Industrial To Commercial Rates

by Darrin DeRoches July 26 - August 1, 2012

There is a big difference in the tax rate from industrial to commercial rates. This may not seem like a big deal but with the city starting to grow and the brownfields being redeveloped, a company will look at all factors. This week I dealt with a company that has been in Hamilton for many years and about 5 years ago they built a brand spanking new facility without taking in to consideration the tax rates. They are now looking at how they can bring down their costs and they’ve realized that they are paying a higher industrial tax rate. Their facility has about 20 per cent of industrial production and the other 80 per cent is commercial space. They called me for advice and asked if I could refer them to a tax specialist. They believed they could explain the usage and get the 80 per cent of their facility changed to the lower commercial tax rates. This would be a huge savings and help their business thrive in our city.      I made a call to a specialist in these matters who has done over 10,000 cases in lowering the tax rates for such commercial companies. He was able to give great advice but unfortunately the company that I was helping would not be able to lower their taxes. Their point that 80 per cent of the facility was being used as commercial and therefore should be taxed as such does not fly with the government. If every company sent in a request to lower their taxes stating a percentage of use inside their facility, the government would have no way of policing this. So even if 1 per cent of the property is being used as industrial, the other 99 per cent will be taxed at the higher rate.     Obviously we did not like this answer and continued searching for a solution. The answer made sense but the costs were prohibited. If a separate building housed the industrial part of the business then it would be assessed as industrial tax rate and the main building would then be able to given the commercial tax rate and drastically bring down the yearly taxes their company is paying. This designation of separate buildings is the only way the government will accept the division of tax rates, but in this case, building a separate structure would cost way more than the savings. This company will continue to pay industrial tax rates on the entire property for years to come.     The answer to the problem seems pretty simple, but it got me thinking. Whoever designed, built and advised the company to build their new state of the art building should have known about this. The big thing in today’s buildings is about LEEDS building and saving energy. The company that is building the facility should have simply separated the 20 per cent industrial section to save them a great deal of money in wasted tax payments. A little bit of knowledge is dangerous. V     Darrin DeRoches is a local real estate and mortgage broker. He can be reached to answer questions, comments or stories about real estate experiences through this weekly column at mail@uniquerealty.ca.