Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE: April 5, 2016 FILE NO.: ID 138136

Assessed Person(s): 8768013 Canada Ltd. Appellant(s): The Corporation of the City of London Respondent(s): 8768013 Canada Ltd. Respondent(s): Municipal Property Assessment Corporation ("MPAC") Region 23

Property Location(s): 977 Oxford Street East Municipality(ies): City of London Roll Number(s): 3936-030-180-00100-0000 Appeal Number(s): 3069667 and 3158731 (deemed 2016 appeal) Taxation Year(s): 2015 and 2016 (deemed appeal) Hearing Event No.: 607561

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

Heard: December 17, 2015, in London, Ontario

APPEARANCES:

Parties	Representative
City of London	Brian Shimla
Assessed Person	Jeff Pickles, Erin Pickles, Ratha Halford
MPAC	Tobin Edmunds

INTERIM DECISION OF THE BOARD DELIVERED BY DAN WEAGANT

INTRODUCTION

1The subject property is comprised of 0.40 acres of land with a church building of 2,136 square feet ("sq. ft.") and a single-family dwelling of 1,440 sq. ft. The property was purchased by 8768013 Canada Ltd. ("8768013") in 2014 for $310,000. The vendor at the time was the Trustees of the Congregation of Knollwood Park Presbyterian Church. At the time of the sale, the vendor had been using the church structure as a place of worship and was leasing the single-family residence to a family not connected with the church itself, although in years past it had served as the manse or residence of the serving clergy of the church. The church building was constructed in 1918 and the dwelling was constructed in 1928.

2The property lies at the southeast corner of Quebec Street and Oxford Street East in the City of London. The church building is known by municipal address 977 Oxford Street East and the dwelling structure is known as 836 Quebec Street. Each has a separate driveway from its respective street frontage. The Church building has approximately four parking spaces associated with it that lie on the south side of the building.

[3] MPAC has returned a value for the 2015 taxation year of $328,000 apportioned as follows:

• Residential Tax Class - $137,000
• Place of Worship - $ 191,000

4As part of a regular review of places of worship that have sold, Mr. Shimla undertook a closer review of the subject property to determine the nature of the use of the property after the February 2014 sale. It is the City's position that the church structure itself, while continuing to be used as a place of worship, the ownership of 8768013 changes the classification from place of worship, to commercial. There is no dispute with respect to the classification of the residential portion of the property.

5As a result of the City's review, an appeal of the assessment of the subject property was filed by the City, chiefly to amend the classification of the church building to commercial. MPAC agrees with the City with respect to the classification and also believes that the current value returned for the entire property should be confirmed.

68768013 believes that as the church building continues to be used as a place of worship, as it is being leased to the Universal Church – Kingdom of God, the exemption from assessment and taxation should still apply. They also believe that the current value returned is too high, mostly due to the poor physical condition of the buildings at the time of their possession.

[7] In considering the submissions of the parties, the Assessment Review Board (the "Board") must decide several things in this appeal:

• The current value of the subject property, based on the value it would have sold for on January 1, 2012.
• Whether or not the value determined is equitable when consideration is given to the assessments of similar properties in the vicinity.
• The classification of the subject property for the 2015 taxation year.
• The apportionment of the assessment if more than one classification applies to the subject property.

DECISION

8The Board finds that the current value of the subject property is $328,000. The Board also finds that, when reference is made of the assessments of similar properties in the vicinity, the assessment of the subject property is reduced to $314,000.

[9] Accordingly, the Board finds that assessment of the subject property is reduced, from $328,000 to $314,000 for the 2015 taxation year, apportioned as follows:

• Residential Tax Class - $ 137,000
• Commercial Tax Class - $ 177,000

[10] The Board further finds that, given the land holdings attached to the two buildings, the Commercial Excess Land sub-class applies, as there is evidence to suggest that there are commercial lands within the subject property that exist beyond the area required to support the commercial enterprise occurring on the property, in accordance with the regulations of the applicable zoning by-law. The Board did not hear evidence with respect to the issue of excess commercial land. Accordingly, the Board directs the parties as follows:

• Within 45 days of the release of this interim decision, the City of London shall, with the assistance of MPAC as required, provide to 8768013 Canada Ltd., an accounting of the minimum land area required to support the commercial use at the building known as 977 Oxford Street east.
• At the same time the City shall provide 8768013 Canada Ltd. with the minimum land area required to support the residential use at the building known as 836 Quebec Street; and
• Calculate the remaining land area to be placed in the Commercial Excess Land Sub-class.
• Within 30 days of the City's calculation of the Commercial Excess Land area, 8768013 Canada Ltd. shall provide to the City, with a copy to the Board, it's acceptance of the calculation of the Excess Land area. Within 45 days of the agreement, the parties are further directed to provide minutes of settlement to the Board.
• If the Parties cannot agree on the Commercial Excess Land area calculation, they are directed to contact the Board to schedule a re-convening of the hearing for the Board to make this determination.

LEGISLATION

11In making its determination on this appeal, the Board must consider the Assessment Act ("Act")

[12] Section 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.

[13] Section 3.(1) of the Act states: 3.(1) Property assessable and taxable, exemptions. – All real property in Ontario is liable to assessment and taxation, subject to the following exemptions from taxation:

1. Crown Lands. – Land owned by Canada or any Province.
2. Cemeteries, burial sites. – A cemetery for which a consent has been issued under the Cemeteries Act (Revised) and a burial site as defined in that Act so long as the cemetery or burial site is actually being used for the interment of the dead.

[14] Section 19.(1) of the Act states: 19.(1) Assessment based on current value. – The assessment of land shall be based on its current value.

15Section 19.2(1) of the Act states:

Valuation days

19.2 (1) Subject to subsection (5), the day as of which land is valued for a taxation year is determined as follows:

1. For the 2006, 2007 and 2008 taxation years, land is valued as of January 1, 2005.
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.

Exception

(5) Subsection (1) does not apply in respect of the valuation of land for a taxation year after 2004 if the Minister prescribes a different day as of which land is valued for that year.

[16] Section 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

[17] Section 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.

[18] Section 45 of the Act states: 45. Powers and functions of the Assessment Review Board. – Upon an appeal with respect to an assessment, the Assessment Review Board may review the assessment and, for the purposes of the review, has all the powers and functions of the assessment corporation in making an assessment, determination or decision under this Act, and any assessment, determination or decision made on review by the Assessment Review Board shall be deemed to be an assessment, determination or decision of the assessment corporation and has the same force and effect.

CITY'S EVIDENCE

Current Value

19Mr. Shimla submitted Exhibit 4, consisting of five comparable properties that fall within the property code 700 – 'Place of Worship – with a clergy residence'. Mr. Shimla explained that even though the City's position is that the place of worship building on the subject property should be assessed as commercial, his comparison of church properties is the best indicator of the value of the subject property owing to its physical characteristics. He submitted that the physical properties of the comparable properties in his analysis are generally the same as the subject property.

20The five properties in the comparison include places of worship that were built between 1926 and 1959. Each property also has a residence on the same lot. The residential buildings in Mr. Shimla's comparison were built between 1956 and 1970.

21All of the comparable properties in Exhibit 4 are relatively comparable in size to the subject property with place of worship building areas ranging from 1,586 sq. ft., to 2,866 sq. ft. The single family residences on the comparable properties range in size from 1,022 sq. ft., to 1,367 sq. ft. Mr. Shimla submitted that the comparable properties in his analysis are suitably comparable to the subject property and the assessed value as of the 2012 valuation date can be used to make a determination of current value of the subject property as a result.

22Mr. Shimla testified that the place of worship building assessments in the comparison range from $102.23 per sq. ft. to $207.59 per sq. ft., with a mean of $160.64 and a median value of $173.91. The single-family dwelling assessment values of the properties in his comparison have per sq. ft., values from $81.21 to $98.02, with a mean of $87.63 and a median value of $86.42.

23Mr. Shimla submitted that by using the mean values per sq. ft., of the comparable properties, the indicated or suggested current value is $343,000 for the church building with an additional $126,000 for the residence, totaling $469,000.

24In addition to the assessment comparison, Mr. Shimla also submitted Exhibit 5, being an Assessment to Sale Ratio ("ASR") study, including five similar places of worship and five similar single-family residential dwellings. The ASR study shows the relationship between the current assessment value and the sale value of each of the properties in the study. The same relationship at the subject property was made, indicating that the assessed value of the subject property of $328,000 is 106% of the value of the sale price of $310,000 that occurred in February 2014.

25Mr. Shimla's ASR study indicates that a mean ASR of the five place of worship properties is .93, meaning that similar properties in the vicinity have an assessment value that is 93% of the sale value of the same property. He applies the .93 figure to the assessed value of the subject property to arrive at a suggested value for the place of worship of $177,000.

26Using the same approach to the five residential properties in his study, Mr. Shimla determined that the mean ASR for similar residential properties is 1.00, meaning that in comparison to similar properties in the vicinity, sale values and assessment values are generally the same. Accordingly, Mr. Shimla arrived at a suggested assessment for the residential portion of $137,000, the same as what is returned for the 2015 taxation year.

Classification

27Mr. Shimla testified that the City's chief concern with respect to the subject property is the classification of the place of worship. During the City's review of the property it determined that, given the sale in February 2014, it no longer qualified as exempt under the Act. He submitted that s. 3.(1)3 of the Act indicates those properties that are exempt from assessment and taxation and includes "Land that is owned by a church or religious organization or leased to it by another church or religious organization…"

28Mr. Shimla submitted that the current user of the place of worship does not own the subject property. He also submitted that the owner, and Assessed Person in this appeal is not a church or religious organization. In support of his position that the subject property should correctly be assessed in the commercial property class, Mr. Shimla cited s. 5.(1) of Ontario Regulation 282/98 which states: "The commercial property class consists of the following: 1. Land and vacant land that is not included in any other property class." Mr. Shimla does not believe a property used by a tenant for church or religious purpose, like the subject property is included in any other property class.

ASSESSED PERSON'S EVIDENCE

Current Value

29The Appellant, represented by Jeff Pickles, described the process by which 8768013 Canada Ltd., acquired the property. According to Mr. Pickles, the property was listed for $285,000 on the open market. 8768013 was determined to acquire the property and was advised by the real estate agent representing them that multiple offers were expected by the listing agent. While they did not intend to over pay for the property, its acquisition was an important part of their business plan and as a result, they submitted an offer of $310,000 or $25,000 over the asking price

30Mr. Pickles testified that no detailed inspection was made of the property prior to the closing date, but expressed disappointment at the condition of the property on closing.

31The Pickles and Ms. Halford testified that some 300 hours of labour were expended on both buildings in the ensuing months to bring them up to a standard that was appropriate for leasing. They have since successfully leased both buildings; the church building to a religious organization and the house to a family that is unrelated to the religious function of the church building.

32Given the condition of the buildings at the time of closing, 8768013 believes that the appropriate value of the property should be $270,000 reflecting a reasonable cost of $40,000 to cure the property to bring it up to standards acceptable for leasing. They did not submit any documentary evidence with respect to this value.

Classification

338768013 believes that there should be no distinction between the use of a building for religious purpose, based on its ownership. It submits that the use by the Universal Church – Kingdom of God demonstrates that the building was a church in the past, and continues to be one and that as a result, the property should continue to have an exempt status. They have no concerns with respect to the classification applied to the residential portion of the property.

ANALYSIS

34With respect to the value of the property, the Board has only the documentary evidence of the City. While 8768013 made a case for a cost to cure deficiencies in the property, they did not submit any documentary evidence in this regard.

35The Board finds that the current value of the property is $328,000 as returned by MPAC. This value was demonstrated by Mr. Shimla's assessment comparables analysis where the values of comparable properties were compared with the subject property. That analysis supported a value in excess of the returned value, but in the context of its appeal, the City did not seek an increase, noting that the properties used for comparison were all newer than the subject buildings and that difference would account for at least part of the higher value for the comparable properties.

36With respect to equity of assessment, the Board finds Mr. Shimla's evidence of ASRs most compelling. This analysis shows that similar residential properties in the vicinity are generally assessed at or near their sale values. The same analysis indicates that assessments of similar places of worship are generally assessed at a level equal to 93% of their sale values. When this percentage is applied to the assessment of the place of worship on the subject property, the assessed value changes from $191,000 as returned, to $177,000.

37With respect to the correct property class, the Board is guided by the Act and Ontario Regulation 282/98. The Board agrees with the City's submission; that the property ceased to have an exempt status when it was purchased by 8768013, which is neither a charitable organization nor a church or religious organization. Even though the church building continues to be used as a place of worship, it is the ownership of the property that is the determining factor with respect to exemption of assessment and taxation.

38Further, the Board agrees with the City that since the church component of the property in its present form is not included in any other property class, the correct classification is Commercial.

39The Board did not hear any evidence from the parties with respect to the apportionment of the property classes at the hearing. In the context of the issues being considered, there is no dispute in this regard. However, the Board is compelled to make an additional finding, based on the evidence presented by 8768013 regarding the use of the commercial part of the land by its tenant. There are only four parking spots available on site for the church use. This renders a good portion of the remaining property as unused or excess to the commercial use.

40The Board finds, as a result of the use of the property, that a portion of the property is considered land excess to the operation of the property and that the sub-class "Commercial – Excess Land" applies.

DECISION

41The Board finds that the current value of the subject property is $328,000. The Board also finds that, when reference is made of the assessments of similar properties in the vicinity, the assessment of the subject property is reduced to $314,000.

[42] Accordingly, the Board finds that assessment of the subject property is reduced, from $328,000 to $314,000 for the 2015 taxation year, apportioned as follows:

• Residential Tax Class - $ 137,000
• Commercial Tax Class - $ 177,000

[43] The Board further finds that, given the land holdings attached to the two buildings, the Commercial Excess Land sub-class applies, as there is evidence to suggest that there are commercial lands within the subject property that exist beyond the area required to support the commercial use, in accordance with the regulations of the applicable zoning by-law. The Board did not hear evidence with respect to the issue of excess commercial land. Accordingly, the Board directs the parties as follows:

• Within 45 days of the release of this interim decision, the City of London shall, with the assistance of MPAC as required, provide to 8768013 Canada Ltd. an accounting of the minimum land area required to support the commercial use at the building known as 977 Oxford Street east.
• At the same time the City shall provide the 8768013 Canada Ltd. with the minimum land area required to support the residential use at the building known as 836 Quebec Street; and
• Calculate the remaining land area to be placed in the Commercial Excess Land Sub-class.
• Within 30 days of the City's calculation of the Commercial Excess Land area, 8768013 Canada Ltd. shall provide to the City, with a copy to the Board, it's acceptance of the calculation of the Excess Land area. Within 45 days of the agreement, the parties are further directed to provide minutes of settlement to the Board.
• If the Parties cannot agree on the Commercial Excess Land area calculation, they are directed to contact the Board to schedule a re-convening of the hearing for the Board to make this determination.

2016 DEEMED APPEAL

44An appeal for the 2015 taxation year is presently before the Board. Section 40.(26) of the Assessment Act 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 2015 appeal before March 31, 2016. For that reason, this decision also applies to the 2016 taxation year.

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

Deemed appeals, 2009 and subsequent years (26) 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.