Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE: October 23, 2015

FILE NO.: WR 134986

Assessed Person(s): 872039 Ontario Inc.

Appellant(s): 872039 Ontario Inc.

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

Respondent(s): City of Mississauga

Property Location(s): 26 Park Street East

Municipality(ies): City of Mississauga

Roll Number(s): 2105-090-005-01500-0000

Appeal Number(s): 2942173, 3007750 and 3085379 (deemed 2015)

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

Hearing Event No. 590831

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

Heard: September 23, 2015 in Mississauga, Ontario

APPEARANCES:

Parties	Counsel+/Representative
872039 Ontario Inc.	Daniel Attard, Andrew Attard
MPAC	Roger Leroux, Joseph McFadden
City of Mississauga	No one appeared

DECISION OF THE BOARD DELIVERED BY TYRONE D. SKANES

PRELIMINARY ISSUE

1Prior to the start of the hearing Roger Leroux, advocate for MPAC, advised that he wished to enter his witness, Joseph McFadden, Curriculum Vitae ("CV") into the record, attesting to his expertise in the area of valuation of multi residential properties.

2Daniel Attard, advocate for the Appellant, replied that he did not have an issue with Mr. McFadden's qualifications in general but requested that the evidence relating to equity not be accepted by the Board as expert. He said that there was no mention in Mr. McFadden's CV that specifically addressed his having expertise in determining equity for properties.

3Mr. Leroux responded that Mr. McFadden's education, training and experience were well established in his CV and that he is qualified to give expert testimony in all aspects of valuation.

4The Board considered the parties submissions and ruled that Mr. McFadden is an expert in valuation and valuation includes an equity analysis.

INTRODUCTION

5The appeal before the Assessment Review Board ("Board") is an appeal by 872039 Ontario Inc. in respect of the assessment of a multi-residential apartment building located at 26 Park Street East (subject property) for the 2013, 2014 and the deemed 2015 taxation years.

6The subject property is described as a high rise multi-residential apartment building, with 82 residential units, that was built in 1965. It has 54 one bedroom apartments, 26 two bedroom apartments and two bachelor apartments. It is located in the Lakeshore Road East and Elizabeth Street North area of Mississauga.

7Mr. McFadden, appearing as witness for MPAC, testified that he used the income approach to value in determining the assessment of the subject property. He said that the returned assessment was $8,427,000 despite his determining that the current value of the subject property should be $9,289,000. He said that MPAC had not applied for an increase in the assessment and therefore was asking the Board to confirm the assessment at $8,427,000 for the 2013, 2014 and 2015 taxation years, a value that he considered fair and reasonable.

8Mr. D. Attard said he believed that, although MPAC used the income approach to value, it did so using a Fair Market Rent ("FMR") study to determine what the rents for the various units ought to be. He disagreed with this approach and said that he would present evidence using actual rents realized by the Appellant to determine a more fair and reasonable assessment of $7,194,000.

ISSUE

9The issue before the Board for determination is whether the assessment of the subject property for the 2013, 2014 and deemed 2015 taxation years is at current value and whether the assessment is equitable with the assessment of similar lands in the vicinity.

DECISION

10The Board is required by s. 44.(3)(a) of the Act to determine the current value of the land and have reference to the value at which similar lands in 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.

11The Board finds that the current value of the subject property as of January 1, 2012, is $9,298,000 and that amount is equitable with the assessments of similar properties in the vicinity. MPAC proposed an assessment for the subject property at $8,427,000 and did not apply for an increase to the assessment. Therefore, the Board confirms the subject property's assessment at $8,427,000 for the 2013, 2014 and deemed 2015 taxation years.

REASONS FOR DECISION

Relevant Legislation

12Section 19.(1) of the Act states:

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

13Section 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.

14Section 19.2(1)3 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:

20. For the period consisting of the four taxation years from 2009 to 2012, land is valued as of January 1, 2008.

21. 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 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.

16Section 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.

17Section 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.

MPAC's Position and Evidence

18Mr. McFadden described the subject property and testified that he used the income approach to value in determining the value to be $9,289,000. This included rents and additional parking revenue of $4,860.

19Mr. McFadden said that he arrived at this value by conducting a Fair Market Rent ("FMR") study using 917 rents from properties in the same homogenous neighbourhood. He said that he obtained the rent information from the Tenant Information Program ("TIP") and determined that the FMR ought to be:

1 bedroom apartments 54 @ $ 960 2 bedroom apartments 26 @ $1,092 Bachelor apartments 2 @ $ 804

20Mr. McFadden said that he determined the Potential Gross Income ("PGI") from the FMR study to be $962,784 and then added the parking revenue of $4,860 for a total of $967,644.

21Mr. McFadden explained that he preferred to use fair market rents as opposed to actual rents for several reasons. He said that a potential buyer would not only be interested in what a property is actually realizing but what its potential income could be, based on market conditions. He acknowledged that some buildings perform better than others; that some buildings were realizing lower rents than what the market would bear. He said using the PGI derived from the FMR should reasonably indicate how a property is performing.

22Mr. McFadden said that, for comparable properties, he used the sales of 10 properties that occurred in 2011 and 2012, which are located in Mississauga and Brampton. He said that it can be difficult to get a sufficient sample size of comparable properties and that is why he had to expand the search area to include the city of Brampton.

23Mr. McFadden said that he employed a Gross Income Multiplier ("GIM") to arrive at the subject property's value. He advised that a GIM is calculated using the sales of comparable properties and dividing the sale price by the PGI.

24Mr. McFadden said that his analysis of the 10 comparable properties revealed that the GIMs ranged from 7.04 to 12.00 and that the median GIM was 9.06. He said that he used the median GIM in his calculations to arrive at his estimate of value by multiplying $967,644 by 9.60, for a value of $9,289,000.

Equity

25Mr. McFadden entered an equity analysis as part of Exhibit 1. He said that he examined the sales of 17 multi-residential properties between January 2011 and October 2012. He said that as this type of sale is difficult to find he expanded the vicinity to include four sales from Brampton and one sale from Caledon. Mr. McFadden said that he determined that the median Assessment to Sales Ratio ("ASR") was 0.95. He opined that as the ASR fell within a range of 0.95 and 1.05 this indicated to him that similar lands in the vicinity are being assessed at their correct current values and an equity adjustment is not required.

26In response to the Board's and Mr. Attard's questions, Mr. McFadden stated that:

• He used the 2012 TIP information as opposed to 2011 because he wanted to use the most current information,
• He used a range of FMR's,
• He used the median of the FMR range because it helped smooth out any differences that may be present,
• He expanded the vicinity in the equity study because he wanted a greater number of sales in order to determine a more accurate result.

Appellant's Position and Evidence

27Mr. A. Attard testified that the crux of the Appellant's argument was that they disagreed with MPAC's determining current value using FMRs. He said that using actual rents was a more accurate method of determining value as it reflected an amount in hand for the subject property's owner and any potential buyer. It clearly indicates what the true value of the subject property is by how much revenue it is generating.

28Mr. A. Attard said that he used the rent rolls from the subject property from January 2012. He said that he determined the median rents for the units as follows:

1 bedroom apartment 54 @ $884 each, 2 bedroom apartment 26 @ $957 each, bachelor apartment 2 @ $667 each.

29Mr. A. Attard said that he applied a GIM of 9.01 and multiplied it by the GPI of $892,130 resulting in a market value for the subject property of $8,041,000.

30Mr. A. Attard disputed MPAC's equity analysis by testifying that MPAC erred by expanding the vicinity to include five sales outside of Mississauga. He said that the 12 sales from Mississauga were sufficient for an analysis to be done. He stated that by using only properties from the same municipality meant that they were all being assessed using the same rules.

31Mr. A. Attard said that by using only the 12 sales from Mississauga the average ASR was 0.89 and that an equity adjustment was necessary, as this clearly indicated that similar lands were being under assessed.

32Mr. A. Attard said that applying the average ASR of 0.89 to the market value of the subject property of $8,041,000 returned a value of $7,156,000.

33Mr. D. Attard said that this completed the Appellant's presentation and asked the Board to reduce the assessment of the subject property to $7,156,000, for the 2013, 2014 and deemed 2015 taxation years.

34In response to the Board's and Mr. Leroux's questions, Mr. Attard said;

• He used only the 2012 rent rolls in his evidence,
• He did not know the start dates for each rent,
• He proposed that a smaller sample size be used for equity as it was preferable that the properties be from the same municipality,
• He admitted that he used the average ASR as opposed to the median.

35Mr. Leroux summed up MPAC's presentation by providing the Board with the following Authorities:

"Cardinal Plaza Ltd. et al and Regional Assessment Commissioner, Region No. 19 et al, 1984 CanLII 1841 (ON CA), 49 O.R. (2d) 161, using economic rents rather than actual rents."

"Duesburry-Porter v. Municipal Property Assessment Corp. Region No. 25, [2014] O.A.R.B.D. No. 558, before Member Weagant May 29, 2014, held that parties may expand the vicinity for the purpose of equity.

36Mr. Leroux advised the Board the Cardinal Plaza decision is on point at it pertains to using economic rents in determining value as opposed to using actual rents, as proposed by the Appellant. He said that the appellate judges were unanimous in agreeing that economic rents should be used, rather than actual rents, when determining market value using the income approach.

37Mr. Leroux said that MPAC had provided the best evidence and determined the market value of the subject property was $9,289,000 using a FMR study. He said that despite determining the market value of the subject property was substantially higher than the recommended value MPAC had not applied for an increase.

38Mr. Leroux asked the Board to confirm the current value of the subject property at $8,427,000 for the 2013, 2014 and deemed 2015 taxation years.

39Mr. D. Attard summed up the Appellant's presentation by saying that the rents actually being paid is the best evidence of what the market value is for the subject property. He said that the evidence presented by the assessor had gaps in it because MPAC based its conclusions from the TIP from 2012, rather than 2011. He said that using the 2012 information resulted in higher rents being paid and that this skewed the results, particularly the PGI and the GIM.

40Mr. D. Attard also said that MPAC's equity analysis ought to be disregarded because they expanded the vicinity to obtain a larger sample size. He reiterated the Appellant's position that only using the sales from Mississauga returned a sample size sufficient to determine whether similar lands were being assessed correctly. He said that the Duesburry case cited by MPAC was heard in Blue Mountain, a much smaller municipality than Mississauga, and should not be used as an example of having to expand the vicinity to get a larger sample size. He opined that MPAC expanded the vicinity simply to increase the range of ASR.

41Mr. D. Attard said that he believed that the Appellant had presented the best evidence for current value by using actual rents and that an equity adjustment is required if the Board accepts that the average ASR is 0.89, as determined by the Appellant.

42Mr. D. Attard asked the Board to reduce the subject property's assessment to $7,194,000, which would include an equity adjustment, for the 2013, 2014 and 2015 taxation years.

Board's Deliberations

43The Board has carefully considered the testimony of the parties and the documentary evidence tendered as exhibits. When considering comparable properties, the Board does not expect exactness or sameness nor does the legislation require it. Therefore, the Board looks at similarity of characteristics, amenities and location to determine comparability.

44The Board usually considers sales of comparable properties that have occurred within one year on either side of the valuation date as the ideal time period for consideration. All ten comparable properties submitted for consideration by MPAC occurred in this time period. The Appellant did not enter any comparable properties for consideration. The Appellant chose to focus their argument on the appropriateness of using actual rents rather than rents developed from MPAC's FMR study.

45The comparable properties used by MPAC are listed below in Table 1:

Table 1

Address	Units	Year Built	Sale Date	Sale Price	2012 CVA	FMR-PGI	IND GIM
1525 Bloor St.	44	1967	05/31/12	$5,900,000	$4,590,000	$491,705	12.00
1315 Silver Spear Rd.	90	1969	10/31/12	$13,600,000	$11,067,000	$1,234,177	11.02
3151 Jaguar Valley Dr.	41	1965	12/19/11	$5,150,000	$4,588,000	$489,526	10.52
2757 Battleford Rd.	184	1981	06/14/12	$23,900,000	$22,124,000	$2,568,787	9.30
7110 Darcel Ave.	116	1972	05/31/11	$13,030,000	$12,919,000	$1,460,844	8.92
95 Paisley Blvd. W.	60	1969	09/12/11	$6,700,000	$6,502,000	$708,792	9.45
14 Reid Dr.	52	1969	10/25/11	$5,750,000	$5.453,000	$589,590	9.75
192 Church St. E.	93	1972	09/09/11	$7,350,000	$8,772,000	$1,043,964	7.04
161 Church St. E.	61	1962	01/19/11	$5978,000	$6,109,000	$709,995	8.42
110 McLaughlin Rd. N.	20	1968	07/03/12	$2,650,000	$2,360,000	$257,613	10.29

46The assessor testified that he used 917 rents from the same homogeneous neighbourhood to develop his FMR study, from which he determined the market value of the subject property. The Appellant disputed the study and said that there were gaps in the information as the assessor chose to use 2012 information from the TIP, rather than 2011 information. However, exactly what those gaps were was not identified for the Board. Therefore, the Board will place no weight on this assertion.

47The Appellant focused on their position of why actual rents are a more preferable method of determining market value. The Appellant said that rents paid by tenants and any other revenue generated, like parking fees, clearly indicated a property's true worth, instead of some speculative FMR study.

48The Board is sympathetic to this position but the case law on this point is clear, with the Cardinal Plaza citation provided by Mr. Leroux.

49The presiding justices described what an "economic" rent is and dismissed the Appellant's appeal, which was similar in nature to the Appellant's position in this appeal.

50The unanimous decision, written by Lacourciere, J.A. said in part;

"We are all of the view that the Divisional Court and the Ontario Municipal Board did not err in law in holding that the proper determinant of market value pursuant to s. 18 of the Assessment Act, R.S.O. 1980, c.31, using the income approach was "economic rent" rather than the actual rent received by the appellants."

51The decision of the appellate court is clear and defeats the Appellant's position of using actual rents, rather than MPAC's position of using fair market or "economic" rents in determining the market value of the subject property.

52The Appellant's position is quite clear in their evidence. In the Points of Agreement it is clear that they have no issue with either the tax classification or the GIM determined by the assessor. Their disagreement was with the GPI but this was predicated on using actual rents in their presentation. The Board is somewhat confused by the Appellant's agreement with the GIM, as in their evidence a GIM of 9.01 rather than 9.06 was used in the calculation of the GPI. The Board accepts the GIM at 9.06 as presented by MPAC.

53The Board, therefore, on the absence of evidence to the contrary accepts MPAC's FMR study and finds the current value of the subject property to be $9,289,000.

54The assessor presented an equity analysis where he used 12 properties from Mississauga and expanded the vicinity to include five other properties. The assessor testified that as multi-residential building sales are difficult to find he had to expand the vicinity to obtain a sample size suitable for analysis. Thus, he included five sale outside of Mississauga. He testified that the larger the sample size from the data the more accurate the result would be. He determined that the median ASR was 0.95 and opined that as this fell within MPAC's acceptable ASR range of 0.95 to 1.05 an equity adjustment was not required.

55Mr. Leroux presented the Duesburry citation as a prior decision of the Board whereby MPAC had expanded the vicinity in order to be able to get a sufficient sample size to conduct and equity analysis.

56The Appellant disputed this equity analysis. However, the Appellant did not submit an alternative equity analysis but chose to explain why MPAC study was flawed and how it should be evaluated.

57The Appellant said that there was no need for MPAC to expand the vicinity from Mississauga to get a suitable sample size to analyze. He said that 12 sales from Mississauga was sufficient to determine if similar lands in the vicinity were being assessed at their correct current values. He said he believed that MPAC expanded the vicinity for no other reason than to get an ASR that fell within the range that indicated an equity adjustment was not necessary. He said that if only the 12 Mississauga sales were used the average ASR would be 0.89 and an equity adjustment would be necessary, which was their position. He said failing this the Board ought to use only the 12 Mississauga sales in its deliberations and find that the median ASR would be 0.91. He also said that by using sales from the same municipality meant that they were being assessed by the same municipal rules and not by those from a neighbouring municipality.

58Mr. D. Attard said that the Board ought to find that MPAC did not have to expand the vicinity, despite Duesburry. He advised that this case was heard in the Blue Mountain area, which is a very small municipality, whereas Mississauga is one of the larger municipalities in the province.

59The Board considered both equity arguments and rejects them. The assessor was forthright and frank in the delivery of his evidence and the Board did not get the impression that he was attempting to tailor the evidence to achieve a pre-determined result. He clearly explained, without embellishment, that he wanted a larger sample size from which to conduct an analysis because the larger the size of the sample being studied, the more accurate the result. Additionally, the fact that Duesburry was heard in a municipality smaller than Mississauga is immaterial. The principles of conducting a thorough equity analysis are the same regardless of where it is conducted. The only difference between Mississauga and the Blue Mountain area is the availability of relevant sales from which to choose. The assessor testified that it was his opinion that 12 sales was not a large enough data set from which to form an opinion and he, therefore, expanded the vicinity.

60This makes sense to the Board. It appears logical that the larger the data set being studied the more accurate the result should be. In this case, more is better.

61As for all of the properties being evaluated by the same rules, the Appellant did not present any evidence on what rules he was referring to or how the results would be skewed by being compared with another municipality or even if those rules were different.

62Therefore, the Board accepts MPAC's equity analysis and finds no equity adjustment is necessary.

CONCLUSION

63The Board finds that the current value for the subject property as at January 1, 2012 to be $9,289,000.

64Rule 30 of the Board's Rules of Practice and Procedure dictates that notice must be must be sent to parties and the Board if a party intends to seek an increase to an assessment. Since notice was not sent and MPAC proposed that the assessment of the subject property be accepted as $8,427,000, the Board finds no compelling reason not to accept this recommendation. Therefore, the assessment of the subject property is confirmed at MPAC's recommended value of $8,427,000 for the 2013, 2014 and 2015 taxation years and that this value is equitable with the assessments of similar lands in the vicinity.

Footnotes

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