According to the Assessment Act (the “Act”), the legislation that governs property taxation in Ontario, the Assessment Review Board (the “ARB”) has authority to determine whether lands are “farm lands used only for farm purposes by the owner” for purposes of valuing property. Section 19(5) of the Act provides that in valuing “farm lands used only for farm purposes by the owner”, consideration must be given to the current value of lands and buildings for farm purposes only (i.e. not their value for any other purpose) and consideration must not be given to any sales of lands and buildings to “persons whose principal occupation is other than farming”. Generally, lands valued as “farm lands” will be assessed a lower value for property tax purposes than lands valued as residential, commercial or industrial lands because of the restrictions in Section 19(5).
The ARB has previously identified several factors to be considered in determining whether lands are “farm lands”, including: physical characteristics of the land, including soil quality and its capacity to support crops if the activity is raising crops; use of surrounding lands, to the extent that activities in the immediate vicinity suggest that the land on the property will support a farming activity; the history of the use of the property, including whether the land has previously been farmed; whether activities on the land are undertaken with a legitimate intention to “farm”, as opposed to activities intended to create the appearance of “farming” for purposes of obtaining favourable tax treatment; the scale of the farming activity in the sense that the activity must not be too limited to indicate that farming is taking place; permitted use of the land, including zoning; the general nature of the locality; whether the lands have physical characteristics of a farm; and, whether the lands involve a bona fide farmer. The ARB’s focus is on the use of the land – a factual issue to be decided on a case-by-case basis.
The ARB recently considered an appeal by a landowner in the Kingston, Ontario area who claimed a reduction in the assessed value of his property because it should be considered “farm lands used only for farm purposes”. The subject property was assessed at $428,000, with $121,500 apportioned to “Conservation Lands” and $306,500 apportioned to lands in the “Residential” property class. The appellant landowner also contended that the property should be classified in the “Farm property class”. In response to the appeal, the Municipal Property Assessment Corporation (“MPAC”) took the position that the subject property was properly classified as a combination of “Conservation Lands” and “Residential” lands, but offered that the proper value to be assessed was $368,000. The appellant landowner agreed with this proposed value.
It should be noted that while the ARB has authority to determine whether lands are “farm lands” for purposes of assessing the value of the lands, it does not have authority to classify lands as “farm lands”. The General Regulation made under the Act says that, where the ARB has determined the value of “farm lands used only for farm purposes” but there is still a question as to whether the lands should be included in the “Farm property class”, the ARB must refer the question to the Agriculture, Food and Rural Affairs Appeal Tribunal. So, in this particular appeal proceeding before the ARB, there was the odd circumstance of two parties who agreed on the number to be decided (the practical issue that the ARB did have authority to determine) but disagreed on how to get to the number.
Although the ARB could not determine the property classification issue, it did proceed to determine that the appellant’s lands were “farm lands used only for farm purposes by the owner”. The subject property was over 90 acres in size, with a one-storey single family detached residence built in 1981 and outbuildings including a barn and goat pen. The appellant landowner testified that he used roughly 80 acres for farm activity, including some of the lands classified as “Conservation Lands”. He cited activities such as: renting part of the property for horse grazing and boarding; gathering and processing maple sap from trees on the property; keeping laying hens and selling their eggs for cash; raising and harvesting goats; raising and harvesting cattle; clearing pasture land; adding new fences and gates; etc.
MPAC’s assessor testified that he saw four cattle, two goats and 40 chickens onsite when he visited the farm. MPAC submitted that the appellant’s activities did not constitute a bona fide farm operation but only a small hobby farm. However, the appellant’s evidence about his activities on the property was uncontested and the ARB accepted that, while the appellant’s operation was small, it was still farming: growing hay, using pasture to raise livestock; harvesting livestock; and, selling eggs. The ARB rejected MPAC’s argument that the subject property was a “hobby farm” and could not qualify as “farm land used only for farm purposes”. The ARB concluded:
“The Board finds that the term “hobby farm” is imprecise in this instance, and the exact parameters of what constitutes a “hobby farm” as compared to “farm land used only for farm purposes” is unclear in the evidence and submissions before the Board. No single factor is determinative of whether a property is, or is not, farm lands used only for farm purposes. Taking a purposive approach to interpreting s. 19(5), considering the entirety of the evidence, and weighing the factors … above, the Board finds that a portion of the Subject Property is farm lands used only for farm purposes within the meaning of s. 19(5) of the Act.”
Read the decision at: 2023 CanLII 39089 (ON ARB)
