Leasing a Vacant Lot to a Parking Operator in Ontario: Zoning, Tax Class and the Lease Terms That Matter

Three separate rule sets apply to the same piece of land. Each one answers a different question, and passing one tells you nothing about the other two.

I'm Arthur Zhao, a Toronto real estate Broker.

When a piece of land is leased to a parking operator, it falls under three sets of rules that have nothing to do with one another. Zoning asks whether this land may be used as Public Parking at all. Municipal licensing asks whether the business running the lot holds a commercial parking lot licence under Chapter 545 of the Toronto Municipal Code. Assessment asks which property class the land belongs to under O. Reg. 282/98. A yes to one question does not answer the other two.

This piece takes them one at a time, starting with the tax class, then turns to what the lease or operating agreement needs to cover. The zoning and licensing examples are the City of Toronto's; other Ontario municipalities have their own by-laws.

Assessment class: a category that exists only where the municipality opts in

O. Reg. 282/98, the general regulation under Ontario's Assessment Act, creates a parking lots and vacant land property class. Section 13(1) says that class applies in a single-tier or upper-tier municipality only if council has passed a by-law opting in.

Where it applies, s.13(2) lists what goes into it, drawn from land that would otherwise be in the commercial property class:

• a parcel of land used exclusively for the parking of vehicles;
• vacant land;
• railyard land owned and used exclusively by a railway company.

Section 1(1) defines vacant land as land that is not being used and has no buildings or structures on it, or has a building under construction, or a building not yet used, or one that is substantially unusable.

The regulation also sets up a separate vacant land subclass inside the commercial class and inside the industrial class (s.20). In a municipality that has not opted into the s.13 class, commercially classed vacant land sits in that commercial subclass.

What changes when an empty lot becomes a paid lot? The regulation does not answer that directly, so read the following as conditional. If your municipality has opted in, the land could move from the “vacant land” item to the “used exclusively for parking” item, both inside the same s.13(2) class. If it has not opted in, the land would stay in the commercial class but may no longer meet the s.1 definition of vacant land, because it is now being used. Confirm the classification of your parcel with MPAC; this piece does not cover tax rates.

What Chapter 545 calls a commercial parking lot

Chapter 545, Licensing, of the Toronto Municipal Code defines a commercial parking lot as any location that demands compensation in relation to the use of a parking space. Article XLV, which regulates these lots, was added by By-law 804-2015 and came into force September 1, 2015.

The definition then excludes five kinds of parking:

• parking operated by or under the authority of the Toronto Parking Authority;
• any City agency, board, commission, corporation or division;
• a parking space rented on a weekly, monthly or yearly basis for one person's exclusive use;
• a parking space on the driveway of a residential building;
• parking operated by a registered charity with a CRA registration number.

The trigger is compensation. A lot where drivers pay by the hour or the day fits the definition; a lot that charges nothing does not.

Duties that land on the owner, and the operator duties that affect the land

Apart from its definitions, Article XLV addresses the operator in every section but one, and that one is aimed at the property owner. Section 545-524: no owner of a property shall permit any person to operate a commercial parking lot at that property unless that person holds a commercial parking lot operator's licence under Chapter 545.

Three more sections connect the owner to the licence file:

• §545-523: the operator needs a separate licence for each commercial parking lot.
• §545-526: the licence application must state the location and dimensions of the land, the maximum number of vehicles, the hours of business, each entrance and exit, and any office to be erected on the lot.
• §545-527: the operator must file proof that the owner authorized it, either a letter signed by the owner or a copy of an operating agreement signed by the owner, and must notify Municipal Licensing and Standards in writing within 5 days of any expiration, termination or change in that authorization.

Section 545-528 then sets site conditions the operator must keep, and they play out on your land: keep the lot clean and the abutting sidewalk and street free of dirt from it, prevent surface water from draining across the abutting sidewalk, and never move snow from the lot onto an abutting sidewalk or roadway. On a corner lot, no entrance or exit may be less than 7.6 metres from the nearest intersection of the curbs, unless it was lawfully located closer on December 19, 1956.

The remaining sections cover how the operator charges (a time-based rate under §545-529), the rate signs at each entrance and pay station (§545-530) and the City's right to inspect a licensed lot (§545-528E).

Zoning: whether this land may be used as Public Parking

Toronto's Zoning By-law 569-2013 defines Public Parking in Chapter 800 as premises having an area for the parking of one or more vehicles as a principal use, where parking is available for public use with or without a fee. Note the difference from Chapter 545: zoning does not care whether anyone pays.

In the CR (Commercial Residential) zone, Public Parking appears in clause 40.10.20.20 as a permitted use with conditions, tied to conditions (7) through (11) of clause 40.10.20.100:

• (7) on a lot subject to Development Standard Set 1, 2 or 4, it may not be in an above-ground parking garage; on SS3 or SS5 lots there is no location condition;
• (8) the entrance or exit may only be through a zone that permits public parking;
• (9) on a surface lot, public parking spaces must be at least 1.5 metres from a lot line abutting a lot in the Residential or Residential Apartment zone category;
• (10) one parking attendant building is allowed, with a maximum height of 4.0 metres, a maximum interior floor area of 5.0 square metres, and at least 6.0 metres from a lot line abutting a street;
• (11) on a surface lot, a fence is required along lot lines abutting a street (except vehicle and pedestrian access) and along lot lines abutting a Residential or Residential Apartment zone lot.

The permitted-use lists I reviewed for the CL (Commercial Local) zone (Chapter 30.20) and the E (Employment Industrial) zone (Chapter 60.20) do not list Public Parking. I have not reviewed residential zones, the other commercial and employment zones, or site-specific exceptions in Chapter 900, so this is not a statement about every zone. For a specific parcel, confirm the zone and any exception with the City's zoning review staff.

Lease or operating agreement: what the contract has to carry

No statute decides whether your arrangement with the operator is a lease or a licence-style operating agreement; the document you sign does. Chapter 545 itself names an operating agreement signed by the owner as one acceptable form of authorization under §545-527, alongside a signed letter.

The bylaw puts site duties on the operator, but it does not say who pays for what between you. Points to settle in writing:

• Insurance and liability: who carries liability coverage for the lot, in what form, and how claims arising on the land are handled between the parties.
• Snow: who clears it and where it goes, since §545-528D(1) bars moving it onto the abutting sidewalk or roadway.
• Lighting, drainage and surface: who maintains and repairs them, including the drainage duty in §545-528C(3).
• Authorization: what you sign for the licence file under §545-527, and whether the operator must copy you on any notice it gives the City about a change to that authorization.
• Restoration: the condition the land must be returned in when the arrangement ends.
• Early termination: an exit right if you expect to redevelop or sell.

Whether a given draft works as a lease or as a licence depends on its wording and the facts. Have a real estate lawyer review it for your situation.

Lease vs. operating agreement (licence): what each leaves with the owner

Before you sign

Grouped by the rule set each item answers to: