Robert Reuben Bell v. Municipal Property Assessment Corporation, 2015 CanLII 54412

Assessment Review Board

Issue Date: August 27, 2015 File No.: WR 133536 Assessed Person(s): Robert Reuben Bell and Eva Bell Appellant(s): Robert Reuben Bell, Eva Bell and Pizza Pizza Respondent(s): Municipal Property Assessment Corporation ("MPAC") Region 09, City of Toronto Property Location(s): 1193 Bloor Street West Municipality(ies): City of Toronto Roll Number(s): 1904-024-450-12500-0000 Appeal Number(s): 3043453, 3077393, 3001872 and 3075461 Taxation Year(s): 2014 and 2015 Hearing Event No.: 579684

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

Heard: July 6, 2015 in Toronto, Ontario

Appearances

Parties	Counsel/Representative
Robert Reuben Bell and Pizza Pizza	Nick Perrotta
MPAC	Robert Boccia
City of Toronto	No one appeared

Decision of the Board Delivered by Subuola Awoleri and Jennifer Griffith

Introduction

1The appeals before the Assessment Review Board ("Board") are filed by the Assessed Person and by Pizza Pizza (tenant) in respect to the returned assessments of $2,317,000 for the subject property in the City of Toronto for the 2014 and 2015 taxation years.

Preliminary Issue

2At the commencement of the hearing Robert Boccia, representative for MPAC advised the Board that AEC Paralegal Professional Corporation's ("AEC"), representative for the cross-appeal made by Pizza Pizza was not in attendance and that MPAC's evidence included sales of comparable properties taken from both First Metro Consultant Ltd ("First Metro") and AEC's disclosure.

3Nick Perrotta, representative for the Assessed Person raised no objections to MPAC's use of the comparable properties stated above. However, he presented the Board with a copy of an email (Exhibit 4) from AEC, dated Sunday, July 5, 2015, stating that they would not be attending the hearing and that AEC is in support of First Metro's position. Although the email was copied to Robert Boccia, he was not aware of the email because it was sent the night before which happens to be a Sunday.

4As Mr. Perrotta was taking the lead for the above appeals, and no objections were raised, the hearing continued.

Issue

5Mr. Boccia, representative for MPAC is of the view that a fair and equitable assessed value for the subject property is $2,267,000 for the 2014 and deemed 2015 taxation years. He testified that this value is as a result of a change in the finished basement area from 3,321 square feet ("sq. ft.") to 1,500 sq. ft. which was discovered during an inspection on June 23, 2015 of the subject property. He also argued that this value is supported by sales of similar properties in the vicinity.

6Mr. Perrotta, representative for the Assessed Person/Appellant is of the view that the subject property is assessed too high, because MPAC failed to recognize the negative impact of faulty construction, water leakage, vacancies and the current use of comparable properties presented in support of the returned assessment value of the subject property. Mr. Perrotta is of the view that a fair and equitable assessed value for the subject property should be $1,772,000 based on similar properties in the vicinity.

7The City of Toronto was not in attendance at the hearing.

8The Board has to decide:

• Whether the returned assessment of $2,317,000 for the 2014 and deemed 2015 taxation years for the subject property is at current value as at the valuation date January 1, 2012; and
• Whether the value is equitable with the assessments of similar lands in the vicinity.

Decision

9The Board having determined the current value to be $1,938,000 and having found that an equity adjustment is not required reduces the assessment for the subject property from $2,317,000 to $1,938,000 for the 2014 and deemed 2015 taxation years.

Reasons for Decision

Background

10The subject property is described as a two storey retail building, built in 1953, and located on the south west corner of Bloor Street West and Brock Avenue in the City of Toronto. The subject property is situated on a corner lot, with a frontage of 42 feet, a depth of 110 feet for a total site area of 4,620 sq. ft. and a total floor area of approximately 8,858 sq. ft. The assessment of the subject property was returned at $2,317,000 based on the valuation date of January 1, 2012. The assessment was determined by MPAC's Direct Sales Comparison Approach.

The Legislation

11In determining the value at which land shall be assessed, the Board must have regard to the following provisions of the Assessment Act ("Act"):

12Section 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.

13Section 19.(1) of the Act states:

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

14Section 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.

15Section 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.

16Section 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.

17In determining the value at which any land shall be assessed, s. 44.(3)(a) and (b) of the Act requires the Board to do two things:

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.

Current Value

MPAC's position

18In presenting his case, Mr. Boccia testified that he visited the subject property on June 6, 2012 because of a building permit that was taken out in 2006. The permit was valued at $150,000 for renovation, alteration, plumbing and signage for the subject property. He also testified that together with First Metro he inspected the subject property on June 23, 2015. The purpose of the visit was to confirm and record all structure details and site characteristics as detailed in Exhibit 2. Based on the inspection the finished basement area of 3,321 sq. ft. was reduced to $1,500 sq. ft. reflecting a change in the 2012 Current Value Assessment ("CVA") from 2,317,000 to $2,267,000. He also testified that at the time of the inspection the second floor was vacant.

19In support of his argument, Mr. Boccia presented Exhibit 1, containing amongst other things, a sales analysis of comparable properties; time adjusted factor analysis, photographs and map. Mr. Boccia testified that he examined all the sales of comparable properties contained in the disclosure documents provided by both First Metro and AEC and determined that the comparable properties situated on corner lots are similar to the subject property in terms of their physical characteristics and location. All other sales were excluded from MPAC's analysis.

20Based on the above argument, Mr. Boccia presented a sales analysis of five sales (from First Metro, AEC and MPAC). The analysis contained both actual and time adjusted sales values. The Board relied on the actual sales information which is factual and not estimated as is the time-adjusted sales values.

21These five sales are located at 1184 1188 Bloor Street West, sold in December 2013 for $2,530,000, at 883 Bloor Street West, sold in April 2011 for $1,950,000, at 890 Bloor Street West, sold in May 2013 for $2,780,000, at 946 Bloor Street West, sold in March 2011 for $1,000,000, and at 693 Bloor Street West, sold in November 2010 for $1,975,000.

22In reviewing the above five sales, the Board did not rely on the three sales which occurred in 2010 and 2013, because these sales are too far removed from the valuation date of January 1, 2012, to provide any meaningful test of current value.

23The remaining two sales sold in 2011 have on average a total lot size of 3,605 sq. ft., a total building area of 6,879 sq. ft., total year built 1937, sold at a cost per sq. ft. of $231.50 based on total building area and with an Assessment to Sales Ratio ("ASR") of 1.205. This is compared to the subject property with a total lot size of 4,620 sq. ft., a total building area of 8,958 sq. ft., built in 1953 and assessed at a value of $261.57 per sq. ft. based on total building area.

24On cross-examination, Mr. Perrotta argued that not all of the above comparable properties are located on major intersection as is the subject property. Referencing the photographs contained in Exhibit 1, Mr. Perrotta argued that some of the comparable properties have outdoor patios, some appeared to have been renovated and others have residential units on the upper level. Mr. Perrotta argued that outdoor patios and residential units positively impact potential income and drive up sale prices.

25In response, Mr. Boccia testified that outdoor patios are not assessed; agrees that not all of the above five comparable properties are located on major intersections as is the subject property; that the sale presented are pre-renovation sales; and was not aware that most of the comparable properties contained residential units. However, Mr. Boccia accepted Mr. Perrotta's argument that some of the comparable properties contained residential units on the upper level.

26Mr. Boccia also argued that commercial properties with less than 10,000 sq. ft. are generally assessed using the Direct Sales Comparison Approach by MPAC. Therefore he argued that income is not a factor that is considered in the Direct Sales Approach to value. Finally in response to Mr. Perrotta, Mr. Boccia agreed that the use of a property can change.

Appellant's Position

27In support of his argument, Mr. Perrotta presented Exhibit 5, disclosure documents received from AEC. The documents contained five sales (three corner lot and two non-corner lot comparable properties). The three corner lot comparable properties were included in MPAC's sales analysis above. However, the two non-corner lots comparable properties were not analyzed.

28These two sales of non-corner lot comparable properties are located at 998 Bloor Street West, sold April 2012 for $960,000, and at 1657 Bloor Street West, sold August 2011 for $1,350,000. These two comparable properties have on average a total lot size of 3,656 sq. ft., a total building area of 6,956 sq. ft., total year built 1925, an ASR of 1.25 and sold at a cost of $170.56 per sq. ft. based on total building area. This is compared to the subject property with a total lot size of 4,620 sq. ft., a total building area of 8,958 sq. ft., built in 1953 and assessed at a value of $261.57 per sq. ft. based on total building area.

29Mr. Perrotta called Sue Perrella as a witness for the Appellant. Ms. Perrella presented an overview of her work experience from 1980 to present. No objections were raised by MPAC and Ms. Perrella testified to the evidence contained in Exhibit 7.

30Ms. Perrella testified that the subject property is a two-storey commercial building that is occupied on the main floor by Pizza Pizza and Dueling Grounds game store and the second floor by Sport Club Angrense of Toronto. She testified that Pizza Pizza moved in in September 2006, after the space they leased was renovated that same year. The sublet space for Dueling Grounds and other interior spaces have not changed since around 1974, except for window replacement about 10 years ago.

31She testified that the upper floor is in poor/fair condition with vinyl floors, stucco ceiling, florescent lighting. The exterior is in fair condition and is in need of repair.

32In support of current value, Ms. Perrella presented an analysis of five sales at 703 Bloor Street West, sold in 2011, at 883 Bloor Street West, sold in 2011, at 693 Bloor Street West, sold in 2010, at 998 Bloor Street West, sold in 2012 and at 655 Bloor Street West, sold in 2013. Using internal measurements, Ms. Perrella testified that these comparable properties sold at a median cost of $201.00 per sq. ft. (average cost $199.40 per sq. ft.) based on total building area. Based on a cost of $200.00 per sq. ft., Ms. Perrella testified that the value should be $1,771,600.

33Ms. Perrella also presented an analysis based on 2012 rental income for Pizza Pizza (Exhibit 7, A1, and A3) and Sport Club Angrense of Toronto (Exhibit 1, A5). Using the total income for these two companies, Ms. Perrella adjusted the value by 3% for vacancy, 2% for expenses and 5.5% as capitalization rate. Based on these adjustments, Ms. Perrella testified that the value based on income should be $1,420,500.

34Ms. Perrella also testified that the subject property has drainage problems and a sump pump had to be installed in 1999 to pump out the water. Ms. Perrella cited an Engineering Report, prepared for Robert Bell, by Bi-Port Engineering Ltd and dated September 15, 1999 (Exhibit 7, A6). She testified that the report indicated that the City's sewers are higher than the subject property's sewer, causing drainage problems.

35Ms. Perrella testified that the assessment was appealed with the Board for the taxation years 1999 and 2000 because of the drainage problem. After an inspection and a review of the Engineering report, she testified that the assessment was reduced from $384,000 to $299,000 for both years (Exhibit 7, A15 -16). Ms. Perrella testified that the obsolescence adjustment should have remained with the property because it would be an issue if the subject property was ever to be sold. She testified that allowing an obsolescence adjustment would result in a value of $1,807,000.

36On cross-examination and in response to Mr. Boccia, Ms. Perrella testified:

• That for the above sales analysis, actual sale prices were used. She testified that she did not feel it was necessary to time adjust the sale prices, because of the sale dates;
• That the value of $1,771,600 determined by the analysis of five sales above is based on net rentable space (internal measurement). In response, Mr. Boccia reiterated the fact that MPAC assesses properties based on external measurements;
• That she agrees land is valuable although she did not include any value for site area in her analyses;
• That she had not done a study to determine the capitalization rate, vacancy rate and expense rate for the above income analysis that was based only on rents from Pizza Pizza and Sport Club Angrense of Toronto. The third tenant, Dueling Ground's rental income was not included. Instead, she used the rates shown on the GRAD report for other properties (Exhibit 8 and 9);
• That the Engineering Report was done in 1999, that cost to cure was not quantified in the report and that the drainage problem was not cured by the installation of a sump pump;
• That the change in the returned assessment for the 1999 and 2000 taxation years was based on a judgment call by the assessor after much discussion; and
• That there was no evidence of water leakage and water overflowing at the time of the inspection in June 2015; that according to her client, water leakage happens once or twice a year depending on the weather; and that the basement was being used at the time of the inspection.

The Board's Analysis and Decision

37In reviewing all of the above evidence, the Board finds the following:

• That MPAC addressed the discrepancies with the finished basement area after inspecting the subject property by changing the finished area from 3,321 sq. ft. to 1,500 sq. ft. and adjusting the returned assessment from $2,317,000 to $2,267,000;
• That although Mr. Perrotta argued that some of the comparable properties presented by MPAC appeared to be renovated as testified above, he presented no factual evidence to show the dates of the renovation and what exactly was done to the comparable properties;
• That the subject property is not prejudiced by the fact that it is compared to comparable properties with patios. The Board accepts Mr. Boccia's testimony that patios are not assessed by MPAC;
• That although the sales of comparable properties presented by MPAC are not all located on a major intersection as the subject property, the Board recognizes that at times there are insufficient sales in the immediate vicinity of the subject property and therefore, it is necessary to expand the vicinity to find a meaningful number of sales of comparable properties to assist the Board in its determination of current value. Generally, the Board considers comparable properties close to the immediate physical vicinity of the subject property as is possible;
• That although Mr. Perrotta argued that the subject property has not been renovated (except for the area occupied by Pizza Pizza) and is in poor to fair condition and in need of repair, he presented no quantitative evidence to demonstrate the impact on the assessed value of the subject property;
• That Mr. Perrotta failed to prove that the same drainage problems exist as of the valuation date January 1, 2012, as it was in 1999 when the Engineering Report (Exhibit 7, A6) was done and after a sump pump was installed. Also, there is no factual evidence that the reason for the change in the returned assessment from $384,000 to $299,000 rendered by an ARB decision (Exhibit 7, A15 – 16) for the 1999 and 2000 taxation years was for drainage problems associated with faulty construction. Therefore, the Board did not rely on the Engineering Report and the 1999 decision of the Board;
• That the value of $1,771,600 based on an analysis of five sales by Ms. Perrella was not relied on because it was based on internal measurement and included sales which occurred in 2010 and 2013. Sales in 2010 and 2013 are too far removed from the valuation date of January 1, 2012 to provide any meaningful test of current value. The Board accepts Mr. Boccia's testimony that properties are consistently assessed based on external measurement;
• That the value of $1,420,500 based on the 2012 rental income for Pizza Pizza (Exhibit 7, A1, A3) and Sport Club Angrense of Toronto (Exhibit 7, A5) was not relied on because no factual income statement was presented into evidence to corroborate the values provided in an email by the assessed person; and no factual evidence was presented into evidence to show how Ms. Perrella arrived at the factors (percentage) used for adjusting for vacancy, expenses and capitalization rate. Instead, Ms. Perrella relied on factors stated in the GRAD reports (Exhibit 8 and 9) for two comparable properties;
• The Board also accepts the above revised assessment value of $2,267,000 presented by Mr. Boccia because of a reduction in the total finished basement area discovered during the June 23, 2015 inspection of the subject property; and
• Finally, the Board finds the best evidence to be the average ASR of 1.17 of the above five sales presented by (MPAC, AEC and First Metro) at 703, 946, 883, 1657 and 998 Bloor Street West, and sold in 2011 and 2012. As discussed above, these five comparable properties are on average not similar in total lot size, total building area and in age. The Board also finds that there are other issues (patios, residential units, renovation and location) that further differentiate these comparable properties from the subject property. Applying the ASR to the revised assessment value of $2,267,000 for the subject property reflects a value of ($2,267,000 / 1.17) = $1,938,000.

38Based on all of the above evidence, the Board determines the current value to be $1,938,000.

Equity

39In support of equity, MPAC presented an equity analysis of 30 sales with a median ASR of 1.05 (Exhibit 1) which Mr. Boccia testifies fall within MPAC's acceptable standards of and ASR of 0.95 to 1.05. He testified that MPAC's standards also call for a Coefficient of Dispersion ("COD") of 20%, and the COD for the equity analysis is 15.4%.

40No other evidence was presented by the Appellant.

41Based on the above evidence, the Board finds that the evidence does not support the conclusion that the current value as determined above requires an equity reduction.

Conclusion

42Based on all of the evidence, the Board determined the current value to be $1,938,000, and finds this value to be fair and equitable. Therefore, the Board reduces the returned assessment from $2,317,000 to $1,938,000 for the 2014 and deemed 2015 taxation years.