JS & JB Holdings Inc. v. Municipal Property Assessment Corporation, 2015 CanLII 69920

Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE: October 27, 2015

FILE NO.: WR 133987

Assessed Person(s): Otal Precision Company Limited

Appellant(s): JS & JB Holdings Inc. and Joseph Schuster

Respondent(s): Municipal Property Assessment Corporation (“MPAC”), Region 03

Respondent(s): City of Ottawa

Property Location(s): 2730 Fenton Road

Municipality(ies): City of Ottawa

Roll Number(s): 0614-600-070-00106-0000

Appeal Number(s): 3000082 and 3072747

Taxation Year(s): 2014 and 2015

Hearing Event No. 581077

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

Heard: July 28, 2015 in Ottawa, Ontario

APPEARANCES:

Parties

Counsel⁺/Representative

Otal Precision Company Limited and JS & JB Holdings Inc.

Joseph Schuster and Andrew Attard

MPAC

Jonathan Lapp and Stefan Bourassa

City of Ottawa

No one appeared

DECISION OF THE BOARD DELIVERED BY ANDREW E. FENUS

INTRODUCTION

1The appeal before the Assessment Review Board (“Board”) is an appeal by Joseph Schuster of JS & JB Holdings Inc. (“Appellant”) in respect of the assessment of the industrial property at 2730 Fenton Road, City of Ottawa (“subject property”) for the 2014 and 2015 taxation years.

2The subject property is described as a “standard industrial” type and located in an IS4 homogeneous neighborhood. It is a one-storey building operating as a machine shop. It is situated on a site area of 2.070 acres and it has a total gross floor area of 14,044 square feet (“sq. ft.”).

3The three issues disputed are:

(a) the correct current value of the property,

(b) whether the assessment requires an adjustment below current value to make it equitable; and

(c) whether a portion of the property should be classified in the excess land subclass (IU) of the Industrial Property Class (IT) and if so the amount of the assessment to be apportioned to IU.

DECISION

4The Board finds the current value of the property at the valuation day, January 1, 2012 to be $1,432,000.

5The Board finds that an equity adjustment is warranted. The assessment is reduced below current value for the taxation years 2014 and 2015 to $1,232,000.

6Accordingly the Board reduces the assessment from $1,654,000 to $1,232,000 for the 2014 and 2015 taxation years.

7The Board finds that a portion of the property is eligible to be classified in the excess land subclass (IU) of the Industrial Property Class (IT).

8The Board finds that the assessment is apportioned as follows for the taxation years 2014 and 2015:

• $998,000 (IT)

• $234,000 (IU)

EVIDENCE AND DELIBERATIONS

Case for MPAC

9Jonathan Lapp and Stefan Bourassa filed the following documents:

(i) An Assessment Review Board Report dated July 7, 2015 complied by Mr. Lapp, the Statement of Issues (“SOI”) written by Andrew Attard for the Appellant dated July 3, 2014, email correspondence from Mr. Lapp to Mr. Attard dated September 26, 2014, and six terrestrial and aerial photographs of the subject property’s site highlighting the disputed excess land [Exhibit 1].

(ii) Copies of email correspondence between Mr. Lapp and Mr. Attard on valuation issues, an Equity Study presenting an assessment to sales ratio (“ASR”) study of 19 properties all within one kilometer of the subject property and showing sales/assessments from May 2010 to December 2014, and a two page document entitled 2012 CVA Comparable Sales Property Report compiled by a colleague for another assessed property [Exhibit 2].

(iii) A statement of the industrial time adjusted factors for the time period January 2007 to December 2013 [Exhibit 3].

(iv) Copies of two Board decisions on the issue of excess land:

a. Stiver House Gift Ltd v. Municipal Property Assessment Corp., Region 14 [2008] O.A.R.B.D. No. 85 (ARB File No.66107) (“Stiver”) with accompanying photograph of the site, and,

b. Torontario Properties Limited v. Municipal Property Assessment Corp., Region 19 [2005] O.A.R.B.D. No. 445 (ARB File No. 41130) (“Torontario”).

Current Value and Equity Issues

10Mr. Lapp testified that the subject property has a current value of $1,654,000 determined using MPAC’s “cost approach to value” methodology. No details were presented.

11Mr. Lapp submitted that the six properties used by a colleague (Exhibit 2) for another property assessment are applicable to justify the current value of the subject property. He calculated that the average sale price per square foot of these six properties is $102. His evidence is that time adjusted, the average sale price per square foot is $118. The subject property has 14,044 sq. ft. of total floor area, and he calculated the following:

• 14,044 sq. ft. x $102 = $1,260,000 [sic] non-time adjusted value

• 14,044 sq. ft. x $118 = $1,657,000 time-adjusted value

12The time-adjusted value of $1,657,000 corresponds to the current value and assessments as returned for the subject property of $1,654,000 for the taxation years 2014 and 2015.

13Mr. Lapp stated that at the request of the Appellant, he inspected the subject property on September 19, 2014 and found some additions had been added to the property which when costed out by MPAC’s computer model would result in a revised value of $1,691,000.

14Mr. Lapp testified that he became aware that the Appellant was appealing the valuation of the subject property when Mr. Attard filed a 2011 appraisal report. Consequently, Mr. Lapp submitted an equity study of 19 properties located within one kilometer of the subject property to justify the assessment of the subject property (Exhibit 2). The time period for the equity study ranged from May 2010 to December 2014. The equity study presented the average and median time adjusted ASRs of 0.999 and 0.9432 respectively. The non-adjusted median ASR was 0.9593. Based on this study, he testified that assessed value of $1,654,000 is considered correct because the ASRs were within an acceptable 5% range of value.

15In response to Mr. Attard’s email of July 17, 2015 critiquing the figures in the equity study of 19 properties, Mr. Lapp testified that he recommended that the subject property be assessed at $1,488,000 with no excess land adjustment. He explained that this recommendation is based on a market study of a similar property by another assessor familiar with neighborhood. Mr. Lapp became aware that an equity adjustment of 0.88% was applied to that assessment and he believes it is acceptable to apply this same reduction to the subject property. He calculated that the subject property’s revised current value of $1,691,000 could be justifiably adjusted by the 0.88% ASR to arrive at the recommended assessment of $1,488,000.

16In cross-examination, Mr. Lapp confirmed that 6 of the 19 properties in his equity study are vacant lots and only 6 of the 19 sales occurred within 12 months of either side of the valuation day, January 1, 2012. Moreover, he confirmed that four property assessments in his equity study differed from their assessed values as returned on their respective assessment rolls. He agreed that this would affect ASR calculations. He also explained that he applied the December 2013 time adjusted rate to all sales that occurred in 2014. He responded that the time-adjusted factors [Exhibit 3] were commonly used at MPAC, but he could not produce a study to support the basis for the time-adjusted values. Mr. Lapp maintained that the time-adjusted factors are valid to adjust sales values to a common point in time. He offered no explanation as to why it is valid to use a December 2013 rate for 2014 sales other than it is the last rate factor he could find. He did not think the results would be overly affected by using the rate. Mr. Lapp and Mr. Bourassa both maintain that the use of vacant land in the equity study is valid for two reasons: they are properties that sold within one kilometer of the subject property and they show the land values for similar industrial properties in the closest vicinity to the subject property.

17Mr. Lapp justified the revised assessment of $1,691,000 as an overall costing correction. He further added that employing the 12% reduction for equity from a previous assessor’s study of a similar property on Fenton Road to the subject property is appropriate since it is an amount used in a 2013 case of similar properties in the same vicinity. Finally, Mr. Lapp argued that it was more valuable to use similar properties within the closest proximity of the subject property even though the sales were spread out over a wider time period because these sales reflected the fluctuating values of industrial properties within the same vicinity.

18In closing, Mr. Lapp submitted that the revised current value of $1,691,000 is correct and the recommended assessment adjusted for equity should be $1,488,000.

Classification - Excess Land Issue

19Mr. Lapp testified that assessments as returned for the subject property have never included an excess land subclass. His evidence is that the land at the back of the building measuring approximately 37,114 sq. ft. has always been included in (IT) for assessment purposes. Although an old MPAC SOURCE document may have noted excess land, the assessment rolls as determined by the Integrated Property System (“IPS”) have never assessed any land at the site in the IU subclass. Mr. Lapp conducted an inspection of the subject property on September 19, 2014 and decided among other conclusions (discussed earler) that no excess land existed on the site. Mr. Lapp reiterated what he had written in his Report:

“Land at the back does not qualify as excess land as it is in use. Cut grass is a use and does not qualify for excess land.”

20Under cross-examination Mr. Lapp explained that to qualify for the excess lands subclass land had to be left in its natural state. He stated that the land should be free from being used, and cutting the grass is in his view a use. He maintained that this conclusion is supported by case law.

21Mr. Lapp also acknowledged that a “building to land” ratio of 3.00 has been recorded on the MPAC records for the subject property. Given a hypothetical situation where the grass is not cut, both Mr. Lapp and Mr. Bourassa declined to speculate as to whether there would be any land eligible of the excess land sub-class.

22In response to questioning from the Board, Mr. Lapp and Mr. Bourassa stated that they were not aware of any other Board decisions that dealt with excess land other than the ones they filed. Moreover, to their knowledge MPAC does not have any written policy, legal interpretations, or other studies or guidelines on this matter.

23Mr. Bourassa argued that “cut grass” on the land in question constitutes developing the land “in any way” as set out in Ontario Regulation 282/98 (Regulation 282) subsections 21(1) and 21(3)(infra). He argues that the Board’s decisions in Torontario and Stiver uphold MPAC’s position that cut grass contributes to the beautification of the property and enhances its value. Mr. Lapp cited Torontario:

”The evidence indicates this portion of the property to differ from land in its natural state. The lawn is grassed and obviously cared for. Logic leads the Board to conclude that this circumstance enhances the property’s “street appeal””.

Case for MPAC

24Mr. Attard filed the following documents:

(i) A 24 page Analysis Report for 2730 Fenton Road dated July 28, 2015 complied by Mr. Attard consisting of selected MPAC documents and calculations pertaining to the subject property for the 2012 current value assessment, correspondence between Mr. Lapp and Mr. Attard, two equity studies, calculations to determine valuation of the subject property, and photographs and maps pertaining to the subject property and excess land (Exhibit 4).

(ii) Copies of four Basic Reports issued by MPAC of four properties listed in MPAC’s equity study of 19 properties. Four properties are color coded in pink to show the discrepancy of assessment values used in MPAC’s equity study and found in their respective assessment rolls. Six properties color coded in green show sales which occurred within a twelve month window either side of the valuation day (Exhibit 5).

(iii) A 32 page appraisal for the subject property prepared by Affiliated Property Group dated March/April 2011 (Exhibit 6).

(iv) Four photographs for the commercial property located at 10160 Hurontario Street, Brampton (see (vi) (b) below) and two maps and two photographs for the commercial property located at 206 Main Street, Unionville (see (vi) (a) below) (Exhibit 7).

(v) Copies of three Board decisions on the issues of correct use of data and time use studies in determining valuation (including equity):

a. TTF Holdings Inc. v. Municipal Property Assessment Corp., Region 9 [2015] O.A.R.B.D. No116 (ARB File No.130688) (“TTF Holdings Inc.”),

b. 2299900 Ontario Ltd. v. Municipal Property Assessment Corp., Region 9 [2015] O.A.R.B.D .No112 (ARB File No. 130690),(“2299900 Ontario Ltd”) and,

c. 1196158 Ontario Inc. v. Municipal Property Assessment Corp., Region 9 [2015] O.A.R.B.D. No111 (ARB File No. 130689) (“119658 Ontario Inc.”)

(vi) Copies of two Board decisions on the issue of excess land:

a. Stiver House Gift Ltd v. Municipal Property Assessment Corp., Region 14 [2008] O.A.R.B.D. No. 85 (ARB File No.66107), (“Stiver”) accompanied by two maps and two photographs, and,

b. Bjb Holdings Inc. v. Municipal Property Assessment Corp. Region No. 15 [2009] O.A.R.B.D. No. 171 (ARB File No.72116) (“Bjb”), a case he argued in 2008. Four photographs were attached to the decision.

Current Value and Equity Issues

25Mr. Attard submitted that the current value of the subject property as of the valuation day, January 1, 2012, is $1,575,000. An appraiser from Affiliated Property Group, Daniel J. Labelle, AACI, P.App., certified the estimate on April 18, 2011. (Exhibit 6, p. 32). Mr. Attard acknowledged MPAC’s objections to the introduction of this appraisal since Mr. Labelle was not present to be cross-examined as to his opinion of value.

26Apart from the appraisal report, Mr. Attard submitted that that he would rely on the 2012 CVA Comparable Sales Report filed by MPAC for another similar property on Fenton Road in order to establish the market value of the subject property (Exhibit 4, p. 24).

27There are seven properties listed on this report: the property 14794 Bank Street should be eliminated because its site area is 17.60 acres and it is not similar to the subject property. The remaining six properties, located on Fenton Road, Del Zotto Avenue, and Southclark Place, are all within close proximity, and have similar characteristics to, the subject property. Mr. Attard calculated that the average sale price per square foot of total floor area is $102. Applying this to the subject property, the current value of the subject property is $1,432,000. (14,044 square feet @ $102 per square foot).

28Mr. Attard submitted that the market value of the subject property should be either $1,432,000 or $1,575, 000 (the appraisal report).

29Mr. Attard questioned the correctness and reliability of the data and calculations arising out of MPAC’s equity study of 19 properties. He submitted that six of the properties were vacant lots, four were shown to have incorrect assessments recorded, six were sales in 2014 where the time adjusted factor recorded at December 2013 was applied, and only six sales were listed within the 12 month window on either side of the valuation day. Mr. Attard challenged the reliability of MPAC’s time adjustment factors: no supporting evidence has been presented to authenticate or support their validity, let alone reliability. Finally he mistrusts the “apparent coincidence and convenience of the equity study producing a time adjusted ASR average of 0.999”.

30Mr. Attard requested that MPAC’s equity study be given no weight. In his view the numbers and calculations presented by MPAC appear to change with whatever MPAC wants to present. Mr. Attard made reference to a statement made by Member Cowan in Highland Equipment Ltd. v. Municipal Property Assessment Corp., Region 9 [2013] O.A.R.B.D. No. 157 (ARB File No.119489) (“Highland”)(This reference is cited in paragraph 33 of 1196158 Ontario Inc. where Mr. Attard was a participant at the hearing).

31Mr. Attard submitted that figures were being altered in the equity analysis that would bring into question its utility. Mr. Attard asserted, as in Highland, MPAC’s evidence provides no level of comfort that its process and facts merit consideration. Also, in 1196158 Ontario Inc. (paragraph 35), the Board did not rely on MPAC’s ASR study because altered values of certain properties were used in their ASR study which rendered the results inaccurate.

32According to Mr. Attard the time-adjusted factors used by MPAC are problematic as well. Mr. Attard stated that in both 2299900 Ontario Ltd and TTF Holdings Inc.,(cases he provided to the Board) there is a time-adjustment summary entitled “% Change for Commercial and Industrial Properties located in Region 9”. He testified that the summary is commonly used in commercial and industrial real estate market in Toronto. Nonetheless in both decisions the summary was not relied on by the Board because he had not provided the Board with evidence to support the basis on which his time adjustment calculations were made. Mr. Attard asserted that in this case, MPAC has not provided the necessary evidence to support the basis for using their time-adjustment factors, but also used the factors incorrectly and arbitrarily. He argues that they should not have used the December 2013 factors for the 2014 sales and that this is unsound methodology. He submits that the time-adjustment factors should be given no weight.

33Mr. Attard contended that using sales within the 12 month window on either side of the valuation day is proper and generally accepted in valuation matters. In his view MPAC is using an effective five-year window in their equity study which he submits is excessive and unwarranted.

34Mr. Attard submitted two equity studies (Exhibit 4, p. 14 and p. 23) for the Board’s consideration. Both studies covered a time frame from 2011 to 2012 and the sales were not adjusted by any time factor. Mr. Attard testified that there are overlap properties with MPAC’s equity study, all within the 2011-2012 time frame.

35The first study showed 36 industrial property sales, ranging from $800,000 to $3,300,000, located within 20 kilometres of the subject property. It produced an average ASR of 0.85, a weighted ASR 0.86, and a median ASR 0.86.

36The second study consisted of 29 property sales within 10 kilometers of the subject property. These industrial property sales ranged from $100,000 to $4,000,000. The average ASR is 0.90, the weighted ASR 0.88, and the median ASR 0.89.

37Mr. Attard stated that in order to find sales within the time frame of a 12 month window, it was necessary to expand the geographic parameters of the search. He submits that the one-kilometer vicinity is not the only factor that can or should be used. He submits that the vicinity is an arbitrary choice by MPAC. He argues that the two equity studies he presented contrast MPAC’s evidence: the narrower time frames of a broader variety of similar properties that sold he argues offers a better perspective of the assessment values of industrial properties in the vicinity of the subject property.

38Mr. Attard submits that his evidence clearly shows that assessments in the vicinity are below current value. Consequently, he submits that the current value of the subject property should be adjusted for equity by applying the median ASR of 0.86 as calculated in his first equity study. This is the broadest study with 36 sales. Also it shows a narrower range of sale prices of similar properties that took place within the 12 month window. The 14% reduction is very close to MPAC’s 12% equity adjustment proposed to the Appellant.

39In conclusion, Mr. Attard submits that the current value of the subject property should be either $1,432,000 or $1,575, 000 either of which should be adjusted for equity by 14% to make the assessment equitable with the assessment of similar lands in the vicinity.

Classification - Excess Land Subclass Issue

40Mr. Attard testified that the Appellant’s Statement of Issues (“SOI”), dated July 3, 2015, raised only one issue: “the tax class apportionment by MPAC may be incorrect”. Based upon the MPAC documents available at that time, Mr. Attard highlighted that MPAC’s Automated Cost System (“ACS”) valuation in reference to the subject property’s land value showed that $409,753 was ascribed as excess land value (Exhibit 4, p. 8). The document also indicated a “land to building ratio” of 3.00 and that the size of excess land is 1.103 acres out of a total site area of 2.07 acres. However, MPAC has determined that the net rate value to be $371,489. Since MPAC had calculated the area at the back of the property to be 37,114 sq. ft., this represents 0.85 of the land valuation adjusted cost (“AC”). Mr. Attard submitted that this 0.85 AC figure attributed to the net rate of $371,489 would result in a value of $315,765 for the excess land. This was approximately 19% of the current value of $1,654,000. Mr. Attard requested that the Board accept this 19% rate and apply it to Board’s finding with respect to subject property’s current value as adjusted to equity.

41When the SOI was submitted, Mr. Attard stated that the Appellant’s request for an apportionment of the tax class to incorporate some excess land (IU) value seemed straight forward and reasonable. The offer made to MPAC to inspect the property to determine the size of the site was conducted on September 19, 2014. MPAC had informed the Appellant via an email dated September 26, 2014 that there was “no excess land” and, further, the revised value of the subject property had increased to $1,691,000 for the 2016 tax year all of which was classified as industrial (IT). Mr. Attard stated that the new MPAC documents accompanying the revised assessment valuation still showed the land to building ratio of 3.00 but references to value and size of excess land had disappeared (Exhibit 4, p. 13).

42Mr. Schuster, the Appellant, testified that he has been the owner of the property since 2007 and that the back portion of the site has never been used as part of his industrial business. He conceded that the land undoubtedly can be used in any future plans for expansion, but he had no intention to do so in the foreseeable future. He added that the land may have value to any prospective purchaser who may wish to develop it, but a sale of the property is not planned. Mr. Schuster stated that the subject property’s lot is much bigger that it needs to be to accommodate the building and its industrial processes.

43Mr. Schuster emphasized that this portion of land “just sits there”, and the only thing he does with it, “as a good deed”, is cut the grass. Mr. Schuster pondered that in hindsight, given what he knows now about MPAC’s thinking about such activity on such land, he would just let the land grow wild. In cross-examination, Mr. Schuster testified that employees do not use the land at all for recreational purposes. There are no picnic tables present nor does the business use any portion of the land for any activity. The grass is cut in the summer months at the cost of $8,000 per annum. This cost is includes the maintenance of land at the parking area and entrance to the site. In winter, snow is not removed from the excess land, and the land is not being used as a dumping ground for the snow removed from the parking lot. It was never used for that purpose. Snow is ploughed to the edge of the start of the excess land only. Mr. Schuster stated that the resulting tax consequence of the cutting of the grass is very exorbitant. His business is located in an industrial setting where the view of whether or not the grass is cut has no relevance or any added value either to himself, or to any of his clients, or even to prospective purchasers of his business.

44Mr. Attard argues that 19% of the assessed value should be allocated to the excess land subclass for the subject property. He argues that the intent of the regulation is not to penalize an owner for doing a good deed by keeping grass cut. This land has neither been nor will be developed for the any purposes of the industrial process or to the recreational benefits of its employees. The street appeal value has no relevance in this industrial setting.

45Mr. Attard stated that undeveloped land is entitled to receive the benefit of a lower tax rate in the excess land (IU) subclass. The appraiser in the site data description on page 13 of the appraisal report states: “The site coverage ratio is approximately 15% and is within the lower end of the range for similar industrial properties, and based on current zoning regulations, the site size permits future expansion.” He argues that there are no valid reasons why the excess land could not be classified in IU.

46Mr. Attard argued that the Stiver and Torontario cases were correctly determined and are not appropriate as comparisons in this situation. In Striver, the land was clearly developed by the delineation of the land with “concrete curbs” In Torontario, picnic tables were present on the land for recreational use by the landowner’s employees and tenants, and the land was used for business signage.

47Mr. Attard submitted that Bjb Holdings Inc. is on point with the current situation. Photographs show that the land was covered with grass that was tended. This case focused on the facts that”…there is no evidence to show that the back portion of the subject lands is being used for any purpose; there is no evidence to show that the 0.284 acres have been developed in any way as of the classification day”.

48Mr. Attard submits the property meets the conditions set out in the Regulation (supra) to be classified in the Industrial Property Class Excess Land subclass. He submits that the value of this excess land should be set at 19% of the assessed value of the subject property. Mr. Attard submitted that the assessment as adjusted for equity should be apportioned with 81% to IT and 19% IU.

Relevant Legislation

49For the 2013 and 2014 taxation years, in determining the value at which land shall be assessed the Board must have regard to the following provisions of the Assessment Act (“Act”):

50Section 1 Definitions:

“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.

51Section 19.(1) of the Act states:

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

52Section 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:

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.

53Section 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.

54Section 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.

55Section 44.(3) of the Act states:

44.(3) Same, 2009 and subsequent year. – 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.

BOARD FINDINGS

Valuation

56The first task of the Board is to determine the current value of the subject property at the valuation day, January 1, 2012 as required by s 44.(3)(a) and 19.(1) of the Act.

57The best test of current value is an arm’s length and market tested sale of the subject property on valuation day, January 1, 2012 or close to it. If, as in this case, no such transaction took place, the next best measure of current value is arm’s length and market tested sales of comparable properties in the same market and vicinity on or close to the valuation day.

58The appraisal report submitted by the Appellant may be the best evidence available to the Board to determine the current value of the subject property. The April 2011 appraisal report appears to be a professional, comprehensive, and reasonable survey of the estimated market value of the subject property. The date of the appraisal falls well within the 12 month window of the January 1, 2012 valuation day. However, the Board will not rely on this report and the estimate due to MPAC’s objection that the appraiser is not available to be cross-examined as to his methodology, references, and conclusions. The value of $1,575,000 will not be used as the Board finds that that the right to cross-examine the author of a report is a fundamental principle of natural justice.

59The Board has other evidence to determine the current value of the subject value. This consists of sales of six industrial properties within the same neighborhood as, and showing similar characteristics to, the subject property. Both MPAC and the Appellant rely on the same evidence. MPAC is attempting to justify the current value of the subject property which was determined through a cost approach to value. The Appellant on the other hand wishes to establish a current value though a market oriented approach. The Board has no issues with these sales and finds that they are appropriate similar properties.

60As stated above, both parties employ the same figures and methodology to either justify or calculate current value. Both calculated that the average sale price per square foot of floor area for the six industrial sales is $102. Applying this to the square footage of the subject property both parties arrive at the same conclusion --- a value of $1,432,000. [The Board notes there is an arithmetic error in MPAC’s evidence Exhibit 2: 2012 CVA Comparable Sales Property Report, page 2. The calculation of $1,260,000 is erroneous.].

61Where the parties differ is with the application of the time-adjustment factors used by MPAC. MPAC calculates that the time-adjusted average sale price per square foot of floor area of the industrial sales is $118, hence producing a value of $1,657,000. Thus, MPAC argues that the current value of $1,654,000 is justified.

62The Appellant argues that these time-adjustment factors are unsubstantiated and arbitrary and the actual figures for sale and ASR transactions should be used. MPAC argues that time-adjustment factors are an integral part of MPAC’s methodology and their use is accepted practice in the assessment industry.

63The Board prefers to use the actual sales figures in determining current value and ASR calculations. The time-adjustment factors introduced by MPAC may very well be used by MPAC in its internal calculations, but MPAC offers no evidence to support the basis on which the time-adjustment factors were determined and how the calculations were made. Nor does MPAC offer any cogent reason as to why the Board should use the factors given that appellants do not have the same opportunity to offer alternative time- adjusted factors in their own calculations and submissions. MPAC’s time-adjustment factors are problematic as their origins and their rationale are unknown. The Board will not use them either to determine the current value of the subject property or to ascertain whether the subject property has been equitably assessed.

64The Board uses the sales evidence relied upon by both parties to determine the current value of the subject property as of the valuation day, January 1, 2012. The Board finds that current value to be $1,432,000. (14,044 square feet times $102 per square foot).

Equity

65The second task for the Board is to determine whether an assessment at the current value of the subject property is equitable given the assessment of other similar properties in the vicinity. This is required by s. 44.(3)(b) of the Act.

66MPAC’s equity study of 19 properties appears haphazard and there are concerns as to its applicability and accuracy of the information therein. Six properties are vacant land. These offer no similarity to the subject property. Twelve sales occurred well outside the normal 12-month window on either side of the valuation day, January 1, 2012: two in 2009, four in 2010, and six in 2014. These sales may fit MPAC’s arbitrary one-kilometer radius range, but the sales themselves are outdated on either side of the valuation day. Sales within the 12-month window offer a better picture of the relative value of the subject property at the valuation date. MPAC’s vacant land properties are not similar.

67The assessments of four sales have been adjusted in MPAC’s equity study. These adjustments plus the fact that MPAC applied the December 2013 time adjusted factor to all six of the 2014 sales further makes the Board leery as to the validity of MPAC’s study. The Board echo’s the same disquiet of MPAC’s evidence in this hearing as was stated by Member Cowan with MPAC’s adjusted evidence in Highland Equipment Ltd. The altered values of certain properties in the equity study renders the results of the study inaccurate. The Board will not rely on MPAC’s equity study.

68MPAC justified that the subject property was correctly assessed because their equity study showed that the average and median ASRs fell with the 5% range of acceptable value, hence no equity adjustment was necessary. However, this did not deter MPAC from applying a 12% reduction to the revised value of the subject property, thereby recommending an assessment value of $1,488,000. The 12% reduction is the result of an equity study made by another assessor for another property on Fenton Road. No evidence was presented in respect to this reduction. This is unusual and disconcerting. The use of another assessor’s equity study prepared for another property has questionable worth. Also, the basis of the 12% reduction in that study is at odds with MPAC’s own equity study of 19 properties. In this instance, the application of a 12% reduction based on another study is arbitrary on MPAC’s part. It is also without evidentiary foundation. The Board will not apply this reduction to the current value of the subject property.

69The Board has evidence to support the conclusion that the current value of the subject property should be adjusted for equity. The two equity studies presented by the Appellant show that similar industrial properties are under assessed. The properties submitted by the Appellant in these two equity studies are similar to the subject property by way of zoning and function. They offer a mix of industrial properties sold within a 12- month window. They offer better comparison and utility than the equity study submitted by MPAC. The Board finds that it is necessary to go out further to get a sample of similar properties in the vicinity for equity purposes.

70The first ASR study offers the Board an appropriate ASR adjustment. This study shows 36 sales ranging from $800,000 to $3,300,000 in the time frame 2011 and 2012. This study offers a narrower range of property values. All sales occurred within 20 kilometers of the subject property. They consist of industrial properties similar to the subject property by zoning and function. The Board has verified the calculations and finds that the median ASR of 0.86 is the appropriate adjustment. (This is close to the unverifiable 12% reduction offered by MPAC).

71The Board adjusts the current value of the subject property for equity by the ASR of 0.86. The Board finds the assessment should be reduced below the properties current value to$1,232,000 ($1,432,000 x 0.86 = $1,231,520 rounded).

Excess Land

72Section 21.(3) of Ontario Regulation 282/98 provides:

21.(3) A portion of a parcel of land is included in the subclass for excess lands for a class of real property if,

(a) it has not been developed in any way, other than to service the parcel of land;

(b) it is not being used other than for farming purposes; and

(c) it is in excess of the municipal requirement for any existing development elsewhere on the parcel.

73MPAC steadfastly maintains the position that the cutting grass on the portion of the land with no buildings is a use which means that the property has been developed. MPAC argues this development precludes it from be classified in IU. Mr. Bourassa submits that the findings in two Board decisions, Stiver and Torontario, support this interpretation. Mr. Attard for the Appellant, agrees with the findings in these decisions, but argues that that the findings do not confirm that grass cutting is by itself the development of land.

74The Board concurs with the Appellant. The Board is not persuaded that these cases support MPAC’s interpretation. The evidence per se in these cases has nothing to do about cutting grass as a constituent component of land use or development. They deal with the facts that the landowners, tenants or employees of these commercial properties have derived benefits from the actual use or development of the land. The matter of intent by landowners coupled with an actual use or development of the land for their benefit are paramount considerations.

75Stiver and Torontario deal with commercial properties, not industrial properties, where the Board in each instance speculated logically that “street appeal” and “beautification efforts” could add value to the properties. The evidence clearly showed that actual use or development of the land was evident, whether it was for the “recreational use” of employees and tenants by way of picnic tables or for the benefit of landowners who used the land for “signage” or delineated it by “concrete curbs”. There is no evidence that such intent or actual use or development of the land for the benefit of the Appellant in the current matter before the Board.

76The Board finds that the facts in this case differ substantially from the facts in Stiver and Torontario, and as such, these cases may be distinguished.

77The Board observes that other than Stiver and Torontario, MPAC presented no helpful supporting documentation --- internal explanatory notes, policy statements, legal interpretations, or guidelines to help interpret this Regulation.

78Cutting grass per se on excess land in an industrial site is, in and of itself, no indication that the land is being actually used or developed in any way. It seems that common sense would consider this to be unreasonable, inaccurate, and possibly absurd.

79The Board is cognizant that the Appellant bears the onus to show that MPAC’s classification is incorrect. The Board is satisfied that the Appellant has made his case. The Board finds the evidence and sworn testimony of the Appellant and his representative credible and sensible. Both have demonstrated that the subject property’s excess land was, and is, not being used for any purpose or being developed in any way for the benefit of the Appellant or his employees. There was and is no intent to use or develop the land. MPAC’s interpretation may be compelling or persuasive for commercial properties, but not necessarily or appropriately so for industrial properties. MPAC’s discretionary pronouncement is unreasonable in light of the sworn testimony and evidence presented by the Appellant and his representative.

80Moreover, Mr. Schuster’s testimony and Mr. Attard’s evidence with respect to appraiser’s site data description suggests that the excess land does exist at the subject property. This goes uncontested by MPAC. Moreover, there was no evidence or argument by MPAC that the land does not meet the requirements of s. 23(3) of the Regulation.

81Importantly, MPAC documentation at one time recognized that the subject property had excess land. This cannot be explained away as some sort of error. The Board is satisfied that the three components in the Regulation have been met, and the 37,114 sq. ft. of land at the back of the building is classified as excess industrial land.

82MPAC did not challenge the 19% rate of apportionment calculated by the Appellant. In the absence of evidence or submission to alter or contest this calculation, the Board apportions 19% of the subject property’s assessment as adjusted for equity to the industrial excess land subclass (IU).

83The Board calculates the industrial class values as follows:

• $998,000 IT ($1,232,000 x 81% = $997,920 rounded)

• $234,000 IU ($1,232,000 x 19% = $234,000 rounded)

CONCLUSION

84The Board reduce the current value from $1,654,000 to $1,432,000 for the taxation years 2014 and 2015.

85The Board finds that an equity adjustment is warranted. The assessment value has been reduced for the taxation years 2014 and 2015 to $1,232,000.

86The Board finds that the assessment value as adjusted for equity is apportioned as follows: $998,000 IT and $234,000 IU.

Footnotes

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