Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE:

May 18, 2016

FILE NO.:

WR 139942

Assessed Person(s):

June E Higgins

Appellant(s):

June E Higgins

Respondent(s):

Municipal Property Assessment Corporation (“MPAC”)

Region 7

Respondent(s):

Township of North Kawartha

Property Location(s):

43 Fire Route 10D

Municipality(ies):

Township of North Kawartha

Roll Number(s):

1536-020-001-45500-0000

Appeal Number(s):

2997655, 3018991, 3073600 and 3145994 (deemed 2016 appeal)

Taxation Year(s):

2013, 2014, 2015 and 2016 (deemed appeal)

Hearing Event No.

621332

Legislative Authority:

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

Heard:

April 4, 2016 in North Kawartha, Ontario

APPEARANCES:

Parties

Representative

June E Higgins

Rae Buchan

MPAC

Ron Donnelly

Township of North Kawartha

No one appeared

DECISION OF THE BOARD DELIVERED BY WARREN MORRIS

INTRODUCTION

1This appeal relates to the assessed value of a 39,204 square foot lakefront property on Stoney Lake containing two main structures at 34 Fire Route 10D in North Kawartha Township. The principal dwelling is a 1.5-storey self-contained residence of 2,003 square feet (sq. ft.”), and a secondary dwelling of 1,226 sq. ft. Both the buildings were built in 2006. The subject property also contains a detached garage and a boathouse. MPAC determined the effective frontage of the property to be 300 feet.

2For the 2013 to 2015 taxation years, MPAC originally returned an assessed value for the subject property at $1,811,000 however MPAC’s position is that the current value as of January 1, 2012 is $1,636,000. The property owner believed the assessment was too high and appealed MPAC’s decision to the Assessment Review Board (“Board”).

3At the hearing, MPAC presented five sales of purportedly comparable properties. Of the five sales, MPAC found three to be inferior, one to be superior, and one to be relatively comparable to the subject property. MPAC believes that the current value assessment (“CVA”) of $1,636,000 is reasonable since it is greater than the time adjusted sale amounts of the three inferior sales, less than the superior sale, and virtually the same as the comparable sale. The Appellant’s representative, Rae Buchan, did not introduce any new property sales, however Mr. Buchan believed that only two of MPAC’s identified sales were useful to determine current value, with one being inferior and the other being superior to the subject property. Mr. Buchan took issue with MPAC’s time adjustment calculations and presented his own time adjustments based on data found on MPAC’s website. Mr. Buchan also expressed that the Appellant’s main concern was the equity of the subject property’s assessment relative to the assessment of its neighbours, particularly two properties – one abutting to the immediate north of the subject property, and another property just east of the subject property - both of which he believes are superior to the subject property, yet assessed lower.

4At the completion of the hearing, the Board reserved its decision.

ISSUE

5The issues are to determine the current value of the property, and to ensure that the current value is equitable relative to the assessed values of similar properties in the vicinity.

DECISION

6The Board finds that the current value of the subject property is $1,620,000.

7Further the Board finds that there is no evidence before it leading to the conclusion that the current value, as determined above, requires an adjustment in accordance with s. 44.(3)(b) of the Assessment Act (“Act”).

8Accordingly, the assessment of the subject property for the 2013, 2014 and 2015 taxation years is reduced from $1,636,000 to $1,620,000.

REASONS FOR DECISION

The Legislation

9Section 1 of the Act defines “current value” as:

“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.

10Section 19.(1) of the Act states:

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

11Section 19.2(1)3 of the Act states:

19.2 (1) Valuation days. – 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.

(5) Exception. – 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.

12Section 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.

Current Value

13The best indicator of current value is an arm’s length and market tested sale of the subject property on the 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 vicinity and market on or close to the valuation day. To enable an estimate of value for the subject property to be derived from a comparable property there must be sufficient elements of similarity, in terms of location and physical factors such as total building area, lot area, water frontage, age/quality of construction and other features such as outbuildings, so as to enable a direct comparison to be made between the comparable property and the subject property.

Time Adjustment Factors (“TAFS”)

14Prior to examining the features of the comparable properties, the issue of time adjusting the sale price to the valuation date of January 1, 2012 must be addressed. Both MPAC and the Appellant have adjusted the sale prices of comparable properties to reflect changing prices, either appreciation or depreciation, between the sale date and the valuation date.

15In Exhibit 1, MPAC presents a “Price Changes Over Time” study of 481 property sales in the vicinity of the subject property for a four year period commencing January 2009 to December 2012 - three years prior to, and one year after the relevant valuation date. The MPAC data shows a scatter diagram of sale to assessment ratios over the time period, and to which a curvy line-of-best-fit has been applied. When the MPAC data is assembled in Table 1, the Time Adjustment Factors (“TAFS”) show that sale prices in the vicinity of the subject property rose up until September 2009 but began to decline from October 2009 until March 2012. According to MPAC’s data, the valuation date of January 1, 2012 was the bottom of the market, and therefore any sale being compared to that date, either prior to or after the valuation date, must be adjusted downward.

16Mr. Buchan presented two other methods of calculating TAFs. His first proposal was based on information found on MPAC’s website. On page 17 of the Appellant’s Exhibit 6, there is a chart titled “North Kawartha Township – Municipal Discount Factors” which contained property classes and a Municipal Discount Factor (“MDF”) for the time between 2008 and 2012. For the “Residential” class, the MDF was 0.8751741 or as Mr. Buchan calculates, approximately 12.5% over the four year period. Mr. Buchan then simply divided by 4 to obtain 3.1% as an average annual TAF.

17As an alternative formula for determining TAF, Mr. Buchan divides the increase in the 2008 to 2012 CVA of the property immediately abutting the subject property at 31 Fire Route 10D as a percentage. In that four year span, his neighbor’s CVA increased by 8.1%.

18A brief analysis of MPAC’s price changes over time study displays data points that vary greatly from the line-of-best-fit. This means that the TAF factors presented by MPAC are far from perfect. Nonetheless, it displays a general trend of deflation approaching, and inflation following, the valuation date, resulting in downward adjustments to comparable sales. MPAC’s TAFs appear reasonable. On the other hand, the Appellants straight line TAF of 3.1% per year is not satisfactory for a couple of reasons. Firstly, it is not clear whether the MDF number includes all residential sales on water near the subject property, or merely all residential sales within the Municipality. More importantly, applying a straight line average rate of appreciation would work to the Appellant’s disadvantage since comparable sales prior to the valuation date would have to be adjusted upward, even though MPAC’s data shows a deflationary period. Mr. Buchan’s alternative time adjusting method based on the increased returned assessment of a neighbour from 2008 to 2012 is even more unsatisfactory, as assessments are not sales, and one property’s increase does not establish a general rate of inflation. For these reasons, the Board finds the MPAC TAFs to be preferable and will use them to adjust comparable sales.

19The Board reviewed the five property sales presented into evidence by MPAC. Of the five comparable sales, two of the sales (MPAC Sales B and E) occurred more than a year prior to the January 1, 2012 valuation date, which represent a different market and are therefore less reliable. This leaves three property sales, including the two sales (Sale C and D) relied on by the Appellant, all of which sold within a year of the valuation date and have some similarity to the subject property. They are as follows:

Address

Sale Date

Sale Price

x TAF =

Building (sf.)

Lot sf

Frontage (ft.)

Age / Quality

Other Features

Subject Property

43 Fire Route 10D

3,229 (2003+1226)

39,204

300

2006 / 7.5

Boathouse, garage

Sale A

87 Fire Route10E

Nov 2011

$1,400,000

x 0.998 = $1,397,675

3,002

106,286

235

2003 / 7.0

Boathouse, garage, basement

Sale C

50 Bedwell Drive

Oct 2012

$1,300,000

x 0.952 = $1,237,826

2,416

40,075

195

1991 / 7.5

Boathouse, garage w/res

Sale D

38 Napier Crescent

May 2012

$1,641,870

x 0.992 = $1,628,178

3,153

31,798

120

1987 / 8.0

Garage, basement

20As with all real estate valuation, the single biggest factor is location. The subject property and the three comparable sales are all located close to one another on the north shore of Stoney Lake, albeit Sale A is in the closest proximity to the subject property. Building size, water frontage, age/quality and other features can impact price greatly, whereas for this type of property, the lot size is less of a factor and will be given less weight than the others. The parties agree that 50 Bedwell Drive (Sale C) is inferior to the subject property, having a smaller living space, less frontage and being slightly older. The Board agrees, and also agrees with the parties’ conclusion that the current value of the subject property must be greater than $1,238,000.

21It is the Board’s view that Sales A and D are most like the subject property and therefore provide the best indication as to the current value for the subject property. MPAC has argued that Sale A is inferior but that Sale D is reasonably comparable to the subject property and therefore the $1,636,000 current value is reasonable. Mr. Buchan has argued that Sale A is not at all comparable and agrees that Sale D may be the best comparable sale, however he believes Sale D is superior to the subject property. Mr. Buchan described Sale D as being an “estate” explaining that it has a grand entrance with intercom and a sophisticated security system. Further, Mr. Buchan described Sale D as having a superior sandy shoreline, a superior detached garage and a basement (albeit only 5.5 feet in height).

22The Board agrees that Sale A is inferior to the subject property. Therefore, the current value of the subject property must be above $1,398,000.

23The Board also agrees that Sale D is the best comparable sale to the subject property and should therefore be given the most weight. While the Board accepts that Sale D has a number of features that are superior to the subject property, there are also aspects of the property, such as frontage (120 feet frontage versus 300 feet for the subject property) that are inferior to the subject property, which go to offset the superior factors. It is the Board’s view that overall, Sale D is close to, but slightly superior to the subject property. As such, the current value of the subject property can be no more than the time adjusted sale price of Sale D.

24Based on the above, the current value of the subject property must be less than, but close, to $1,628,000. Given that there is insufficient evidence before the Board to determine the differential dollar value between Sale D and the subject property, the Board is not prepared to speculate as to how much less the value is. The Board will simply round the value down slightly to acknowledge the slight inferiority of the subject property relative to Sale D. As such the Board finds the current value of the subject property to be $1,620,000.

Equity

25The Act requires the Board to address the issue of equity by having reference to the assessment of similar lands in the vicinity of the subject property. The Appellant has the burden of proving that the CVA is not equitable relative to similar lands in the vicinity of the subject property. From Mr. Buchan’s submissions, it is clear that the primary motivation for this appeal is the Appellant’s concern over the subject property’s CVA relative to its neighbours. While the governing legislation requires the Board to “…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…”, there is no requirement to adjust CVA downward to fall in line with the most under assessed properties in the vicinity. It is the Board’s view that the legislation is intended to assure that similar properties are generally assessed on a similar basis.

26In his submission, Mr. Buchan introduced evidence of the previous assessment cycle (2008). He included two decisions rendered by the Board regarding assessments of the subject property for tax years 2009 through 2012. Since the valuation date for those appeal years was January 1, 2008, the Board finds the values set out in those decisions to be irrelevant. The CVAs used to determine equity in the previous Board decisions are based on sales and assessment data from a time period four years prior to the current appeal. For this reason, the previous Board decisions are not relevant to the current appeal, and have therefore been given no weight by the Board in this decision. By the same token, the Board has disregarded Mr. Buchan’s evidence that between 2008 and 2012 assessments, the subject property’s CVA rose 31.1% whereas his neighbours CVA only rose by 8.4% during the same period. Mr. Buchan also pointed out that the previous Board’s decision in 2012 found that an equity adjustment of 9% was warranted and the CVA was reduced by $175,000. Mr. Buchan proposed that in the current appeal(s), the returned CVA ought to be reduced by the same amount. Once again, it is the Board’s view that the previous CVA cycle is irrelevant to the decision at hand. MPAC supplied the case of Pellarin v. Municipal Property Assessment Corp., Region No. 3 [2009] O.A.R.B.D. No. 97, which addresses the matter at paragraphs 39 and 40, as follows:

..market conditions may change from one valuation date to the next date. Accordingly, value concessions given by the Board… in respect of a CVA for one valuation day are not concessions which may necessarily be carried forward. The concessions which may, and generally should, be carried forward are those given because of a local influence or condition such as heavy traffic and the structural challenges to the garage which have not changed…..(T)here is nothing in the Act requiring a correlation of CVAs from one valuation day to the next… (Emphasis added)

27On page 23 of Exhibit 6, Mr. Buchan has presented a “reputed level” of assessment to sale ratios (“ASRs”) as 91%. The source of this information is a telephone conversation with the MPAC assessor. The only other evidence to support this ASR figure are the old Board decisions. The Board can give no weight to this figure given that there is nothing to support this calculation for the current appeals.

28Mr. Buchan presented two properties in the immediate vicinity of the subject property (one to the east and one to the north) as evidence that there is inequity in assessments.

29Mr. Buchan described the neighbouring property to the east as having superior features (such as a tennis court and extra living space in the boathouse and garage) leading him to believe that the eastern neighbour’s property was more valuable than the subject property, despite being assessed at $1,428,000, approximately $200,000 less than the subject property. The Board notes that the neighbour’s property also contains some features that are inferior to the subject property, such as less effective frontage, older building and fewer washrooms. Mr. Buchan did not provide any evidence as to the actual value of this property and for that reason, it is difficult to determine whether this neighbouring property is in fact inferior or superior to the subject property. Even if the Board concludes that the neighbour’s property is superior yet assessed lower, one property is insufficient for the Board to conclude that the assessed value is inequitable to lands in the vicinity.

30In regard to the neighbouring property to the north, Mr. Buchan’s evidence is that it is reasonably similar to the subject property except the neighbour’s property has 445 feet of effective frontage (versus 300 feet for the subject property). Even though Mr. Buchan acknowledges that the neighbour’s property has been assessed higher at $2,045,000, he argues that on an assessed value per frontage foot, the neighbour is assessed considerably lower than the subject property. The Board is not satisfied that taking the assessed value per frontage foot is an appropriate manner for comparing properties for equity purposes. The only conclusion the Board draws from Mr. Buchan’s evidence of the neighbour to the north is that it is superior to the subject property and it has been assessed higher, which is appropriate.

31MPAC presented an Equity Study consisting of 30 property sales of similar properties in the vicinity of the subject property that occurred between May 2009 and October 2012. The ASR have a median of 1.00, which indicates that on average, similar properties are being assessed at very close to the market sale prices. It was noticed that MPAC’s Equity Study included properties that were coded as “not on water”. If these ten “not on water” properties are removed, the median ASR of the remaining 20 properties would be 1.06, indicating similar properties in the vicinity of the subject property are, on average, being assessed approximately 6% more than their actual value. The legislation does not require adjustments upward to achieve equity.

32Another way to determine whether a downward adjustment is required would be to restrict our equity analysis to the most similar properties in the vicinity whose value relative to their assessment is known. This would be the five most comparable sales presented by MPAC, as follows:

Address

Sale Date

Sale Price

x TAF =

CVA

ASR

Subject Property

43 Fire Route 10D

Sale A

87 Fire Route 10E

i) Nov 2011 ii) May 2009

$1,400,000 $940,000*

x 0.998 = $1,397,200 x 1.295 = $1,017,017

$1,552,000 $1,552,000

1.11 1.08

Sale B

72 Fire Route 10F

Dec 2009

$2,150,000

x 0.972 = $2,089,800

$2,050,000

0.98

Sale C

50 Bedwell Drive

Oct 2012

$1,300,000

x 0.952 = $1,237,600

$1,781,000

1.44

Sale D

38 Napier Crescent

May 2012

$1,641,870

x 0.992 = $1,628,735

$1,303,000

0.80

Sale E

56 Fire Route 24

Dec 2010

$1,500,000

x 0.959 = $1,438,500

$1,379,000

0.96

33The data in MPAC exhibits show that there were six sales (87 Fire Route 10E sold twice) during the period, of which three were assessed under their value and three where assessed over their value. The average ASR is 1.06 and the median ASR is 1.03. Even if we remove the old sale of 87 Fire Route 10E, the average and median ASR are still 1.06 and 0.98 respectively. All these ASR show that in general, similar properties in the vicinity are assessed reasonably close to their value.

34Given that the Appellant has failed to satisfy the Board that an equity adjustment is required, coupled with evidence from MPAC indicating that similar properties in the vicinity are being assessed very close to their values, the Board finds that an equity adjustment is not warranted.

CONCLUSION

35The assessment of the subject property for the 2013, 2014 and 2015 taxation years is reduced from $1,636,000 to $1,620,000.

2016 DEEMED APPEAL

36An 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.

37Section 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.