Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE: July 8, 2015

FILE NO.: WR 130136

Assessed Person(s): 2049382 Ontario Corp.

Appellant(s): 2049382 Ontario Corp.

Respondent(s): Municipal Property Assessment Corporation (“MPAC”) Region 15

Respondent(s): City of Mississauga

Property Location(s): 204 Queen Street South

Municipality(ies): City of Mississauga

Roll Number(s): 2105-120-004-17800-0000

Appeal Number(s): 2896548 and 2916013

Taxation Year(s): 2011 and 2012

Hearing Event No. 571731

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

Heard: January 14, 2015 in Mississauga, Ontario

APPEARANCES:

Parties	Counsel+/Representative
2049382 Ontario Corp.	R. Baranowski
MPAC	C. Mattat, L. Aberdeen
City of Mississauga	No one appeared

DECISION OF THE BOARD DELIVERED BY CRISTINA MARQUES

BACKGROUND

1These appeals originally came before the Board on January 20, 2014. At the commencement of the hearing Mr. Baranowski, the Appellant’s representative and witness made an oral motion to the Board asking the Board to hear evidence only with respect to equity.

2Christeen Mattat, appearing as advocate for MPAC, disagreed with Mr. Baranowski’s oral motion because in her opinion the Board must first determine current value before determining if an adjustment below current value for equity is required. The Board dismissed Mr. Baranowski’s motion, in DM 123747, released on April 22, 2014; and the appeals were re-scheduled for a hearing on the merits.

PRELIMINARY MATTER

3At the start of the hearing, Mr. Baranowski objected to MPAC’s introduction of new evidence, chiefly the introduction of equity evidence which was not disclosed when full disclosure occurred in December 2013 in preparation for the January 20, 2014 hearing.

4Ms. Mattat argued that After-Tax Paralegal Services’ received MPAC’s full disclosure and evidence package for the January 14, 2015 hearing, the full 21 days before the hearing as per Rule 45 of Assessment Review Board’s (“Board”) Rules of Practice and Procedure.

5Rule 45 states:

DISCLOSURE, EVIDENCE, EXPERTS AND DISCOVERY

Disclosure Prior to a Hearing

(1) In the Direct Hearing Stream, within 90 days of filing of an appeal of the assessment, MPAC shall disclose to the appellant and the municipality any assessment data together with the basis or analysis that supports the assessment that has been appealed.

(2) In the Direct Hearing Stream, unless the Board orders otherwise, if a party intends to present documentary evidence at a hearing, at least 21 days before the hearing, the party must provide one copy of each document to each party.

(a) If documentary evidence is not exchanged at least 21 days before the hearing, the Board may refuse to accept the documents at the hearing.

(b) Material in response must be exchanged 14 days prior to the hearing and other parties may respond 7 days prior to the hearing.

6The Board admitted the equity evidence presented by MPAC, in Exhibit 3 being satisfied that: it is relevant; the Appellant had sufficient time to review the evidence; and that the Appellant was not prejudiced by its admission. Rule 45 contemplates that there will be circumstances where the Board will “order otherwise” and this is such a circumstance.

ISSUE

7The subject property is a two-storey 4,222 square foot commercial building. The lot is 4,792 square feet with a frontage of 36.45 feet and a depth of 130.4 feet. Located on the West side of Queen Street and North of Pearl Street.

8Ms. Mattat, takes the position that the assessment as returned, if anything, reflects a low current value. She maintains that the assessment should be confirmed by the Board as returned at $787,000.

9Mr. Baranowski takes the position that the current value as arrived at by MPAC and returned on the roll is correct, and that an adjustment below current value is required to make the assessment equitable with the assessment of similar lands in the vicinity.

10The Board must determine the current value of the property as of January 1, 2008 and where an assessment at current value is equitable having reference to the assessment of similar lands in the vicinity.

DECISION

11The Board finds that the current value of the land is $1,221,000 as of January 1, 2008.

12The Board also finds that an assessment at the current value as returned at $747,000 is equitable with the assessment of similar lands in the vicinity and no further reduction below current value is required.

13The Board confirms the assessment at $747,000 for the 2011 and 2012 taxation years.

REASONS FOR DECISION

Legislation

14The Board must have regard to s. 1, 19.(1), 19.2(1), 40.(19), 44.(3) of the Act when determining whether or not the assessment under appeal is correct.

15Section 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.

16Section 19.(1) of the Act states:

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

17Section 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.

18Section 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.

19Sections 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.

Case for MPAC

20Les Aberdeen, who testified for MPAC, stated that the subject property is assessed by the market modified cost approach using the Automated Cost System (“ACS”), which values major building components in place. An estimated replacement cost of the building and land improvements is developed, a deduction made for depreciation and the land value added.

21Mr. Aberdeen presented Exhibit 1, which include the current value analysis for two suggested comparables. Details of each property on the Current Value Analysis are summarized in Table 1:

Table 1

Address	2008 Assessment	Lot size	Building size	ACS Building Value/ Per sq. ft. ($)	ACS Land Value/Per sq. ft. ($)	SaleDate	Sale
204 Queen Street (Subject Property)	787,000	4,792	4,222	166,694/ 39.48	621,050/ 147.10	n/a	n/a
233 Queen Street	678,000	6,970	4,765	143,348/ 30.08	1,156,652/ 165.95	Jun. 2009	1,300,000
208-210 Queen Street	846,000	3,049	5,354	339,877/ 63.48	835,123/ 273.90	Aug. 2007	1,175,000

22Mr. Aberdeen submitted that the sales, as set out on Table 1, are assessed using a land residual cost approach, and sold in the open market, in arm's length transactions for sale prices ranging from $1,175,000 to $1,300,000. Based on the sales of these properties, Mr. Aberdeen argued that the property is under assessed at $787,000. Mr. Aberdeen also testified that the subject property sold in June 2004 for $849,000, a value greater than its current value as of January 1 2008. It is his opinion that the property should be valued at $220 per sq. ft. of land ($220 x 4,792 - $1,054, 240) plus the value of the structure which MPAC values at $166,694 for a total of $1,221,000 (rounded).

Case for the Appellant

23Mr. Baranowski, contended that there is no real argument that the subject property’s assessment is not at current value. He does not dispute the depreciated value of the building using the cost approach is $166,694. He insisted that an adjustment below current value is required to make the assessment equitable with the assessment of similar lands in the vicinity. Mr. Baranowski maintained that in the very least the subject property’s assessment should be reduced to $527,000.

24Mr. Baranowski presented Exhibit 4, with sales of three properties which he suggested are similar in nature to the subject property, and pointed out that these sales are merely an indication that the subject property is not under-assessed, as claimed by the assessor. During cross-examination, Mr. Baranowski, admitted that the properties are all commercial condominiums. The Board rejects these properties as comparables because commercial condominiums transact in the market place differently than non-condominium properties, as such they are not similar in nature.

Analysis

Current Value

25In accordance with s. 44(3)(a) of the Act the Board must determine the current value of the subject property.

26The best indicator of current value is an arm’s length and market-tested sale of the subject property on the valuation date, January 1, 2008, 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.

27In this case the best evidence before the Board is the two sales presented by MPAC which are located fairly close to the subject property, sold close to the valuation day of January 1, 2008, and the sales values are time-adjusted. The Board notes that the accepted comparables, like the subject property, are also considerably under -assessed demonstrating to the Board that, at least in this area, MPAC’s model is not working optimally.

28Since most of the value of the subject property is in the land, the Board would have liked to have some evidence as to the sale of vacant land in the vicinity, but no such sales were presented by either party. The subject property’s current value assessment of $787,000, as returned, falls below the average sale price of the two similar properties that the Board calculates to be $1,237,500 and significantly below the last known sale for the subject property in 2004 at $849,000.

29Mr. Aberdeen’s valuation of $220 per sq. ft. of land is based on Board accepted comparables, and because there is no dispute between the parties on the depreciated value of the subject property’s structure. The Board finds current value to be $1,221,000.

Equity

30Section 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.

31The parties argued that the disposition of these appeals goes to whether or not an equity adjustment is warranted. MPAC argues that an equity adjustment is not required because an equity study of 63 sales reveals a median ASR of 0.94. MPAC also submits that because the assessor’s evidence is that the subject property’s current value is 1,221,000, although the roll was returned at $787,000, the subject property is already assessed below its current value.

32By Ms. Mattats’ own admission the equity study was not done by the assessor for the subject property. She qualified the study as a universal study of properties that sold in the general vicinity between January 2007 and December 2008 indicating that MPAC is valuing properties within MPAC’s acceptable range between 0.95 - 1.05.

33On the other hand, Mr. Baranowski stresses that there is no significant dispute about the subject property’s values. He emphasizes MPAC’s Exhibit 1- page 4, and the Property Assessment Notice as evidence of current value. He maintains that the current value arrived at by MPAC and returned on the roll is 787,000, and that any adjustment to equity should be applied to that returned value.

34Mr. Baranowski argued that based on s. 44.(3)(b), and the three sales on Exhibit 4 presented by the Appellant that the subject property’s assessment should be reduced to $523,000. He further argued that an analysis of the sales in MPAC’s Exhibit 1 together with the sales in the Appellant’s Exhibit 4 that the average ASR is 0.67 which would result in an assessment for the subject property of $527,000.

35The three properties presented by the Appellant are found by the Board to be dissimilar to the subject property to merit inclusion in its analysis because of the reasons as stated above.

36The subject’s current value assessment of $787,000 falls below the average sale price of the two similar properties that the Board calculates to be $1,237,500, and below the last know sale for the subject property in 2004, at $849,000.

37By applying the 0.67 ASR to the average sale price for the two comparable properties ($1,237,500 x0.67) results in $829,000 (rounded). The subject’s current value assessment of $787,000 also falls below this value.

38MPAC’s Equity Study shows that properties in the vicinity have a median ASR of 0.94, applied to the subject property’s value as found above ($1,221,000 x 0.94) results in a value of $1,148,000 (rounded).

39No reduction below $787,000 is demonstrated by the evidence as necessary to achieve equity with the assessments of similar lands in the vicinity.

40The assessment is confirmed at $787,000 for the 2011 and 2012 taxation years.

Footnotes

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