Halifax sues developer over taxes in Mic Mac Mall sale

The Halifax Regional Municipality is taking a developer to court over what it says are unpaid taxes on the sale of the Mic Mac Mall, looking for clarity on when companies must pay up.

Halifax filed the lawsuit against Joseph and Anthony Ramia's Rank Inc. this July in the Supreme Court of Nova Scotia. It asked for a legal ruling on whether Rank should pay deed transfer tax on the transfer of "beneficial ownership" of the Dartmouth mall's land.

Everyone who buys property in Halifax owes the city 1.5 per cent of the purchase price, which is set out under the Municipal Government Act, but Rank got the land in an indirect way where no deed changed hands.

The legal title to the mall land is held by a numbered company — 4239474 Canada Inc. — while the "beneficial interest" in the property is held by Mic Mac Mall Limited Partnership, according to Halifax's application. Property records show Joseph Ramia as president of the numbered company.

Both Halifax and Rank said that in September 2021, Rank bought all of the shares in the numbered company, and all of the limited partner interests in the Mic Mac Mall partnership.

But the parties disagree on whether deed transfer tax applies in this type of deal.

Halifax argues that it gave Rank control "over both legal and beneficial ownership" of the mall property, but the company "refused" to pay the tax when requested.

In a notice of contest filed Monday by lawyer Robert Grant, Rank said the sale of those shares did not involve transfer of interests in "real property," and there was no deed filed during this transaction, so the tax is not applicable under the current bylaw.

The lawsuit was first reported by the Halifax Examiner. 

Martin Ward, the lawyer representing the municipality, said there's currently "uncertainty" around how the Municipal Government Act applies to sales done outside of a deed.

"Our position is that the legislation covers all transfers of property no matter what mechanism you use. And so we're seeking clarification from the court that that's the case," Ward said outside court Tuesday, after an appearance to set future dates.

Ward said it's important to take this legal step because some developers have already been paying deed transfer tax on these types of transactions, and some have not.

It's also uncertain exactly how much Rank would owe under this tax, Ward said, since the city does not know how much the company paid for the shares and interests. 

The Property Valuation Services Corporation (PVSC) assessed the roughly 15-hectare mall property at $89.4 million for 2023, down from $116 million in 2021 when Rank made the deal. If, for example, Rank paid $116 million at the time, a 1.5 per cent deed transfer tax would work out to about $1.7 million.

When asked if the outcome of this case could impact other developers in the city who take over property this way, Ward said "it could."

Rank wrote that Halifax never attempted to take deed transfer tax from similar transactions before this. It said the municipality is using the situation as a "test case" to support its goal of collecting taxes on this kind of transaction.

A one-day hearing is set for April 2024 before Justice Scott Norton.

Joseph Ramia is planning a new major development on the mall lands, called the M District, which is moving ahead alongside master neighbourhood planning for the area which would include any changes to land-use bylaws, parks or transit hubs.

The current plan is a phased project that would develop the parking lots and Chapters building into seven 30- to 36-storey residential towers with about 1,660 apartments and five residential buildings nine storeys high with ground-floor retail and about 240 apartments.

There would also be a 12-storey retirement facility containing about 400 units and an addition of six to 14 stories to the west face of the mall that would include parking, office and entertainment space. Underground parking is also planned.

The second phase of public engagement on the project is slated for this fall, when draft planning documents will be shared for comment and feedback.