Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE: October 15, 2015

FILE NO.: WR 131836

Assessed Person(s): Uri Kiselman

Appellant(s): Uri Kiselman

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

Respondent(s): City of Toronto

Property Location(s): 520 Douglas Avenue

Municipality(ies): City of Toronto

Roll Number(s): 1908-061-540-06700-0000

Appeal Number(s): 3049450 and 3073742

Taxation Year(s): 2014 and 2015

Hearing Event No. 580905

Legislative Authority: Sections 34 and 40 of the Assessment Act, R.S.O. 1990, c. A.31, as amended

Heard: March 18, 2015 in Toronto, Ontario

APPEARANCES:

Parties	Counsel⁺/Representative
Uri Kiselman	D. Attard⁺
MPAC	Carlo Bassi
City of Toronto	No one appeared

DECISION OF THE BOARD DELIVERED BY MARILYN SHARMA AND MARK SPRAGGETT

INTRODUCTION

1The property under appeal is located at 520 Douglas Avenue (“Property”), in the City of Toronto. The owner (“Appellant”) purchased the property in November of 2009, with an existing house on the property. Shortly after taking possession, a demolition permit was issued in late 2009. A newly built detached, two-storey, 3,829 square foot (“sq. ft.”) structure with an in-ground garage was completed sometime in 2012.

2The redevelopment of the land, after demolition of the older house, to include a newly built house, has increased the assessed value of the property.

3This appeal concerns the supplementary assessment of the newly constructed house.

4The representative for the Appellant (“Representative”) believes that s. 34 of the Assessment Act (“Act”) where it identifies that “…….an increase in value occurs which results from the erection, alteration, enlargement or improvement of any building, structure, machinery, equipment or fixture or any portion thereof……” such value in his opinion is to be determined based on the cost of the addition or construction of the new building.

5The Representative stated that the Direct Sales Comparison approach used by MPAC to arrive at a current value does not represent the best approach to arriving at the supplementary assessment for the newly built house. He argues that the Cost Approach is a more accurate approach in determining the supplementary assessment for the new house.

6The Assessor maintains that the newly constructed home on the property increases its value of the property by not only the cost of constructing the new house but increases the current value of the entire property as it relates to other similar properties in the subject neighborhood. He is of the view that the Direct Sales Approach is the best method to arrive at an accurate current value for the subject property.

PRELIMINARY ISSUE

7At the start of the hearing the Assessor pointed out that in the Assessment Review Board’s (“Board”) Notice of Hearing, the supplementary assessment under appeal was stated as $850,000. He, however clarified that this value is the land value only and does not include the value or any portion of the newly constructed house. The Representative for the Appellant agreed with this position. The Assessor corrected the record by indicating that the supplementary assessment under appeal for the newly constructed house is $1,412,000.

8The Assessor advised the Board that the land value of $850,000 is not an issue in this appeal. The Representative for the Appellant concurred.

ISSUE(S)

9The issues before the Board are:

• To determine whether the supplementary assessment for the construction of the newly built house is too high.
• To determine whether the methodology employed by MPAC to establish the supplementary assessment is correct.

DECISION

10The Board finds that the best method of arriving at the supplementary assessment for the construction of a home on the subject property is by the Direct Sales Approach.

11Having agreed on the land value at $850,000, the Board finds that the current value of the subject property is $2,252,000 (rounded) broken down as follows:

• Land Value: $ 850,000
• Building Value: $1,402,000 (rounded)

12The Board has made reference to similar lands in the vicinity and finds that no reduction is required for equity under s. 44.(3)(b) of the Act.

13Accordingly, as at the valuation day, January 1, 2012, the supplementary assessment of the subject property for the 2014 taxation year is reduced from $1,412,000 to $1,402,000. The assessment for the 2015 deemed taxation year is therefore reduced from $2,262,000 to $2,252,000.

Legislation

14For the 2014 taxation year, in determining the value at which land shall be assessed, the Board must have regard to the following provisions of the Act:

15Section 19.(1) of the Act states:

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

16Section 1 of the Act 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.

17Section 19.2(1)2 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:

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 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.

19Section 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.

20Section 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.

21Section 34(1) of the Act states:

34(1) Supplementary assessments to be added to collector’s roll. – If, after notices of assessment have been given under section 31 and before the last day of the taxation year for which taxes are levied on the assessment referred to in the notices,

(a) an increase in value occurs which results from the erection, alteration, enlargement or improvement of any building, structure, machinery, equipment or fixture or any portion thereof that commences to be used for any purpose;

(b) land or a portion of land ceases,

(i) to be exempt from taxation,

(ii) to be farm lands the current value of which is determined in accordance with subsection 19 (5),

(iii) to be conservation land or managed forests land the current value of which is based on current use under subsection 19 (5.2),

(iii.1) to be land in the managed forests property class the current value of which is determined under subsection 19(5.2) or (5.2.1),

(iv) to be land the current value of which is based on current use under regulations made under subsection 19 (2), or

(v) to be classified in a subclass of real property;

(c) Repealed: 1997, c. 5, s. 22 (1).

(d) a pipeline increases in value because it ceases to be entitled to the reduction provided for in subsection 25(9),

the assessor may make the further assessment that may be necessary to reflect the change, and the clerk of the municipality upon notification thereof shall enter a supplementary assessment on the tax roll and the amount of taxes to be levied thereon shall be the amount of taxes that would have been levied for the portion of the taxation year left remaining after the change occurred if the assessment had been made in the usual way.

Analysis

22Under the Act the Board is required to do three things:

1. Find the current value of the property.
2. Make reference to the value at which similar lands in the vicinity are assessed.
3. Adjust the assessment of the subject property if the adjustment would result in a reduction in the assessment.

Current Value

23The best measure of current value is an arm's length and market tested sale of the subject property on the valuation date of January 1, 2012, or close to it. If no such transaction took place, a further measure of current value is arm's length and market tested sales of comparable properties in the same vicinity and market. This measure acts as a benchmark and gauge of the correctness of the assessed value of the subject property. The onus for establishing the correctness of the current value lies with MPAC.

MPAC’S Evidence

24The Assessor for MPAC presented 12 suggested comparable properties as shown in Table 1.

Table 1 MPAC's Suggested Comparable Properties

Address	Bldg. Area (sq. ft.)	Lot Size (sq. ft.)	Year Built	Quality Class	Adj. Sale Amount	Sale Date
530 Douglas Avenue (Subject)	3,829	5,559	2012	8.5	n/a	n/a
417 Glengarry Avenue	3,475	5,300	2011	8.0	2,017,816	July 2011
433 Douglas Avenue	3,164	4,346	2010	8.0	2,078,785	Dec. 2010
415 Douglas Avenue	3,831	5,300	2012	9.0	3,017,037	May 2012
381 Douglas Avenue	3,128	4,240	2009	8.5	2,213792	May 2010
479 Douglas Avenue	3,927	5,406	2011	9.0	2,782,523	May 2011
461 Douglas Avenue	4,050	5,432	2010	8.5	2,734,081	June 2010
661 Bedford Park Avenue	3,323	4,800	2011	8.5	1,921,918	Aug. 2012
522 Douglas Avenue	3,588	5,613	2003	8.0	1,841,843	July 2012
509 Bedford Park Avenue	3,993	6,000	2010	8.0	2,635,182	Jan. 2011
404 Bedford Park Avenue	3,724	5,750	2005	8.5	2,137,531	Dec. 2012
522 Bedford Park Avenue	3,582	5,187	2010	8.0	3,206,177	Apr. 2012
527 Cranbrooke Avenue	3,329	5,094	2005	8.0	2,082,000	June 2012

25The Assessor stated that in his opinion, the four properties located at 381 Douglas Avenue, 661 Bedford Park Avenue, 461 Douglas Avenue and 404 Bedford Park Avenue are the most similar to the subject property.

26The Assessor computed the average adjusted sales price of the four properties he considered to be most similar to the subject property and arrived at an average price per square foot of $633. This rate was applied to the subject property’s total building area of 3,829 sq. ft. resulting in a value of $2,423,000. However, MPAC is recommending a value of $2,262,000 for the 2014 taxation year.

Appellant’s Evidence

27The Representative for the Appellant presented Exhibit 3 titled “Cost Assessment Report” which was prepared on behalf of the Appellant. The original intended use of the report was to:

• Support a matter before the Superior Court pertaining to a dispute for construction services of a private building at 520 Douglas Avenue – the subject property.

28The owner explained that the original contracted price to build the new house was approximately $752,000. He further explained that at some point during the construction of the new house the contractor absconded after being paid a total sum of $749,000. In order to complete the construction, a new contractor was engaged for a further sum of $448,000. The net result is that the total cost of constructing the new house amounted to $1,197,060.

29The Representative and the owner believe that the actual cost incurred of $1,197,060 represents the “value” of the newly built house and thus represents the supplementary assessment attributable to the subject property.

30The owner recounted his efforts to sell the property based on an original asking price of $2.7 million but had no success. The owner then indicated that he reduced the listing price to $2.45 million and again had no success. He went on inform the Board that he received a verbal offer in the amount of $1.9 million through his Real Estate Agent but decided not to sell the property. The owner believes that $1.9 million is more reflective of the total assessment of the subject property (land and building).

31The Representative presented Exhibit 4, MPAC document titled “Property Assessment Details” (“PAD”), specific to the subject property and called his witness Cheryl Muirie (sic) to explain the breakdown of the various components of the PAD for the subject property. The witness pointed out that there are errors in MPAC’s data and pointed out that the land value in the PAD report is $739,000 compared to the land value stated in the tax roll which states the value at $850,000.

32In his closing remarks, Mr. Attard stated that the real issue in this appeal is not a s. 40 appeal, but rather, a s. 34 appeal of a supplementary assessment in the amount of $1,412,000. The Representative argues that the supplementary assessment should be the actual cost of construction in the amount of $1,197,000.

Board’s Analysis of Evidence

Analysis of MPAC’s Evidence

33The Assessor presented 12 suggested comparable properties.

34The Board reviewed the details of the 12 and finds that the properties located at 417 Glengarry Avenue, 661 Bedford Park Avenue, 522 Douglas Avenue, 522 Bedford Park Avenue, and 527 Cranbrooke Avenue are sufficiently similar to the subject property and can be used in the determination of the current value of the subject property because:

• They are all located the same homogeneous neighbourhood.
• They are of similar building and lot sizes.
• They are of similar age.
• They are all in a similar quality class ranging from 8.0 to 8.50.
• All five properties have valid sales.

35The Board rejects the properties located at 433 Douglas Avenue, 381 Douglas Avenue and 461 Douglas Avenue as being comparable to the subject property because they do not have a valid sale.

36The Board rejects the property located at 479 Douglas Avenue as being similar to the subject property because it has a higher quality classification than the subject property.

37The Board also rejects the properties at 415 Douglas Avenue, 509 Bedford Park Avenue and 404 Bedford Park Avenue because they differ from the subject property in one or more of the following:

• Age.
• Quality class.
• All three have swimming pools.

38The Board considered the Assessor’s argument that the Direct Sales Approach is the appropriate approach to arrive at the supplementary assessment of the newly constructed building and that this approach is consistent with the requirements of s. 19.(1) and s. 34(1) of the Act. The Board also considered the argument by the Representative that the Cost Approach is more appropriate in this instance because he has presented the actual cost of construction for the newly built house and in his opinion such costs represents the value of the newly built house.

39The Board is of the view that s. 19.(1) directs that the assessment of “land” as defined under the Act, shall be based on its current value. The Act also stipulates that current value is determined on the basis of sales. The Board notes that s. 34(1) refers to an increase in “value” resulting from the erection, alteration, enlargement, or improvement of any building etc. shall be established.

40The Assessor maintains that the newly constructed home on the property does not increase the value of the property by only the cost of constructing the new house but increases the current value of the entire property as it relates to other similar properties in the subject neighborhood. He is of the view that the Direct Sales Approach is the best method to arrive at an accurate current value for the subject property.

41The Board is of the view that the Representative is attempting to treat “cost” as synonymous with “value” of the newly constructed building. The Act envisages that value will be determined in an open market where a willing buyer and willing seller determines what they believe the value of a piece of property should be worth. In this instance, the Board recognizes that there was a certain cost incurred in the construction of the new building, but such costs do not represent the “value” of the property in the open market. The Board also notes that s. 34(1) requires that the supplementary assessment to be levied is to be determined based on the increase in “value” and not based on an increase in “cost”. The Board prefers the Direct Sales Approach used by the Assessor as being the appropriate method by which the supplementary assessment for the newly constructed house shall be determined.

Analysis of Appellant’s Evidence

42The Board considered the Cost Assessment Report submitted by the Representative for the Appellant. The Board notes that this report was prepared to support a matter before the Superior Court pertaining to a dispute for construction services of a private building at 520 Douglas Avenue (the subject property) and to assist in establishing the supplementary assessment based on the cost approach. The Board could not rely on the content of this report since the author stated in the report that all the information that went into the preparation of the report was provided by the owner himself and in addition, the author of the report was not present to be cross-examined.

43The Board also dismisses the report’s applicability in establishing the supplementary assessment of the newly constructed house because the Board has already established above that it does not consider the Cost Approach as the appropriate methodology to determine value in this case.

44The Board was not persuaded by the arguments advanced by the Representative and the owner pertaining to the placement of the subject property on the open market and what he perceives to be the expected value from such efforts. The Board was not provided with any concrete evidence regarding the owner’s sales efforts and therefore any suggested market value could not be ascertained.

45The Board considered the concern raised by the Representative for the Appellant that MPAC‘s PAD report showed an error regarding the assessed value of the land. The Board notes that the PAD report gives the assessed value of the land portion only as $739,802. However, the assessment roll return for the taxation year 2014 records the value of the land only as $850,000. The Board notes that at the start of the hearing, both the Representative for the Appellant and MPAC agreed with the value of the land as $850,000 and neither party expressed any reservations or concerns. The Board therefore dismisses the concern raised by the Representative.

46The Board notes that the Representative did not provide any suggested comparable properties for consideration in the establishment of the value of the newly constructed house. The Board therefore relies strictly on the properties submitted by MPAC that the Board has determined are similar and comparable to the subject property.

47The Board considered the representative’s submission that the supplementary value should be based on the actual coast of construction which was in the amount of $1,197,000 and in his view with the addition of the land value of $850,000 it would result in a total assessed value of $2,047,000. As previously discussed, the Board has already accepted the principle in the Act that supplementary assessments are to be determined based on “value” and not based on “cost”. Therefore the Board rejects the representative’s submission to the contrary.

Board’s Analysis

Determination of Current Value/Supplementary Assessment

48The Board agrees that the best method to determine the current value and the supplementary assessment of the subject property is based on the sales of similar properties in the neighborhood.

49The Board, having accepted the properties at 417 Glengarry Avenue, 661 Bedford Park Avenue, 522 Douglas Avenue, 522 Bedford Park Avenue, and 527 Cranbrooke Avenue as being similar and comparable to the subject property and each having a valid sale, finds that the sale value per square foot is $588. When this sales value per square foot is applied to the subject property it results in a current value of $2,252,218. The parties agreed that the land value is $850,000.

50The current value of $2,252,218 is therefore broken down as follows:

• Land Value: $ 850,000
• Building Value: $1,402,218

51The Board finds that in accordance with s. 19.(1) and s. 34(1) of the Act, the value of the supplementary assessment is $1,402,000 (rounded).

Equity

52The Board is required under s. 44.(3) sub-paragraph (b) of the Act, 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.

53For purposes of establishing equity, properties do not need to be comparable; they need to be of a similar nature and within a reasonable proximity. MPAC presented the sales of 30 residential properties within 0.25 kilometres of the subject property which occurred between January 2011 and December 2012. The median Assessment to Sales Ratio (“ASR”) of the 30 valid sales is 0.97. A value within five percentage points is usually considered an acceptable value. In this case the average ASR of 0.97 falls within an acceptable range and suggests that MPAC’s methodology may be producing assessments in line with sales. The Board therefore finds that no adjustment is required for equity in accordance with s. 44.(3)(b) of the Act.

CONCLUSION

54The Board finds that the best method of arriving at the supplementary assessment for the construction of a home on the subject property is by the Direct Sales Approach.

55Having agreed on the land value at $850,000, the Board finds that the current value of the subject property is $2,252,000 (rounded) broken down as follows:

• Land Value: $ 850,000
• Building Value: $1,402,000 (rounded)

56The Board has made reference to similar lands in the vicinity and finds that no reduction is required for equity under s. 44.(3)(b) of the Act.

57Accordingly, as at the valuation day, January 1, 2012, the supplementary assessment of the subject property for the 2014 taxation year is reduced from $1,412,000 to $1,402,000. The assessment for the 2015 deemed taxation year is therefore reduced from $2,262,000 to $2,252,000.

Footnotes

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