Vacant Unit and Underused Housing Tax

What are the Vacant Unit Tax and the Underused Housing Tax and why should condominium corporations take notice?

(1) Vacant Unit Tax – City of Ottawa

In 2022, the City of Ottawa approved the residential Vacant Unit Tax.  The tax was implemented in an effort to encourage owners to maintain, occupy or rent their properties and increase housing supply.

Whether or not a residential property qualifies as an eligible property can be determined by reviewing the list of eligible properties set out on the website.  Based on our review and our communication with the City of Ottawa, a condominium corporation might have a unit that is subject to the tax if it is classified as a residential taxable Unit (ex. Superintendent units, guest units or other residential units might fall under this classification).  

Residential homeowners were initially required to make a declaration on whether the property would be considered vacant under the terms of the By-law (i.e. unoccupied for an aggregate of more than 184 days during the previous year), by March 16, 2023.  However, late declarations can be submitted until April 30, 2023. 

How does this affect condominium corporations?

If your condominium corporation (in Ottawa) has a residential unit that is classified as a residential taxable unit, the condominium corporation must make the declaration required by the By-law.  We received confirmation from the City of Ottawa that this obligation doesn’t change if the Unit has been assessed at a nominal value. The amount of the assessment is irrelevant.

[NOTE: This does not apply to common elements of the condominium corporation as the common elements are not subject to municipal taxation (and don’t have a municipal tax roll).]

The City of Ottawa has confirmed:

• If the condo has a unit that is classified as a residential taxable unit, then it is eligible for the VUT declaration.

• The owner (in this case the condo board) is responsible for making a declaration.

• The condo board could declare it/them using the permitted occupant option because the superintendent is not an owner, and not really a tenant, but this is their principal residence.

In summary, if your condominium corporation owns a residential unit that is classified as a taxable unit – even if it is assessed at a nominal value – the condominium needs to make the necessary declaration to the City of Ottawa.  The necessary declaration must be made by April 30, 2023.  A failure to make the declaration will result in the Unit being deemed vacant and the tax will be applied to the Units roll.  Additionally, in future years, a failure to declare will result in a $250 fee.  The fee has been waived for 2023.

(2) Underused Housing Tax

This tax is mainly geared towards non-residents of Canada.  However, there are some situations where Canadians, and in particular, condominium corporations, could be impacted.  In fact, the impact is likely similar to the Vacant Unit Tax set out above.

As currently drafted, this tax could apply to Guest Units or Superintendent Units or other residential Units owned by a condominium corporation. Some industry stakeholders are taking steps to dialogue with the government about this tax.  There are currently some exemptions for co-operative housing corporations.  It would be ideal if a similar exemption could be granted for condominium corporations.  Until a change is made, however, condominium corporations with a unit, as set out above, should review whether filing a return is required.

The deadline for filing returns is set as April 30 of each year.  However, this year, due to challenges faced by owners affected by the tax, the government has waived the application of penalties and interest.  While filings are still due on April 30 (May 1, 2023 due to April 30 being a Sunday), any condominium that files after this deadline, but before October 31, 2023, will not be penalized.”

Stay tuned to Condo Law News to keep up to date on the latest developments on condominium law!