McCammon v. Municipal Property Assessment Corporation, 2015 CanLII 52619

Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE: August 19, 2015

FILE NO.: WR 133886

Assessed Person(s): Ministry of Natural Resources

Appellant(s): Jeffrey McCammon

Respondent(s): Municipal Property Assessment Corporation (“MPAC”) Region 30

Respondent(s): Town of French River

Property Location(s): Scollard CON 2 Lot 7 LUP

Municipality(ies): Town of French River

Roll Number(s): 5201-050-000-33200-0000

Appeal Number(s): 3110355 and 3109629 (deemed 2015)

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

Hearing Event No. 590332

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

Heard: June 26, 2015 in Noelville, Ontario

APPEARANCES:

Parties

Counsel+/Representative

Ministry of Natural Resources

No one appeared

Jeffrey McCammon

James McCammon

MPAC

Marc Serré

Town of French River

No one appeared

DECISION OF THE BOARD DELIVERED BY NICOLL PLUMSTEAD

ISSUE

1There is a s. 40 appeal for the 2014 taxation year. Marc Serré, representing MPAC, informed the Assessment Review Board (“Board”) that the assessment for the subject property was returned at $136,000 for the 2014 taxation year. During the Request for Reconsideration (“RFR”) process, adjustments were made to the effective site area (from one acre to 0.39 acre), its access (from water access to no access), and to the Quality Class of the structure (from 3.0 to 2.0, the latter being “a shed plus”). Appellant Jeffrey McCammon rejected the resulting reduced assessment of $62,000. The assessment was returned for 2015 at $62,000, and this is the value Mr. Serré is defending for 2014 and 2015.

2This is a Land Use Permit (“LUP”) property leased from the Ministry of Natural Resources. The property has been in the McCammon family for approximately 66 years, with the lease being renewed every five years; Tenant/Appellant Jeffrey McCammon pays an annual rent or fee, about which there is no dispute. He seeks a value for his property of $29,000 (Exhibit 2).

3The Board must determine whether MPAC’s recommended value of $62,000 reflects the correct current value of this leased property as of the legislated valuation day of January 1, 2012, and whether it is equitably assessed vis-à-vis the assessments of similar lands in the vicinity.

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 $50,000.

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 $50,000 is equitable with that of similar lands in the vicinity, and an adjustment is not required.

5The assessment of the subject property is reduced from $136,000 to $50,000 for the 2014 taxation year and from $62,000 to $50,000 for the deemed 2015 taxation year.

REASONS FOR DECISION

The Subject Property

6This Land Use Permit (“LUP”) property is a seasonal/recreational dwelling – first tier on water, located on Eighteen-Mile Island on the Lower French River. Mr. Serré explained that most LUP properties have a site area of one acre, but because of this property having “almost all solid rock and varying water levels and topography,” he has applied an “effective useable area of less than 17,000 square feet” (approximately 0.39 acre). 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, 2). The 490-square-foot one-storey dwelling was built in 1950, and as mentioned earlier, MPAC lowered its Quality Class from 3.0 to 2.0 during the RFR process. There are no other structures.

Position of MPAC

7Mr. Serré provides Exhibit 1, a Valuation Report which includes an exterior photograph of the subject property, a scattergram depicting sale to assessment ratios over time, a time adjustment factors table (“TAF”), two appendices, an Equity Analysis and a “Choose a municipality to view” diagram portraying locations of five “most comparable” properties in the same market, which did not have sales (three are LUP properties), with an accompanying property report. Mr. Serré also includes a chart which he made, depicting economies of scale which demonstrate decreasing values per acre of land as lot areas increase.

8Appendix A is a Market Analysis (with locational map) which estimates the current value of the subject property using 2009, 2011 and 2012 sales of four suggested comparable properties in the same W01 homogeneous neighbourhood (“HNBHD”) as the subject property.

9Appendix 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 601 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.

10MPAC’s Equity Analysis (with locational map) compares assessments to time adjusted sale prices of 30 “residential properties within 14.53 kilometres of the subject property” between March 2008 and November 2012. MPAC calls this an Assessment to Sale Ratio (“ASR”) study.

Position of the Appellant

11At the hearing, James McCammon ( referred to as Mr. McCammon) represented his brother, Appellant and tenant Jeffrey McCammon (hereafter referred to as the Appellant). He presented a comprehensive submission package (Exhibit 2) which had been prepared by the Appellant; it outlines his issues and reasons for appealing his assessment.

12Mr. McCammon describes a much loved hunt camp which has been in the family for several generations, and which he (as well as the Appellant) visits frequently. Access to the property is via a 30-kilometre boat trip east from a commercial marina near Highway 69, through two sets of rapids that vary in height and intensity throughout the year. Water levels in front of the camp fluctuate by up to 12 feet between spring and fall. At high water, the foundation is flooded, resulting in heaving and cracking of the foundation blocks; also, the land behind the camp is flooded, cutting off the property from the main part of the island. The property is accessible for only about six months of the year. Photographs depict these difficult conditions and the property’s steep rock faces.

Relevant Legislation

13In determining the assessment, the Board is governed by the following sections of the Act:

14Section 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.

15Section 18 of the Act states:

18.(1) Assessment of Crown lands. – Despite paragraph 1 of subsection 3 (1),

(a) the tenant of land owned by the Crown shall be assessed in respect of the land as though the tenant were the owner if rent or any valuable consideration is paid in respect of the land; and

(b) an owner of land in which the Crown has an interest shall be assessed in respect of the land as though a person other than the Crown held the Crown’s interest.

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 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.

18Section 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.

19Section 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.

20Section 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.

The Board’s Deliberations

Determination of Current Value

21The 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 is $50,000.

22The Board is also bound by s. 18.1(a) of the Act, which states: “The tenant of land owned by the Crown shall be assessed in respect of the land as though the tenant were the owner if any rent or valuable consideration is paid in respect of the land; . . .” There is no dispute that an annual rent is paid to the Crown for the lease of the property. The Board must determine its current value as though the Appellant owns it, but this is not to say that its value should be determined by an analysis of sales of properties with fee simple ownership.

23Ideally, the subject property should be valued only with regard to the sales of other leased properties in the same vicinity and market. Mr. Serré testified that there were none. With Mr. McCammon not presenting sales evidence, the Board considers MPAC’s four suggested comparables, whose time adjusted sales values range from $76,046 to $100,183. It rejects Sales C and D as being directly comparable to the subject property for these reasons: both have significantly larger lot areas; their dwellings have Quality Classes of 3.0 and 4.0 respectively, vis-à-vis the Quality Class 2.0 subject; Sale C’s building total area is approximately 26% larger than the 490-square-foot subject dwelling, and although Sale D’s building size is comparable to that of the subject, it has a boathouse, an amenity which the subject property does not enjoy.

24The Board regrets not having sales of leased land for its current value analysis because these would provide the most meaningful evidence to assist it in fulfilling its mandate. It rejects Sales A and B because it does not consider vacant land sales to be directly comparable to those of built-on properties. MPAC’s standard method of valuing residential properties in Ontario is by the sales comparison approach (which was used in the properties it presented at the hearing ); its “multiple regression analysis” statistical tool establishes the value of land and buildings (and their depreciation), and arrives at an overall market value for a property. The Board is not persuaded that presenting vacant land sales and applying those values to the built-on subject property is in furtherance of determining the property’s correct current value in accordance with the Act. It is also mindful of its obligation under s. 18.1(a) to determine current value as though the Appellant owns the land.

25To assist it in determining the correct current value of the subject property, the Board turns to a useful tool to compare properties that have a number of similar attributes – residential, waterfront, similar market and vicinity – but are dissimilar in a number of key attributes that prevent direct comparison such as vacant or built-on, Quality Class, lot and building sizes: 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.

26The Board calculates that the time adjusted ASRs for MPAC’s four sales are 0.97, 0.74, 1.49 and 1.75, with the average being 1.24 and the median 1.23. Sales C and D are included on MPAC’s Equity Analysis and Sales A and B are not. The Board finds that applying the median ASR of 1.23 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 the subject property is ($62,000 ÷ 1.23 rounded) $50,000. While there is no evidence to allow the Board to address value differences, if any, that might apply to LUP versus fee simple properties, it seems reasonable to the Board that, given the subject property’s significantly lesser attributes of lot area, building total area and Quality Class, its current value should be lower than any of the Appendix A sales values.

27While the Board acknowledges the Appellant’s concern with the lack of a public (“free”) boat launching and parking facility and municipal services outlined in Exhibit 2, the Board has no jurisdiction in either, and gives this testimony little weight.

Equity with Similar Lands in the Vicinity

28The 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.

29Under 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 MPAC’s Appendix A sales 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.

30The Board takes comfort in noting that, on MPAC’s “Choose a municipality to view” referenced earlier, the average assessment of the three LUP properties is $51,500, which is consistent with the $50,000 current value of the LUP subject property.

CONCLUSION

31The Board reduces the assessment of the subject property from $136,000 to $50,000 for the 2014 taxation year and from $62,000 to $50,000 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.