Introduction

Heritage property tax relief is a financial tool for municipalities to help owners maintain and restore their properties for the benefit of the entire community — today and into the future.

Adopting the program is a municipal choice and the program is administered at the local level. Section 365.2 of the Municipal Act, 2001 gives municipalities the option of establishing a program to provide property tax relief (10 – 40%) to owners of eligible heritage properties. Municipalities must pass a bylaw to adopt the program.

This new program was developed by Ontario in response to requests from municipalities, heritage organizations and property owners for a permanent tax incentive to promote heritage conservation.

Conservation aims at safeguarding a heritage property so it retains its cultural heritage value or interest, integrity or appearance, and so its physical life is extended. Activities include: identification, protection, interpretation, management, use, preservation, stabilization, repair and maintenance.

Paying for heritage property tax relief

A portion of property taxes goes to school boards, and another portion goes to the municipality. The province shares in the cost of the program by funding the education portion of the property tax relief. Municipalities that provide heritage property tax relief will contribute to this important program by funding their portion of the tax relief.

Why municipalities provide heritage property tax relief

Well-maintained heritage properties enrich our quality of life and give communities their unique character and sense of place. Throughout Ontario, conserving heritage properties has helped revitalize historic town centres and attract residents, businesses and visitors to communities.

Although heritage properties provide benefit and enjoyment to the whole community, most of these properties are privately owned. This program provides an incentive to owners to make regular investments in the ongoing conservation of their heritage properties. With continuous care and maintenance, major restoration projects and their high costs can often be avoided.

Maintenance aims at mitigating natural wear and deterioration without altering the cultural heritage value or interest, integrity or appearance of a heritage property. It includes both routine and cyclical activities.

The property tax relief encourages and supports owners to be stewards of their heritage properties, so that Ontario’s heritage is protected for future generations.

Ten steps to developing a heritage property tax relief program

This guide provides step-by-step information on how municipalities can develop a heritage property tax relief program. The guide provides two kinds of information:

  • steps that are mandatory under section 365.2 of the Municipal Act, 2001 — these are indicated throughout the guide by the word “must”
  • steps that are not mandatory but are recommended

For clarity, the guide divides the process of developing a heritage property tax relief program into 10 steps. However, the number and sequence of the steps can vary depending on local circumstances and decision-making processes.

Ten steps to developing a heritage property tax relief program for your municipality:

  1. Involve people in the community.
  2. Develop eligibility criteria.
  3. Decide amount of relief.
  4. Decide form of relief.
  5. Determine how to fund program.
  6. Establish application process.
  7. Develop a monitoring strategy.
  8. Identify remedial actions.
  9. Pass program bylaw.
  10. Promote your program.

This guide is provided for information purposes only and is not intended to be authoritative. Reference should be made to the official text of section 365.2 of the Municipal Act, 2001 in developing or administering a heritage property tax relief program.

1: Involve people in the community

Involving people with a range of interests and expertise will help ensure that your heritage property tax relief program meets the needs of your community. You may want to consult with interested parties at the outset before making some key decisions about your program, and throughout the program development process. This approach will help develop public awareness and support for your program.

If your municipality has a Municipal Heritage Committee (MHC), it is important to consult with this committee as its members have expertise in heritage conservation and can help promote and support your program.

MHCs are volunteer committees, usually made up of council members and residents, appointed by municipal councils to advise them on heritage issues. MHCs are involved in a wide range of activities, including:

  • advising council on designations and alterations to individually designated properties
  • advising council on alterations to heritage conservation districts to ensure that buildings, streetscapes and open spaces are conserved appropriately
  • developing local criteria for designation
  • conducting research and compiling inventories of heritage properties in the community
  • providing information and education on heritage resources and conservation
  • liaising between property owners and council
  • organizing heritage events (for example, walking tours, open houses)

You may want to consult with interested parties at the outset before making some key decisions about your program, and throughout the program development process.

The following is a list of other groups that may be able to provide valuable input into the development of a tax relief program:

  • municipal, regional and county councillors
  • municipal staff, such as finance, planning, heritage and economic development officers
  • property owners, especially of heritage property
  • local historical societies and Architectural Conservancy of Ontario chapters
  • Chambers of Commerce
  • ratepayers’ and neighbourhood associations
  • development industry representatives
  • real estate industry representatives

2: Develop eligibility criteria

Mandatory eligibility criteria

To be eligible for the tax relief, a property must contain a building, structure or a portion of a building or structure that is subject to a heritage conservation agreement for the property and either:

Heritage conservation agreement

A heritage conservation agreement is a voluntary legal agreement between the municipality or the Ontario Heritage Trust and an owner to protect the heritage features of a property, and to encourage good stewardship of the property. As the agreement is voluntary, it recognizes the intention of both parties to protect the heritage character of the property.

The Ontario Heritage Trust, a provincial Crown agency, is authorized under Part II of the Ontario Heritage Act (OHA) to enter into heritage conservation easement agreements with owners of heritage properties.

The Trust holds hundreds of easement agreements across the province. Most protect significant architectural features, but an increasing number are being used to protect endangered natural heritage and archaeological sites. The Trust’s conservation agreements recognize the heritage value of a property, raise awareness of heritage conservation practices, and ensure good stewardship of the heritage property into the future.

The Municipal Act, 2001 provides three options for the heritage conservation agreement:

  • an easement agreement between the property owner and the local municipality under section 37 of the OHA
  • an easement agreement (often referred to as a “conservation easement”) between the property owner and the Ontario Heritage Trust under section 22 of the OHA
  • an agreement between the property owner and the local municipality respecting the preservation and maintenance of the property

In this guide, “agreement” or “heritage conservation agreement” refers to all three options.

The first two options are binding on future owners of the property. These agreements ensure protection of the heritage property in perpetuity, as every new owner must conserve the property to the same extent.

In contrast, the third option is an agreement made with the current owner of the heritage property and may or may not be registered on title. It ceases to have effect when the owner sells the property.

One of the three agreement options is required because, under section 29 of the OHA, municipal designation alone does not oblige owners to maintain their properties on an ongoing basis. As the purpose of the tax relief measure is to offer an incentive for heritage property conservation, relief will only be made available to those owners who have made a long-term commitment to conserve their heritage properties.

Information contained in designation bylaws (for example, heritage attributes) can be useful in drafting heritage conservation agreements. Municipalities can adapt their heritage conservation agreements to reflect their local program. However, all agreements should contain certain core elements to ensure the conservation of heritage properties, including:

  • requirements for the owner to maintain the property in good condition and seek approval for alterations that would affect its heritage attributes or features
  • provisions for the municipality to monitor the condition of the property periodically

For more information about the Ontario Heritage Trust’s Heritage Conservation Easement Program, or if your municipality requires assistance in designing an effective conservation agreement as part of your heritage property tax relief program visit its website.

Appendix A provides more information on heritage conservation agreements and examples are available on the ministry website.

Municipal Property Assessment Corporation

In some cases, only a portion of a property is designated (for example, the farmhouse and its adjacent grounds, but not the entire farm property).

The Municipal Property Assessment Corporation (MPAC) can help municipalities determine the value of the designated portion of property that is deemed eligible under a local program. (See Appendix B for more information on assistance from MPAC.)

Additional Eligibility Criteria

Section 365.2 of the Municipal Act, 2001 gives municipalities the flexibility to establish additional eligibility criteria, and to specify different criteria for properties in different classes.

Municipalities can establish additional criteria to support strategic community development objectives, including:

  • rehabilitation of certain kinds of properties (for example, commercial, residential, agricultural)
  • regeneration of specific areas (for example, high vacancy areas, town centres)
  • conservation of certain parts of the community that have special character or tourist appeal (for example, heritage conservation districts, historic business or waterfront areas)
  • promotion of heritage designation in specific areas with relatively few properties designated under the OHA

Municipalities can also use the eligibility criteria to limit the number of eligible properties (and thus, the total cost of the program), including:

  • targeting their program to properties already subject to a heritage conservation agreement to make the program easier to administer in the first few years
  • targeting properties designated prior to a certain date to test the program as a pilot before extending it to additional properties
  • requiring that properties be in good condition or have a conservation plan approved by the municipality
  • setting a limit on the number of years a property can be eligible for tax relief (for example, 10 years)

Municipalities can provide relief to all eligible properties located in a heritage conservation district, provided that each is subject to a heritage conservation agreement or target specific properties in the district by developing additional eligibility criteria. For example, the municipality may target properties that:

  • date from an early time in the community’s development and retain most of their heritage features
  • represent an historic architectural style or method of construction, or the work of an important builder, designer, engineer or architect
  • are associated with a significant historic event or person

3: Decide amount of relief

The Municipal Act, 2001 allows municipalities that adopt a program to provide tax relief between 10% and 40% of the property taxes levied on the eligible property or eligible portion of the property. Municipalities may:

  • choose the specific amount of relief within the 10% to 40% range
  • apply different percentages to different property classes or to different types of properties within a class
  • specify a minimum or maximum amount of taxes for a year to be reduced or refunded under the bylaw. Minimum and maximum amounts can be set per eligible property, property class or for the overall municipal program
  • establish a threshold (for example, at least $500) of tax relief so that owners who would qualify for only a nominal amount of relief would not be eligible, so that the administrative cost to the municipality of providing the relief would not exceed the amount of relief itself

A municipality can also use the percentage of relief to target certain kinds of properties. For example, if a municipality wants to develop a program that will recognize the importance of agricultural heritage to the community, it could set a higher percentage of relief for properties in the farm class. Also, if there is a large proportion of income-generating heritage properties in need of repair, the municipality could set a higher percentage of relief for properties in the commercial class.

4: Decide form of relief

Tax relief under this program may take the form of a tax reduction, or it may be processed as a refund after property owners have paid their taxes.

For example, municipalities could:

  • reduce taxes by applying a credit against the owner’s property tax account to reduce the total balance owed in the current year (owners would see a credit adjustment posted on their property tax bill)
  • refund taxes by issuing a cheque
  • credit all or part of the tax reduction against the owner’s outstanding property tax liability from the current year and/or previous years, if applicable

A tax refund has the advantage of highlighting to owners what they have saved and the savings that can be put back into heritage property conservation.

5: Determine how to fund the program

Funding the Program

The heritage property tax relief program is subject to the same funding rules that apply to other optional municipal tax relief programs. It is up to municipalities to decide how they want to fund their program, for example, through:

  • non-tax revenue sources (for example, reserves, municipal program resources)
  • tax revenue sources (for example, a general municipal levy increase)

It is important to note that municipalities must adhere to the tax ratio and levy restriction rules under Part VIII of the Municipal Act, 2001.

Municipalities can control the total cost of the program in a number of ways by, for example:

  • choosing relief rates at the lower end of the 10% to 40% range
  • setting a cap on the amount of relief available to all properties or on classes with a higher proportion of eligible properties
  • limiting the number of applicants by establishing additional eligibility criteria (see Step 2)

Municipal tax collectors and other finance officials can help identify ways to fund the municipal portion of the program.

Provincial Contribution

A portion of property taxes goes to school boards and another portion goes to the municipality. The province shares in the cost of the program by funding the education portion of the property tax relief. The overall education funding available to school boards is not affected by a heritage property tax relief program. Under the current funding framework for public education, called Grants for Student Needs, overall funding for public education in Ontario is set on a fair and equitable basis, and is protected from fluctuations in property tax revenues. If the property tax revenues decline, provincial grants increase automatically to make up for the shortfall in the allocation to the overall funding level approved by the province.

If a municipality provides tax relief under this program, the education portion of the tax must be reduced in the same proportion as the municipal portion of the tax relief. The municipality recoups the cost of the education tax reduction by deducting the appropriate amount from the remittances it makes to school boards.

Process in single-tier structure

If your municipality is a single-tier municipality, the amount of the tax reduction or refund must be shared by the municipality and the school board(s) in the same proportion as you share in the tax revenues.

Process in two-tier structure

If a lower-tier municipality adopts the program, the upper-tier municipality may pass a bylaw to authorize a similar reduction or refund of taxes levied for upper-tier purposes. If the upper-tier does not pass a similar bylaw, the lower-tier has two choices:

  • provide tax relief on all portions of the property taxes levied and absorb the upper-tier’s portion of the tax relief
  • calculate the tax relief based on the lower-tier and education share of the property taxes only, without affecting the upper-tier’s tax revenues — in this case, the property owner would receive a lower amount of relief

If the upper-tier municipality does pass a bylaw to match that of the lower-tier, the cost of the relief must be shared by both municipalities and the school board(s) in the same proportion as these bodies share in the tax revenues.

Appendix C provides examples of program funding in a single-tier structure and a two-tier structure.

6: Establish an application process

Municipalities will need to establish an application process, which may include application forms, information requirements and submission deadlines.

Heritage property owners must submit an initial tax relief application. To receive tax relief for a particular year (for example 2022), property owners must submit their applications by February 28 of the following year (for example 2023).

It is up to municipalities to decide whether they want property owners to submit applications in subsequent years of the program, or to continue the relief based on the original application. If municipalities wish to receive applications after the first year, they must specify this in their program bylaw.

Municipalities can establish their own timelines to process tax relief applications, inform owners of their decisions and provide tax reductions or refunds. There is no legislative requirement for municipalities to pay owners interest if tax reductions or refunds under this program are not provided by a specified date.

A heritage conservation agreement may be developed before or after an application is submitted, or while the municipality is considering the application. For example, a municipality may decide to:

  • consider only applications with evidence of a valid agreement secured prior to the application
  • approve an application on the condition that an agreement be secured within a specific timeframe. In this case, tax relief benefits would begin on the day the agreement becomes effective
  • develop an agreement as part of the application review process. In this case, final approval would be given when the agreement is finalized

Municipalities may consider collecting key property information in the application form, including:

  • designation information (for example, date, bylaw number)
  • details about the heritage conservation agreement, or a copy of the agreement, if applicable
  • current photographs of the property (if not included with the agreement)
  • anticipated scope of work, if applicable (for example, multi-year project)
  • past conservation costs, along with appropriate receipts, if applicable (for example, if program criteria include the submission of a conservation plan and/or program is retroactive)

7: Develop a monitoring strategy

Municipalities are encouraged to develop a monitoring strategy to:

  • help ensure that heritage property owners comply with their heritage conservation agreements to maintain their properties
  • assess how well their program is working and bring to light any changes that may be needed (for example, evaluation of results against community objectives)

Heritage conservation agreements (discussed in Step 2 and Appendix A) should include monitoring requirements to ensure that owners who benefit from this program are meeting the terms of their agreements. For example, agreements could:

  • authorize municipal representatives to conduct property inspections, as required or scheduled
  • require owners to provide municipal staff with property insurance certificates and photos of their properties
  • require tax relief recipients to submit a heritage maintenance report (for example, to document work completed), as required or scheduled
  • require owners to hire a qualified heritage consultant (for example, every five years) to inspect and certify that the property has been maintained in accordance with the heritage conservation agreement

Municipalities can also include additional eligibility criteria in their bylaw and on the application form (for example, program terms and conditions) as they see fit.

8: Identify remedial actions

If a tax relief recipient demolishes the property or breaches the terms of the heritage conservation agreement, the municipality may require the owner to repay all or part of the tax relief that has been provided to the property owner under the program. The municipality may also do either of the following:

  • require the landowner to pay interest on the amounts being repaid at a rate that does not exceed the lowest prime rate reported to the Bank of Canada by Canadian chartered banks (Schedule 1 banks under the Bank Act) for the period calculated from the date the tax relief was provided (see section 365.2(15) of the Municipal Act, 2001)
  • take appropriate legal action against the property owner to enforce the terms of the agreement

Under section 349 of the Municipal Act, 2001, property taxes are a lien against the property and payment can be enforced against a subsequent owner. Section 365.2 provides that section 349 applies in cases where the property is sold to a new owner and repayment is still required.

Any amounts that a municipality receives back from a property owner in these circumstances must be shared with the upper-tier municipality (where applicable) and school board(s) in the same proportion that these bodies shared in the cost of the tax relief.

9: Pass program bylaw

A municipality must pass a bylaw to adopt the heritage property tax relief program. The contents of the bylaw will vary depending on the particular program parameters adopted by the municipality.

A lower-tier municipality that passes a bylaw must notify the upper-tier municipality of the amount of property tax relief it will provide under its program. Lower-tier municipalities are encouraged to provide a copy of their bylaw to the upper-tier municipality to enable the upper-tier to decide if it wants to provide similar relief based on its portion of the tax revenues.

Within 30 days after the bylaw is passed, municipalities must provide a copy of their bylaw to the Minister of Finance.

In addition, municipalities are encouraged to send a copy of their bylaw to the Programs and Services Branch of the Ministry of Heritage, Sport, Tourism and Culture Industries. (See Step 10) The ministry is collecting these bylaws so that it can follow how the program is being implemented across the province and help other municipalities that adopt the program.

Checklist: Heritage Property Tax Relief Bylaw

  • Introduction (See Introduction)
    • Should include:
      • reference to section 365.2 of the Municipal Act, 2001;
      • definitions, as necessary;
      • effective program start and end dates, if applicable.
  • Eligibility criteria (See Step 2)
    • should include mandatory eligibility criteria:
      • Designation under the Ontario Heritage Act;
      • Type(s) of Heritage conservation agreement(s).
    • may include additional eligibility criteria, if applicable:
      • Terms and conditions;
      • Different criteria for properties in different property classes or areas.
  • Amount and form of relief (See Step 3 and Step 4)
    • must include:
      • Percentage of relief (i.e., 10 – 40%);
      • Form of relief (i.e., reduction or refund).
    • may include, if applicable:
      • Different percentages of tax relief for different property classes or different types of properties within a property class;
      • Minimum and/or maximum amount(s) of relief to be provided to an individual property in a year;
      • Minimum and/or maximum amount(s) of tax relief to be provided to a given property class and/or all property classes in a year.
  • Application process (see Step 6)
    • should include: application process for the first year of the program.
    • may include: a requirement to submit an application for subsequent years, if applicable.
  • Remedial actions (see Step 8)
    • may include identify, if any, remedial actions for demolition or breach of the heritage conservation agreement.

10: Promote your program

Municipalities are encouraged to promote the benefits of their new heritage property tax relief program to maximize preservation of the community’s unique heritage.

If there is a Municipal Heritage Committee in the community, the committee can work with council and municipal staff to inform owners of heritage properties about the program. These committees have a wealth of experience in providing advice and promoting awareness of heritage conservation in the community.

The measure can be promoted in many different ways, including:

  • letters or brochures to designated property owners
  • a local heritage forum to talk about tax relief and other conservation incentives
  • articles in the local newspaper
  • information on municipal websites

Appendix A: Heritage conservation agreements

A heritage conservation agreement is a mandatory eligibility requirement for the heritage property tax relief program. The Municipal Act, 2001 subsection 365.2 (2) provides three options to meet this requirement. These are discussed in Step 2 and examples are available from the Ministry of Heritage, Sport, Tourism and Culture Industries.

Process

Negotiating a heritage conservation agreement is an opportunity for the municipality to develop a relationship with the owner of a designated property to help ensure good stewardship of the property. The negotiation process is important in addressing both parties’ concerns and clarifying expectations. Key steps of this process are outlined below:

  1. Respond to owner’s request (initial contact between the owner and the municipality): A property owner usually initiates contact, requesting information on the process to apply to the heritage property tax relief program and enter into a heritage conservation agreement. The municipality will generally ask questions to determine if the property meets the criteria established for such agreements
  2. Encourage owner to consult with legal and tax advisors: While the municipality can assist owners with the requirements of the program, it cannot provide professional legal or tax advice to an owner
  3. Visit the property and compile baseline information: A representative from the municipality should visit the property with the owner to assess its current status (e.g., boundaries, heritage attributes or features, historic land uses and hazards) and prepare baseline documentation using photographs and other recording methods. This documentation provides the basis upon which future improvements to the property are approved or breaches of the agreement are identified. This visit can also assist in acquiring other key information such as deeds, surveys and maps
  4. Initiate title search: As soon as it appears that a heritage conservation agreement is a real possibility for both parties, it is wise to conduct a title search to confirm the legal description and ownership, and to identify mortgages and other existing obligations that may be registered on title. Information obtained through the title search is critical to developing and registering a heritage conservation agreement
  5. Negotiate the terms of the agreement: Building a personal rapport and a positive relationship up front will ensure smooth and successful negotiations. The terms of each heritage conservation agreement will vary depending on the property’s heritage attributes or features and owner’s interests. Parties must focus their discussions on the requirements that are critical to the protection of the property’s cultural heritage value, as well as on the responsibilities of both parties under the heritage conservation agreement. As part of this step, parties should also determine whether a survey or special mapping is required to identify the areas or parts or the property subject to restrictions
  6. Finalize the agreement: Once the parties have agreed to the terms of the agreement, the agreement document must be approved and executed on behalf of the municipality in accordance with the municipality’s procedure for the approval and signing of legal agreements. If the agreement is to be registered in the local land registry office, the municipality should make the necessary arrangements to ensure that the agreement is registered

Key elements

To be effective in conserving heritage properties, all heritage conservation agreements, whether they are registered in the local land registry office or not, should contain key elements, which are provided in the chart below.

Checklist of key elements in a heritage conservation agreement

  • Legal description of the property eligible for property tax relief
  • Statement (including background information) of the property’s heritage attributes or features to be conserved
  • Baseline documentation (usually including photographs) of the status of the property and its heritage attributes or features at the time of the agreement
  • Obligation for the owner to maintain the property in good condition
  • Requirement for the owner to obtain approval (for example, from the municipality or the Ontario Heritage Trust, depending on who holds the easement) for any alteration to the property that would affect its heritage attributes or features (and associated context); and to provide the appropriate plans or specifications for the proposed alteration
  • Condition that the owner cannot demolish the property or any part of it without the permission of the municipality or Foundation
  • Provisions for the municipality or Foundation to monitor the condition of the property (e.g., through inspections) and take remedial action if necessary

Appendix B: Assistance from the Municipal Property Assessment Corporation for determining the assessment when a portion of the property is eligible under the heritage property tax relief program

Under the Ontario Heritage Act, designation of a heritage property applies to real property — the land itself and the buildings and structures on it. In some situations, it may be inappropriate for a designation bylaw to be applied to an entire property.

The property comprises an historic farmhouse on a 100-acre farm. Only the historic farmhouse, the barn and the land associated with them are considered by council to be of heritage value and worthy of designation under the Ontario Heritage Act. The remaining farmland is excluded from the designation bylaw.

In such cases, a registerable description (usually a reference plan of survey) is used to define the portion of the property that is designated and therefore eligible for heritage property tax relief.

The Municipal Property Assessment Corporation (MPAC) can help municipalities determine the portion of the property’s assessment that relates to the part of the property that is eligible under the heritage property tax relief program. Municipalities may contact MPAC to request this information.

Municipalities should provide MPAC with sufficient documentation (for example, designation bylaw, land registry records) regarding the portion of the property that is designated under the Ontario Heritage Act.

Please send your information requests to your local MPAC Municipal Relations Representative. MPAC will provide municipalities with the special assessment requested within 90 days of receiving the request. For more information, visit MPAC’s website.

Appendix C: Program funding process

Example 1: Process in a single-tier structure

A single-tier municipality passes a bylaw to provide property tax relief to owners of eligible heritage properties.

In this municipality, 60% of property taxes are allocated to the school board.

Assuming the total cost of relief provided under the program amounts to $100,000, the municipality must:

  • deduct $60,000 (for example, $100,000 x 60%) from its usual remittances to the school board
  • fund the other $40,000 (for example, $100,000 x 40%), which is the municipal portion of the property taxes

The school board will be compensated by the province for its revenue shortfall to maintain per student funding levels as determined through the Grants for Student Needs.

Example 2: Process in a two-tier structure (participation of both tiers)

A lower-tier municipality passes a bylaw to provide property tax relief to owners of eligible heritage properties.

In this municipality, 50% of property taxes are allocated to school boards, 30% to the lower-tier municipality, and 20% to the upper-tier municipality.

Assuming the total cost of relief provided under the program amounts to $100,000, the lower-tier municipality must:

  • deduct $50,000 (for example $100,000 x 50%) from its usual remittances to school boards
  • fund $30,000 (for example $100,000 x 30%), and the upper-tier municipality must fund $20,000 (for example $100,000 x 20%)

School boards will be compensated by the province for their revenue shortfall to maintain per student.