Ontario Tax Sale Property Forum
Tax Sale Forum => General => Topic started by: Dave2 on October 07, 2009, 12:31:38 PM
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Sometimes if you try long enough there is a little light at the end of the tunnel when you actually win one. ;D
The hard work and likely expenditure starts after the win when you actually look carefully at what you have and make a decision what do you want to do with what you have won.
In my case I have won a large amount of waterfront property with a cottage and a bunkie. As expected both structures need some major work and the fundamental decision is whether to rehabilitate or start new.
To start new the best way is to sever the property and build a new structure on the newly created lot. In discussions with the Municipality on this issue an interesting issue came to light. Currently my zoning is rural and my property taxes are classified as forest land. The municipality has confessed that the property is miszoned.
As a result they will likely approve the severance (I am fortunate to have a large parcel of land and could even chop it into 3 lots but I only want to chop it into two because of the land shape.) The problem is they also want to rezone it to seasonal rural residential.
Normally that is what you want, but in this case it comes at a high price.
Consider the property tax rates for a a nearby town where I live Cobourg to illustrate:
Residential Tax Rate = 1.66%
Farm or Forest Land Rate = 0.416%
Thus the rezoning results in a property tax increase of 400%. In my actual case it is 500% difeerence.
Any suggestion on this one? FYI we will probably keep the property for now cause we have a real gem at an affordable price.
Finally what are my options if they decide to change their mistake and rezone in future.
One final note sometimes paying money for a surveyor is worth it. Property was never surveyed and it came in 50% larger then the official records. I was happy to pay the bill.
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Dave Also
Your property tax change will be much greater than 400%. Consider that not only is the tax rate itself a quarter on farms and managed forests, but the assessed value will change as well. Typically, farms and forests come in at one or two grand per acre (except for one acre if there is a house)...as much as fifteen depending on location, and type of crop (I'm thinking of the fruitbelt). However, seasonal rural residential (read expensive cottage lot), will come in at anywhere from 10 to 150 grand per acre, at the higher rate of course...the only way to maintain the managed forest status is to do a forestry management plan on it. When you do your severance, make sure it is done by R plan, and not M plan...if you end up going M plan, which would be the case for more than three lots (ie. a subdivision), then MPAC will not revert to the lower assessed values. Future taxes will definitely be a deal breaker.
You are in a box on this one....can't get the severance without the rezoning; rezoning may be inevitable now that they know, and they can correct it the next time they do a zoning by-law update. I say let them rezone, get the severance...repair the existing structures and then sell both properties...and I'll be happy to split the profits with you. After all, you only got it cause I wasn't there for that one...okay, enough crying over split milk...sounds like you got the deal of the century, and it looks good on you. Wow, an existing bunkie as well, and we thought it was just a rocky island in the middle of a busy shipping channel.
p.s. the whole story of 'Them Black Donnoley's' originates in Lucan. The family terrorized the town for years, and then one nite all hell broke loose.
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Dave:
Ask yourself what you will do with the property. If you want to use it, leave it as is. The risk is that future land use changes might impact you. Just keep your ear to the ground.
If you are doing this to make money, this is a no-brainer. Sever the land, fix the cottage and make about $250k or more on this one - do the math!
I know how your wife feels, but show her the numbers and promise her something nice.
You pay for the coffee this weekend if we hook up? You should still have some change from the $250k.
Mike
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Then let sleeping dogs lie until you decide.
That just gets better and better.nicely done.
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If you talking about the island.. I think you will devalue it as the value is that fact that it is private, adding lots reduces the value of the whole.. I would treat it like a diamond..a 3 carat rock is worth 5 times 1 carat
Its a total lose lose by severing or rezoning, shut your mouth with the town, fix the existing cottages ( fix actually means the door is original and the rest is replaced but on the same foot print) They have no grounds to re-assess and they have no fair market other then your tax sale .
so Dont mess with it as noone will pay you for 1/3 of a 11 acre island
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Its a total lose lose by severing or rezoning, shut your mouth with the town, fix the existing cottages ( fix actually means the door is original and the rest is replaced but on the same foot print) They have no grounds to re-assess and they have no fair market other then your tax sale .
As always the astute comments of senior board members are welcomed. I think PFM's observation is best. And within reason I think I will take this approach. The severance was a means to construct a new building without having to demolish the old structures as I am only allowed 1 cottage and 1 bunkie on a building lot. The severance was not intended for resale but a means to allow me to construct an additional structure on the island without having to demolish the original structures.
Regarding Frank's comment on the Black Donnelly's this actually came from a private post and according to local lore no they did not all die in the Lucan shootout. Apparently some of their relatives were involved in the burning of a ship owned by the original owner of the property which is now a wreck by the property. The original owner of the property was a sea captain and apparently got himself into some trouble with the FBI (in Michigan) because he transported some cargo over there by night during prohibition. (he never got caught but did have some US property seized so the story goes.) Gee I wander why he got into a friendly dispute with some surviving members of the honest Donnelly clan. (Note to self; buy a couple of extra shovels and rent ground penetrating radar for next summer.) ;D
It all started because I wanted to save some money on GST. At this point I want to observe that I consider the township staff to be both friendly and helpful. What follows is a paraphrase of some correspondence of our findings:
""The Canada Revenue Agency provided a ruling regarding the GST. They ruled that the sale of the property seized by the municipality is considered to be two supplies. The sale of the cottage? on the property is exempt from GST. The sale of the remainder of the property is subject to GST at the rate of 5%. The amount charged for land transfer tax is not subject to GST.
I wonder which part of the property I wanted maximum value for??
In order to determine the breakdown of assessed value of the property between the cottage and land, I contacted the Municipal Property Assessment Corporation (MPAC). They stated that all assessments since 1996 are based on market value and that they do not have that kind of breakdown anymore. They did provide data on two properties that are vacant (land) and are similar in size and location to your island. They are assessed 1/3 of my assessed value.
The total assessment for your property is _____. The amount I am applying to land is one third, leaving an assessment of 2/3 for the building. The land represents 1/3 of the total which is the percentage applied to the GST on your bid. Short of obtaining an appraisal on the property, I believe this is a fair and equitable way to calculate it.
I accepted this to reduce GST but may have undermined my long term costs because the property tax breakdown in the original post. Got to admit I underestimated the sagacity of the township treasury staff. At the time they were reducing the the GST they maximized their property tax yield. At the same time I got a good deal on GST I totally got my pocket picked on property tax. ( The building and surrounding one acre are residential zoned.)