If you own a residential property in Ottawa, you’ve likely heard about the city’s new Residential Vacant Unit Tax (VUT).
The city sent letters in November to property owners to inform them of the new tax and explain how to declare the occupancy status of their properties by the deadline of March 16, 2023.
The tax applies to properties that are not an owner’s principal residence and are vacant for more than six months of a year. But even if you own only one property and live there, it’s necessary to submit a declaration. You can complete the forms online in a few minutes on the city website.
The city plans to require property owners to make the declaration in the first few months of every year, regarding the status of the property in the previous year.
The city introduced the tax to try to increase affordable housing and reduce the number of properties left empty and neglected. The City has said it will use proceeds from the tax to fund affordable housing.
In your declaration, you report if and how your property was occupied over the past year.
The tax will apply to any property that has been unoccupied for more than 184 days in the previous year, though there are exceptions.
These exceptions will be granted if an owner has died, been hospitalized or is in care, if a property was for sale or if the property was under major renovation that prevented occupancy, and the owner has the city permits to prove it.
If the city does not receive your declaration by the deadline, it will deem the property vacant, and you will be charged the added tax, which will be an additional charge of 1% of your property’s assessed value. If you have a property assessed at $700,000, for example, the extra 1% tax will amount to $7,000.
For more details about requirements and exemptions, visit www.ottawa.ca/vut , where you can also submit your declaration. To submit the declaration, you will need your roll number and your access code, which are on the upper right of your most recent municipal tax bill and on the letter the city sent about the new tax.
If you need assistance completing your declaration, you can call the City of Ottawa assistance line, at 613-580-2444, where you can get help completing the submission by phone.
Impact on Real Estate Transactions
If you are involved in the purchase or sale of a property in Ottawa, you should also keep the new Vacant Unit Tax in mind to ensure the rules are followed.
If you are a seller, selling a property between January 1 and April 30, you are required to complete the VUT declaration as required by the city for the occupancy during the previous year.
For a transaction that occurs later in the year, it’s the buyer who will complete the declaration in the new year. If necessary, the buyer can claim the city’s exemption for properties that were for sale in the reference year.
If you are purchasing a property during the first few months of the year, when the declarations are supposed to be completed by the seller, the city recommends including a clause in your Agreement of Purchase and Sale (APS) that the seller confirms the vacancy status and agrees to provide you with a copy of their vacant unit tax declaration before the closing of the sale.
Without due diligence, a vacant unit tax on a property could become the buyer’s responsibility. Your real estate lawyer can help ensure that the seller complies with all requirements.
The city of Ottawa page www.ottawa.ca/vut has a helpful tab, titled “Real Estate Transactions and the VUT,” offering suggestions for those selling or buying property.
If you’re considering buying or selling in Ottawa, I’d love to chat about the current market and conditions in your neighbourhood. With more than three decades of experience as a Realtor in Ottawa, I’ve helped hundreds of clients buy and sell and I know the city’s neighbourhoods well.
You can read more about me on my site, www.nancybenson.com. Feel free to call me at 613-747-4747.