board stated that "being available for lease is not the same as being appropriate for lease." In this particular case, given the nature of location of the dispersed workstations, the Board asked itself the following question; "what company, regardless if they are automotive based or not, would lease the available space in this instance? There would be no coherence or semblance of order, with employees spread out and intermingled with the appellant's employees." There is one troubling paragraph in Manheim. Para. 31 seems to suggest that the Board required the owner to actively market the space for lease. This, however, is not a requirement under the relevant legislation.

In the 2011 decision in Vaspan Developments Ltd. v. London (City), [2011] O.A.R.B.D. No. 294 the Board dealt with a case where the City of London denied a vacant unit rebate application on the basis that there were fixtures and chattels that remained on site. The Board found that "the word vacant refers to whether the property or portion of the property is being used. If the owner is not using the property for its own purposes and it is available for lease to tenants, in the Board's view that property is vacant. The Board does not read the Act or the regulation to mean 'without contents or empty'." The Board went on to state that it "does not interpret the Legislation enabling a vacant unit rebate and the accompanying regulations to force an owner to do what is not reasonable and empty the unit of such valuable chattels in order to qualify for the program."

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