Capocci v. Municipal Property Assessment Corporation, 2015 CanLII 60939

Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE: September 28, 2015

FILE NO.: WR 125959

Assessed Person(s): Gerardo Capocci and Rosina Capocci

Appellant(s): Gerardo Capocci and Rosina Capocci

Respondent(s): Municipal Property Assessment Corporation (“MPAC”) Region 09

Respondent(s): City of Toronto

Property Location(s): 1348 St. Clair Avenue West

Municipality(ies): City of Toronto

Roll Number(s): 1904-033-580-07500-0000

Appeal Number(s): 2997503, 3015970 and 3074024 (deemed 2014 and 2015)

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

Hearing Event No. 560018

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

Heard: June 5, 2014 in Toronto, Ontario

APPEARANCES:

Parties

Counsel+/Representative

Gerardo Capocci and Rosina Capocci

Gerardo Capocci

MPAC

Terry Kroi

City of Toronto

No one appeared

DECISION OF THE BOARD DELIVERED BY CHARLOTTE D. SLOAN

INTRODUCTION

1The issue for the Assessment Review Board (“Board”) to determine is whether the assessment as returned for the subject property for the 2013 taxation year is at current value as at the January 1, 2012 valuation day; and whether the assessment is equitable with the assessments of similar lands in the vicinity.

DECISION

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

1. Section 44.(3)(a) requires the Board to “determine the current value of land.”

For the reasons stated below, the Board finds that the current value of the subject property as at the valuation day of January 1, 2012, is $736,000.

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.”

For the reasons stated below, the Board finds that no adjustment is required to be made for the purpose of equity.

3Accordingly, the current value of the subject property is $736,000 as of January 1, 2012, apportioned $220,800 to the commercial class and $515,200 to the residential class and the assessment of the subject property is reduced from $788,000 to $736,000 for the 2013 and taxation year.

REASONS FOR DECISION

The Subject Property

4The subject property is an attached two-storey retail building with commercial on the main floor and residential units on the main and second floors, located at 1348 St. Clair Avenue West in the City of Toronto in the Municipal Property Assessment Corporation’s (“MPAC’s”) Q07 homogeneous neighbourhood, and more particularly in the Corsa Italia Business Improvement Area (“CI-BIA”). The dwelling, built in 1910, has a total building area of 3,700 square feet (“sq. ft.”), made up 1,850 sq. ft. on the first floor, the front being commercial and the back being a residential self-contained apartment; and 1,850 sq. ft. of residential on the second floor. It also has an unfinished basement area of 1,850 sq. ft. There has been a store-front revitalization effort in the CI-BIA, including the subject property. The lot has an effective frontage of 19.43 feet by an effective depth of 103 feet, and an effective site area of 2,002 sq. ft. The subject property is further described in the MPAC Disclosure Report (Exhibit 1) and photographs of the subject property are included in MPAC’s Exhibit 1-A and the Appellant’s Exhibit 2-A.

5On questioning by the Appellant, Roberto Boccia of MPAC stated that the subject property was last inspected in July 2011 for the purposes of its 2008 current value assessment. He used the notes of that inspection for the 2012 current value assessment, which is the subject of this appeal.

The Legislation

6Section 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.

7In determining the value at which land is assessed, s. 44.(3) 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.

8In making its determination, the Board is directed by various other sections of the Act, the most relevant being the following:

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 1 defines current value as:

“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.

11Section 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.

12Section 40.(17) of the Act provides:

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.

MPAC’s Position

13Terry Kroi called upon Mr. Boccia, an MPAC Property Valuation Analyst as MPAC’s witness. Mr. Boccia had earlier been accepted by the Board as an expert witness on residential and small commercial assessment, with no objection from Gerardo Capocci.

14Mr. Boccia stated that the assessment as returned for the 2013 taxation year is $788,000, apportioned $236,000 to the commercial class and $552,000 to the residential class. According to Mr. Boccia, MPAC offered to reduce the assessment as returned for the 2013 taxation year to $749,000, apportioned $224,700 to the commercial class and $524,300 to the residential class. That offer was not accepted by the Appellant. Mr. Boccia advised that MPAC would honour that offer.

15Mr. Boccia stated that the current value of the subject property had been determined using the direct sales comparison approach to value. To support MPAC’s position that the current value of the subject property as at January 1, 2012 is the offered-reduced assessment of $749,000, Mr. Boccia provided four sales between June 2011 and October 2012 of suggested comparable properties within the Q07 homogeneous neighbourhood and adjacent neighbourhoods. Two of the MPAC suggested comparable properties are located in the same CI-BIA. Two maps (one being of the CI-BIA) showing the location of the subject property and the suggested comparable properties are included Exhibit 1-C.

16The key features of the subject property and the four suggested comparable properties are set out in MPAC’s sales investigation of sold properties (Exhibit 1-B), in three photographs presented by MPAC as Exhibit 1-B and one photograph presented by the Appellant, also marked Exhibit 1-B, and in Mr. Boccia’s testimony. According to Mr. Boccia, all of the suggested comparables have similar physical characteristics, lot sizes and total building areas as the subject property, as well as all having main floor commercial and upper floor(s) residential. All have had store-front revitalization. MPAC’s comparable Sale 4 is a corner lot, for which there is a plus 13 per cent adjustment.

17Exhibit 1-B sets out the actual sale price of each of MPAC’s four suggested comparable properties. According to Mr. Boccia, the sale amounts of the suggested comparable properties establish a range of values for the subject property of between $665,000 and $1,275,000. Mr. Boccia further submitted that the offered-reduced assessment of $749,000: falls within that range of values; is very similar, on a sale price per square foot of total building area basis, to Sale 3, which is in the same CI-BIA and is the most comparable MPAC suggested property; and is reasonable.

18Mr. Boccia submitted the Equity Analysis in Exhibit 1-D and further described in Exhibit 1. According to the Equity Analysis, which is comprised of 21 arm’s length sales of commercial properties within the vicinity of the subject property between January 2011 and December 2012, the assessment to sale ratios (“ASRs”) ranged from 0.54 to 1.37 with a median ASR of 1.01. According to Mr. Boccia:

• The median ASR in equity analyses should fall between 0.95 and 1.05; a range that is consistent with International Association of Assessing Officers (“IAAO”) standards and indicates that equity has been achieved because similar properties in the vicinity have been assessed at their current values; and

• The Equity Analysis in Exhibit 1-D, with a median ASR of 1.01, indicates that similar properties in the vicinity of the subject property are assessed at their current values. Therefore, no equity adjustment is required.

19Mr. Boccia submitted that the offered-reduced assessment of $749,000 is the correct current value of the subject property and is reasonable, using sale prices of comparable properties in the same neighbourhood, of similar quality, condition age and size. Mr. Boccia further submitted that this amount requires no adjustment for equity.

The Appellant’s Position

20Mr. Capocci asserted that the offered-reduced assessment of $749,000 is too high, especially because of the negative issues related to the subject property and its surrounding neighbourhood (location).

21The Appellant purchased the subject property in 1999 for $266,000. In addition to the apartment on the second floor, it has a self-contained apartment at the back of the main floor that brings in about $800 per month. However, the subject property has lost four parking spots in the back, because of that main floor apartment (photograph included in Exhibit 2-A).

22In Exhibit 3 and in testimony, the Appellant asserted that the subject property has had bad flooding problems from the time of his purchase in 1999. As a result of the significant cracks in the foundation walls, parts of the property suffer from flooding, mould and rot (photographs in Exhibit 2-A). Currently the back basement cannot be used because of the water problems. While the Appellant has temporarily fixed the flooding problem with pits and sump pumps, it would require substantial repairs, including shoring up the foundation, before he could sell the subject property. Included in Exhibit 3 are contractors’ estimates (dated 2007 and 2010) of between $129,000 to $135,000 for the work that needs to be done to the subject property to permanently fix the flooding problem.

23Mr. Capocci disagreed with all of MPAC’s suggested comparables. In particular, the Appellant asserted that MPAC should not be using comparable properties from the heart of the CI-BIA and outside of the CI-BIA. According to Mr. Capocci, who has lived in the area all of his life, the St. Clair and Dufferin and Via Italia sections, where two of MPAC’s suggested comparable properties are located, are “hot areas” of the CI-BIA; the St. Clair and Lansdowne part, where the subject property is located, is not a “hot area”; property values in that area are going down. The subject property will soon be losing its current commercial tenant, which is moving to the most up-and-coming neighbourhood, St. Clair and Keele (the Stockyards).

24The Appellant submitted as his suggested comparable, a property directly adjoining the subject property – 1350 St. Clair Avenue West. MPAC used this property as a suggested comparable in the Appellant’s appeal of the subject property’s 2008 current value assessment. According to evidence provided by the Appellant in Exhibit 3 (and photographs in Exhibits 1-A and 2-A), 1350 St. Clair Avenue West sold in July 2011 for $320,000. The dwelling, built in 1910, has a total building area of 1,716 square feet (“sq. ft.”), made up 858 sq. ft. of commercial on the first floor and 858 sq. ft. of residential on the second floor. It also has an unfinished basement area of 984 sq. ft. It has had a store-front revitalization. This suggested comparable property has a frontage of 17.18 feet by a depth of 100.47 feet, and an effective site area of 1,726 sq. ft. The MPAC representative confirmed that its 2012 current value assessment is $583,000. According to Mr. Capocci, while this neighbouring property does not have the subject property’s extra apartment at the back of the main floor apartment, it has four extra parking spaces, which are very valuable in the area. Further according to Mr. Capocci, this neighbouring property is very similar to the subject property except for the latter’s extra apartment and significant flooding problem.

25Mr. Capocci further submitted that the Board should not accept MPAC’s Equity Analysis since many of the properties included in Exhibit 1-D are so different than the subject property and the sale prices of so many of the properties included in the Equity Analysis are so different than their current value assessments. The Appellant asserted that, with so many questions surrounding MPAC’s Equity Analysis, it should not be relied upon by the Board.

26Mr. Capocci explained that, as a result of the foundation problems and flooding and mould, the subject property’s 2000 current value assessment was $212,000 even though he purchased the property in 1999 for $266,000. In recent past appeal decisions by the Board, the subject property’s assessment has been reduced. The Appellant submitted that because of the continuing physical problems of the subject property and given that property values in the neighbourhood have gone down over the last few years, the correct current value of the subject property should be its 2008 current value of $362,000.

The Board’s Analysis and Conclusions

Current Value

27Section 44.(3)(a) of the Act requires the Board to determine the current value of the subject property.

28Section 19.(1) of the Act provides that the assessment of land is based on its current value.

29The Board notes the Appellant’s remarks regarding the subject property’s 2000 and 2008 current value assessments. However, prior years’ assessments, including the prior assessment cycles described by the Appellant, are not the subject of or relevant to this appeal, which is to determine the current value of the subject property as of January 1, 2012. There is nothing in the Act that requires any correlation between the assessments of different valuation years.

30To determine current value, the best evidence the Board can receive is an arm’s length sale of the subject property at or near the valuation date. If there is no such transaction (as in this appeal), the Board looks to arm’s length sales of comparable properties located in the vicinity of the subject property, at or near the valuation day. For the 2013 taxation year, the valuation date is January 1, 2012 according to s. 19.2(1) of the Act.

31To establish current value, MPAC has submitted information on the sales of four suggested comparable properties in Exhibit 1-B. The Appellant provided his views as to why none of MPAC’s suggested properties are comparable to the subject property. In Exhibit 3, the Appellant submitted information about one suggested comparable property, and its sale.

32To enable an estimate of current value for the subject property to be derived from sales of comparable properties, there must be sufficient elements of similarity in terms of physical factors such as total building area, land area, frontage, age of construction, physical condition and characteristics of the dwelling, and in terms of neighbourhood characteristics such as access to amenities, type and nature of housing, etc., so as to permit a direct comparison to be made between the comparable properties and the subject property. The Board does not generally include unsubstantiated repair costs, such as those submitted by the Appellant in Exhibit 3, in its determination of current value based on sales of comparable properties.

33The Board does not accept 1192 St. Clair Avenue West (MPAC’s suggested Sale 2) as a comparable property although it is located in the same CI-BIA and is of a similar age as the subject property. However, its effective frontage, effective lot size and total building area are all somewhat larger than the subject property, and that combination is such that the Board is not persuaded that MPAC’s Sale 2 is sufficiently similar to the subject property in order to be used for a direct sales comparison analysis.

34The Board does not accept 1686 St. Clair Avenue West (MPAC’s suggested Sale 4) as a comparable property because its total building area is substantially larger than the subject property and the building is almost 60 years newer than the subject property. When those very significant factors are combined with 1686 St. Clair Avenue West being located in a different homogenous neighbourhood, on a corner lot with a somewhat smaller lot size, the Board is not persuaded that MPAC’s Sale 4 is sufficiently similar to the subject property in order to be used for a direct sales comparison analysis.

35The Board does not accept the Appellant’s suggested property, 1350 St. Clair Avenue West as a comparable property. While it is the same age and is in the same location as the subject property, its total building area is substantially smaller (about 54% smaller) than the subject property. When that significant difference in building area is combined with its somewhat smaller lot size, the Board is not persuaded that 1350 St. Clair Avenue West is sufficiently similar to the subject property in order to be used for a direct sales comparison analysis.

36The Board accepts both 1059 St. Clair Avenue West and 1257 St. Clair Avenue West, which are Sales 1 and 3 of MPAC’s suggested comparable properties, since they are both of a similar age as the subject property and both have similar, albeit somewhat smaller, total building areas as the subject property. Both properties have similar lot sizes as the subject property, with Sale 1 being somewhat smaller and Sale 3 being somewhat larger. While Sale 1 is located in a different homogenous neighbourhood than the subject property, it is still located quite close to the subject property, just a few blocks to the west.

37As set out in Table 1, the average total building area and effective lot size of the two comparable properties are 3,477 sq. ft. and 2,144 sq. ft. respectively. That is comparable to the subject property with a total building area and effective lot size of 3,700 sq. ft. and 2,002 sq. ft., respectively.

Table 1

Address of Property

Total Building Area (sq. ft.)

Effective Lot Size (sq. ft.)

Sale Price ($)

Sale Price ($) per sq. ft. of Total Building Area (rounded)

1348 St. Clair Avenue West Subject Property

3,700

2,002

1059 St. Clair Avenue West MPAC Sale 1

3,369

1,713

665,000

197

1257 St. Clair Avenue West MPAC Sale 3

3,585

2,575

725,000

202

Average

3,477 (rounded)

2,144 (rounded)

199

38The Board finds the best evidence of current value is by reference to the average sale price per square foot of the two comparable properties in Table 1, being $199 per sq. ft. of total building area. That is lower than the offered-reduced assessment of the subject property ($749,000) per square foot of total building area (3,700 sq. ft.), being $202 (rounded).

39When $199 is applied to the total building area of subject property, the result is $736,300 ($736,000 rounded).

40Based on the evidence provided, the Board finds that the current value of the subject property is $736,000 as of January 1, 2012. Neither party presented the Board with any evidence that the current value should be apportioned in any way other than 30:70, commercial to residential. Therefore, the current value of $736,000 is apportioned $220,800 to the commercial class and $515,200 to the residential class.

Equity

41Section 44.(3)(b) of the Act requires the Board to determine if the assessment of a property at current value is equitable with the assessments of similar lands in the vicinity and to lower the assessment below current value if required to achieve equity.

42The purpose of the equity test in s. 44.(3)(b) of the Act is to ensure that the municipal tax burden is shared fairly and equitably amongst all similarly situated property taxpayers. If similar properties in the vicinity are assessed at or near 100% of their current value, equity has been achieved.

43Mr. Boccia submitted an Equity Analysis in Exhibit 1-D of 21 arm’s length sales of commercial properties within the vicinity of the subject property between January 2011 and December 2012, with ASRs ranging from 0.54 to 1.37 and a median ASR of 1.01. According to Mr. Boccia, this indicates that similar properties within the vicinity of the subject property have been assessed at their current value.

44The onus in this portion of the assessment appeal is on the Appellant, to show on a balance of probabilities that the assessment of the subject property at its current value (as determined above) is not equitable with the assessments of similar lands in the vicinity.

45Mr. Capocci submitted that MPAC was cherry picking assessments in order to reach the conclusion of a median ASR of 1.01 in its Equity Analysis and that many of the properties included in the Equity Analysis are very different than the subject property, including strip plazas and corner properties.

46Given this disparity in the positions of the Appellant and MPAC with regard to equity, a useful tool in making the determination required by s. 44.(3)(b) of the Act is the ASRs of both parties’ suggested comparable properties with sales sufficiently close to the valuation date, which acts as a check on the MPAC valuation model to determine whether the model is tending to either over-value (over-assess) or under-value (under-assess) similar properties in the vicinity of the subject property.

47For equity, properties do not need to be as similar as required for valuation purposes. They should be of the same general nature, character and function - similar in such matters as structure, quality and age - and within the vicinity of the subject property. For that reason, in Table 2 the Board has reviewed the ASRs of the four MPAC suggested comparable properties and the one Appellant suggested comparable property (including the two MPAC properties that the Board did not use for the Current Value Analysis and the Appellant’s one suggested property that the Board also did not use for the Current Value Analysis, but all of which are sufficiently similar for the purposes of an equity analysis).

Table 2

Address of Property

2012 Assessed Value ($)

Sale Price

ASR (Assessment to Sale Amount)

1059 St. Clair Avenue West MPAC Sale 1

671,000

665,000

1.01

1192 St. Clair Avenue West MPAC Sale 2

1,036,000

1,275,000

0.81

1257 St. Clair Avenue West MPAC Sale 3

725,000

725,000

1.00

1686 St. Clair Avenue West MPAC Sale 4

802,000

750,000

1.07

1350 St. Clair Avenue West Appellant’s suggested comparable property

583,000

320,000

1.82

Average

1.14

48The above calculations, resulting in an average ASR of 1.14, indicate that similar properties in the vicinity of the subject property are generally assessed at above their current value. Accordingly, there is no evidence before the Board that would require it to adjust the current value of the subject property, determined in the Current Value Analysis above to be $736,000, for the purpose of equity under s. 44.(3)(b) of the Act.

CONCLUSION

49Based on the foregoing, the current value of the subject property is $736,000 as of January 1, 2012, apportioned $220,800 to the commercial class and $515,200 to the residential class, and the assessment of the subject property is reduced from $788,000 to $736,000 for the 2013 taxation year.

2014 AND 2015 DEEMED APPEALS

50An appeal for the 2013 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 2013 appeal before March 31, 2014. For that reason, this decision also applies to the 2014 taxation year.

51The Board has not disposed of the 2014 appeal before March 31, 2015. For that reason, the decision also applies to the 2015 taxation year.

52Section 40.(26)

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.