Here’s a summary of the provided article, along with a key takeaways section at the beginning and split into paragraphs.
Key Takeaways
- A proposed class-action lawsuit alleges that Montréal, Laval, Longueuil, and Brossard are incorrectly calculating property transfer taxes (also known as "welcome taxes").
- The core issue is the use of the unadjusted property assessment roll value, rather than the adjusted value that takes into account the gradual increase in property value, for calculating the tax.
- The lawsuit argues that homeowners are being taxed on future property value increases that haven’t yet been fully realized.
- If successful, the class action could result in reimbursements for affected homeowners and a change in how these cities calculate the property transfer tax.
Summary
A class-action lawsuit has been filed against the cities of Montréal, Laval, Longueuil, and Brossard, alleging that they are incorrectly calculating property transfer taxes (also known as "welcome taxes"). The lawsuit, filed on October 31, claims that these cities are overcharging new homeowners by using an inflated base for calculating the tax. According to the claim, several thousand real estate transactions in these cities have been affected by these miscalculations.
The heart of the matter lies in the base of assessment used by the cities to determine the property transfer tax. In Quebec, this tax is imposed on new buyers when a real estate transaction occurs. The basis for taxation is typically the highest of the following values: the price paid for the transfer of the property, the price stipulated in the deed of sale, or the market value of the property as it appears on the property assessment roll. The highest value is then multiplied by a "comparative factor" (1.08 in Montreal, 1 in the other cities) and the transfer taxes are applied to the final price.
The lawsuit focuses on the situation when the calculation is based on the property assessment roll value. These rolls are established every three years, and many cities opt to spread out the increase in property values over this three-year period. This means that instead of showing the full increase in property value in the first year of the new roll, they gradually increase the assessed value over the three years. For example, if a property’s value increases by $150,000 over the 2026-2028 assessment period, this increase won’t be reflected immediately in 2026. Instead, the assessment will gradually increase by $50,000 each year until 2028.
While these cities use the gradual, or "étalement," increase for calculating property taxes, they use the unadjusted assessment roll value for calculating property transfer taxes. The class-action lawsuit argues that this practice results in buyers being taxed on a future increase in value. "You can’t impose transfer taxes on the total value if, for example, in 2023, we were in the first year of the spreading," explains Me. Bourgoin, the lawyer representing the plaintiffs.
The lawsuit uses the example of the lead plaintiff, Pierre-Luc Pelletier, who purchased a property in Rosemont for $600,000 in 2024. The City of Montréal valued the property at approximately $755,000 for the 2023-2025 assessment roll. However, due to the city’s spreading policy, the adjusted taxable value of the property was $698,000 for 2024. Because the assessment roll value was higher than the purchase price, it was used to calculate the transfer tax. As a result, M. Pelletier paid $12,074 in property transfer taxes based on the $755,000 value. Had the city used the adjusted value of $698,000, he would have paid $10,829 – a difference of $1,245.
The class-action lawsuit must first be authorized by a judge of the Superior Court of Quebec before it can proceed. The judge will decide if the claim is sufficiently serious to proceed to the next stage. If authorized, evidence will be presented in court, and a settlement between the parties may be reached at any point. If the plaintiffs are successful, the judge will determine the compensation and the terms. According to Me Bourgoin, individuals do not need to register as they are automatically included if they have experienced the same issue.
Although the class action focuses on transactions in Montréal, Laval, Longueuil, and Brossard, the possibility exists in other municipalities as well. The ability to make use of the "étalement" is possible in any city before the adoption of its budget. As Me Bourgoin says, Quebec and Lévis were verified and do not make use of "étalement".
In April 2025, the Court of Quebec ruled in favor of buyers who argued that transfer taxes should be calculated based on the adjusted taxable value rather than the unadjusted assessment roll value. In that case, the City of Montréal was ordered to pay $5,600 to the plaintiffs.