Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE: June 26, 2015

FILE NO.: WR 132638

Assessed Person(s): Victor Steve Zupancic

Appellant(s): Victor Steve Zupancic

Respondent(s): Municipal Property Assessment Corporation (“MPAC”) Region 29

Respondent(s): Kirkland Lake Town

Property Location(s): 48 Woods Street

Municipality(ies): Kirkland Lake Town

Roll Number(s): 5468-000-005-07400-0000

Appeal Number(s): 2998051, 3029730 and 3093309 (deemed 2015)

Taxation Year(s): 2013, 2014, (and deemed 2015)

Hearing Event No. 581189

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

Heard: May 6, 2015 in Kirkland Lake, Ontario

APPEARANCES:

Parties	Counsel/Representative
V. Zupancic	Self-represented
MPAC	Glen Shalton
Kirkland Lake Town	No one appeared

DECISION OF THE BOARD DELIVERED BY NICOLL PLUMSTEAD

INTRODUCTION

1Glen Shalton, representing MPAC, informed the Assessment Review Board (“Board”) that the assessment for the subject property was returned at $67,000 for the 2013 taxation year. During the Request for Reconsideration (“RFR”) process (when the property was “visited” by MPAC on September 26, 2013 and “inspected” on September 25, 2014), a negative 5% adjustment was applied, to recognize a problem with the basement leaking. Victor Zupancic, Assessed Person/Appellant, rejected the resulting reduced assessment of $64,000. “Following the 2014 inspection and further discussions with the owner a further recommendation was made to revise the current value to $50,000. This offer was rejected by the owner” (Exhibit 1, p. 1). The assessment was returned for 2014 and 2015 at $64,000.

2Mr. Zupancic has two principal issues with his assessment, which he submits should be reduced to $30,000:

(a) He describes the building of many one and one-half-storey to two-storey homes in Kirkland Lake during the 1930s to house workers in the area gold mines. “Common to their design is a separate entrance (usually located at the rear of the house) to each of the first and second floors, as well as an exclusive entrance (usually located at the front of the house) to the first floor. The objective of this type of design was for the owner to occupy the first floor and to rent the second floor as a self-contained unit to another family, to supplement wage income earned from working in the gold mines” (Exhibit 6, p. 2). For many years MPAC coded these properties as duplexes (332). Mr. Zupancic argues that this is the correct description of the subject property, even though for many years his (and other similar properties) have had the second floor vacant, with no tenants. During the 1990s MPAC changed his property code to 301 (single family detached), with the assurance that it would not be subject to a higher valuation, and that the 332 code “would be reinstated whenever the property owner desired” (Exhibit 6, p. 2). The appellant asserts that code 301 properties do have a higher assessment. There is apparently confusion over the designations of similar two-unit properties in Kirkland Lake, with some having one code and some the other, even though the second storey may have been vacant for many years, “to the point where any person may mistake one for the other” (Exhibit 6, p. 2).

(b) Mr. Zupancic testifies that the housing market for residential properties has been skewed to the point of being unfair because of the offering of housing initiatives by Kirkland Lake Gold to its employees, which arbitrarily forces sale prices upward in the local market which, he testifies, has a limited residential housing stock.

3The Board must determine the correct and equitable value of the subject property for the 2013, 2014 and deemed 2015 taxation years.

DECISION

4In determining the amount of the assessment, the Assessment Act, R.S.O 1990, c. A.31, as amended (“Act”), requires the Board to arrive at two conclusions:

1. Section 44.(3)(a) requires the Board to “determine the current value of the land.” The Board finds that the current value is $57,000.

2. 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 if such an adjustment would result in a reduction of the assessment of the land.” The Board finds that the current value of $57,000 is equitable, and an adjustment is not required.

5The assessment of the subject property is reduced from $67,000 to $57,000 for the 2013 taxation year and from $64,000 to $57,000 for the 2014 and 2015 taxation years.

REASONS FOR DECISION

The Subject Property

6The Property Profile for the subject property has an MPAC property code 301, single-family detached (not on water); the property is located at 48 Woods Street in the Municipality of Kirkland Lake, an established North Eastern Ontario community with a population of approximately 10,000 people. The neighbourhood consists predominantly of single family dwellings built between the 1920s and the 1960s, “with some plex type properties” (emphasis added). The property’s current value was determined using the direct sales comparison approach to value. It is classified as “residential” (RT), and there is no issue with regard to its classification (Exhibit 1, p. 1). The property has an effective frontage of 33 feet, an effective depth of 98.48 feet and an effective site area of 3,250 square feet. The 1 and ½-storey dwelling was built in 1936 and is in average condition. Mr. Shalton testifies that its renovation year of 1980 captures improvements such as new windows, roof, siding which are typically made to an older property over time. The building total area is 1,185 square feet and there is a 720-square-foot basement area, of which no part is finished. There are no secondary structures.

Relevant Legislation

7In determining the assessment, the Board is governed by the following sections of the Act:

8Section 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.

9Section 19.(1) of the Act states:

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

10Section 19.2(1) of the Act states:

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:

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.

11Section 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.

12Section 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.

13Section 44.(3) of the Act states:

(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.

The Board’s Deliberations

Determination of Current Value

14The initial task for the Board is to use the best evidence available to determine the current value of the property in accordance with s. 1, 19.(1) and 44.(3)(a) of the Act. In its current value deliberations, the Board relies on sales of comparable properties. Assessed values of properties are dealt with in the equity section of the decision. The Board finds that the current value of 48 Woods Street is $57,000.

15Mr. Shalton submits Exhibit 1, a Valuation Report which includes exterior photographs of the subject property and of MPAC’s six suggested sales comparables, two appendices and an Equity Analysis.

16Appendix A is a Market Analysis (with locational map) which estimates the current value of the subject property using 2009, 2010 and 2011 sales of six suggested comparable properties in the same A04 homogeneous neighbourhood (“HNBHD”) as the subject property.

17Appendix B depicts Sales for Price Changes Over Time; in its effort to adjust sale dates to the valuation day of January 1, 2012, MPAC determines time adjustments by comparing the sale prices and assessments of 600 properties in the subject property’s neighbourhood and adjacent neighbourhoods from January 2008 to December 2012. From this data, monthly time adjustment factors (“TAF”) are established for this 60-month time period and are provided in Table 1.

18MPAC’s Equity Analysis depicts 30 sales of residential properties “within 0.11 kilometers of the subject property” between January 2008 and October 2012.

19Mr. Zupancic provides a comprehensive submission package which includes his issues and reasons for appealing his assessment (Exhibits 2 - 9).

20In support of his position that his property is a duplex which should be coded 332, Mr. Zupancic submits Exhibit 5(a), a March 5, 2013 Comparable Property Report with 24 properties. He draws the Board’s attention to ten of these which he considers comparable to the subject property. Mr. Shalton provided photographs and time adjusted sales prices for these ten properties. Two properties, (referred to as Properties 1 and 3) are coded 301 and eight properties (referred to as Properties 2, 5, 7, 10, 11, 13, 17 and 19) are coded 332. All ten are in the same A04 HNBHD as MPAC’s six code 301 sales comparables (referred to as Sales A, B, C, D, E, F), as well as the subject property.

21Since Mr. Zupancic argues strenuously that his property is a code 332 duplex, and in order to compare “apples with apples,” the Board does not consider the appellant’s two code 301 properties 1 and 3, and it considers separately the six code 301 sales from MPAC and the eight code 332 properties from the appellant. The Board rejects MPAC’s Sale F because it had a much newer (2011) renovation year than any of the other sales comparables from both parties, and sold in 2012 for a time adjusted sale price of $119,987, exceeding by $31,000 the next highest sale price among MPAC’s remaining suggested comparable properties.

22Although MPAC’s five code 301 sales A to E had reasonably similar years of construction and renovation, the Board does not find any to be directly comparable to the subject property, for the following reasons: all have larger lot areas; they vary considerably in building total area, with the median being 1,316 square feet, approximately 11% larger than the 1,185-square-foot subject dwelling; two of the properties enjoy finished basement areas and one (different) property has a detached garage, with neither of these amenities being enjoyed by the subject. In addition, the Board is not confident that these are good comparable properties to 48 Woods Street because the midpoint and median of their time adjusted sale prices are $74,645 and $84,767 respectively, significantly higher than the subject property’s assessment of $64,000 which was returned by MPAC for 2014 and 2015. There does not appear to be a paucity of sales in the vicinity, with the Board counting 37 sales (with more than one sale for some properties) on the subject street (Appendix B), and noting that the 30 sales on the Equity Analysis (of which 15 are between 28 and 63 Woods Street) all occurred within 0.11 kilometers of 48 Woods Street.

23Although Mr. Zupancic’s eight suggested code 332 sales 2, 5, 7, 10, 11, 13, 17 and 19 had reasonably similar years of construction and renovation, the Board does not consider any directly comparable to the subject property for the following reasons: all have larger lot areas; they vary considerably in building total area, with the median being 1,631 square feet, approximately 38% larger than the 1,185-square-foot subject dwelling; five properties have detached garages, while the subject does not. The midpoint and median of their time adjusted sales are $56,300 and $54,851 respectively, much closer to MPAC’s $64,000 returned assessment for 2014 and 2015 than those of MPAC’s Appendix A code 301 sales.

24For these appeals, for the reasons given above, the Board prefers the sales submitted by the Appellant. The parties agree that all are two-unit properties, as is the subject property, and their sales prices reflect more closely the two assessed values which MPAC returned for the subject property than do the sales values of the single-family detached properties submitted into evidence by MPAC. Property codes are assigned by MPAC and not by the Board. Mr. Shalton stated in his summation at the hearing that if the Board were to determine that the subject property is “a duplex,” its current value would be $50,000. The only other reference to $50,000 is in MPAC’s Valuation Report, quoted in paragraph 1 above. The Board received no evidence in this regard and is therefore unable to make a finding that $50,000 is the correct current value of 48 Woods Street.

25It is to be hoped that MPAC can correct the anomaly that appears to exist in Kirkland Lake, resulting in the confusion referred to by both parties between “plex type” and single family detached properties. The confusion may turn on whether or not the second unit of a two-unit property is normally occupied. It is not clear to the Board whether MPAC assigns code 301 to two-unit properties which generally have one unit vacant, and code 332 to two-unit properties which generally have both units occupied. As stated earlier, there is no disagreement between the parties on the fact that the subject property has two units.

26To assist it in determining the correct current value of 48 Woods Street, the Board turns to a useful tool to compare properties that have a number of similar attributes – residential, similar market and vicinity – but are dissimilar in a number of key attributes that prevent direct comparison such as lot and building areas: the Assessment to Sale Ratio (“ASR”). This tool acts as a check upon the MPAC valuation model to determine whether the model is tending to either overvalue or undervalue residential properties in a vicinity. The ASR is determined by dividing the assessed value of a property by its sale price or time adjusted sale price. It permits the Board to compare assessed values as determined by MPAC with values achieved in the marketplace. An ASR greater than 1.00 is an indication that MPAC’s model may be producing values greater than those demonstrated in the marketplace. An ASR of less than 1.00 would indicate that the model may be producing values less than those demonstrated in the marketplace.

27The Board calculates that the time adjusted ASRs for the appellant’s eight sales are 1.36, 0.90, 0.64, 0.96, 1.44, 1.14, 1.01 and 1.09. Five of these sales are included on MPAC’s Equity Analysis and three are not. Two other code 332 properties are included on the Equity Analysis (properties 24 and 28), and their ASRs are 1.23 and 1.51. Taken together, three of these ten properties are under-assessed and seven are over-assessed. The Board finds that applying their median ASR of 1.12 to the assessed value of the subject property is in furtherance of seeking a likely sale value (that is, current value in accordance with the Act). The Board determines that the current value of 48 Woods Street is ($64,000 ÷ 1.12 rounded) $57,000. The Board does not have the building total areas for properties 24 and 28 on the Equity Analysis, but for the eight properties for which it does have this data, it seems reasonable to the Board that, given the subject property’s considerably smaller building size, five properties sold for more than the subject property’s revised current value, and three sold for less.

28In Exhibit 5 Mr. Zupancic uses his own calculations to adjust sale values of the Exhibit 5(a) Comparable Property Report properties which he drew to the Board’s attention. He devises a January 1, 2012 “market value of $30,000” for the subject property (p. 5). With his adjustments not being based on any recognized valuation methodology, the Board gives this testimony little weight.

29The Board acknowledges the Appellant’s belief that the residential housing market in Kirkland Lake is distorted by the housing benefits offered to some employees of the gold mining company. These benefits have been terminated but apparently may be reinstated. The Board cannot rely on speculation, and is unable to make an adjustment because it did not receive measurable evidence of the possible impact to value which these housing initiatives may have had.

30While the Board acknowledges Mr. Zupancic’s dismay with the significant increase in his assessment between the January 1, 2008 and January 1, 2012 valuation days, there is nothing in the Act requiring a correlation among assessments from one valuation period to another; rather, the relationship is between the subject property and applicable comparables in the relevant time frame. Market conditions may change, and may vary significantly from neighbourhood (“NBHD”) to NBHD; it is not unusual for values to change by differing percentages from NBHD to NBHD. This principle may also be true for properties in the same NBHD.

Equity with Similar Lands in the Vicinity

31The Act was amended in 2009 to require the Board to lower an assessment below current value if required to make the assessment equitable with the assessments of similar properties in the vicinity. The Board recognizes that a fundamental principle of Ontario assessment law is that property is to be assessed at a level that has the same ratio between its assessment and market value as similar properties in the vicinity. The Board’s equity conclusion reflects this principle.

32Under s. 44.(3)(b) of the Act, the Board’s task is not to determine the overall accuracy of MPAC’s model, but to determine how it has performed with regard to similar property in the vicinity. For the reasons stated above, the Board has found that its preferred sales comparables (from the Appellant) are not directly comparable to the subject property, but for an equity analysis, the properties are valued by MPAC using the same methodology, and the Board accepts them as being of the same general nature, function and character as the subject property. As the Board has adjusted for the over-assessment as described in the current value section above, and adjustments under s. 44.3(b) are made only when MPAC’s methodology results in under-assessments, it follows that no further adjustment for equity is warranted.

CONCLUSION

33The Board reduces the assessment of 48 Woods Street from $67,000 to $57,000 for the 2013 taxation year and from $64,000 to $57,000 for the 2014 and deemed 2015 taxation years.

2015 DEEMED APPEAL

34An 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.

35Section 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.

Footnotes

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