Municipal Tax Increase by Extraordinary Amount (LTB)

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Date Retrieved:	2024-11-22
CLNP Page ID:	2213
Page Categories:	[AGI Applications]
Citation:	Municipal Tax Increase by Extraordinary Amount (LTB), CLNP 2213, <https://rvt.link/5->, retrieved on 2024-11-22
Editor:	Sharvey
Last Updated:	2024/01/22

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Houston v. 530675 Ontario, 2017 ONSC 6419 (CanLII)

[1] The appellants are tenants of the respondent landlord. They appeal three related orders of the Landlord and Tenant Board (the “Board”) which authorized an above-guideline rent increase (an “AGI”) for municipal taxes and charges under s. 126(1) of the Residential Tenancies Act, 2006, S.O. 2006, c. 17 (the “RTA”).

[2] The Board held that fees paid by the landlord to the municipality for a Rental Housing Licence (a “RHL”) and to the Electrical Safety Authority (the “ESA”) for a certificate, both of which were required by a by-law, were part of an extraordinary increase in municipal taxes and charges.

[3] The tenants challenge the Board’s ruling in four respects. First, they allege that the Board was wrong to find that ESA fees are charges levied by a municipality. Second, they contend that, although the RHL fees qualify as municipal charges, both the RHL fees and the ESA fees are exempted because they relate to an alleged breach by the landlord of health, safety, housing or maintenance standards and the Board was wrong to conclude otherwise. Third, they argue that the Board improperly fettered its discretion by not calculating the AGI in a way that spread the fees and charges more evenly over the period of time for which they were incurred. Lastly, they allege that they were not afforded procedural fairness in the manner in which they received notice of the landlord’s application, disclosure of the basis for the application, and the way in which the Board proceeded to deal with it.

[4] These reasons explain why I would dismiss the appeal. The Board’s conclusions that the ESA fees qualify as municipal charges and that the RHL fees and ESA fees are not exempt were reasonable. So, too, was the Board’s decision that it was required by the RTA to calculate the AGI over a 12 month period only. Finally, although the notice and the disclosure provided to the appellants were inadequate, the procedural unfairness that resulted was cured in this case by the Board’s subsequent review of its own decision.

...

[70] Vice-Chair Charron held that the ESA fees qualified as a charge levied by the municipality. At paras. 18 and 19 of her Interim Order, the Vice-Chair wrote:

18. In 1736095 Ontario Ltd. v. Waterloo (City) [2015 ONSC 6541], the court held:

“In summary, the RHL Program requires landlords of most low-rise rental units to obtain a rental housing license, renewable annually, and to pay the prescribed license or renewal fee to the City. The rental housing license application process requires landlords to certify that the rental property is in compliance with the Building Code Act, 1992, S.O. 1992, c.23 and the Fire Protection and Prevention Act, 1997, S.O. 1997, c. 4 and the Electrical Safety Code, O. Reg. 164/99 and to submit, inter alia, the following: (a) a general inspection certificate report from the Electrical Safety Authority (“ESA”) (required every five years; (b) an HVAC certificate (required every five years); (c) proof of insurance (required annually); (d) a criminal record check (required every five years); and, (e) a floor plan for the rental property.” [At para. 11 Emphasis Added]

19. The Divisional Court clearly contemplated that landlords were to obtain a general inspection report from the ESA as a component of the licensing program and there is no evidence before me that if the inspection is conducted by ESA, and not directly by the Landlord, that the fee charged for the inspection ceases to be a municipal charge.

[71] The appellants submit that Vice-Chair Charron erred in two important ways in reaching the conclusion she did. First, they submit that whether the ESA inspection is carried out by the landlord is immaterial to the question of whether the inspection fees are a municipal charge. Instead, the appellants submit that what matters is whether the fees are charges levied on a landlord by a municipality. They submit that the ESA is a completely separate entity than the municipality and that the inspection fee bears no similarity to taxes. They also submit that the term “levy” is not one that can properly be used to describe the fee paid by the landlord to the ESA. In summary, the appellants submit that, in order to be a municipal tax or charge, the expense must be paid directly to a municipality and not to a third party, even if required by municipal by-law to do so.

[72] I disagree. To understand why, it is important to bear in mind that we are not called upon to determine if the ESA fee is a municipal tax or charge. Rather, we are called upon to determine if the Board’s conclusion that it is was reasonable.

...

[103] The appeal does raise questions of law, which questions are reviewable on a standard of reasonableness.

[104] The Board’s decisions that the ESA fee was a municipal charge and that neither the ESA nor RHL fees were exempt, were reasonable. So, too, was the Board’s decision that it had no discretion to allocate the AGI over more than 12 months.

[105] While the appellants were not given proper notice of the landlord’s application or disclosure of the basis upon which it was made, the denial of procedural fairness that resulted was cured by the reviews undertaken by the Board.

[106] For these reasons, the appeal must be dismissed.

Residential Tenancies Act, 2006, S.O. 2006, c. 17

126 (1) A landlord may apply to the Board for an order permitting the rent charged to be increased by more than the guideline for any or all of the rental units in a residential complex in any or all of the following cases:

1. An extraordinary increase in the cost for municipal taxes and charges for the residential complex or any building in which the rental units are located.

2. Eligible capital expenditures incurred respecting the residential complex or one or more of the rental units in it.

3. Operating costs related to security services provided in respect of the residential complex or any building in which the rental units are located by persons not employed by the landlord. 2006, c. 17, s. 126 (1); 2017, c. 13, s. 22 (1).

Interpretation

(2) In this section,

“extraordinary increase” means extraordinary increase as defined by or determined in accordance with the regulations. 2006, c. 17, s. 126 (2).

...

(10) Subject to subsections (11) to (13), in an application under this section, the Board shall make findings in accordance with the prescribed rules with respect to all of the grounds of the application and, if it is satisfied that an order permitting the rent charged to be increased by more than the guideline is justified, shall make an order,

(a) specifying the percentage by which the rent charged may be increased in addition to the guideline; and

(b) subject to the prescribed rules, specifying a 12-month period during which an increase permitted by clause (a) may take effect. 2006, c. 17, s. 126 (10).

(11) If the Board is satisfied that an order permitting the rent charged to be increased by more than the guideline is justified and that the percentage increase justified, in whole or in part, by operating costs related to security services and by eligible capital expenditures is more than 3 per cent,

(a) the percentage specified under clause (10) (a) that is attributable to those costs and expenditures shall not be more than 3 per cent; and

(b) the order made under subsection (10) shall, in accordance with the prescribed rules, specify a percentage by which the rent charged may be increased in addition to the guideline in each of the two 12-month periods following the period specified under clause (10) (b), but that percentage in each of those periods shall not be more than 3 per cent. 2006, c. 17, s. 126 (11).

(12) Subsection (13) applies to a rental unit if the Board finds that,

(a) the landlord,

(i) has not completed items in work orders for which the compliance period has expired and which are found by the Board to be related to a serious breach of a health, safety, housing or maintenance standard,

(ii) has not completed specified repairs or replacements or other work ordered by the Board under paragraph 4 of subsection 30 (1) for which the compliance period has expired and which are found by the Board to be related to a serious breach of the landlord’s obligations under subsection 20 (1) or section 161, or

(iii) is in serious breach of the landlord’s obligations under subsection 20 (1) or section 161; and

(b) the rental unit is affected by,

(i) one or more items referred to in subclause (a) (i) that have not been completed,

(ii) one or more repairs or replacements or other work referred to in subclause (a) (ii) that has not been completed, or

(iii) a serious breach referred to in subclause (a) (iii). 2006, c. 17, s. 126 (12); 2017, c. 13, s. 22 (4).

(12.1) Subsection (13) applies to a rental unit in a residential complex if the Board finds that,

(a) the landlord has not completed items in work orders for which the compliance period has expired and which relate to one or more elevators in the residential complex;

(b) the landlord or another person or entity, as applicable, has not completed items in orders made under the section 21 of the Technical Standards and Safety Act, 2000 for which the compliance period has expired and which relate to one or more elevators in the residential complex; or

(c) the landlord has not completed specified repairs or replacements or other work ordered by the Board under paragraph 4 of subsection 30 (1) for which the compliance period has expired and which relates to one or more elevators in the residential complex. 2017, c. 13, s. 22 (5).

(13) If this subsection applies to a rental unit, the Board shall,

(a) dismiss the application with respect to the rental unit; or

(b) provide, in any order made under subsection (10), that the rent charged for the rental unit shall not be increased pursuant to the order until the Board is satisfied, on a motion made by the landlord within the time period specified by the Board, on notice to the tenant of the rental unit, that,

(i) all items referred to in subclause (12) (a) (i) that affect the rental unit have been completed, if a finding was made under that subclause,

(ii) all repairs, replacements and other work referred to in subclause (12) (a) (ii) that affect the rental unit have been completed, if a finding was made under that subclause,

(iii) the serious breach referred to in subclause (12) (a) (iii) no longer affects the rental unit, if a finding was made under that subclause,

(iv) all items referred to in clause (12.1) (a) have been completed, if a finding was made under that clause,

(v) all items referred to in clause (12.1) (b) have been completed, if a finding was made under that clause, and

(vi) all repairs, replacements and other work referred to in clause (12.1) (c) have been completed, if a finding was made under that clause. 2006, c. 17, s. 126 (13); 2017, c. 13, s. 22 (6).

O. Reg. 516/06: GENERAL: under Residential Tenancies Act, 2006, S.O. 2006, c. 17

19. (1) In this Part,

“base year” means,

(a) when determining rent increases due to an extraordinary increase in the cost for municipal taxes and charges, the last completed calendar year immediately preceding the day that is 90 days before the effective date of the first intended rent increase referred to in the application,

(b) when determining rent increases due to operating costs related to security services, the annual accounting period of one year in length chosen by the landlord which is most recently completed on or before the day that is 90 days before the effective date of the first intended rent increase referred to in the application; (“année de base”)

“local board” means a “local board” as defined in the Municipal Affairs Act; (“conseil local”)

“reference year” means the 12-month period immediately preceding the base year. (“année de reference”) O. Reg. 516/06, s. 19 (1); O. Reg. 562/17, s. 2 (1).

(2) Despite clause (b) of the definition of “base year” in subsection (1), if an order has previously been issued with respect to the residential complex under section 126 of the Act in which relief was granted or for operating costs related to security services, the base year shall begin and end on the same days of the year as the base year used in the previous order. O. Reg. 516/06, s. 19 (2); O. Reg. 562/17, s. 2 (2).

Interest rate
20. The interest rate for the purposes of subsection 18 (2) and subsection 26 (6) is the chartered bank administered conventional five-year mortgage interest rate on the last Wednesday of the month before the month in which the application is made, as reported by the Bank of Canada. O. Reg. 516/06, s. 20.

Factor to be applied
21. (1) The factor to be applied for the purposes of paragraph 6 of subsection 29 (2) and paragraph 2 of subsection 30 (2) is determined by dividing the total rents of the rental units in the residential complex that are subject to the application and are affected by the operating cost by the total rents of the rental units in the residential complex that are affected by the operating cost. O. Reg. 516/06, s. 21 (1); O. Reg. 562/17, s. 3.

(2) For the purpose of subsection (1), the rent for a rental unit that is vacant or that is otherwise not rented shall be deemed to be the average rent charged for the rental units in the residential complex. O. Reg. 516/06, s. 21 (2).

Material to accompany application
22. (1) An application under section 126 of the Act must be accompanied by the following material:

1. If the application is based on an extraordinary increase in the cost for municipal taxes and charges,

i. evidence of the costs for the base year and the reference year and evidence of payment of those costs, and

ii. evidence of all grants, other forms of financial assistance, rebates and refunds received by the landlord that effectively reduce those costs for the base year or the reference year.

2. If the application is based on capital expenditures incurred,

i. evidence of all costs and payments for the amounts claimed for capital work, including any information regarding grants and assistance from any level of government and insurance, resale, salvage and trade-in proceeds,

ii. details about each invoice and payment for each capital expenditure item, in the form approved by the Board, and

iii. details about the rents for all rental units in the residential complex that are affected by any of the capital expenditures, in the form approved by the Board.

3. If the application is based on operating costs related to security services, evidence of the costs claimed in the application for the base year and the reference year and evidence of payment of those costs. O. Reg. 516/06, s. 22 (1); O. Reg. 562/17, s. 4.

(2) Despite subsection (1), if any of the following material is unavailable at the time the application is made under section 126 of the Act but becomes available before the end of the hearing, the material must be provided to the Board before or during the hearing:

1. Evidence described in subparagraph 1 ii of subsection (1).

2. Information concerning grants and assistance referred to in paragraph 2 of subsection (1).

3. Information concerning insurance, resale, salvage and trade-in proceeds referred to in paragraph 2 of subsection (1). O. Reg. 516/06, s. 22 (2).

(3) An application under section 126 of the Act must be accompanied by one additional photocopy of the application, by one additional photocopy of the material that accompanies the application under subsection (1), and by an electronic copy of the material that accompanies the application under subsection (1) in portable document format. O. Reg. 516/06, s. 22 (3); O. Reg. 37/20, s. 1 (1).

(4) If material is provided to the Board under subsection (2), it must be accompanied by one additional photocopy of the material and by an updated electronic copy of the material that accompanied the application under subsection (1) and the material provided under subsection (2) in portable document format. O. Reg. 516/06, s. 22 (4); O. Reg. 37/20, s. 1 (2).

(5) Revoked: O. Reg. 37/20, s. 1 (3).

(6) Subsections (3) and (4) do not apply if the application referred to in subsection (1) is not based on capital expenditures. O. Reg. 516/06, s. 22 (6); O. Reg. 37/20, s. 1 (4).

Information for tenants
23. (1) The rules set out in this section apply for the purposes of subsection 126 (4) of the Act. O. Reg. 516/06, s. 23 (1).

(2) Upon the request of a tenant subject to the application, the landlord shall provide the tenant with an electronic copy of the material provided to the Board under subsections 22 (1) and (2) in portable document format, at no charge to the tenant. O. Reg. 516/06, s. 23 (2); O. Reg. 37/20, s. 2 (1).

(3) Instead of providing the electronic copy referred to in subsection (2), the landlord and the tenant may agree that the landlord will provide the tenant with a photocopy of the material provided under subsections 22 (1) and (2), for no more than the landlord’s reasonable out-of-pocket costs for the photocopying. O. Reg. 37/20, s. 2 (2).

(4) Revoked: O. Reg. 37/20, s. 2 (2).

(5) If the landlord has an office in or close to the residential complex, the landlord shall, during normal business hours and at no charge, make a photocopy of the material provided under subsections 22 (1) and (2) available for viewing by tenants subject to the application. O. Reg. 516/06, s. 23 (5).

(6) The landlord shall, in the application, inform every tenant subject to the application of the ways in which a tenant may obtain access under this section to the material provided under subsections 22 (1) and (2). O. Reg. 516/06, s. 23 (6).

...

28. (1) An increase in the cost for municipal taxes and charges is extraordinary if it is greater than the guideline plus 50 per cent of the guideline. O. Reg. 516/06, s. 28 (1); O. Reg. 562/17, s. 6 (1).

(2) For the purposes of subsection (1), the guideline is the guideline for the calendar year in which the effective date of the first intended rent increase referred to in the application falls. O. Reg. 516/06, s. 28 (2).

(3) Despite subsection (1), if the guideline is less than zero, any increase in the cost for municipal taxes and charges is deemed to be extraordinary. O. Reg. 516/06, s. 28 (3); O. Reg. 562/17, s. 6 (2).

28.1 (1) This section applies, and section 28 does not apply, in respect of an increase in the cost for municipal taxes and charges if both of the following conditions are satisfied:

1. The effective date of the first intended rent increase referred to in the application falls within calendar year 2021.

2. The application was not finally determined before November 30, 2020. O. Reg. 694/20, s. 1.

(2) An increase in the cost for municipal taxes and charges is extraordinary if it is greater than 2.25 per cent. O. Reg. 694/20, s. 1.

...

29. (1) The rules set out in this section apply to the Board in making findings related to extraordinary increases in the cost for municipal taxes and charges. O. Reg. 516/06, s. 29 (1); O. Reg. 562/17, s. 7 (1).

(2) The amount of the allowance for an extraordinary increase in the cost for municipal taxes and charges is calculated as follows:

1. If section 28 applies in respect of the increase, adjust the reference year costs for municipal taxes and charges by the guideline plus 50 per cent of the guideline determined in accordance with subsection 28 (2).

1.1 If section 28.1 applies in respect of the increase, adjust the reference year costs for municipal taxes and charges by 2.25 per cent.

2. If municipal taxes and charges for a tax year are increased as a result of an appeal of a tax assessment, add to the base year costs for municipal taxes and charges the amount of the increase resulting from the appeal.

3. If a tax notice respecting the reference year municipal taxes and charges is issued on or after November 1 in the base year, add to the base year costs for municipal taxes and charges the amount, if any, by which the reference year municipal taxes and charges exceed the municipal taxes and charges for the year preceding the reference year.

4. If a tax notice respecting the reference year municipal taxes and charges is issued on or after November 1 in the base year and if the reference year municipal taxes and charges are increased as a result of an appeal of a tax assessment, the amount of the increase resulting from the appeal,

i. shall be included in determining the amount by which the reference year municipal taxes and charges exceed the municipal taxes and charges for the year preceding the reference year for the purpose of paragraph 3, and

ii. shall not be added under paragraph 2.

5. Subtract the reference year costs for municipal taxes and charges, as adjusted under paragraph 1, from the base year costs for municipal taxes and charges, as adjusted under paragraphs 2, 3 and 4.

6. Multiply the amount determined in paragraph 5 by the factor determined under section 21. O. Reg. 516/06, s. 29 (2); O. Reg. 562/17, s. 7 (2); O. Reg. 694/20, s. 2.

(3), (4) Revoked: O. Reg. 562/17, s. 7 (3).

(5) Despite section 28, if the guideline is less than zero percent, for the purposes of the calculations in subsection (2), the guideline is deemed to be zero percent. O. Reg. 516/06, s. 29 (5); O. Reg. 562/17, s. 7 (4).

(6) An increase in municipal taxes and charges as a result of an appeal of a tax assessment shall not be considered under subsection (2) if the application for the rent increase was filed more than 12 months after the decision on the appeal was issued. O. Reg. 516/06, s. 29 (6).

...

32. (1) Subject to section 33 of this Regulation, if the Board orders a rent increase for a rental unit under subsection 126 (10) of the Act, that rent increase may only be taken within 12 months of the first intended rent increase referred to in the application for a rental unit in the residential complex. O. Reg. 516/06, s. 32 (1).

(1.1) For clarity, the following rules apply if the Board orders a rent increase for a rental unit under subsection 126 (10) of the Act with respect to municipal taxes and charges on or after October 1, 2020 and the first intended rent increase referred to in the application falls within the rent freeze period:

1. If part of the 12-month period described in subsection (1) of this section falls after the rent freeze period, the rent increase may be taken only during the part of the 12-month period that falls after the rent freeze period.

2. If no part of the 12-month period described in subsection (1) of this section falls after the rent freeze period, the rent increase may not be taken. O. Reg. 694/20, s. 3.

(1.2) For the purposes of subsection (1.1), “rent freeze period” has the same meaning as in subsection 136.1 (1) of the Act. O. Reg. 694/20, s. 3.

(2) Subject to section 33 of this Regulation, the rent increases provided for under subsection 126 (11) of the Act may only be taken during the subsequent 12-month periods which begin and end on the same days of the year as the 12-month period referred to in subsection (1). O. Reg. 516/06, s. 32 (2).

(3) Despite subsection (1), if the unit is subject to clause 126 (13) (b) of the Act, the rent charged for the rental unit shall not be increased before the date specified by the Board under clause 126 (13) (b) of the Act, and the increase may only be taken within 12 months after that date. O. Reg. 516/06, s. 32 (3).

(4) Despite subsection (2), if the unit is subject to clause 126 (13) (b) of the Act, the rent increases provided for under subsection 126 (11) of the Act may only be taken during the subsequent 12-month periods which begin and end on the same days of the year as the 12-month period referred to in subsection (3). O. Reg. 516/06, s. 32 (4).

33. (1) If an order with respect to a rental unit that increases the lawful rent is made under section 126 of the Act with respect to capital expenditures or operating costs for security services before the time for taking any rent increases under one or more previous orders has expired, the landlord may annually increase the lawful rent being charged by no more than the guideline rent increase plus 3 per cent of the previous lawful rent, until such time as no rent increase with respect to capital expenditures or operating costs related to security services ordered under section 126 of the Act remains to be taken. O. Reg. 516/06, s. 33 (1).

(2) If a landlord fails to take a rent increase in accordance with subsection (1) in any 12-month period in which the landlord was entitled to take such a rent increase, the landlord may not take that rent increase in any subsequent time period. O. Reg. 516/06, s. 33 (2).

(3) If a landlord takes a rent increase in accordance with subsection (1) that is less than the amount the landlord was entitled to take, the landlord may not take the amount of the rent increase which the landlord failed to take in any subsequent time period. O. Reg. 516/06, s. 33 (3).

(4) This section does not prevent a landlord from increasing the rent charged by more than 3 per cent of the previous lawful rent charged with respect to an extraordinary increase in the cost for municipal taxes and charges in accordance with an order under subsection 126 (10) of the Act. O. Reg. 516/06, s. 33 (4); O. Reg. 562/17, s. 9.

34. For the purpose of making determinations under section 36 and subsection 38 (2) of this Regulation, the following rules apply if a landlord was permitted to increase the rent pursuant to an order under subsection 126 (10) of the Act based on more than one of the grounds in subsection 126 (1) of the Act but the increase taken by the landlord was less than the maximum increase permitted by the order:

1. The increase taken by the landlord shall be deemed to have been taken for municipal taxes and charges, up to the percentage set out in the order for municipal taxes and charges.

2. If the increase taken by the landlord was greater than the percentage set out in the order for municipal taxes and charges, the balance of the increase shall be deemed to have been taken for eligible capital expenditures, up to the percentage set out in the order for eligible capital expenditures.

3. In the case of an order issued by the Board on an application made under subsection 126 (1) of the Act before January 1, 2018, if the increase taken by the landlord was greater than the sum of the percentages set out in the order for municipal taxes and charges and for eligible capital expenditures, the balance of the increase shall be deemed to have been taken for utilities, up to the percentage set out in the order for utilities.

4. If the increase taken by the landlord was greater than the sum of the percentages set out in the order for municipal taxes and charges, for eligible capital expenditures and, if applicable, for utilities, the balance of the increase shall be deemed to have been taken for operating costs related to security services. O. Reg. 516/06, s. 34; O. Reg. 562/17, s. 10.

...

Calculation of percentage rent increase
31. The percentage rent increase above the guideline for each rental unit that is the subject of the application shall be calculated in the following manner:

1. Divide the amount of each allowance determined under subsection 29 (2) and section 30 by the total rents for the rental units that are subject to the application and are affected by the operating cost.

2. If the Board is of the opinion that the amount determined under paragraph 1 for an allowance does not reasonably reflect how the rental units that are subject to the application are affected by the operating cost to which the allowance relates,

i. paragraph 1 does not apply in respect of the allowance, and

ii. the Board shall determine an amount by another method that, in the opinion of the Board, better reflects how the rental units that are subject to the application are affected by the operating cost to which the allowance relates.

3. Determine the percentage that each allowance referred to in paragraph 1 represents of the total rents for the rental units that are subject to the application and are affected by the operating cost by multiplying each of the amounts determined under paragraph 1 or 2, as the case may be, by 100.

4. Add together the percentages determined under paragraph 3 for each allowance referred to in paragraph 1 that relates to an operating cost that affects the rental unit.

5. Revoked: O. Reg. 562/17, s. 8 (3).

6. Add the percentage determined under paragraph 4 and the percentage determined under paragraph 8 of subsection 26 (6). O. Reg. 516/06, s. 31; O. Reg. 562/17, s. 8.

TEL-27801 (Re), 2010 CanLII 92789 (ON LTB)

6. For the purpose of an above guideline increase application, the terms “base year” and “reference year” are defined in section 19 of the Regulation as follows:

19. (1) In this Part, “base year” means,

(a) when determining rent increases due to an extraordinary increase in the cost for municipal taxes and charges, the last completed calendar year immediately preceding the day that is 90 days before the effective date of the first intended rent increase referred to in the application,

…

“reference year” means the 12-month period immediately preceding the base year.

7. The Landlord’s application, filed on December 11, 2009, has a first intended rent increase date of March 15, 2010. Therefore, pursuant to the definitions found in section 19 of the Regulation, the “reference year” for the instant application is 2007 and the “base year” is 2008.