Property Assessment and Classification Review - Float Homes



A trend that seems to be gaining popularity is for people to reside in dwellings that are floating on the water (commonly referred to as float homes).

These properties look like ordinary houses, except that they are located on the waterfront. They are different than recreational houseboats as they have no means of self-propulsion, they occupy a permanent berth, and they are hooked up to utility connections (e.g. hydro). The residents of these homes can take advantage of the same local services (such as the education system) as residents of traditional homes.

Questions have arisen as to the assessability of these floating dwellings. Municipalities believe these homes should be subject to taxation because they are receiving municipal services.


  • It is recommended that residential dwellings located on the water should be subject to property taxation at the residential rate. If there is ambiguity in the definition of assessable property under the Assessment Act, it is recommended that the Act be amended to clarify that permanent dwellings located on water are assessable in the same manner as dwellings located on land.

    Motorized vehicles, commonly known as houseboats, which are designed for short-term recreational accommodation would continue to be treated like personal property (i.e. chattels) and would not be assessed.


The legislation governing the bereavement sector in Ontario (the Cemeteries Act and the Funeral Establishments Act) does not permit funeral homes to be located on cemetery sites. However, it was indicated during the consultations that facilities referred to as "visitation centres", which serve the same essential function as funeral homes, are being operated on cemetery sites.

Visitation centres are providing such services as visitations, memorial services and post-burial receptions. The only functional difference that has been observed between visitation centres and funeral homes is that visitation centres are not offering on-site embalming services.

The emergence of visitation centres on cemetery sites has raised concerns about competitive inequities in the bereavement sector. Under the Assessment Act, cemeteries and burial sites are exempt from property taxation, while funeral homes are subject to taxation at the commercial rate. By virtue of being located on cemetery grounds, visitation centres have been treated by MPAC as exempt from taxation.
Funeral home operators feel that they are not able to compete fairly with visitation centres. Both of these facilities are competing for the same business, but funeral homes have higher overhead costs because they are subject to property taxation.


  • In order to level the playing field, it is recommended that visitation centres and other facilities that provide non-interment services on cemetery sites should be subject to property taxation in the same manner as their off-site counterparts.

    The burial ground areas of cemetery sites should retain their exemption from taxation. It is only visitation centres or other non-interment facilities that should be identified on the assessment roll as taxable.



This recommendation was made to the former Minister of Finance in an interim report dated December 5, 2001.


Currently, the working face of gravel pits (that is, the area under active excavation) is included in the industrial property class pursuant to O. Reg. 282/98.

Beyond the working face of many quarries and gravel pits, there are unused areas which are licensed for future excavation. These areas are currently included in the residential property class pursuant to O. Reg. 282/98.

A proposal was made during the consultations to include areas licensed for future gravel extraction in the industrial class.


  • It is recommended that changes not be made to the classification of gravel extraction sites.


It is a basic premise of our property classification system that properties should be classified based on their actual use, not based on potential future uses. The assessment of a property will reflect potential uses of the property because the potential use has an impact on market value, but the tax classification should reflect the current use.


Assessment Methodology

Representatives from the hotel industry made submissions during the consultations to express concerns about the methodology that is used to assess hotels. Specifically, the industry believes that the methodology for assessing hotels incorporates a business value rather than just reflecting the value of the real estate, therefore the industry believes that hotels are over-assessed relative to other commercial properties.

When valuing hotels for assessment purposes, MPAC utilizes the income approach to value based on the uniform system of accounts which is the standard approach used in the valuation of hotels in most North American jurisdictions. A step-by-step process, commonly referred to as the pro-forma approach, utilizes a standardized spreadsheet to facilitate the valuation.

In essence, the valuation approach establishes the income stream of a hotel, deducts operating expenses and charges from the income stream to arrive at a net income, capitalizes the net income, and then deducts the value of chattels (furniture, fixtures and equipment) to arrive at a market value for the hotel property.

While the approach used in Ontario follows the North American standard, there are jurisdictional variations in certain components of the valuation. For example, while the percentage amounts that are deducted for management expenses and chattels fall within a consistent range, some jurisdictions use the high end of the range while others use the low end.

On the specific issue of business value versus real estate value, the assessment authorities and the courts in most North American jurisdictions are satisfied that the current income approach removes business value through the deduction of management fees and other business expenses.


  • Having regard for the assessment methodology that is applied in other jurisdictions, it is proposed that the following standards be used by MPAC in the assessment of hotels in Ontario:

    • The standard deduction for management expenses should be 5%, but MPAC should have discretion to apply a higher or lower percentage based on the circumstances demonstrated for each individual property.

    • The standard deduction for chattels (furniture, fixtures and equipment) should be 15%, but MPAC should have discretion to apply a higher or lower percentage based on the circumstances demonstrated for each individual property.


While it is recognized that the assessment approach used by MPAC to value hotels is reflective of the North American standard, a few adjustments to the standard deductions are being recommended with the aim of ensuring that hotel assessments in Ontario remain consistent and competitive with those in other Canadian provinces.



  • These recommendations were made to the Minister of Finance in a letter of the Special Advisor dated April 22, 2002, as part of the pre-budget consultation process.
  • In the Ontario Budget on June 17, 2002, the Minister of Finance announced that the Government plans to prescribe standard deductions to be used by MPAC when assessing hotels. The standards would be 5% for management expenses and 15% chattels, and MPAC would have the discretion to apply different percentages in unique circumstances.

Suite Hotels

It was pointed out during the consultations that there are growing inequities in the property tax treatment of hotel facilities, with some being taxed at the residential rate, some at the multi-residential rate, and some at the commercial rate.

The differential tax treatment of hotels is largely a result of the fact that the definition of "hotel" in O. Reg. 282/98 has not kept pace with the new ownership and operational structures emerging in the tourist accommodation industry. O. Reg. 282/98 stipulates that hotels shall be included in the commercial property class. Hotels are defined for the purposes of O. Reg. 282/98 as having the same meaning as the following definition of "hotel" in the Hotel Registration of Guests Act:

"Hotel" means a separate building or two or more connected buildings used mainly for the purpose of catering to the needs of the travelling public by the supply of food and also by the furnishing of sleeping accommodation of not fewer than six bedrooms as distinguished from any other building or connected buildings used mainly for the purpose of supplying food and lodging by the week or otherwise commonly known as "boarding houses" or of furnishing living quarters for families and having a dining room or restaurant commonly known as "apartment houses" or "private hotels".

The residential and multi-residential classification of tourist accommodation has become a particular issue in the case of suite hotels. In this type of hotel, guests are provided with amenities beyond the traditional hotel room - the suites usually include a kitchen (equipped with utensils), a dining area, and laundry facilities. Quite significantly, many of these hotels do not provide food or restaurant service to guests - this is significant because the provision of food to guests is a key element of the above-noted definition of "hotel".

In situations where the hotel operator does not provide its own food service, the Assessment Review Board has been scrutinizing the other characteristics of the accommodation to determine the appropriate classification of the property. (It is interesting to note that the guests of many hotels will be under the impression that the hotel does offer food service because room service is available or because there may be a restaurant on site. However, the food service is often contracted out to a third party whose facilities may not be located on the hotel's property, or the restaurant may be located adjacent to the hotel but not owned or operated by the hotel. In these cases, the hotel owner is not considered to be the entity providing food service.)

In cases where hotels do not provide food service and therefore do not meet the definition of "hotel" in section 17 of O. Reg. 282/98, the Assessment Review Board has found that many suite hotels fall within the definition of the multi-residential class in section 10 of O. Reg. 282/98 because the building has more than six "self-contained units" that are used "for residential purposes". Other suite hotels have been included in the residential property class because the suites in the building have been registered as condominium units under the Condominium Act which brings them within the definition of the residential class in section 3 of O. Reg. 282/98.

The condominium phenomenon is becoming more prevalent in the tourist accommodation industry. In some cases, a condominiumized building will be used in its entirety as a hotel, bearing the flag name of the hotel operator and appearing to the public to be a traditional hotel. In other cases, it is only designated units, or blocks of units or floors within a residential condominium building that are providing transient accommodation to the travelling public.

During the consultations, frustration was expressed with the unlevel playing that is developing between different types of hotel operators. It is felt that suite and condo hotels, which are attracting the residential or multi-residential rate of taxation, are enjoying an unfair advantage over traditionally-structured hotels which are taxed at the commercial rate. Hotel owners are seeking consistency and equity within the tourist accommodation sector.

Concerns were also expressed in the interest of public safety and security. It was noted by the Assessment Review Board in a recent case that several suite hotels did not comply with the Hotel Fire and Safety Act. Concern was expressed that properties which offer accommodation to the travelling public may not be meeting the life safety standards which have been prescribed for hotel establishments.


  • It is recommended that all hotel operations be included in the commercial property class. To achieve this objective, it is recommended that the definition of "hotel" in O. Reg. 282/98 be modified to capture facilities that are in the business of providing transient accommodation to the travelling public, regardless of whether on-site food service is provided and regardless of whether the property is a condominium.

Previous - Farms   |   Next - Industrial Property Class   |   Back to the table of contents