How To Appeal The Toronto Vacant Home (VHT) Tax: Here’s What One Landlord Did To Fight VHT Assessment

Overview

Since 2022, the City of Toronto has imposed an annual Vacant Home Tax (VHT) on residential units left unoccupied for more than six months of the year. For most owners the tax is an afterthought: file the annual declaration, confirm the unit was lived in, and move on. But when the City’s administrative process breaks down, an owner can find themselves fighting a five-figure tax bill over a unit they insist was never vacant at all.

This article uses a recent, first-of-its-kind judicial review case study, involving Ms. Owner, a Toronto condominium owner, to explain how the City’s VHT by-law works, where its enforcement process can go wrong, and what owners should do if they receive a VHT assessment they believe is incorrect.

Background

The Vacant Home Tax framework

Toronto’s Vacant Home Tax is authorized by provincial legislation and implemented through a City by-law in force since 2022. A residential unit is treated as vacant if, for more than six months of the taxation year, it was not the “principal residence” of the owner or another occupant, and was not rented out for a comparable period. A principal residence is the place where a person is “ordinarily resident”. A person may have only one, though a unit can be the principal residence of more than one person living there.

Every owner must file an annual declaration confirming whether the unit was vacant and whether an exemption applied. The declaration portal opens November 1, and the declaration is due by April 30 of the following year; an owner who does not file is deemed vacant and assessed the tax regardless of actual occupancy. An owner who disagrees with an assessment must first file a complaint, and if unsuccessful, may appeal internally.

The tax is significant: one percent of assessed value per vacant year for the 2022 and 2023 taxation years, rising to three percent from the 2024 taxation year onward, and interest keeps accruing on unpaid amounts at 1.25 percent per month in default, since the by-law requires payment regardless of a pending dispute. The City also audits past declarations, and owners are expected to retain supporting occupancy records for at least three years.

Two different defenses exist. The first is to argue the unit qualifies for a narrow exemption: the owner’s death, a permitted renovation, a care-facility stay, an arm’s-length transfer, employment-related absence, or a court order barring occupancy. The second, at issue in Ms. Owner’s case, is to argue the unit was never “vacant” at all because someone was, in fact, ordinarily resident there.

Ms. Owner’s assessment and appeal

Ms. Owner owned a downtown Toronto condominium unit throughout the year in question. She maintained the unit was her home for a substantial part of that year, pointing to utility and insurance records in her name and shared occupancy with her then-partner for several months. She also kept a second residence in a Toronto suburb, where she also spent time. By the time the City moved to verify the declaration, Ms. Owner had sold the unit, and the City directed its request for information to the new owners rather than to Ms. Owner herself.

When Ms. Owner did respond, she described the unit as “not my primary residence” but said she had “lived there at least half of the year”. The distinction became central to the dispute: her phrasing was based on her understanding of the income-tax concept of a “principal residence”, under which a taxpayer may designate only one property at a time to shelter capital gains, whereas the VHT’s “ordinarily resident” test can still treat a unit as a residence even if it is not an owner’s only home. The City upheld the assessment.

Ms. Owner appealed, relying on the doctrine of ordinary residence and the corroborating affidavit. The City’s appellate authority dismissed the appeal. Ms. Owner then retained our firm, Rotfleisch & Samulovitch (Taxpage), to apply for judicial review in the Ontario Divisional Court, arguing the decision was unreasonable and the process procedurally unfair; because the filing deadline had passed, we first obtained an extension of time.

The litigation that followed was substantial for a municipal tax dispute of this size: it involved production of the City’s record, written cross-examination of its decision-maker, and a supplementary affidavit. The provincial Ministry of the Attorney General considered intervening, given that this was the first judicial review of a City of Toronto VHT decision to reach the court. The matter was ultimately resolved by settlement where the City agreed to vacate the assessment in full.

Key Issues and Findings

Because the case settled before the court ruled on the merits, there is no reported decision interpreting the by-law. What it does provide is a clear illustration of the issues that arise when VHT enforcement meets a genuinely contested set of facts.

Ordinary residence versus “primary residence.”

The by-law does not ask whether a unit was an owner’s exclusive or “primary” residence colloquially; it asks whether the unit was ordinarily resided in by the owner or another occupant. Ms. Owner’s statement that the unit was “not my primary residence” was unhelpful on its face but not necessarily fatal. A person can be ordinarily resident in a unit for only part of the year, and a unit can be the residence of “another occupant” even if it was not the owner’s own. The case shows how easily an owner’s casual description of their living arrangements can be used against them.

Procedural fairness in directing inquiries to the wrong party.

The City routed its verification request to the unit’s new owners rather than to Ms. Owner, who actually owned and occupied the unit in the relevant year. New owners have no personal knowledge of a prior owner’s occupancy and little ability to marshal evidence about a year in which they did not own the property, which raises a fair question about whether the process gave the person actually responsible for the tax a meaningful opportunity to be heard.

Adequacy of the appeal process.

The by-law requires a “hearing” before an appeal is decided, yet no record, minutes, or resolution of one existed in the City’s file: Ms. Owner was never notified of a hearing, was never invited to attend or to submit anything in support of her case, and the City could not confirm when a hearing allegedly took place or who was present. The only reasonable conclusion was that no hearing occurred at all, which seriously questions the adequacy of the appeal process.

The weight of corroborating evidence.

Utility accounts, insurance records, and a supporting affidavit are the kind of evidence counsel routinely marshal in VHT disputes, and Ms. Owner’s record was very well-documented. Whether that evidence was given appropriate weight against one imprecise sentence in her own letter was, in substance, the crux of the dispute, and it is exactly this kind of record that puts an owner in a position to negotiate a favourable resolution.

Implications for Canadian Taxpayers

This case did not produce a binding precedent, but it illustrates real risk for owners who divide their time between two residences, sell or transfer a property mid-dispute, or respond to a City inquiry informally and without legal advice. It also shows how a change in ownership mid-dispute can complicate an owner’s ability to respond and, if handled poorly by the City, unfairly prejudice it. Anyone who sells a unit while a VHT dispute over an earlier year remains outstanding should consider how future inquiries will reach them, since the City’s own practice cannot always be relied on to route things correctly.

Strategic Takeaways

Owners facing a Toronto VHT assessment should treat the complaint and appeal stages as the main opportunity to build a documentary record, not a formality. That means gathering utility bills, insurance records, mail, and corroborating statements from anyone who shared occupancy before the City demands them. Where an owner disputes that a unit was ever vacant, as opposed to seeking an exemption, the response should say so explicitly rather than relying on a reviewer to draw the distinction unprompted.

Where an appeal is dismissed, and an owner believes the decision was unreasonable or unfair, judicial review remains available, subject to strict deadlines. This case shows a well-supported application, even one that never reaches a hearing on the merits, can bring enough pressure to produce a full reversal through settlement, and that municipal tax litigation of this kind can attract wider attention given how novel this by-law remains relative to the volume of assessments issued.

Pro Tax Tips

• Do not wait for a tax notice to start documenting occupancy. If you split time between two residences, or your living arrangements are unconventional, keep utility bills, insurance records, and other proof of occupancy in your own name well before the City asks for them.
• Read every City communication, and every response you send, against the by-law’s actual definitions rather than how you would describe your living situation casually.
• If you receive an assessment or decision you believe is wrong, act quickly, because deadlines are strict, and once they close, judicial review becomes a narrower and more expensive route back to the same result.

According to David Rotfleisch, Law Society of Ontario (LSO) Certified Specialist in Taxation, CPA, founder of Rotfleisch & Samulovitch PC (Taxpage), “this case is a useful warning for any Toronto owner who thinks the Vacant Home Tax is a formality. The City is administering a brand-new tax at enormous scale, largely through a paper-based system, and that system does not always get the facts right when an owner’s living arrangements do not fit neatly into a form.

The lesson here is not that owners will always win; it is that a well-documented, carefully argued challenge, pursued through judicial review if necessary, can succeed even against a City that has already dismissed a complaint and an appeal.” Owners uncertain whether their circumstances support a vacancy challenge or an exemption claim should get advice from an experienced Canadian tax lawyer before responding to the City.

“The City is administering a brand-new tax at enormous scale, largely through a paper-based system, and that system does not always get the facts right when an owner’s living arrangements do not fit neatly into a form.”

Frequently Asked Questions

What is Toronto’s Vacant Home Tax?

An annual tax the City of Toronto imposes on residential units that are vacant, meaning not used as anyone’s principal residence and not rented out, for more than six months of a calendar year, in force since 2022.

How much is the Vacant Home Tax?

One percent of the unit’s Current Value Assessment (CVA) for the 2022 and 2023 taxation years, rising to three percent of CVA from the 2024 taxation year onward. For example, a $1,000,000 CVA unit found vacant for 2024 or a later year would be assessed $30,000. Interest accrues on any unpaid balance at 1.25 percent on the first day of default and on the first day of each following month until paid.

What is the difference between disputing vacancy and claiming an exemption?

Disputing vacancy means arguing the unit was never vacant because someone was ordinarily resident there. Claiming an exemption means conceding vacancy but arguing a narrow statutory exemption applies. The two require different evidence and should not be conflated.

Can the City pursue a new owner for a previous owner’s liability?

The Vacant Home Tax attaches to the property, not the individual owner: an unpaid VHT balance from an earlier year can be added to the current owner’s tax bill even though someone else owned the unit when the liability arose, and a purchaser under a power of sale takes the property “as is” and remains responsible for the associated taxes. This is why occupancy status and any outstanding VHT should be addressed in the agreement of purchase and sale and confirmed in the statement of adjustments on closing. As this case shows, the City’s correspondence does not always route correctly when ownership has changed, creating fairness problems for both former and current owners.

Do I have to pay while I am appealing an assessment?

Yes. Payment is required notwithstanding an outstanding complaint or appeal, and unpaid amounts accrue interest. Most owners are best served by paying and pursuing a refund if their dispute succeeds.

Is judicial review available if my appeal is dismissed?

Yes, on grounds such as unreasonableness or procedural unfairness, as occurred here. See our case results for other examples of successful tax litigation outcomes.

What evidence helps prove a unit was not vacant?

Utility bills, insurance records, mail addressed to the unit, and sworn statements from anyone who shared occupancy. The more contemporaneous and consistent the documentation, the stronger the position at every stage.

What happens if I miss the Vacant Home Tax declaration deadline?

Every Toronto residential property owner must declare occupancy status each year, whether or not the unit was occupied. The declaration portal opens on November 1 and the declaration is due by April 30 of the following year. An owner who does not declare can have the unit deemed vacant and be assessed the tax even if someone lived there for the entire year. A deemed-vacant assessment is challenged the same way as any other, by filing a complaint and then appealing, so a missed deadline is not the end of the matter.

How do I dispute a Vacant Home Tax assessment, and what are the deadlines?

The first step is a complaint to the City within the period set out in the assessment notice and the by-law. If the complaint is refused, an internal appeal is available, and if the appeal is dismissed, judicial review in the Ontario Divisional Court is the remaining route. Each stage has its own filing deadline, and missing one narrows the options at every stage that follows. Confirm the dates on the notice itself, and get advice from an experienced Canadian tax lawyer before responding rather than after a deadline has passed.

Can the City audit my past Vacant Home Tax declarations?

Yes. The City audits prior-year declarations and asks owners to produce documents supporting the occupancy or exemption they claimed. Owners should keep occupancy records for at least three years after the declaration is filed. Records created at the time, such as utility accounts, insurance policies, lease documents, and mail addressed to the unit, carry far more weight on an audit than a description of the living arrangements written afterward.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.