M Cooper Nominees Pty Ltd. v. Municipal Property Assessment Corporation, 2016 CanLII 14707

Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE: March 15, 2016

FILE NO.: WR 138537

Assessed Person(s): M Cooper Nominees Pty Ltd., and Aero Park III Inc.

Appellant(s): M Cooper Nominees Pty Ltd., and Aero Park III Inc.

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

Respondent(s): City of Mississauga

Property Location(s): 2695 Slough Street

Municipality(ies): City of Mississauga

Roll Number(s): 2105-050-115-11010-0000

Appeal Number(s): 2962449, 3060728, 3033535, 3084813 and 3082516

Taxation Year(s): 2013, 2014 and 2015

Hearing Event No.: 613559

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

Heard: January 22, 2016 in Mississauga, Ontario

APPEARANCES:

Parties	Representative
M Cooper Nominees Pty Ltd., and Aero Park III Inc.	Paul Grossman
MPAC	Damion Bernacick, Sarah Davis
City of Mississauga	No one appeared

DECISION OF THE BOARD DELIVERED BY F. SAPONARA

INTRODUCTION

1M Cooper Nominees Pty Ltd., purchased the property located at 2695 Slough Street in the City of Mississauga, in August 2013 from Sreit (Malton) Ltd and Aero Park III Inc., and paid $1,930,000.

2The property is located near the Pearson International Airport, within the City of Mississauga. It consists of a single storey industrial building, built in 1978 and situated on a 1.65 acres of land. The building total area is 23,199 square feet of which 5,728 square feet consists of finished interior office space.

3The subject property was placed in the industrial property class and assessed at $2,326,000 for the 2013 and 2014 taxation years. For the 2015 taxation year, the property was apportioned between the industrial and commercial classes and assessed at a combined total of $2,413,000.

ISSUES

4Damion Bernacick, representing MPAC submits that the purchase price paid by the Appellant is not reflective of the property’s current value, as of January 1, 2012. It is MPAC’s position that because another 12 properties in the same area as the subject property, were being sold by the previous owner, prices were depressed by an excess supply of properties being offered for sale at the same time. By rejecting the sale of the subject property, Mr. Bernacick argues that the correct current value of the property is provided by MPAC’s Automated Cost System (“ACS”). This valuation methodology calculates the replacement cost, less depreciation, of the building, and the land value is added, to determine the property’s current value.

5Based on the ACS methodology, it is MPAC’s position that the subject property’s current value, as of January 1, 2012, is $2,384,000. To demonstrate the correctness of the ACS valuation method, Mr. Bernacick has provided as evidence, the sales of four comparable properties. These properties were sold on the open market during the period of July 2011 to May 2012 at prices ranging from $2,105,000 to $2,664,189, resulting in an unadjusted median sale price per square foot of $99. When this value indicator is applied to the subject property total area of 23,199 square feet, it gives a value of $2,296,701. If the sale price of the comparable properties is adjusted for the differences in lot size, building age, building height, total area and timing differences between the sale and valuation date, the median sale price of the comparable properties sales is $106. By this value indicator, Mr. Bernacick submits that the subject property current value would be $2,459,094.

6In rejecting the sale of the subject property , the Assessor submits that it is not a valid sale. Based on the four comparable property sales, Mr. Bernacick argues that since the average land sale price of these properties is $160 per square foot, the subject property’s highest and best use land value is equivalent to $4.8 million, hence the price paid for the subject property is significantly lower than current value.

7Paul Grosman, representing the Appellant, takes the position that the best indicator of current value for the subject property is the purchase price paid by the Appellant. According to Mr. Grosman, this price was negotiated by the seller and buyer in an arm’s length transaction, between a willing buyer and a willing seller. Based on this evidence, it is the Appellant’s position that the correct current value of the subject property as of January 1, 2012, is $1,930,000.

8The main issues for the Assessment Review Board (the “Board”) are to determine the current value of the subject property as of January 1, 2012 and whether a reduction to the assessment of the subject property is required in order to make it equitable with the assessment of similar lands.

DECISION

9The Board finds that the current value of the subject property as of January 1, 2012 is $1,930,000.

10Further, the Board finds that no adjustment to the subject property’s current value is required to make it equitable with the assessment of similar lands in the vicinity.

11The Board therefore, reduces the assessment for the 2013 and 2014 taxation years from $2,326,000 to $1,930,000, and for the 2015 taxation year from $2,413,000 to $1,930,000. For the 2013 and 2014 taxation years the whole assessment is apportioned to the Industrial property class. For the 2015 taxation year the Board apportions the current value to the industrial and commercial classes, as follows: Industrial (Full) class $1,243,000, Commercial (Full) class $687,000.

REASONS FOR DECISION

Determination of Current Value

12The initial task for the Board is to determine the current value of the subject property as required by s. 44.(3)(a) of the Assessment Act, R.S.O. 1990, c.A.31, as amended (“Act”), which in part states that “…the Board shall…determine the current value of the land.”

13Section 19.(1) of the Act states that “…the assessment of land shall be based on its current value…” and s. 1 of the Act defines current value as “…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 40. (17) of the Act stipulates that “…the burden of proof as to the correctness of the current value of the land rests with the assessment corporation.”

15The issue for the Board’s determination is the current value of the subject property as of January 1, 2012.

Sale of Subject Property

16By concluding that the correct current value of the property is $2,384,000, Mr. Bernacick’s starting position is to acknowledge that the returned assessments are incorrect. However, he disagrees with the Appellant’s position that the amount at which the property sold, is the best indicator of current value. MPAC submits that since the purchase price cannot be relied on, the correct current value should be determined by utilizing the ACS valuation methodology.

17Exhibit 7, contains a copy the Agreement of Purchase and Sale between the Purchaser and the Vendor. The Agreement is dated May 16, 2013. From a review of the terms of the Agreement, the Board is able to establish that the following terms are most relevant to the valuation issue:

a) the sale price negotiated in an arm’s length relation, was $1,930,000;

b) payment of the purchase price was cash on closing. There were no Vendor financing or other special financing terms;

c) purchase price payable was only subject to normal real estate closing adjustments;

d) on closing, title to the property was to be given to the Purchaser; and

e) the sale was completed on August 28, 2013.

18The reasons advanced by Mr. Bernacick for asking the Board not to rely on the subject property sale price are found on page 12 of Exhibit 1. The reasons given are summarized as follows:

a) the vendor was a capital investment firm disposing a number of properties in the area of the subject property;

b) vendor was disposing the properties in a short time frame;

c) the number of properties being offered for sale all at the same time, depressed sale prices in the area

Board’s Findings

19The Board finds that the sale of the subject property for $1,930,000 was an arm’s length transaction between a willing buyer and a willing seller.

20The Board agrees with MPAC that for the type of property under appeal, the ACS and Direct Sales Comparison methodologies are suitable estimating methodologies to establish current value. However, the Board is of the view, a view which is well established in appraisal practice and jurisprudence, that if there is a sale of the subject property, this evidence is of primary importance and provided certain criteria are met, it is the most reliable evidence of a property’s current value. If the sale of the subject is valid, the Board takes the position that there is no need to look beyond this evidence and resort to other estimating methods for determining current value. Therefore, the Board will first consider the evidence related to the sale of the subject property. Only if the Board is unable to rely on this evidence, other estimating methodologies need to be considered. The key issue is whether the sale of the subject property meets the validity criteria of the Act. MPAC’s position is that it does not, whereas the Appellant says that it does.

21In making its determination on the validity of the subject sale transaction, the Board is bound by s. 1 of the Act which defines current value as follows:

“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.

22Section 19.(1) of the Act which states:

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

23In determining whether the subject sale meets the definition of current value, per s. 1 of the Act, the Board finds it instructive to answer the following questions:

1. Did the transaction take place between unrelated parties?

2. Were buyer and seller motivated to enter into a binding transaction without duress?

3. Was the property reasonably exposed on the open market to identify potential buyers?

4. Are the parties to the sale transaction sufficiently knowledgeable and advised to make an informed decision?

5. Is the price paid readily identifiable and unaffected by other special terms included in the transaction?

24The Board has considered the evidence presented by the Assessor and Appellant in the context of the questions set out above. From this review of the evidence, the Board makes the following findings:

1. The sale took place between a seller and a buyer who were dealing at arm’s length. The argument advanced by MPAC that prices were depressed because there were a number of other properties being offered for sale, may have very well been the case, however the existence of either a buyer’s or seller’s market conditions are not relevant considerations in determining current value.

2. There is no evidence to suggest that the seller was under any form of duress to sell.

3. The buyer was a willing buyer who came forward as a result of the seller’s marketing efforts to seek a buyer through the services of a major real estate brokerage firm. The evidence before the Board indicates that the property was adequately exposed on the open market.

4. There is no evidence that the parties involved in the transaction, were not knowledgeable.

5. The sale price in the Purchase Agreement is clearly stipulated and was satisfied in cash without any special terms or conditions which may indicate a transfer of value between the parties through other means.

Conclusion

25The terms of the transaction satisfy the Board’s test of being a valid sale between a willing seller and a willing buyer in an arm’s length, market based transaction. Therefore, the sale meets the current value requirements under s. 1 of the Act.

26The Board further concludes that it is not necessary to resort to other valuation estimating methodologies to determine the subject property’s current value, given the availability of the subject property sale evidence.

Determination of Equity

27Having established the current value of the property, the next task is for the Board to determine whether a reduction should be made to lower the assessment below current value in order to make it equitable with the assessments of similar lands in the vicinity.

28Section 44.(3)(b) of the Act states that:

Same, 2009 and subsequent years

(3) 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.

29The Board was provided with assessment and sales evidence of 14 properties in the vicinity of the subject property, to make a determination on account of s. 44. (3)(b), as detailed on page 74 of Exhibit 1. According to the MPAC’s analysis, the median assessment to sales ratio of these sales is 0.98. This result infers that overall there is no indication that properties in the vicinity are being under assessed. Relying on this evidence, the Board finds that equity has been achieved and no further adjustment to the current value of the subject property as determined above is necessary.

30Accordingly, the assessment for the subject property for the taxation years 2013 and 2014 is reduced from $2,326,000 to $1,930,000 and for the taxation year 2015, the assessment is reduced from $2,413,000 to $1,930,000. Based on the 2013 and 2014 returned assessment being allocated 100% to the Industrial property class, the Board apportions $1,930,000 to the Industrial property class for these two taxation years. Based on the returned assessment for the 2015 taxation year, being allocated 35.6% to the Commercial (Full) and 64.4% to the Industrial (Full) property class, the Board apportions $687,000 to the Commercial (Full) property class and $1,243,000 to the Industrial (Full) property class.