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How Rent Reductions are Calculated

Provincial law assumes that 20% of rent collected by landlords is used to pay the property tax, so where the taxes decrease, rents are reduced by 20% of the percentage of the tax reduction. As an example (for one unit):

Rent Reduction from Tax Reduction

Rent: $1,000 per month
Taxes: $ 200 per month
Tax reduction: $ 20 per month
 
Tax reduction (as %): 10%
20% rule: X 20%
Rent reduction (as %): 2%
X $1,000 rent
Rent reduction (in dollars): $20 per month

In Ottawa, most properties pay less than 20% of the rent in taxes. Therefore, the automatic rent reduction calculation gives tenants a larger rent reduction than the tax decrease actually justifies.

TIMING OF RENT REDUCTIONS
The Municipal Property Assessment Corporation now values properties every year. Quite apart from what the City of Ottawa decides about property taxes, assessment increases will lead to tax increases and assessment decreases will lead to tax decreases. Tenants need to note that rent reductions will only take place in rental buildings that have a tax decrease, after taking into account both any assessment change and the City of Ottawa's tax changes.

If City Council lowers tenants taxes in 2010, the corresponding rent reductions will take place at December 31, 2010, or in effect at January 1, 2011.

Tenants who are entitled to a rent reduction due to property tax decreases will receive a notice from the City of Ottawa in September or October, letting tenants know the percentage rent reduction you are entitled to. Many landlords will send you their own notice telling you the dollar amount of your rent reduction.