2291465 Ontario Inc. v. Municipal Property Assessment Corporation, Region 25 and the Town of the Blue Mountains, 2015 CanLII 32536

Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE:

June 5, 2015

FILE NO.:

WR 131639

Assessed Person(s):

2291465 Ontario Inc.

Appellant(s):

2291465 Ontario Inc.

Respondent(s):

Municipal Property Assessment Corporation (“MPAC”)

Region 25

Respondent(s):

MPAC Region 25 and the Town of the Blue Mountains

Property Location(s):

151 King Street East

Municipality(ies):

The Town of the Blue Mountains

Roll Number(s):

4242-000-016-02910-0000

Appeal Number(s):

3042996 and 3091752

Taxation Year(s):

2014 (and deemed 2015)

Hearing Event No.

570162

Legislative Authority:

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

Heard:

November 21, 2014 in the Town of the Blue Mountains

APPEARANCES:

Parties

Counsel⁺/Representative

Appellant

Sushila Pathak

MPAC

Kathryn Hutchinson

Municipality

Dennis Doyle

DECISION OF THE BOARD DELIVERED BY DAN WEAGANT

INTRODUCTION

1The subject property at 151 King Street East lies in the community of Thornbury and comprises a 73’ x 165’ (12,045 square feet) corner lot, improved by two structures. The first structure is a single storey commercial building, of 800 square feet (sq ft). The second building is a 660 sq ft single storey building used for residential purposes. The buildings were constructed in 1974 and 1975 respectively. The original use of the residential building was as a detached garage in support of the larger building.

2For the 2014 taxation year, MPAC returned an apportioned value of $183,000 in the commercial tax class and $86,000 in the residential tax class for a total assessment of $269,000 which is $47,000 higher than what was returned in 2008.

3The Parties agree that the buildings are of a lower quality class and that they lack insulation and are of little value without significant improvements to support contemporary commercial and residential uses. The Parties further agree that the bulk of the value of the property lies with its land portion.

4The Appellant believes the value returned by MPAC is too high and that the increased taxes resulting from the increase in assessment for the 2014 taxation year make the tax burden unbearable. When reminded by the Board that the adjustment of taxes per se is not in its jurisdiction, the Appellant acknowledged that the issue at hand is the current value of the subject property.

5The Board must determine two things in these appeals. Firstly, from the evidence submitted at the hearing, the Board must decide the current value of the subject property. Secondly, the Board must determine, having reference to the assessments of similar properties in the vicinity, if the assessment of the subject property should be reduced for the purpose of equity.

DECISION

6The Board finds that the current value of the subject property at 151 King Street East is confirmed at $269,000, apportioned as follows:

• Commercial Tax Class – $183,000

• Residential Tax Class - $86,000

7The Board also finds that the evidence does not support the conclusion that the current value of the property as determined above requires an equity reduction.

8Accordingly, the assessment of the property at 151 King Street East is confirmed at $269,000 for the 2014 taxation year. This decision is deemed for the 2015 taxation year.

LEGISLATION

9In making its determination of the issues of these appeals, the Board must consider sections 1, 19.(1), 40.(19), 44.(3) and 45 of the Act.

1Section 1 of the Act states:

“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.

2Section 19.(1) of the Act states:

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

3Section 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.

4Section 44.(3) of the Act states:

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.

5Section 45 of the Act states:

Powers and functions of Assessment Review Board – Upon an appeal with respect to an assessment, the Assessment Review Board may review the assessment and, for the purpose 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.

MPAC’S EVIDENCE

10Ms. Hutchinson used the modified market cost approach to determine the current value of the subject property. She explained that this approach uses the current cost to replace the various components of the buildings on the site, then deductions are made for depreciation and the condition of the existing structures. Once these adjustments are made, the value of the land is added to arrive at a total value of the subject property.

11She testified that, based on the Automated Cost System (ACS) employed by MPAC, the net value attributed to the existing buildings is $34,664, with $23,500 attributed to the commercial building and $11,164 attributed to the smaller residential building.

12Ms. Hutchinson derived the value of the land portion by comparing it with the value of the land portion of sales of properties in the area that sold near the valuation date stipulated in the Act, of January 1, 2012.

13In support of the value returned for the land portion of the subject property, Ms. Hutchinson selected six properties for comparison. These comparable properties sold between June 2010 and September 2012. The sale values of each were divided between the value of the buildings and the value of the land to make a direct comparison of land value to the subject property. A summary of each comparable property from Ms. Hutchinson’s testimony and her valuation report follows:

• Sale A - 135 King St. East is an office building converted from a former residential building. The property size is 70 feet by 165 feet, with a 1,074 sq ft structure built in 1965. This property sold in June 2011 with a land value of $229,234 or $19.85 per sq ft;

• Sale B – 115 King St. East is a two storey office / retail building with residential use on the upper floor. It is situated on a lot of 65 feet by 165 feet (10,725 sq ft) and like the subject property is a corner lot. It was constructed in 1895 and underwent a significant renovation in 2004. The land is valued at $306,521 or $28.58 per sq ft and sold in August 2012;

• Sale C – 55 King Street East is a one storey retail building on a lot of 107 feet by 60 feet (6,398 sq ft). It was constructed in 1958. This property sold in November 2010 with a land value of $211,290 or $33.00 per sq ft;

• Sale D – 33 Bridge Street has a lot measuring 62 feet by 217 feet (13,454 sq ft), with frontage on the Mill Pond in Thornbury. It sold in September 2012 with a land value of $286,050 of $ 21.26 per sq. ft.;

• Sale E – 21 Arthur Street West sold in April of 2012, with a land value of $198,558 or $18.34 per sq ft.. The lot measures 66 feet by 164 feet (10,824 sq ft).

• Sale F – 23 Arthur Street West is a single storey retail building on a lot of 45 feet by 165 feet (7,425 sq ft). It sold in June of 2010 with a land value of $176,016 or $23.71 per square foot.

14Ms. Hutchinson testified that owing to the relatively small increase in sale values over time during the years represented by her selected sales, the sale prices of the six comparable properties were not adjusted for changes over time. It is her opinion that the values of the sales themselves are sufficient to represent their values as of January 1 2012. Ms. Hutchinson also testified that, to make the comparable properties most suitable for the land value comparison, she undertook a similar modified cost approach for the buildings in each sale to come up with the residual land value.

15She concluded that the land portion of the subject property is valued within the range determined by her comparison and accordingly, should be considered reasonable and correct, while noting that corner lots are considered to be more valuable for commercial purposes owing to their having frontage and exposure on two streets.

16As part of her testimony, Ms. Hutchinson completed an equity study that took into account the sales of commercial properties in the vicinity that took place between January 2008 and December 2012. The study included 72 sales. Each sale value was adjusted for changes in value over time, so that they could be compared equally as though the sales all took place on January 1, 2012. These time adjusted sale (TAS) values were then compared to their 2012 assessments. Ms. Hutchinson summarized her findings by indicating the median assessment to TAS value of the 72 properties in her analysis was 0.97. For commercial properties, the median ASR is considered to be correct if it falls between 0.95 and 1.05 for such a study. She concludes that owing to her findings, commercial properties in the vicinity are equitably assessed and accordingly, no adjustment to the assessment of the subject property is required.

APPELLANT’S EVIDENCE

17Ms. Pahtak focused her submissions on two areas. Firstly, she provided her own perspective on the sales submitted by Ms. Hutchinson for the purpose of determining current value. In her submissions Ms. Pahtak indicated her belief that all of the properties used by MPAC are more valuable than the subject property. She indicated that each was superior in value to the subject property as the buildings situated on these properties were either currently leased or were about to be leased at a rate that is far higher than what could be achieved at the subject property. She also indicated that the comparable properties were all in superior locations for the purpose of commercial use and that using them served to elevate the value determined by MPAC. Ms. Pahtak provided the Board with a series of photographs of each of the comparable properties to demonstrate their superiority in terms of location and appeal for commercial tenants.

18By contrast, Ms. Pahtak submits that the subject property is on the outskirts of the commercial node of Thornbury away from traffic; that it supports no regular income; it is a smaller building that those it is compared to and is of significantly inferior construction and condition.

19Secondly, Ms. Pahtak submitted three alternative properties in the area that she believes demonstrate that the subject property is assessed too high:

• 137 King Street East is two doors closer to the center of Thornbury. It is a two storey building with a structure of better construction. The lot size of 71 feet by 165 feet (11,715 sq ft) is similar to the subject property. This property has an assessed value of $161,926 for the 2014 taxation year.

• 81 King Street East has a similar location on a corner lot, closer to the main intersection of Thornbury. It is currently used as a bistro which Ms. Pahtak considers a high income business, thus supporting rents that are superior to the subject property. The 2014 assessment is $281,500.

• 68 Arthur Street West is in a similar location to that of the subject property, but on the west of the town center. It also supports a restaurant use on a corner lot and is nearby to an existing Tim Hortons outlet that Ms. Pahtak believes should increase its value. The 2014 assessment for this property is $267,000.

20In summary, Ms. Pahtak believes the comparable properties in Exhibit 2 demonstrate that, by comparison, the assessment of the subject property is too high.

ANALYSIS

21With respect to the issue of current value, the Board has only the evidence of MPAC to consider. Ms. Hutchinson provided the Board with two things; an opinion of building value and an opinion of land value. These two values were determined through different methods. The building value, totaling $34,660 was determined through the cost approach to value. This value represents two separate buildings, and the Board finds that there is no evidence to suggest this value should be any lower. While the buildings are of a basic construction and level of finishes, the photographic evidence and the oral submissions from the parties suggest that they are structurally sound, but are in need of updating to current standards.

22The land value of the subject property was determined by Ms. Hutchinson using the direct comparison approach to value. She compared the subject property to the sale values of six other properties nearby. This comparison showed a range of land value per square foot of $18.34 to $33.00, with a median of $22.49. When applied to the subject property’s land area, this median per sq.ft. value results in a land value of $270,892, which is very close to its total value as returned. Adding this median land value to the building value already determined results in a total that is far higher than what has been returned. By considering this land value, MPAC has made a reasonable case that the buildings on the site add nothing to its overall value.

23Mr. Doyle submitted that very little of the overall value is attributable to the buildings and that where the assessment of the property has risen over the previous valuation date in 2008, that increase is attributable to the land portion.

24The Board finds that the best evidence of current value is that of MPAC. The value attributed to the buildings is reasonable, given their size and condition. The land value attributed to the subject property is $234,336 or $19.46 per sq. ft, which is at the low end of the range in MPAC’s sales comparison evidence.

25The Appellant’s case is essentially one of equity of assessment. She believes that, in comparison to other similar properties in the vicinity, the assessment of the subject property is too high. MPAC addressed the equity issue by conducting a study of 72 sales of similar properties in the vicinity which arrived at a median ASR that Ms. Hutchinson testified was an indication of equity of assessment for this type of property in the vicinity.

26Ms. Pahtak countered with some very astute observations with respect to some other commercial properties in the area and their comparative assessments. She argues that these alternative properties are all superior to the subject property, and that the assessment of the subject property should be reduced as a result..

27Ms. Pahtak was not able to quantify the difference in value as she saw it. None of the alternative, comparable properties cited included any data (land area, building condition or building size) to make a meaningful comparison to the subject property.

28The Board finds that the real difference between the properties cited by the Appellant and the subject property is the condition of the buildings and their ability to generate income, which has been adequately addressed by MPAC in their valuation of the building portion of the property.

DECISION

29The Board finds that the current value of the subject property at 151 King Street East is confirmed at $269,000 for the 2014 taxation year, apportioned as follows:

• Commercial Tax Class – $183,000

• Residential Tax Class - $86,000

30The Board also finds that the evidence does not support the conclusion that the current value of the property as determined above requires an equity reduction.

31Accordingly, the assessment of the property at 151 King Street East is confirmed at $269,000 for the 2014 taxation year. This decision is deemed for the 2015 taxation year.

2015 DEEMED APPEAL

32An appeal for the 2014 taxation year is presently before the Board. Section 40.(26) provides that the appellant is deemed to have made the same appeal for the subsequent taxation year if the appeal is not finally disposed of before March 31 of the subsequent taxation year. The Board has not disposed of the 2014 appeal before March 31, 2015. For that reason, this decision also applies to the 2015 taxation year.

33Section 40.(26) of the Act directs:

Deemed appeals, 2009 and subsequent years

For 2009 and subsequent taxation years, an appellant shall be deemed to have brought the same appeal in respect of a property,

(a) in relation to the assessments under sections 32, 33 and 34 for the year; and

(b) in relation to the assessment, including assessments under sections 32, 33 and 34, for a subsequent taxation year to which the same general reassessment applies, if the appeal is not finally disposed of before March 31 of the subsequent taxation year or, if an assessment has been made under section 32, 33 or 34, before the 90th day after the notice of assessment was mailed.