Law Times

PAGE 12 FOCUS January 17, 2011 • Law Times Appeal court resolves property tax conundrum Decision favours vendor in determining who gets refunds following sale BY DARYL-LYNN CARLSON For Law Times A recent Ontario Court of Appeal decision has provided clarity for both municipalities and property owners as to who is entitled to a prospective tax refund from the City of Toronto and surrounding jurisdictions following a sale. Th e court resolved the question as to which party should receive the refund: the vendor or the purchaser. It de- cided in favour of the vendor. Martin Banach of Meyer Was- senaar & Banach LLP in Toronto represented the vendor who won the case. "Th e case basically says that unless there is something to the contrary, any monies refund- ed for prior tax years prior to the sale, the law states it goes to the vendor," he says. Th e case, he notes, provides signifi cant guidance for munici- palities that have been "sitting in the middle not knowing who to pay the taxes to, so this helps mu- nicipalities so they don't have to waste time and eff ort as to who gets it." At the fi rst stage of court, the Inside you will find: • an up-to-date alphabetical listing of more than 57,000 barristers, solicitors and Quebec notaries, corporate counsel, law firms and judges in Canada; • contact information for the Supreme Court of Canada, the Federal Court of Canada, Federal Cabinet Ministers, departments, boards, commissions and Crown corporations; • legal and government contact information related to each province for the Courts of Appeal, Supreme Courts, County and District Courts, Provincial Courts, law societies, law schools, Legal Aid, and other law-related offices of importance. More than a phone book Hardbound • Published February each year • On subscription $146 • P/C 0600140999 One-time purchase $162 • P/C 0600010999 • ISSN 0084-8573 For a 30-day, no risk evaluation call 1.800.565.6967 Canada Law Book. A Thomson Reuters business. Prices subject to change without notice, to applicable taxes and shipping and handling. CLL 1/4 3X.indd 1 1/13/11 10:35:51 AM tax refund went to the purchaser. Th e appeal court reversed that decision. Th e case, known as 80 Mor- nelle Properties Inc. v. Malla Prop- erties Ltd., sets a precedent in real estate transactions. Justices Mi- chael Moldaver, Janet Simmons, and Eileen Gillese presided over the matter. "Basically, this case states who this tax refund belongs to," says Banach. "But more interestingly, it's not a tax refund until you ap- peal your tax refund, and that could take two or three years. Th e city then puts the mill rate against the value that has been lowered, but the Court of Appeal says it is a tangible personal property and the owner during prior tax years gets the money." In its written decision, the appeal court reviewed the facts: "Before closing, the vendor had retained lawyers to appeal the property's tax assessment. Th e vendor continued to pur- sue the assessment appeal af- ter closing and was ultimately successful. In November 2008, the property was reassessed with the result that a refund of $251,166.43 was owed for the period 2003 to 2006." As the appeal court noted, "Th e city paid the refund to the purchaser. It did so because s. 306(2) of the City of To- ronto Act, 2006, provides that property tax refunds are to be paid 'to the owner of the land as shown on the tax roll on the date the adjustment is made.'" But afterwards, "Th e vendor asked the purchaser for the re- fund. Th e purchaser refused. Th e vendor then brought an application in which it asked the court to direct the pur- chaser to deliver the majority of the refund to it. Th e vendor did not seek the entire refund because it accepted that the purchaser could retain the part that related to the period after closing." Th e court determined there were two primary issues in the case: Did the right to the refund pass to the purchaser on the sale of the property and is the purchaser entitled to retain the refund as a result of s. 306(2) of the City of Toronto Act? Th e court affi rmed that in order for the purchaser to gain entitlement to the tax refund, the vendor would have to have expressly assigned the refund to it in writing. However, there was no evidence of an inten- tion to allocate the refund. In the conclusion of the appeal court's 13-page decision, it noted: "Th e vendor eff ectively overpaid taxes on the property during a pe- riod in which it owned the prop- erty. It was the vendor who took the necessary steps to have the property taxes reassessed." Th e court added: "Th e right THE LAW OF SUBDIVISION CONTROL IN ONTARIO, THIRD EDITION Sidney H. Troister, LSM A NEW THIRD EDITION OF "THE" REAL ESTATE LAWYERS' GUIDE TO SECTION 50 OF THE PLANNING ACT Every real estate lawyer knows that section 50 affects all real estate transactions in Ontario. This is the only resource to help guide you through the intricacies of this complicated section. Written by leading expert Sidney Troister, this text has become known as "THE" Planning Act resource since its original publication in 1988. This indispensable and practical text helps you analyze and assess the validity of title and address any problems that may arise. This new third edition updates the law and practice and includes: updated case law and commentary • • • Hardbound • 464 pp. January 2011 • $139 P/C 1002010000 ISBN 978-0-88804-514-0 • updated legislation new commentary on the effect of land titles conversion and the automation and parcellization of title • a detailed section on the validation of title analysis of and recommended strategies for dealing with the complex problems that arise under section 50 to receive the proceeds of the as- sessment appeal was a chose in action, a personal right belonging to the vendor. Th at right did not run with the property. As the ven- dor never assigned the right to the purchaser, it is the vendor who is entitled to the refund." In fact, as Banach notes, "Th ere's nothing in the standard form that deals with tax refunds." Robert Shour, who represent- ed the respondent purchaser of the property, says he doesn't ex- pect his client will want to launch an appeal to the Supreme Court of Canada. LT canadalawbook.ca For a 30-day, no-risk evaluation call: 1.800.565.6967 Canada Law Book, a Thomson Reuters business. Prices subject to change without notice, to applicable taxes and shipping & handling. LT0117 www.lawtimesnews.com

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