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Dear Craig,
You are receiving this email as a Canadian member company to inform you on the Municipal Code Tax – City of Toronto. CHPA Board member Dan Henderson, CCHP, reached out to the City of Toronto elected officials for clarification on the Vacant Home Tax on the industry.
Question to the City
We are seeking urgent clarity to one of the motions that was passed at council in relation to the vacant home tax. A motion was passed at the City Council to amend the Vacant home tax as outlined below. Could you please assist in clarifying what the city considers to be a valid lease? DelSuites Inc has a one-year lease agreement with the unit owner and pay monthly rents to the unit owner, and we subsequently sublease to residents for periods exceeding 30 nights, using an accommodation Guest Agreement. Would the city recognize our lease with the unit owner as meeting their criteria?
https://secure.toronto.ca/council/agenda-item.do?item=2023.EX8.7
Motions (City Council)
4 - Motion to Amend Item (Additional) moved by Councillor Paula Fletcher (Carried)
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That City Council amend City of Toronto Municipal Code Chapter 778, Taxation, Vacant Home Tax, so that any property that is not a short-term rental, as defined by Toronto Municipal Code Chapter 547, and is being rented for 28 consecutive days or more but does not have a lease in place, is subject to the Vacant Home Tax, and request the Chief Financial Officer and Treasurer to include information about these rental properties in the 2024 annual report on the Vacant Home Tax, including potential revenues that could be achieved from collecting the Vacant Home Tax from these rental properties.
Response from the City:
The Vacant Home Tax provisions are set out in Chapter 778 of the City of Toronto Municipal Code.
Chapter 778-1.1 defines a tenant as: “a person who occupies a Residential Unit pursuant to a written lease or sublease, respecting possession of the Residential Unit for a consecutive term of at least 30 days”
At the recent Council meeting of October 11, 2023, Toronto City Council, in its consideration of Item EX8.7 Vacant Home Tax: Status Update, adopted Recommendation 1.d that amends the definition of a tenant “to include a business tenant, to account for situations where a property is assessed in the Residential Tax class, but is occupied by a tenant and operating as a business”.
Taken together, these statements are meant to clarify that a residential unit that is leased by an entity (an individual or a business) and used by the lessee (whether for a residential or business purpose) is deemed to be “occupied” for the purposes of the VHT, and therefore not vacant, and not subject to the VHT for the period that the property is leased, provided the lease duration is 183 days or longer in the tax reference year.
Therefore, in the circumstances described in your email, where DelSuites Inc. has a one-year lease agreement with the unit owner and pays monthly rents to the unit owner, and subsequently subleases the rented premises to residents for periods exceeding 30 nights under an agreement, the entire residential unit would be deemed “occupied” by the primary leaseholder for its purposes, and therefore not vacant for the purposes of the VHT, and the vacant home tax does not apply (again provided the unit is leased for a period of 183 days or more in the taxation reference year).
The further motion (motion 4) that was approved by Council which reads:
“That City Council amend City of Toronto Municipal Code Chapter 778, Taxation, Vacant Home Tax, so that any property that is not a short-term rental, as defined by Toronto Municipal Code Chapter 547, and is being rented for 28 consecutive days or more but does not have a lease in place, is subject to the Vacant Home Tax, and request the Chief Financial Officer and Treasurer to include information about these rental properties in the 2024 annual report on the Vacant Home Tax, including potential revenues that could be achieved from collecting the Vacant Home Tax from these rental properties”.
has no bearing on the circumstance that you describe in your emails, as the motion refers to a situation where there is no “lease in place”. Where a residential unit is rented from the owner under a lease, whether to an individual or to a business, and whether the unit is used for a residential purpose or a business purpose, the unit is therefore deemed occupied for the purposes of the VHT, as the unit is not available for occupation or sale on the open market, and therefore the VHT will not apply for any such period of the lease.
Sincerely,
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