Real Estate Talk: Contesting
municipal tax increases

Is requesting a re-evaluation really worth the time and effort?

By Joseph Marovitch

Each homeowner recently received their new tax assessment. The municipal evaluation of a home is based on a three-year average of home sales in your area. Using the averaged valuation, the municipality determines the amount the property owner owes for municipal services and school tax. Obviously the higher your property is valued, the higher your tax bill will be.

An increased evaluation is not good if you just purchased or are in a home with no intention of selling in the near future since you end up paying more tax. However, an increased evaluation does not hurt if you are selling as it ads fuel/credibility to your asking price.

If the new evaluation you received, for some reason, does not reflect the actual value of your property in your opinion, you have up to April 30, 2020, to contest the valuation. There is a cost to do this and you must prove why the evaluation is too high using comparable sales and the specific features of your home.

When considering whether to contest municipal taxes, one must ask the question: If I placed my property for sale today, could I get the same price or higher than the municipal evaluation states?

The question is, is it worth the effort? Keep in mind that evaluations are assessed every three years and, on average, prices do rise. When considering whether to contest municipal taxes, one must ask the question: If I placed my property for sale today, could I get the same price or higher than the municipal evaluation states? If the honest answer is yes, do not bother contesting. Chances are very high you will not get a reduction.

In some cases, homeowners will contest their taxes and the city will give a reduction. However, chances are very high that the city, with its long written memory, hit you harder in the next roll or keep a close eye on your home so that if you plan to renovate, the city will hit you with permits and tax increases right away.

There is also the time, effort and energy required to apply for a reduction. If you work full time as a doctor or lawyer or business owner, it can be difficult to go through the exercise just to be hit with a higher tax bill in the future. The government gives nothing away. If you owe, you are expected to pay on time or acquire penalties. If the government owes you, you wait and call and wait.

The best circumstance for applying for a tax reduction is when everyone feels the same way. Better to apply in a group than as an individual. Taxes have risen significantly for street-level retail spaces. This is affecting everyone and hurting commerce. Therefore, business owners, as a group, are protesting unfair tax increases with support from landlords, lessees and the public.

‘The best circumstance for applying for a tax reduction is when everyone feels the same way. Better to apply in a group than as an individual.’

I think requesting a re-evaluation on a single residence and acquiring a reduction is a band-aid when it is just one house or condo. The government will get their money back from you one way or another. The government knows we never contest our taxes when we have been under-evaluated.

Should you have questions or comments, please refer to the comments section at the bottom of the page. As well, to view past articles, go to the search link and type in Joseph Marovitch.

Have a great week!

Next article: The income property market craze

State of the market

There are two interesting issues in the news this week. One issue is the housing shortage and ways to curb the problem. The Liberal government is calling for a tax on all unoccupied property or property that is purchased but not lived in. Rather, the property is sitting vacant or being used periodically for Airbnb or other short-term rental platforms.

‘… come April 6, 2020, the government is changing the stress test for mortgages, which will make it easier to acquire a mortgage to purchase a home in an already low interest environment.’

Another solution being proposed to curb rising real estate prices is that the city wants to have a right of first refusal on 300 possible properties in Montreal, for the purpose of turning the properties into low rent homes. The properties in question would be properties that are already for sale by individual owners, however, should the properties receive a promise to purchase from a buyer, the city would have 60 days to exercise their right of first refusal and purchase the property, should they wish to, before the person who submitted the first offer. As a broker, I can tell you this will deter buyers from making offers and make it difficult to sell the property. It would be better if the city just purchased the property in the first place and not make the seller suffer.

On the other side of the coin, come April 6, 2020, the government is changing the stress test for mortgages, which will make it easier to acquire a mortgage to purchase a home in an already low-interest environment. This new stress test for acquiring a mortgage will put more pressure on the housing shortage and cause prices to rise even more.

The government is changing its method of a system based on tier 1 banks posted mortgage rates with a system based on contract rates on all insured mortgages. The new system will increase a buyer’s borrowing power.

It’s a tug of war. We need a middle ground that works for everyone!

Image: 401(K) 2012 via StockPholio.com

Read also: Other articles by Joseph Marovitch