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Power of the Assessment Review Board to Correct Errors
The Assessment Review Board has a broad power to correct palpable errors in the assessment roll. Section 40.1 of the Assessment Act grants the Board that power. It states:
Correction of errors
40.1 If it appears that there are palpable errors in the assessment roll,
(a) if no alteration of assessed values or classification of land is involved, the Board may correct the roll; and
(b) if alteration of assessed values or classification of land is involved, the Board may extend the time for bringing appeals and direct the assessment corporation to be the appellant.
Traditional Legal Test for Correcting Palpable Errors
The Board has long held that there is a stringent test for obtaining that relief and that a party seeking to correct an error must show that “it would be unreasonable, unfair and highly prejudicial to penalize parties for not meeting their statutory obligation to file on time.” see Piggott v Municipal Property Assessment Corporation, Region 28, 2019 CanLII 109527(ON ARB), at paragraph 31.
Why Most Applications Have Been Unsuccessful
The high standard of unreasonable, unfair, and highly prejudicial has been applied to applicants in many cases. The result has been that very few applications under section 40.1 have been successful, even where the Board finds that there is a palpable error in the assessment roll. Many cases focus exclusively on the evidence, or lack thereof, of why appeal deadlines were missed.
Examples of Failed Applications Under Section 40.1
For example, in Municipal Property Assessment Corporation Region 15 v Brampton (Corporation of the City), 2020 CanLII 1382 (ON ARB), the municipality had notified MPAC of errors in an assessment, instead of appealing to the Board. It sought relief under section 40.1 when MPAC didn’t fix the error. The Board held, at paragraph 21, that the municipality had relied on MPAC, “at its peril.”
Another example is in Janovjak v Municipal Property Assessment Corporation, Region 15, 2020 CanLII 24884 (ON ARB), where a taxpayer found that MPAC had added a pool that didn’t exist to its assessment. The error was discovered in discussions with MPAC in 2020, and the taxpayer learned that the assessment had been in error since 2006. The Board denied the request, saying in paragraph 22, that the taxpayer had not sufficiently explained why he did not review the assessment of the Property over the years.”
A New Direction in 2022: Changing Approach to Palpable Errors
On January 18, 2022, the Board released a review decision that indicates a new view on palpable error applications may be developing. It suggests that the focus may shift to fairness and prejudice and away from a sole focus on why an appeal wasn’t filed in time.
The Peel Condominium Case and Its Background
Peel Condominium Corporation No. 408 v Municipal Property Assessment Corporation, Region 15, 2022 CanLII 3269 (ON ARB) is a review (the “Review Decision”) of the earlier Board decision in Municipal Property Assessment Corporation, Region 15 v Peel Condominium Corporation No. 408 and Golf Links Canada Inc., 2020 CanLII 30605 (ON ARB).
The case involved a parcel of land that was split into 59 condominium units with a golf course as the common property of the units. MPAC inadvertently kept assessing the golf course as a separate property, while at the same time including the value of that property in each of the assessments of the condominiums. The effect was that the golf course was assessed twice. The error started in 1995 and was not corrected by MPAC until 2012. The taxes on the golf course parcel had never been paid.
Original Decision vs Review Decision
MPAC brought the motion under 40.1, with the consent of the municipality and the taxpayer, arguing that the parent roll number not being deleted was a palpable error in the assessment roll that should be corrected. The original decision found that the parent roll number not being deleted was a palpable error, but went on to find that the Board would not exercise its discretion to fix the error because the unreasonable, unfair, and highly prejudicial test was not met. It found it was not unreasonable or unfair to leave the error in the roll because the evidence showed that the municipality knew about the error from 2002 but did not appeal, and instead notified MPAC. It also found that prejudice did not favour reopening the roll.
The taxpayer sought a review of that decision.
The New Legal Test Introduced by the Board
The Review Decision reverses the decision below, finding that the assessment roll should be corrected. In doing so, the review decision changes the test to be applied to motions brought under 40.1.
The Board states, at paragraph 42, that “the correct test is to weigh the relevant factors of timing, fairness and finality with the objective of correctness in achieving a balanced approach under the Act. Furthermore, this test cannot be interpreted so stringently as to effectively deny all requests to correct an error, as this would defeat the primary purpose of s. 40.1, which is to allow for correction of errors after an appeal filing deadline has expired.”
The Role of Prejudice in the New Framework
At paragraph 59, the Board stated: “In deciding whether to exercise the discretion to correct a palpable error, the primary consideration is to weigh the prejudice each party would experience if the error is corrected, or not corrected, in the context of the required balancing exercise.”
In the context of prejudice, the review decision notes, at paragraph 61: “there is no ‘counter-balancing’ prejudice to the City or MPAC if the error is corrected, whereas there is significant prejudice to the taxpayer if the error is not corrected. Absent any evidence of systemic prejudice to the administration of the municipal taxation system, the Board finds that considerations of prejudice clearly indicate that the Board should exercise its discretion to correct the error.”
What This Means for Future Applications
It is our view that this is a clear shift in how applications under 40.1 are to be considered by the Board. A test balancing the relevant factors of timing, fairness, and finality with the objective of correctness, weighing prejudice most heavily, means that more applications should be granted.
Ongoing Limits and Considerations
The Review Decision is clear that the main gatekeeping function is the requirement that the error at issue be a palpable error, see paragraph 38. The Review Decision is also clear, however, that “a party cannot rely on its own carelessness when alleging prejudice,” see paragraph 47. Interestingly, that carelessness is framed, in part, as using 40.1 as a way around limitation periods, see paragraph 35.
This means that the conduct of the party bringing the application will still be relevant. There appears to be some analysis of why there were no timely appeals to fix the alleged palpable error. But the Review Decision is clear that prejudice is the biggest factor. The Review Decision relies on the Division Court decision in The Kensington Foundation v. Municipal Property Assessment Corporation et al., 2013 ONSC 7694 (CanLII). That case found that the Board had erred in failing to properly consider the tax consequences of correcting a historical error.
Impact on Taxpayers vs Municipalities
The impact on the taxpayer is a dominant part of any prejudice assessment before the Board. This is because the other parties, MPAC and the City, are unlikely to be prejudiced by any change to a single property. It is difficult to see any prejudice to MPAC, whose purpose is to produce a correct assessment roll. Impacts on municipalities are possible, but due to the many properties a City can tax, its prejudice is unlikely to outweigh the impact on the taxpayer.
Final Takeaway
We believe that Peel Condominium Corporation No. 408 v Municipal Property Assessment Corporation, Region 15, 2022 CanLII 3269 (ON ARB) is an indication that the Board will start to consider palpable errors in a less rigid and more contextual way. These are still remedies that will only be granted “in the clearest of cases,” but the door is now slightly more open.
Contact NextGenLaw LLP if you are aware of an error in the assessment roll that impacts you. We can help you navigate the new test that the Board has set out.