Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE: May 8, 2015

FILE NO.: WR 128189

Assessed Person(s): Bruno Marcoccia and Clara Marcoccia

Appellant(s): Frank Marcoccia

Respondent(s): Municipal Property Assessment Corporation (“MPAC”) Region 09

Respondent(s): City of Toronto

Property Location(s): 110 Saint Clarens Avenue

Municipality(ies): City of Toronto

Roll Number(s): 1904-024-150-05000-0000

Appeal Number(s): 2995364 and 3011408

Taxation Year(s): 2013 and 2014

Hearing Event No. 564198

Legislative Authority: Section 40 of the Assessment Act, R.S.O. 1990, c. A.31, as amended

ARB Case Name: WR 128189

Heard: October 14, 2014 in Toronto, Ontario

APPEARANCES:

Parties	Counsel+/Representative
Frank Marcoccia	Self-represented
MPAC	O. Bocalbos
City of Toronto	No one appeared

DECISION OF THE BOARD DELIVERED BY CRISTINA MARQUES

ISSUE

1The subject property is a detached multi-residential low - rise building, located at 110 Saint Clarens Avenue, in the City of Toronto. The two-storey structure with a basement level and attic is comprised of a one 1-Bedroom unit, and eight 2-Bedroom units. It has a total building area is 8,316 square feet (“sq. ft.”), with a lot size area of 4,293 sq. ft. and was built in 1906.

2Both parties agree that the dispute before the Board is centered on the Gross Income Multiplier (“GIM”) calculation used to calculate the Current Value Assessment (“CVA”).

3Osmondo Bocalbos, appearing for MPAC, takes the position that the GIM of 10.73 that was used is appropriate, and based on sales, he maintains that the assessment as returned, if anything, reflects a low current value. He asks that the assessment be confirmed by the Assessment Review Board (“Board”) as returned at $926,000.

4Frank Marcoccia, the owner of the subject property, takes the position that the assessment for the subject property is too high in comparison to the assessments of similar properties in the vicinity. He is of the opinion that the GIM used by MPAC is too high and coupled with the inappropriately marked up income of the subject property, results in an overestimation of current value. He testified that a more realistic current value is approximately $660,000.

5Pursuant to the Assessment Act (“Act”) for taxation years 2013 and 2014 the assessment was returned at $926,000 using a modeled gross income approach.

6The Board must determine the correct current value for the 2013 and 2014 taxation years as of the legislated valuation day, January 1, 2012 and if that value is equitable, having reference to the assessments of similar lands in the vicinity.

DECISION

7The Board finds that the correct current value of the property is $926,000 for both taxation years.

8The Board also finds that an assessment at the current value as found does not require a reduction to achieve equity.

9The assessment is accordingly confirmed for the 2013 and 2014 taxation years.

REASONS FOR DECISION

Legislation

10The Board must have regard to s. 1, s. 19.(1), s. 19.2(1), s. 40.(19), s. 44.(3)(a) and (b), and s. 45 of the Act when determining if the assessment under appeal is correct.

11Section 1 of the Act defines current value as follows:

“current value” means, in relation to land, the amount of money the fee simple, if unencumbered, would realize if sold at arm’s length by a willing seller to a willing buyer.

12Section 19.(1) of the Act states:

19.(1) Assessment based on current value. – The assessment of land shall be based on its current value.

13Section 19.2(1) of the Act provides:

19.2(1) Valuation days. – Subject to subsection (5)¹, the day as of which land is valued for a taxation year is determined as follows:

2. For the period consisting of the four taxation years from 2009 to 2012, land is valued as of January 1, 2008.

3. For each subsequent period consisting of four consecutive taxation years, land is valued as of January 1 of the year preceding the first of those four taxation years.

14Section 40.(19) of the Act states:

40.(19) Board to make determination. – After hearing the evidence and the submissions of the parties, the Board shall determine the matter.

15Sections 44.(3)(a) and (b) of the Act state:

44.(3) Same, 2009 and subsequent years. – For 2009 and subsequent taxation years, in determining the value at which any land shall be assessed, the Board shall,

(a) determine the current value of the land; and

(b) have reference to the value at which similar lands in the vicinity are assessed and adjust the assessment of the land to make it equitable with that of similar lands in the vicinity if such an adjustment would result in a reduction of the assessment of the land.

16Section 45 of the Act states:

45. Powers and functions of the Assessment Review Board. – Upon an appeal with respect to an assessment, the Assessment Review Board may review the assessment and, for the purposes of the review, has all the powers and functions of the assessment corporation in making an assessment, determination or decision under this Act, and any assessment, determination or decision made on review by the Assessment Review Board shall be deemed to be an assessment, determination or decision of the assessment corporation and has the same force and effect.

Current Value – Evidence and Analysis

MPAC’s Position

17Mr. Bocalbos, testified that on May 30, 2014 he inspected the property, in preparation for this valuation analysis. He reviewed the subject’s income valuation, and he is confident that the GIM used for the valuation for the subject property is correct. He indicated that multi-residential properties are sold in the market based on the income that they are able to generate. These properties are valued by MPAC using a gross income approach to value. The Potential Gross Annual Income (“PGAI”) for the property is multiplied by a GIM to arrive at the assessment.

18The assessor testified that MPAC’s assessment of the subject property was originally calculated based on a unit mix of eight bachelor units and one 1-bedroom units using Fair Market Rents (“FMR”) of $778 and $972, respectively. Upon review of documentation and confirmation with the owner of the building, it was determined that the correct unit mix consists of one 1-bedroom unit and eight 2-bedroom units. Hence, the 2012 CVA of $926,000 is based on an incorrect PGAI of $86,352. Mr. Bocalbos stated that the 2012 CVA should be based, on a PGAI with the correct unit mix and correct FMRs of $119,184, which results in a correct CVA of $1,279,000.

19Mr. Bocalbos, in support of the assessment as recommended, presented Exhibit 1 consisting of an MPAC report asserting the assessor’s position, which also included:

• location and current value study map;

• unit mix and rental income reports for the subject property;

• photographs of the subject property, and the suggest comparables;

• current value study with five comparable sales; and

• time adjustment factors table.

20He calculates that the correct valuation of the subject property should be as shown in Table 1:

Table 1

Suite Type	# of Units	Fair Market Rent / Unit	PGAI	GIM	Current Value / Suite
1 Bedroom	1	$972	$11,664	10.73	$125,155
2 Bedroom	8	$1,120	$107,520	10.73	$1,153,690
Total 9			$119,184		$1,279,000

21Mr. Bocalbos submitted that based on his inspection and data correction he is confident the property is under assessed at $926,000, and the current value should be $1,279,000. He advised that MPAC is not seeking an increase in assessed value for the 2013 and 2014 taxation years.

22Mr. Bocalbos presented suggested comparables which are considered by MPAC to be similar to the subject property on the basis of year built, quality of construction, location, and unit mix. He relied on the sale of walk up apartment properties, all within 3 kilometers from the subject property, to determine whether properties are assessed at or close to their current values.

23Details of each property on the Current Value Study are summarized in Table 2:

Table 2

	Subject Property	Comparable 1	Comparable 2	Comparable 3	Comparable 4	Comparable 5	Median
Property Address	110 St. Clarens Avenue/ Built 1906	1530 King Street West/ Built 1899	2252 Dundas Street West/ Built 1910	3 Elm Grove Avenue/ Built 1931	22 Brad Street/ Built 1900	554 Lansdowne Avenue/ Built 1902
Sale Date		Dec-2012	Nov-2010	Jan-2012	Apr-2012	Aug-2011
Sale Price ($)		925,000	1,182,500	1,506,000	1,330,000	915,000
TA Factor		0.90	1.16	1.00	0.97	1.05
TA Sale Price ($)		834,350	1,374,065	1,498,470	1,283,450	959,835
GIM in Sale		9.54	13.04	12.04	14.65	11.40	12.04
CAP Rate on Sale(%)		3.87	4.78	4.33
Total Units	9	8	8	12	8	9
Sale Price/ Unit ($)		104,294	171,758	124,873	160,431	106,648	124,873
TAR ($) 1 Bedroom Units	972	792
TAR ($) 2 Bedroom Units	1,120	1,179
TAR ($) Bachelor Units		667
# of Storeys	2	3	3	3	3	3
Distance from the Subject		2.4Km	1.3Km	2.1Km	2.5Km	1.3Km

24Mr. Bocalbos relied on these sales to determine whether properties are assessed at or close to their current values. Each sale was time-adjusted to bring the sale to the valuation day of January 1, 2012. Each adjusted sale amount represents an estimated sale value the subject property could realise if sold at the legislated valuation date. The time-adjusted sale of the five comparables establishes a range of values between $834,000 and $1,498,000.

25The assessor also gave details on MPAC’s analysis of sales in the neighbourhood of the subject between January 2010 and December 2012, and stated that the area experienced an overall increase of 44.48% in market value over that time frame. Time adjustment factors for each month during the study period were provided together with the data for the 94 sales analyzed. Mr. Bocalbos testified that the assessment as returned at $926,000 falls in the range of the five comparable time adjusted sales. For that reason he argued that the assessment of $926,000 is reflective of current value as required by s. 19.(1) of the Act.

26During cross-examination the appellant testified that out of all of MPAC’s suggested comparables the only property that is somewhat similar to the subject property is the property located at 554 Lansdowne Avenue.

Appellant’s Position

27Mr. Marcoccia filed Exhibit 2 consisting of:

• A copy of his arguments;

• A letter of opinion of value from Skyway Realty Ltd.;

• A tenant data form with rental income and unit mix;

• A property income and expense report;

• A copy of an engineer’s report from Carson, Dunlop & Associates Limited; and

• A list of 5 properties, with photographs.

28Mr. Marcoccia disagreed with the assessor; in his view the sales presented by MPAC are not comparable to the subject property. He argued that MPAC fails to recognize that his property is modest in comparison and inferior to MPAC’s suggested comparables because they are all of much better quality and in superior locations. He argued that his property is a converted property, has high maintenance costs and has low appeal in the market. His evidence is that the units are generally rented on a monthly basis “geared to low income”, and that he does not enter into lease agreements with his tenants.

29Mr. Marcoccia argued that while the gross income approach to value is an appropriate measure to compare values of sold properties to properties that did not sell under normal circumstances, it is not suitable when the property is unique and comparable properties are difficult to find. He submits that the best method of valuation is to use the actual rents of the subject property in the calculation. He is of the opinion the methodology employed by MPAC overstates the real income of the property, and that the model is not accurately allowing for the real costs of operating this type property.

30The appellant argues that correct valuation of the subject property should not be calculated on fair market rents, rather be based on the actual rents collected, as shown in Table 3:

Table 3

Suite Type	# of Units	Rent
1 Bedroom	1	$930
2 Bedroom	8	$873.95
Total 9

31Mr. Marcoccia testified that in 2011 he only collected an average of $684 per month for a two bedroom unit because the tenants are low income, and don’t always pay the rent on time or at all.

32The appellant’s argues that because the “fair market” rent does not coincide with “actual rent” the subject property is over-assessed. The Board is asked to consider if the rents used by MPAC are the economic rents for the property.

33The appellant on relies on a, Skyview Realty Ltd., letter of opinion dated October 8, 2014, stating that the property was inspected, and that as of January 2012 the estimated value of the subject property is $660.000.

34The appellant also relies upon is an inspection report from Carson Dunlop & Associates Limited, dated January 22, 1990, stating that there are concerns in relation to foundation, structural, and other deficiencies with the building.

35No evidence was presented to support or substantiate Mr. Marcoccia’s testimony that the subject property has a very high turnover rate, resulting in equally high maintenance costs.

36The Board places little weight on the letter of opinion from the realtor, and on the engineering report because the authors were not present for cross-examination.

37Mr. Marcoccia submitted that the subject property is a distinctive property, and that it is extremely difficult, if not impossible, to find comparable properties that were also converted into multi-residential units. While he acknowledges that his list of comparables is not ideal, he is of the opinion that these suggested comparable provide a more relist value for the subject property.

38Details of each of five properties with sales relied upon by Mr. Marcoccia sold, summarized in Table 4:

Table 4

	Comparable 1	Comparable 2	Comparable 3	Comparable 4	Comparable 5	Median
Property Address	5 Greentree Court/ Year built / 1956	12 Buttonwood Avenue/ Year built / 1958	8 Hector Avenue/ Year built / 1958	4029 Old Dundas West/ Year built / 1969	502 Gilbert Avenue/ Year built / 1958
Sale Date	Oct-2011	Sept-2011	Apr-2011	Jan-2011	Jan -2011
Sale Price ($)	960,000	2,700,000	1,150,000	1,600,000	1,030,000
TA Factor	n/a	n/a	n/a	n/a	n/a
TA Sale Price ($)	n/a	n/a	n/a	n/a	n/a
GIM in Sale	n/a	n/a	n/a	n/a	n/a
CAP Rate on Sale(%)	n/a	n/a	n/a	n/a	n/a
Total Units	17	40	17	29	23
Sale Price/ Unit ($)	56,471	67,500	67,647	55,172	44,782	58,314
TAR ($) 1 Bedroom Units	n/a	n/a	n/a	n/a	n/a
TAR ($) 2 Bedroom Units	n/a	n/a	n/a	n/a	n/a
TAR ($) Bachelor Units	n/a	n/a	n/a	n/a	n/a
# of Storeys	3	4	2.5	8	2.5
Distance from the Subject	n/a	n/a	n/a	n/a	n/a

39Mr. Marcoccia testified that his comparables provide a per unit value ranging from $44,785 to $67,674, values substantially lower than the rates per unit derived from MPAC’s suggested comparables.

40The Board rejects the appellant’s properties in Table 4 as good comparables because these properties do not appear to be converted properties, and because they are newer, larger buildings with unit mixes numbering from seventeen to forty units. In the Board’s view the market for these larger apartment building would be different than any unit converted building and the lower sales price per unit may be explained by economies of scale.

41The appellant argues that MPAC has failed to recognize the challenges related with the subject property, and that a method other than the GIM approach should be used to determine correct current value for the subject property. The Board accepts the assessor’s testimony that MPAC’s methodology has been consistently applied, in determining the assessed current value of both the subject property and comparable properties.

Board’s Analysis on Current Value

42Mr. Marcoccia has not adequately demonstrated that the current value for his property is incorrect. As for his submissions that his property should be assessed at $660,000; the Board is not satisfied that the evidence leads to that conclusion.

43An indicator of current value is an arm’s length and market-tested sale of a property on the valuation date, January 1, 2012, or close to it. Since the subject property did not sell, the Board relies upon the sale of similar properties in the vicinity on or close to the valuation day.

44The sales best evidence before the Board is provided in MPAC’s five sales. The accepted comparables are similar to the subject property in all the essential features. The unit mix for the properties presented is similar to the subject property, and will likely rent for similar values. The time adjusted sale price for these properties is between $104,294 and $171,758 per unit, and showing a median GIM of 12.04 which is considerably higher than the 10.73 GIM MPAC is using to establish the current value of the subject property. While Mr. Maroccia challenges the GIM of 10.73 he did not present any evidence to support the use of a lower GIM.

45The Board finds that the correct current value is best established by multiplying the PGAI by the GIM. According to MPAC the assessment as returned for the 2013 and 2014 taxation years at $926,000 is understated because it was calculated on an incorrect PGAI of $86,352, rather than a PGAI of $119,184 for a value of $1,279,000, as based upon the economic rents for multi-residential units in the market place established in Exhibit 1 rather than the rents actually charged for the subject property.

46If the actual rents are used in the GIM calculation the result is:

1 x 1 Bed @ $930 = PGAI of $11,160 (11,160 x 10.73) $ 119,747

8 x 2 Bed @ $873.95 = PGAI of $83,900 (83,900 x 10.73) $ 900,247

for a total value of value of $ 1,020,000 (rounded)

47The current value of the property at $926,000 for the 2014 taxation year as put forth by MPAC does not appear to be unreasonable.

48The appellant did not introduce any evidence to support a GIM lower than the 10.73 used by MPAC.

49The Board did not receive detailed evidence on the appellant’s sales comparison. Mr. Marcoccia’s evidence is that the property at 554 Landsdowne Avenue is the most similar. This nine unit property sold for $106, 648 or $959,835.

50The Board finds the current value of the property to be $ 926,000.

Board’s Analysis on Equity

51Section 44.(3)(b) mandates and directs that after determining current value, the Board shall have reference to the value at which similar lands in the vicinity are assessed. The Assessment to Sales Ratio (“ASR”) is determined by dividing the assessment as returned with the time adjusted sale price an ASR falling below 1.0 is an indication that MPAC’s valuation methodology may be resulting in assessments below values determined in the market place. Conversely, an ASR falling above 1.0 is an indication that MPAC’s valuation methodology may be resulting in assessments above values determined in the market place.

52MPAC relied on the sales of 19 properties to determine whether properties are assessed at or close to their current values, as listed in the Equity analysis of Exhibit 1. The median ASR for the sold properties is 0.97, which is within MPAC’s acceptable range of ASRs between 0.95-1.05. This result satisfies the Board that generally speaking, MPAC’s valuation methodology is achieving values similar to those determined in the marketplace, and no reduction is warranted.

CONCLUSION

53The assessment is confirmed at $926,000 for the 2013 and 2014 taxation years.

Footnotes

1. 1Subsection 5 permits the Minister to prescribe a different valuation day. A different day has not been prescribed.