Retailers – 3 Ways To Shield Your Store(s) From Property Tax Spikes

In Realty Tax by Ricardo McRae

CBC’s recent headline “High commercial rents stripping Queen Street West of its ‘heart,’ merchants warn” as 40 stores lie vacant, reflects the impact of spiking rents, compounded by spiking property taxes.

You can’t avoid market forces that cause rents to rise. You can address property tax spikes.

Where the assessed value of a property spikes wildly high, the probability is the Assessors are now valuing the property based on its value as Development Land rather than on the existing use.  This is referred to as Highest and Best Use (“HABU”).

Here is how you can address the increase:

  • Get the value right. The following Toronto Star headline shows the gut wrenching impact on small business by the assessor valuing property as development land. “Massive property tax hike forces Yonge St. mom-and-pop store out”, we reduced the assessment by 63%, and 6 months later the new headline read “Mom-and-pop store saved by property tax reduction”. In this case, the application of Highest and Best Use was unfounded!
  • Even if the property value is right you can still reduce it. A property’s Current Value assessment is allowed to go below Market Value in certain circumstances. It is referred to as Equity. We saw a case on the Queen West strip where the City appealed the assessment of a store that sold much higher than its assessed value.   This increase could have been prevented using ‘Equity’.  Has Equity been tested?
  • Your lease is key! Have your leasing lawyer stipulate the assessed value that is apportioned to your unit be based on the Income Approach to Value of the existing property, and, be excluded from the Highest and Best Use value.


RAE  BUCHAN, AACI, P. APP., Licensed Paralegal managed the property tax group at PricewaterhouseCoopers and helped set up Deloitte.’ s property tax practice before setting up the boutique property tax, appraisal and consulting group Context Realty Advisors. He has represented owners and tenants of retail properties across Canada.

The largest tax reduction and savings he was involved with was $33 million related to the apportionment of realty taxes in shopping centres in Toronto.