Law Times

Page 12 June 23, 2014 • Law Times www.lawtimesnews.com Landlords advised to be careful on vacancy rebates Tricky definitions can complicate claims for empty commercial buildings By Julius MelniTzer For Law Times martphones have turned out to be a rather handy invention for commercial landlords in On- tario seeking to take advantage of the vacant unit rebate provisions in provincial legislation. That's because whether or not a unit or a portion of a commercial building is vacant within the meaning of the legisla- tion isn't always a simple question. Pic- tures, then, can be handy for evidence. "Does the space have to be separated by walls? Does it have to be empty? Not necessarily on both counts," says Tara Piurko of McCarthy Tétrault LLP's To- ronto office. "It all depends on the facts and, a word of advice, take photos to document the vacant state." To qualify for rebates, landlords must come within the definition of "eligible property" found in the Municipal Act and the City of Toronto Act. The gov- erning provisions state that the portion of the building for which the landlord is claiming the rebate must, for at least 90 consecutive days during the relevant period, not be used and must be "clearly delineated or separated by physical barriers from the portion of the building that was used." Additionally, the unused space must have been available for lease for immediate occupation or, if that's not the case, must have been in need of ongoing repairs, under construc- tion or unfit for occupation. What's apparent from the legislation and the case law, however, is that landlords should tread carefully in order to avoid disqualification from eligibility for the rebate. In Manheim Auto Auctions Ltd. v. Municipal Property Assessment Corp., for example, the Ontario Assessment Re- view Board ruled the space at issue wasn't "capable of being leased" given the workstations dispersed randomly in the offices. The board distinguished "being available for lease" from "being appropriate for lease." So while the landlord had made a case for vacancy, it had "failed to persuade that there was a real opportunity to lease the space to anyone." In the board's view, no company would lease the space in its existing condition because there would be no "coher- ence or semblance of order, with employees spread out and intermingled with the appellant's employees." And there's another, perhaps more troubling, aspect to the decision. "The board seems to suggest that the landlord must actively market the space for lease," Piurko says. "This, however, is not a requirement under the relevant legisla- tion." More favourable to landlords is the board's decision in Vaspan Develop- ment Ltd. v. London (City), where the city denied a rebate on the basis that fixtures and chattels were on the site. In this instance, the board distin- guished vacancy from being "without contents or empty." The legislation didn't force an owner to act unreason- ably and empty valuable chattels from a vacant unit in order to qualify, the board concluded. Also favourable to landlords is the decision in L. Corso (Audia Court) In- vestments Ltd. v. Municipal Property Assessment Corp., Region No. 14, in which the board addressed the mean- ing of "clearly delineated." The case involved two industrial plants within the same building and not separated by walls. The photos and architectural plans in evidence, however, showed a clearly delineated space between the occupied plant and the vacant one. "The architectural plans showed a narrow space or di- viding line between the 17-inch columns of Plant A and the 10-inch columns of Plant B, which clearly outlined each plant," says Piurko. "The board found that the narrow space or dividing line ran from the front to the back of the plants, clearly differen- tiating and delineating the plants." Finally, landlords and their lawyers should be aware that vacant unit rebate applications are generally due on Feb. 28 of the year following the calendar year for which they're claiming the rebate. LT FOCUS A DAILY BLOG OF CANADIAN LEGAL NEWS WWW.CANADIANLAWYERMAG.COM/LEGALFEEDS FEEDS LEGAL POWERED BY Untitled-7 1 14-06-17 2:11 PM S Empty buildings must have been available for lease for immediate occupation in order to qualify for the rebate. Photo: Andy Dean Photography/Shutterstock

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