Garden Trail Development Limited v. Municipal Property Assessment Corporation, 2015 CanLII 69916

Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE: October 26, 2015

FILE NO.: WR 135539

Assessed Person(s): Garden Trail Development Limited

Appellant(s): Garden Trail Development Limited

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

Respondent(s): City of Burlington

Property Location(s): Genista Drive

Municipality(ies): City of Burlington

Roll Number(s): 2402-010-105-15600-0000

Appeal Number(s): 2950588, 3032751 and 3083140 (deemed 2015)

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

Hearing Event No. 601934

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

Heard: October 13, 2015 in Burlington, Ontario

APPEARANCES:

Parties	Counsel+/Representative
Garden Trail Development Limited	Kristina Didiano
MPAC	John Cole
City of Burlington	No one appeared

DECISION OF THE BOARD DELIVERED BY TYRONE D. SKANES

INTRODUCTION

1The subject property is 9.34 acre irregular shaped vacant lot being developed for residential use. John Cole, representing MPAC, said that he applied a 50% negative adjustment to take into account the topography of the land when he assessed the subject property at $4,136,000 for the 2013, 2014 and 2015 taxation years

2Kristina Didiano, representing the Appellant, said that MPAC did not adequately take into account the cost of preparing the land for development. She said that the municipality, before it would issue permits, required that steps be taken to protect a creek bed paralleling the parcel of land on the south end by building a retaining wall and taking other measures. Ms. Didiano stated that railway tracks paralleled the north end of the property and that a noise berm and sound barrier wall had to be built. She opined that MPAC had not accounted for these costs when assessing the land. Ms. Didiano also disputed MPAC's estimation of how much land was undevelopable; MPAC saying that 7.34 acres are developable while the Appellant asserts that only 4.6 acres are developable. She asked the Board to reduce the assessment to $2,208,600.

3Mr. Cole said that he was aware that there were considerable costs associated with preparing the land for development but it was his opinion that these were normal costs associated with developing land for building and any developer should factor these costs. He said that he assessed the subject property at $4,136,000 and believed that it was both fair and reasonable. Mr. Cole also said that the subject property assessment would have been between $8,000,000 and $9,000,000 but for the negative adjustment. He asked the Board to confirm the assessment at $4,136,000 for the 2013, 2014 and 2015 taxation years.

ISSES

4There are three issues for determination before the Board.

i. First, what is the correct acreage of developable land,

ii. Second, what is the subject property's current value as of January 1, 2012 and,

iii. Third, whether the subject property's current value is equitable with the assessment of similar lands in the vicinity.

DECISION

5The Board finds that the current value of the subject property as of January 1, 2012, is $1,937,000 and that it is equitable with similar lands in the vicinity. Therefore, the Board reduces the assessment of the subject property to $1,937,000 from $4,136,000 for the 2013, 2014 and 2015 taxation years.

REASONS FOR DECISION

Relevant Legislation

6Section 19.(1) of the Act states:

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

7Section 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.

8Section 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:

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.

9Section 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.

10Section 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.

MPAC's Position and Evidence

11Mr. Cole described the subject property and testified that of the 9.34 acres, two acres had been designated as open space or undevelopable. He advised that a negative adjustment had not been specifically applied for the two acres as it only accounted for 22% of the total land area, which fell within the reasonable range of undevelopable area found in most standard residential development sites.

12Mr. Cole did advise that a 50% negative adjustment had been applied to the assessment to account for the hilly topography and awkward lot shape. He said that he estimated the assessment would have been in the $8,000,000 to $9,000,000 range if not for this negative adjustment.

13Mr. Cole said that municipal services had not been factored into the valuation, as it usually is for standard residential development land, but those services were available and he opined would not be expensive to connect.

14Mr. Cole said that the assessment of $4,136,000 was determined using urban development land rates for Burlington and classed at Vacant Land Residential Tax Class ("VL RT"). He said that the per acre value was determined to be $442,826 using the entire parcel of 9.34 acres.

15Mr. Cole presented seven sales of vacant lands as comparable properties. Although he ascribed a time adjustment factor to each sale to arrive at an adjusted per acre sale price he did not present any evidence to demonstrate how he arrived at those time adjusted values.

16Mr. Cole advised that Sales 6 and 7 were currently being used as farm land and therefore were subject to a lower tax rate. He said that if these properties were being assessed their correct rate then the assessments would be in the $4,000,000 to $5,000,000 range, although he did not offer any evidence to support this opinion.

17Included in Mr. Cole's evidentiary presentation was a report developed by a colleague. The report contains adjustment values for the location, sale amount, time, density and lot size. Mr. Cole had difficulty explaining how the report had been developed and how it should be interpreted. He said that he believed it was meant to balance the subject property against the seven comparable properties, using various property characteristics. There was no evidence presented of how the adjustment values were developed.

18Mr. Cole admitted that the lot sizes for comparable properties 1, 2 and 3 were considerable larger than the subject property but by applying the principles of economy of scale then these properties ought to be considered. He also said that comparable Sale 4 had some restrictions on use or development due to it being on the Niagara Escarpment, requiring approval from the Escarpment Commission.

19Mr. Cole said that comparable Sales 5, 6 and 7 were the properties he considered most comparable, despite 6 and 7 currently being farmed and taxed at a lower rate. He said that these three properties were located in Oakville and he had to expand the vicinity due to the unique nature of the subject property and there being no other relevant sales in the Burlington area, other than Sales 1, 2, 3 and 4.

20Mr. Cole summed MPAC's position by saying that Sales 5, 6 and 7 were the best comparable properties despite being in Oakville. He admitted that Sale 5 may already be prepared for development but that Sales 6 and 7 were currently being farmed. They, like the subject property, would require preparation before being developed. He said that the topography issues for the subject property had already been taken into consideration by MPAC and a 50% negative adjustment had been applied to account for it. Mr. Cole said that development companies had to accept that there were costs associated with developing land and the taxpayer should not be expected to bear these costs.

21Mr. Cole asked the Board to confirm the assessment at $4,136,000. He did not offer any equity evidence and said that he had no opinion on equity.

Appellant's Position and Evidence

22Ms. Didiano entered a report from Soil-Mat Engineers & Consultants Ltd. ("Soil-Mat") and a cost estimate to place the development site to an approximate pre-grade elevation, from amec foster wheeler ("Amec"), an engineering firm. She testified that she did not have any comparable sales but instead, would challenge the appropriateness of MPAC's comparable properties and highlight the extraordinary costs to the Appellant in preparing the subject property for development.

23Ms. Didano said that it was her opinion a fair assessment should be based on the average value per acre of MPAC's Sales 1, 2, 3, 5 and 6 at $530,133.

24Ms. Didiano said that Sale 4 should not be considered because it is located in an existing residential subdivision. She did not reference Sale 7 at all. Ms. Didiano also said that all of MPAC's comparable properties were ready for development, whereas the subject property required substantial preparation before building could begin.

25Ms. Didiano referred to the report from Soil-Mat that she said advises that the developable area of the subject property was 4.6 acres. She said that extraordinary costs will have to be incurred to prepare the land for development. She referred to the cost report from Amec that estimated it would cost $2,102,295 to place the subject property at an approximate pre-grade elevation. It advised that a more accurate calculation would be provided once building envelopes were established.

26Ms. Didiano elaborated that, besides the topography issues, substantial work had to be undertaken to protect a creek bed that ran parallel to the subject property on the south end. This would include building a retaining wall to prevent erosion into the creek bed. She said that to the north end of the property a noise berm and noise sound barrier wall would have to be built, as railway tracks paralleled the subject property. Ms. Didiano said that this is where MPAC had not taken into consideration those areas as being undevelopable. She said that these environmental issues had to be addressed with Halton Conservation before permits would be issued, as they had very strict standards that had to be adhered to.

27Ms. Didiano reiterated her position that a fair assessment should be based on 4.6 acres of developable land at a per acre value of $530,133. She also asked that a further $50,000 be subtracted from the $530,133 per acre value to account for remedial work required over and above the normal scope of land preparation for residential development.

28On cross-examination Ms. Didiano stated that:

• She agreed that a noise berm would have been built regardless of the railway tracks;

• She admitted that she did not know if any of the slope stabilization and grading work that was required affected the cost of what would normally be required to prepare the land for development;

• She advised that clean soil was required for the noise berm and the soil currently there would have to be removed;

• She stated that the excess land not being used for development but was being utilized to build the noise berm and noise wall and on the south end to stabilize the land to conform to Halton Conservation's strict regulations of protecting the creek bed,

• She admitted that she did not know if the noise berm was a requirement along with the sound barrier. She said that there was no intention to make the area around the berm developable in any way.

29Ms. Didiano completed her current value presentation by saying that the assessment ought to be reduced to account for the extraordinary costs over and above the normal costs of developing land. She said that there were substantial costs to the Appellant. She asked the Board to reduce the assessment to $2,208,600 based on a per acre value of $480,133. She did not present any equity evidence.

Board's Deliberations

30The Board has carefully considered the testimony of the parties and the documentary evidence. 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.

31The best test of current value is a market tested arms' length sale of the subject property, on or near the valuation date. When no relevant sale of the subject property is available, as in this instance, the Board looks to the sales of comparable properties that have occurred within one year on either side of the valuation date as the ideal time period for consideration. The Board occasionally will deviate from this time period if there are no relevant sales. That is not the case in this instance.

32MPAC entered the sales of seven properties that the assessor said were comparable to the subject property. However, Sales 1 and 2 occurred in January 2005, Sale 3 in March 2007 and Sale 4 in November 2009. There sales are too far removed from the valuation date to be useful in making a meaningful comparison. Therefore, the Board places no weight on these sales.

33The Board must now determine what is the more appropriate area of developable land; 7.34 acres as proposed by MPAC or 4.6 acres as proposed by the Appellant. It finds that the best evidence of developable land is from the Appellant's engineering report, that clearly says that 4.6 acres is developable. This is because MPAC's evidence was not articulated very clearly as to why the assessor believed that two acres was designated as open space or undevelopable land. Mr. Cole did state that there was no reduction applied in the valuation for this two acre designation, as it fell within a reasonable range of undevelopable area as was found in most standard residential development sites. He also said that a 50% reduction had been applied to the land for topography issues. Mr. Cole did not, however, present any evidence to prove exactly what the usual range is in residential development sites for undevelopable land. Ms. Didiano, on the other hand, presented a report from an engineering firm and MPAC did not challenge the report. This report indicated that 4.6 acres of the site area was developable and the remainder was designated for use in building the noise berm and noise sound barrier wall to the north of the property and to the south a portion was being used to stabilize the land so as to not negatively impact a creek bed that ran parallel to the subject property.

34Mr. Cole testified that 22% of undevelopable land is within a reasonable range found in most standard residential development sites. Therefore, the Board will use this value in calculating the developable acreage of each comparable property and its corresponding sale price per developable acre.

35Listed below in Table 1 are the sales that the Board finds acceptable:

Table 1

Sale	Date of Sale	Sale Price	Developable Acres	Sale Price per Developable Acre
Sale 5	Dec/2012	$6,215,000	3.8	$1,635,526
Sale 6	July/2011	$4,567,898	10.84	$421,392
Sale 7	Jan/2011	$3,846,005	8.2	$469,025
Average				$841,981

36The Board accepts these comparable properties despite them being located in another municipality. The Board finds they are good comparables because they are more similar than dissimilar to the subject property.

37In regard to the Appellant having to bear extraordinary costs in developing the land the Board finds this argument to be self-serving. It is expected that when a land developer is considering purchasing development lands that they will perform their due diligence and take into account all aspects of the potential purchase, including in assessing whether the land in question would be a good investment. Also included in this due diligence would be considering land preparation costs. This reduction, if granted, would eventually be borne by the tax payer to the benefit of the Appellant, and the Board finds this unacceptable. The Board doubts that any developer is going to purchase and prepare land to be sold at a loss. Therefore, the Board puts no weight on this argument.

38The Board has already said that only MPAC's Sales 5, 6 and 7 will be considered to determine current value. The average value per developable acre of these three properties is $841,981. Applying this value per acre to the developable area of 4.6 acres returns a value of $3,873,112. The assessor testified that he had applied a 50% reduction to the subject property to account for the hilly topography. Therefore, the Board will apply a 50% reduction to $3,873,112 resulting in a value of $1,936,556.

39The Board finds the current value of the subject property as of the valuation date of January 1, 2012 is $1,937,000 (rounded).

40The Board wishes to make it clear that this reduction has nothing to do with the Appellant's argument regarding extraordinary costs associated with preparing the subject property for development. The current value finding is strictly based on the Board's determination of what was the best evidence placed before it.

Equity

41The Board must have reference to equity as instructed by s. 44.(3)(b). However, neither party presented any equity evidence. Mr. Cole said that he was remaining mute on equity and said that the onus was on the Appellant to demonstrate that an equity adjustment was required. Ms. Didiano made no equity submission.

42The Board finds that there is no evidence to suggest that that subject property's current value is not equitable with that of similar lands in the vicinity.

CONCLUSION

43The Board finds that the current value for the subject property as at January 1, 2012 to be $1,937,000 and it is equitable with similar lands in the vicinity. Therefore, the Board reduces the assessment of the subject property to $1,937,000 from $4,136,000 for the 2013, 2014 and 2015 taxation years.

2015 DEEMED APPEAL

44An appeal for the 2014 taxation year is presently before the Board. Section 40.(26) provides that the Appellant is deemed to have made the same appeal for the subsequent taxation year if the appeal is not finally disposed of before March 31 of the subsequent taxation year. The Board has not disposed of the 2014 appeal before March 31, 2015. For that reason, this decision also applies to the 2015 taxation year.

45Section 40.(26) of the Act directs:

Deemed appeals, 2009 and subsequent years

For 2009 and subsequent taxation years, an appellant shall be deemed to have brought the same appeal in respect of a property,

(a) in relation to the assessments under sections 32, 33 and 34 for the year; and

(b) in relation to the assessment, including assessments under sections 32, 33 and 34, for a subsequent taxation year to which the same general reassessment applies, if the appeal is not finally disposed of before March 31 of the subsequent taxation year or, if an assessment has been made under section 32, 33 or 34, before the 90th day after the notice of assessment was mailed.

Footnotes

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