Baird v. Municipal Property Assessment Corporation, 2015 CanLII 32538

Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE: June 5, 2015

FILE NO.: WR 130486

Assessed Person(s): Lillian Gail Cunningham

Appellant(s): Johanna Baird and Timothy Baird

Respondent(s): Municipal Property Assessment Corporation (“MPAC”) Region 7

Respondent(s): Municipality of Highlands East

Property Location(s): 1513 Bolton Point Drive

Municipality(ies): Municipality of Highlands East

Roll Number(s): 4601-101-000-26200-0000

Appeal Number(s): 3044905 and 3073564 (deemed 2015)

Taxation Year(s): 2014 (and deemed 2015)

Hearing Event No. 574933

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

Heard: February 9, 2015 in Minden, Ontario

APPEARANCES:

Parties

Counsel⁺/Representative

J. Baird

Self-represented

MPAC

S. Walt

Municipality of Highlands East

No one appeared

DECISION OF THE BOARD DELIVERED BY ROBERT TCHEGUS

ISSUE

1Is the assessment of 1513 Bolton Point Drive (the “subject property”) correct at $600,000 for the 2014 taxation year? Is the assessment equitable when compared with the assessments of similar properties in the vicinity?

DECISION

2The Assessment Review Board (“Board”) is required by the Assessment Act (“Act”) to do two things:

• Section 44.(3)(a) requires the Board to “…determine the current value of the land.” The Board finds that the current value of the subject property, as of the legislated valuation day, January 1, 2012 is $440,000.

• Section 44.(3)(b) requires the Board to “…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 is such adjustments would result in a reduction of the assessment of the land.” It was the evidence and conclusion of MPAC that similar properties in the vicinity have been assessed lower than their current values and that an equity adjustment of 10% is warranted for the subject property. The Board therefore reduces the assessment of the property below its current value property to $396,000 to make the assessment equitable with that of similar lands in the vicinity.

3The assessment value for the subject property is reduced from $600,000 to $396,000 for the 2014 taxation year and from $542,000 to $396,000 for deemed 2015 taxation year.

REASONS FOR DECISION

Subject Property

4The subject property consists of a 2,577 square foot two-storey seasonal recreation dwelling on Eels Lake. The dwelling was constructed in 1992 and sits on a lot having an effective area of 1.07 acres with 120 feet of waterfront and a depth of 390 feet. The property is serviced by hydro, a septic bed and private well. The dwelling has been assigned an average condition by MPAC. It has forced air heat, one and one-half bathrooms and four bedrooms. The main floor is 1,340 square feet and the second floor has 1,237 square feet. The dwelling has an unfinished basement of 1,340 square feet. MPAC’s records indicate there is a boathouse and basement garage.

5Sheryl Walt represented MPAC in this matter. After reviewing the sales of two comparable properties on Eels Lake, Ms. Walt Scott derived a range of values between $481,531 and $713.073, within which the returned current value of the subject property of $600,000 falls. However, after completing an equity analysis, Ms. Walt determined that a downward adjustment of 10% is appropriate to make the assessment equitable with similar lands in the vicinity. It is Ms. Walt’s submission that the current value of the property should be reduced to $542,000.

6Johanna Baird testified that the subject property was listed for sale from May through October of 2012 for $549,000. She understands that no offers were made and the property came off the market. It was relisted for sale in May of 2013 for $479,900 and Mrs. Baird and her husband bought the property for $440,000 in October of 2013. While MPAC suggests that the value of waterfront decreased after December 2012 and perhaps even before, Mrs. Baird disagrees. She notes that even the MPAC report submitted as Exhibit 1 states that property values in the vicinity increased between January 2009 and December 2012 by approximately 17.81%. For these reasons, she believes that, if anything, the current value should be lower than $440,000.

Position of MPAC

7Ms. Walt advised the Board that she valued the property by using what is known as the “direct sales comparison” approach. By this method, the assessed value of a property is derived from the sales prices of comparable properties. Adjustments are then made for differences in property characteristics that would increase or decrease the value. Adjustments are typically made for variations in location, quality, amenities, lot size, waterfront quality and other factors. By this approach, Ms. Walt determined that the current value of the property is reasonable and proper at $600,000 for the 2014 taxation year.

8Exhibit 1 filed by Ms. Walt is a full copy of her disclosure package to the Appellant, entitled “Valuation Report 1513 Bolton Pint Drive, Municipality of Highlands East”. Appendix A to the package is a Market Analysis comparing the subject property to two other properties on Eels Lake that sold on the open market. A summary of those sales is as follows:

Property

Subject

1020 Downey Laned

4464 West Eels Lake Road

Sale Amount

$475,000

$718,000

Sale Date

2011/09

2012/02

Time Adjusted Sale Amount

$481,531

$731,073

Effective Frontage

120 feet

200 feet

150 feet

Effective Site Area

1.07

1.37

1.03

Structure

Single Family Detached

Single Family Detached

Single Family Detached

Year Built

1992

1989

2007

Quality Class

6.5

6.0

7.0

Condition

Average

Average

Average

Central Air

No

No

No

Heat Type

Forced Air

Forced Air

Forced Air

Fireplaces

1

0

1

Full Bathrooms

1

1

2

Half Bathrooms

1

1

0

Bedrooms

4

3

3

Full Storeys

2

1

1 ½

1^st^ Floor Area

1,340 ft^2^

1,696 ft^2^

1,709 ft^2^

2^nd^ Floor Area

1,237 ft^2^

561 ft^2^

Total Building Area

2,577 ft^2^

1,696 ft^2^

220 ft^2^

Basement Area

1,340 ft^2^

180

1,709 ft^2^

Finished Basement Area

3

Detached Garage

Secondary Structures

3

Detached Garage

Comparable

Inferior

Superior

9Ms. Walt testified that she reviewed the sales of 480 residential properties from the neighbourhood of the subject property and from adjacent neighbourhoods between the period of January 2009 to December 2012 to conclude that such properties’ prices increased approximately 17.81% over this time frame. She therefore calculated and applied time adjustment factors (“TAFs”) to her two sale comparisons to ensure that the sales reflected the market conditions of January 1, 2012. Table 1 in the Price Changes over Time section of her documents provides the month-by-month TAFs that she calculated.

10As the current value falls within the time adjusted sales range of $481,531 and $713,073, Ms. Walt is of the opinion that the current value was both correct and reasonable.

11Ms. Walt referred to s. 44.(3)(b) of the Act, which requires the Board to have reference to the value at which similar lands are assessed and where necessary to make the assessment equitable. She testified that the purpose of the equity test is to ensure that the municipal tax burden is shared fairly and equally among similarly situated tax payers. If all homes in the in the vicinity are assessed at or near their current values, she said that equity has been achieved.

12Ms. Walt referred the Board to an Equity Analysis that she conducted and which derived the assessment to sales ratio (“ASR”) derived from 30 sales of residential properties within 17.08 km of the subject property between June 2011 and June 2012. She advised that the equity test ensures that the residential tax burden is distributed fairly. To be utilized in the equity test, she said properties do not to be as similar as they do for valuation purposes. For equity purposes, properties need to be of the same general nature, character or function. Therefore, she advised that while the sales were not all necessarily waterfront properties, all were typical, arms-length residential transactions between willing buyers and willing sellers. In this regard, she said that if MPAC’s method of valuing properties is achieving equity, the average ASR should fall within 0.95 and 1.05. She confirmed a median ASR of 0.9 has been achieved.

13Ms. Walt noted that the International Association of Assessing Officers (IAAO) states that the ratio should fall within 0.90 and 1.10. Notwithstanding that, she is of the view that an equity adjustment of 10% should be applied and that the property should therefore be assessed for the 2014 taxation year at $542,000.

Position of the Appellant

14Mrs. Baird submitted a copy of the expired listing for the property from the summer of 2012 when it was listed for sale at $549,000. She also submitted a copy of the listing for 2013 at the reduced sale price $479,900, which was in affect when they bought the property. She provided a copy of the first page of the Agreement of Purchase and Sale dated September 5, 2013 by which her and her husband purchased the property on October 4, 2013 for $440,000. The Agreement confirms that their initial offer was for $420,000, which was countered by the Seller at $449,000 before the purchase price of $440,000 was agreed upon by the parties.

15Mrs. Baird disagreed with Ms. Walt’s suggestion that the prices of waterfront properties have been in decline and refers to Ms. Walt’s own price change over time analysis as contained in her written report that states that property values increased between January 2009 and December 2012 by approximately 17.81%. Mrs. Baird is of the view that prices for waterfront property continued to increase in 2013 have been continuing to increase to this day. This would lead to the logical conclusion that the current value for this property should be lower than $440,000.

16Mrs. Baird suggested that the assessment for this property somehow became inflated in the past and the issue simply did not come to light until her October 2013 purchase.

Relevant legislation

17For the 2014 taxation year, in determining the value at which land shall be assessed, the Board must have regard to the following provisions of the Act:

18Section 19.(1) of the Act states:

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

19Section 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.

20Section 19.2(1)2 of the Act states:

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

1. For the 2006, 2007 and 2008 taxation years, land is valued as of January 1, 2005.

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.

21Section 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.

22Section 40.(17) of the Act states:

40.(17) Burden of proof. – For 2009 and subsequent taxation years, where value is a ground of appeal, the burden of proof as to the correctness of the current value of the land rests with the assessment corporation.

23Section 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.

Board’s analysis – Burden of proof

24The burden ascribed in s. 40.(17) is for MPAC to satisfy the Board that the assessment is reasonably correct. If it does so, then the onus shifts to the Appellant to provide evidence to show either that the current value is not correct or that the assessment is not equitable when compared with the assessments of similar lands in the vicinity. The Board reviewed MPAC’s evidence and finds that for the reasons provided below, MPAC has not satisfied the burden of proof referred to in s. 40.(17) of the Act.

Board’s Deliberations

Current Value of the Land

25The best evidence that the Board can receive of current value is an arm’s length and market-tested sale of the subject property at or near the valuation day, being January 1, 2012, for the 2014 taxation year.

26In this case, the property sold on the open market after almost two years of exposure in October 2013 for $440,000. The sale date is 22 months removed from the valuation day of January 1, 2012. MPAC’s price changes over time analysis confirms that residential property values in the vicinity increased between January 2009 and December 2012 by approximately 17.81%. In fact, the two sales comparisons that were relied upon MPAC to defend the current value for this property were both time adjusted based upon that increase.

27If the property had sold in December 2012 for $440,000, using the TAFs provided by MPAC in Table 1 of its “Price Change Over Time” analysis, the time adjusted sale price would become $409,640. If for 2013 the market continued on approximately the same increase as MPAC’s analysis determined it did for the four preceding years, the October 2013 sale of $440,000 would time adjust to $416,240 as of January 1, 2013 and then further time adjust to $387,519 as of January 1, 2012. Unfortunately, there was simply no determinative evidence provided to the Board as to direction of market prices in the vicinity for the year 2013.

28If MPAC is correct and the residential waterfront market in the vicinity was decreasing in value, assuming a direct decrease percentage in the exact opposite direction of the rate of increase as previously experienced, the $440,000 time adjusted sales price would become $455,840 as of January 1, 2013. As MPAC’s analysis confirmed sales prices increased between January 2009 and December 2012 by approximately 17.81%, the $455,840 time adjusted decreases to $424,387 as of January 1, 2012.

29Methods of valuation are simply mechanisms used by assessors and appraisers in an attempt to determine the current value, market value or transaction value of real property. The most accurate models are those which best mirror what takes or has taken place in the market and the moist accurate methods of valuation require accurate sales evidence from the market, either for comparison, determination of market rents and/or determination of land values, depending on the approach that is determined appropriate and applied. In this instance, MPAC used a direct sales comparison to defend a value of the property determined by multiple regression analysis.

30While the Board suspects that the actual current value of this property may be less than $440,000, based upon the evidence provided by the parties, there is not sufficient evidence for the Board to determine how much less and for the reason the Board finds the current value to be $440,000.

Section 44.(3)(b) – Equity

31Systems of mass appraisal do not generate accurate current values for every property. A comparison of the ASRs permits the Board to compare assessed values as determined by MPAC with the values achieved in the marketplace. A median or average ASR of less than 1.00, arrived at by comparing a number of sales, would indicate that MPAC’s model may be producing values less than the values demonstrated in the marketplace. An median or average ASR of greater than 1.00, again using a number of sales, indicates that MPAC may be producing values greater than those demonstrated in the marketplace. In this instance, the median ASR is 0.90, and it was MPAC that gave evidence confirming that an equity adjustment of 10% should be applied. Therefore, having regard to the assessments of similar lands in the vicinity, the Board further reduces the assessment of the property to $396,000 to make the assessment equitable.

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.