Farmhouse loophole to be closed

Near St. Marys, Ontario

A bit of good news for those concerned about our rural heritage.

The provincial government is closing a loophole that allows farmhouses to be demolished without the need to obtain a demolition permit.  A “proposed change” to Ontario’s Building Code (OBC) would finally fix this. [1]

As background, the OBC distinguishes between a “building” and a “farm building.” “Farm building” is defined as “all or part of a building

(a) that does not contain any area used for residential occupancy,
(b) that is associated with and located on land devoted to the practice of farming, and
(c) that is used essentially for the housing of equipment or livestock or the production, storage or processing of agricultural and horticultural produce or feeds.” [2]

The quintessential “farm building” is of course the barn.

The problem arises because of some sloppy drafting way-back-when — or was it a deliberate policy choice?  The OBC says that, “for the demolition of a building located on a farm”, you are exempt from the near-universal requirement for a demolition permit under the Building Code Act. [3]  Since the words “a building located on a farm”, rather than “farm building”, are used, this is interpreted as meaning that the demolition of farmhouses, as well as the demolition of barns and other “farm buildings”, does not require a demolition permit.

Near New Hamburg, Ontario

One might point out that, if a farmhouse was designated under the Ontario Heritage Act, the owner would need the approval of the municipality to demolish the structure.  And where a farmhouse was on property listed under the OHA, the owner would have to give the municipality 60 days notice of their intention to demolish.  So why does it matter what the OBC says?

It matters because of how these heritage controls are administered.

The municipal building department is usually the first point of contact when people want to construct or demolish buildings, and the Building Code Act allows building officials to refuse to issue permits where the construction or demolition would contravene the Act, the OBC “or any other applicable law.”

In the case of a designated or listed property, the OHA is “applicable law”, one saying you need special approval or need to give special notice in order to demolish a structure on the property.  So where the owner applies for a demolition permit the building department would routinely advise them to first get the needed approval or give the needed notice — and would not issue the permit until that was done.

But in cases where the owner doesn’t apply for a permit, because no application is required in the first place … you see the problem.  Technically the law is broken if owners ignore the OHA requirements but the municipality is denied a primary means of enforcing the heritage controls.

Near St. Marys, Ontario

Now most old farmhouses in Ontario are not listed or designated or even identified on local inventories. But even where there is no local recognition whatever, surely they deserve better than being treated as so much refuse, disposable without any local oversight or even record of their demise.

So this change to the OBC — which will narrow the exemption from “building located on a farm” to “farm building located on a farm”, thus excluding farmhouses — is a welcome one. Kudos to the ministries of Municipal Affairs and Tourism, Culture and Sport for making it happen. Cabinet approval of the amendment, part of a package of OBC changes, is expected by the end of next year.

Near Bobcaygeon, Ontario

And now that we’re moving into good weather, what better way to spend a sunny day than driving the backroads of your town or township admiring old farmhouses? While you still can, because they sometimes disappear quickly.

Better still, help out with a farm survey or inventory!

Near St. Marys, Ontario

Note 1: See: http://www.mah.gov.on.ca/AssetFactory.aspx?did=15695. There is an error here. Under “Proposed Code Change” it should say “Revise Sentence 1.3.1.1.(1)(a)”

(emphasis added).

Note that unlike the Ontario Heritage Act the Building Code Act has a definition of demolition: ‘ “demolish” means to do anything in the removal of a building or any material part thereof and “demolition” has a corresponding meaning.’ This definition is broader than the accepted interpretation of “demolish” in the OHA; the inclusion of “or any part thereof” would encompass so-called partial demolition, which would be considered an alteration under the OHA.

Note 2: This and other defined terms (in italics) are in Sentence 1.4.1.2.(1) of the OBC.

Note 3: Sentence 1.3.1.1.(1)(a).

Probing Bill C-323

The legislation we’ve been following, private member’s Bill C-323, is headed to committee!  But it’s uncertain when that will be.  The Environment committee is still busy with a major review of the Canadian Environmental Protection Act.  The committee is off the last two weeks of April and only has five weeks in May and early June before rising for summer break.

So it may not happen until fall.  In the meantime, we in the heritage community should be thinking hard about what to say to the committee — and who should say it — when they hold public hearings on the bill.

There is no question that the principle of the bill deserves strong support.  The principle being ... that the income tax system should be used to provide incentives for the rehabilitation of heritage property.

That doesn’t mean everything in this particular legislative proposal is fine and dandy.  A too-uncritical stance may not be the best course — either policy-wise or politically.  Now is the time to closely scrutinize the bill’s details.

One person doing just that is Paul King, a past president of Community Heritage Ontario/Patrimoine Communitaire de l’Ontario and a member of the CHO/PCO board.  Until recently Paul was a partner in the law firm Fasken Martineau.

In the current issue of CHOnews, Paul talks about what is in the bill (and what is not). [1] He cites and comments on the issues raised during the Second Reading debate by government MPs, particularly Ginette Petitpas Taylor, Parliamentary Secretary to the Minister of Finance.

What concerns do Liberal MPs have about this bill? On February 10, 2017, in the House of Commons, they argued that:

• Tax changes should ideally be made as part of the budgetary process so that all options are examined and a balance is struck between priorities. It is critical that new fiscal commitments are only made when they are affordable and the government can do so responsibly.

• The Bill does not cap the amount property owners can apply for and obtain.
  [Note: The Bill is drafted so that the Minister of Finance has the authority to cap the amounts. For instance, the Minister could prescribe a limit to expenses by using the "prescribed costs" subsection of the rehabilitation expenses definition.]

• There is a concern that this Bill will not be a benefit for the "middle class”.
  [Note: "Middle class" is a commonly used ill-defined buzzword used by politicians.]

• The Income Tax Act already contains incentives to encourage donations for the preservation of historic assets.
  [Note: Tax deductible donations are limited in scope and do not, for example, help the owners of private residences or downtown main street commercial properties.]

• Some property owners will be eligible for the rehabilitation tax credit while their neighbours, who do not own a designated historic property, would not be eligible.
  [Note: This concern does not recognize the cultural value to Canadians generally of rehabilitating historic properties.]

• The tax credit is just providing an unexpected perk to owners for doing work that they are already obligated to do.
  [Note: Unless a property is subject to a heritage easement, there is no such obligation for an owner to carry out rehabilitation work.]

• The government will have to assess whether Parks Canada has the resources to meet the anticipated increased applications for historic designation and whether the Canada Revenue Agency is equipped to handle the added administrative burden.

Concluding that "some of these concerns have merit and deserve attention" at committee and that "[others] are dubious," Paul goes on to raise a number of other questions about the bill.

What other concerns about this Bill need to be reviewed by the House Standing Committee on Environment and Sustainable Development?

• Should there be a clawback of the tax credit or capital cost allowance or perhaps some other mechanism to deal with rehabilitation work that is later undone by neglect, alteration or demolition?  Under some provincial legislation, demolition of designated heritage structures is controlled but this does not apply to national historic sites unless they are provincially designated.
  
  
• Definitions need to be clarified perhaps by adding details in regulations.  For example, rehabilitation expenses do not include costs incurred solely for aesthetic or cosmetic purposes. What does this mean?  Some key heritage ornamentation (such as brackets under eaves, carved gingerbread on gables, or roof cresting) were never functional and solely installed for aesthetic purposes.  Is painting with heritage colours or wallpapering in heritage patterns solely for cosmetic purposes?  Exterior shutters were once functional but are now solely aesthetic, so can  the rehabilitation or replacement of shutters be included as a rehabilitation expense?
  
  
• Is there a way to include heritage properties in heritage conservation districts without also including properties with no heritage attributes?  This issue may already be addressed indirectly in the Bill because any rehabilitation must be carried out in accordance with conservation standards (being the standards and guidelines for the conservation of historic places in Canada adopted and applied by the Parks Canada Agency).  Also, any rehabilitation work must be certified by a professional architect confirming that the work was carried out in accordance with conservation standards.
  
  
• Is it a good idea to leave the judgement call on eligible work to architects? This may be both too broad and too narrow because most architects are not heritage experts.  Perhaps “professional heritage consultants” would be better.  This would include heritage architects but also other heritage experts with appropriate qualifications and experience.

To these questions and concerns, which I share, here is one more.

The rationale for the legislations relies heavily on U.S. and Canadian precedents.  The U.S. model is the Historic Tax Credit, which is only available for properties that will be used for a business or other income-producing purpose.  In Canada, the Commercial Heritage Properties Incentive Fund (CHPIF) pilot had a comparable focus. [2]

This bill goes way beyond these models by making the 20 per cent tax credit available to residential properties as well.  In doing so, it obviously has broader appeal.  But it could undercut one of the strongest arguments for this, or any, tax change — that the program would generate more money for the federal treasury than it costs. [3]

It also greatly increases the number of potentially eligible properties, not necessarily a good thing in the eyes of a government clearly concerned about how wide a net is being cast and the implications in terms of costs and administrative burden.

Don’t get me wrong.  I am the first to agree that we need better, broad-based incentives for the preservation of designated properties.  But by making this bill a vehicle for achieving that, do we risk losing the whole shebang?

What do you think about the finer points of the bill?  Have a closer look here.

Note 1: From “Bill 323: An Act to Amend the Income Tax Act”, CHOnews, Spring 2017, pp. 1-3. The excerpts here are used with Paul’s permission.

Note 2: For more on CHIPIF see OHA+M from December 21, 2016.

Note 3: This is because, as the American experience proves, the return over time on the investment the tax credits stimulate result in increased (taxable!) business income.