Report to: General Committee Report Date: June 1, 2010
SUBJECT: Residential Condominiums – Occupancy Information
PREPARED BY: Paul Wealleans, Director Revenues
Ext 4734
RECOMMENDATIONS:
THAT the report “Residential Condominiums – Occupancy Information” be received;
AND THAT developers of residential condominiums be required to provide the Town with a list of the names of individual unit owners and occupancy dates as a condition of site plan and condominium draft approval;
AND THAT any necessary agreements, on a go forward basis, between developers and the Town be modified to include this requirement;
AND THAT Council adopt the policy attached to this report in Appendix A (Condominium Development Securities Policy);
AND THAT staff be authorized and directed to do all things necessary to give effect to this resolution.
PURPOSE:
This report provides detail on the E3
initiative regarding the provision of individual unit occupancy information to
the Town by residential condominium developers in a timely manner as a condition
of site plan and condominium draft approval. A financial security, in the form of a Letter of Credit, will be
required to secure the information required.
BACKGROUND:
At its meeting of September 28, 2008 General Committee received the presentation “E3 Excellence through Efficiency and Effectiveness”. The presentation outlined several initiatives put forth by staff including this initiative regarding the provision of individual unit ownership and occupancy information by residential condominium developers as a condition precedent to condominium registration.
Options/
discussion:
The current practice of assessing residential condominiums by the Municipal Property Assessment Corporation (MPAC) is to initially assess each unit in the developer’s name at about $30,000 Current Value Assessment each prior to registration of the condominium and, upon registration, assess each unit at market level Current Value Assessment in the name of the purchaser of the unit separately. Generally, all the units are then transferred to the new owners’ names within two weeks of registration of the condominium and it is that registration date that becomes the effective date for taxation for all units. This results in the Town only being able to tax each unit based on market level Current Value Assessment as of the registration date even though most, if not all, units were occupied prior to the registration date. In some cases, separate units have been sold and occupied anywhere from one to two years prior to the condominium being registered.
The new process
will require the developer to provide the names and occupancy dates of all
units to the Town as well a
financial security, in the form of a Letter of Credit, to secure the
information required. While the provision of the information will be a
condition of draft approval, the financial security will not be required by the
Town until just prior to condominium registration.
Access to the names of occupants and dates of occupancy for individual units prior to condominium registration will allow MPAC to assesses each unit at market level Current Value Assessment and ensure that the effective date for taxation each unit will reflect the actual date of occupancy with the individual owners’ name(s). The Town will forward the information received from the developers to MPAC for its action. The developer would then receive a supplementary or omitted assessment notice from MPAC and, subsequently, a supplementary or omitted tax bill from the Town.
The result of this change would be to capture lost tax revenue not only for the Town, but for the Region and school boards as well.
For example, a
residential condominium in
The amount of taxes forgone will vary with the size and assessed value of each condominium development and the length of the delay between occupancy and condominium registration. There are approximately 8 condominium developments currently in the planning or construction process with approximately 1700 units which is estimated to generate approximately $2.72 million for the Taxing Authorities ($ 680,000 for the municipality) over the next few years based on the above assumptions.
To summarize the new process, the following shows the steps:
· Site plan is submitted to the municipality
· Developer provides the required information to the Town
· Town calculates and invoices the security to the developer
· Developer provides security to the municipality. Occupancy information is then forwarded to MPAC
· MPAC issues supplementary assessment notices to developers
· Town issues supplementary tax bills to developer. Developer pays the bills
· Condominium is then released for registration
· Letter of Credit is released by (Tax & Assessment Dept.)
· Developer processes statement of adjustments, including the supplementary taxes to each unit owner
Finance, Legal and the Planning department staff have met to discuss issues regarding this initiative. The Town has the right to establish conditions of approval for of site plans and subdivisions and enter into agreements. On a go forward basis, the Town will need to modify certain development agreements and standard conditions of approval to ensure the receipt of the individual ownership and date of occupancy becomes a condition of condominium registration. Existing approvals (ie draft approval or site plan endorsements) which have not been finalized will be subject to the new rules.
Staff presented this initiative at the Developers Round Table meeting for information and feedback on October 28th, 2009 and the consensus at that time was to create a sub group for further discussion. The sub group met on Feb 23rd, 2010 with considerable discussion around the proposed process with regards to information required and the type of security required. Additional sub group members provided their input at a March 18, 2010 meeting as well. It was generally understood by the group that this process was viable for both the Town and the development industry. However, the Town agreed to reduce the length of time it would hold the security to just before the condominium is registered. It was also agreed that the Town could provide the developer with an insert or brochure that they could provide to purchasers during the sales process that would outline the new process. A high level written summary of this proposal was provided to the members of the Developers Round Table on June 7, 2010 and indicated that the issue would be before General Committee on June 14, 2010.
A policy has been developed to implement this initiative which is attached as Appendix A (Condominium Development Securities Policy). This type of policy and requirement is currently in place in other Ontario municipalities (notably, Mississauga) with success in obtaining both the necessary information from developers and generating tax revenues.
FINANCIAL CONSIDERATIONS AND
TEMPLATE:
It is estimated that the receipt of occupancy information from residential condominium developers prior to registration could generate approximately $120,000 per 300 unit development annually. The actual revenue will vary depending on project size and the extent of the delay between occupancy and registration.
HUMAN RESOURCES CONSIDERATIONS:
Not applicable
ALIGNMENT WITH STRATEGIC PRIORITIES:
Not applicable
BUSINESS UNITS CONSULTED AND
AFFECTED:
Legal Services Department and Planning.
RECOMMENDED BY:
ATTACHMENTS:
Appendix A – Condominium Development Securities Policy
Q:\Finance\SHARED\2010 General Committee Finance\1018
New Residential Condo Process Jun 9.docx
APPENDIX A
CONDOMINIUM REGISTRATION SECURITIES POLICY
Purpose
Securities are required so that the Town can ensure that the obligations of the developer, builder, or land-owner under the various approval processes are met. This policy:
· Identifies when securities are required by the Financial Services (Tax & Assessment Department), and the amount of each security;
· Establishes responsibility for the custody and monitoring of securities;
· Outlines procedures for acting on securities; and
· Identifies conditions under which unclaimed securities will be forfeited to the Town.
The Town of Markham will require financial securities to be provided, to ensure the receipt of individual condominium unit information, as noted in the chart below:
· As a condition of approval of site plan, re-zoning, or land division applications;
· As a condition of condominium registration;
· As required by the Commissioner of Corporate Services
Scope
This policy addresses the additional security required with development of Residential Condominiums.
When Securities are required
The following chart shows when the security is required by the Financial Services (Tax & Assessment Department), the purpose of the security, and the amount of the security required.
|
|
||
|
Securities Required in Conjunction
with Condominium Registration |
||
|
Security Required By: |
Purpose of Security: |
Amount of Security: |
|
Corporate
Services: Financial Services (Tax
& Assessment Dept.) |
To
ensure full payment of land taxes, local improvement charges, prior to
registration of the condominium development, all vacant land and estimated
building portion levies must be sufficiently secured. (This process will also require the applicant to
provide the Town with occupancy information for the individual units prior to
condominium registration) ·
Name (s) of Purchaser ·
Unit # ·
Sale Price ·
Closing Date ·
Occupancy Date |
100%
of the taxes for land and local improvement charges apportioned to the
property for the year of registration. Plus
100% of the anticipated supplementary and omitted assessments / taxes issued
for all occupied units. |
Form and Custody of Security
Financial securities required for taxes and local improvement charges shall be provided in the form of cash, cheque or bank draft, which shall be deposited, or irrevocable Letter of Credit in a form satisfactory to the Town’s Treasurer.
Development Finance, Corporate Services Department is responsible for the physical custody and safe-keeping of securities received by the Corporation.
Draw On Security
The Town may draw on the financial securities provided to pay the supplementary / omitted levies, should the property owner, developer not satisfy its obligations in connection with the development agreement within the time established in the development agreement or within a reasonable time after demand is made in writing by the Town.
Notice to Owners
The party who provided the original security is notified, in writing, of the Town’s requirements to pay and given a reasonable opportunity to comply before the Town draws on the securities. The current owner of the property may also be notified, if appropriate.
Release of Securities
Securities will be returned to the party that provided the security, if cash or certified cheque, or to the issuing bank in the case of a letter of credit, after authorization is received from the Tax & Assessment Department .
· For cash (or certified cheque or bank draft) securities – In the event of a change in property ownership, the Town will release the security to the original party who provided it, unless the Town is in receipt of an irrevocable direction from the original party to release the security to another party.
Unclaimed Securities
Unclaimed securities are those which are no longer required by the Town, but which have not been released because the owner cannot be located, or the owner has not responded to directions from the Town. The Commissioner of Corporate Services and Treasurer shall cause a notice to be published in the local newspaper identifying the names of depositors that have unclaimed securities which are six years old or more. The notice shall provide all persons having any claim to any of the money listed 90 days from the date of publication of the notice to provide documentation to prove their claim. Upon the expiration of 90 days, the Commissioner of Corporate Services and Treasurer may transfer all money for which there is no claim, or for which no claim has been documented to the satisfaction of the Town’s Treasurer, to the Town’s general funds, free from any claims.
Contact:
For more information on the securities required contact the department responsible for taking the security. For more information on monitoring securities, Corporate Services:
Tax & Assessment Department.