Toronto Vacant Home Tax and Change of Ownership Implications

 Residential properties in Toronto that are unoccupied for more than six months (cumulative) in a calendar year, may be subject to the new City of Toronto's Vacant Home Tax (VHT), unless they meet one of the exemptions. The VHT was created to improve the supply of housing in the city.

What You Need to Know

1. A declaration form will need to be completed by property owners by February 2, 2023.
2. A property is considered vacant if it is not the principal residence of the owner or any permitted occupants or was not occupied by tenants for at least six months during the previous calendar year or is otherwise deemed to be vacant under the bylaw.
3. The tax is 1 per cent of the current value assessment (CVA) of the home.
4. Exemptions include principal residence, death, repairs, units undergoing major renovation, owner is in care or hospital, court order, transfer of legal ownership and occupancy for full-time employment is in place.

What You Need to Know During Change of Ownership

The Vacant Home Tax has implications for property transactions, both for purchasers (buyers) and vendors (sellers):

• It is the responsibility of buyers and sellers to make the appropriate arrangements to ensure that the declaration has been filed.
• The Vacant Home Tax will form a lien on the property, and any unpaid taxes will become the buyer’s responsibility.
• If a closing occurs between January 1 and the closing of the declaration period on February 2, the seller must complete the declaration prior to the closing, as only the seller will know the property’s occupancy status for the prior year.
• If a closing occurs after the declaration period – February 3 to December 31 – the buyer must submit a declaration in the following year. The buyer qualifies for the “transfer of legal ownership” exemption.
• The seller should provide a copy of the completed and filed property status declaration to the buyer.
• The seller should provide a statutory declaration at closing confirming the filed property status declaration is true and correct.

The goal of the VHT is to increase the supply of housing by discouraging owners from leaving their residential properties unoccupied. Homeowners who choose to keep their properties vacant will be subject to this tax.