At the end of 2008 Ontario's Municipal Property Assessment Corporation came up with a current market value for the province's 4,193,417 single family homes. Paul Grosman says it got the numbers wrong and at least a third of them are too high.
Indeed, that proportion is likely even higher in older areas of big cities like Toronto, neighborhoods, which contain a wide range of homes of different ages, different sizes and in different condition, says Mr. Grosman, founder of ArGil Property Tax Services.
If Mr. Grosman is correct, that means tens of thousands of home owners in the GTA are paying anywhere from hundreds to thousands of dollars too much in property taxes every year.
My best guess is that about a third of the assessments are too low, a third right on and a third too high. Paul Grosman, founder of ArGil Property Tax Services
Knowing from experience the way MPAC goes about arriving at current market value, he says: "My best guess is that about a third of the assessments are too low, a third right on and a third too high."
He founded ArGil in March to help - for a fee - those owning over-assessed homes substantially cut their property tax bills. Mr. Grosman comes to the task with almost two decades of experience working for one of Ontario's largest commercial property tax consultants.
Owners of office towers, shopping malls and industrial buildings make it standard practice to regularly appeal MPAC's valuations to ensure they are not paying a penny more than they should in taxes. Why not extend that to owners of expensive homes, Mr. Grosman thought. Argil is the result.
Expensive homes are the operative words here. At a $150 flat fee to open a file and get the details of the assessment from MPAC plus half the taxes recovered for a negotiated period, it does not make sense to take on a property valued at less than $1-million, Mr. Grosman says.
"What we would earn just would not justify the time spent," he says.
For property owners, however, hiring a professional may make terrific sense.
In the City of Toronto, where the current property tax rate is .85 per cent of market value, an assessment that is $50,000 too high means paying $425 too much a year in taxes. Now, multiply that by three because today's market value assessment will be the baseline for taxes until the end of 2012.
Equally important, however, today's assessment is factored in when MPAC starts figuring out new market values in 2012; they will hold sway for the next four years.
Granted, there are a few wrinkles, which will knock a chunk off that $425. The new market value assessments, which were introduced in the 2009 tax year, are being applied at the rate of 25 per cent of the change from pre-2008 assessments a year.
That still means that $50,000 over-assessment cost the homeowner $106.25 last year, $212.50 this year, $318.75 next year and $425 in 2012 for a grand total of $1,062.50.
And being assessed $50,000 too high is not uncommon, says Mr. Grosman.
The chances for error are built into the system, he says. MPAC uses a sophisticated computer program, which takes into account elements such as the size of a home, where it is located, the number of bathrooms, bedrooms, and other features, whether it has been recently renovated and what similar properties sold for recently.
The problem is much of the information is based on municipal sources such as building permits and Multiple Listing Service sales figures.
"In newer neighborhoods where the homes are all the same vintage and where there is a limited variety of types and models, the assessments are usually fairly accurate," he says. "The same is true with most condominiums because they are mainly fairly new and suites do not differ a great deal as to finishes and features within a building."
With older neighborhoods, however, the chances of a slip up by MPAC are great indeed.
"You might own a century old home that was last updated 25 years ago but within a block of a similar home where the owner did extensive work five years ago without a building permit," he says. "That home sold in mid 2008 for $1.5-million.
"Now since MPAC has no record of work being done to upgrade that house - because there was no building permit -- it just assumes that yours, being the same vintage and style and in the same neighborhood has to be worth the same money. So while your house might be worth $250,000 less in real terms, it gets assessed at $1.5 million."
Mr. Grosman says he has seen situations on the other side of the coin as well: houses that were on MPAC's rolls as measuring in at 1,400 square feet and assessed as such but thanks to those permit-less renovations actually measured 2,500 square feet.
Home owners wanting to appeal assessments can contact MPAC (www.mpac.ca). After registering and providing proof of ownership they can obtain their own assessment and the assessment of other homes they feel are similar or a selection of houses MPAC chooses.
If they feel over-assessed they can launch an appeal.
"My own advice is to do that search the moment you buy a new home," says Mr. Grosman. "Then do it again every four years when MPAC revises market values. If we go through a period when the price of homes rises dramatically - like they are rising now - then the chances of your house being over assessed go up too."