Assessment Review Board
Commission de révision de l’évaluation foncière
ISSUE DATE: May 16, 2016
Assessed Person(s): 1512467 Ontario Limited
Appellant(s): 1512467 Ontario Limited
Respondent(s): Municipal Property Assessment Corporation (“MPAC”) Region 16
Respondent(s): Township of Severn
Property Location(s): 3331 McClelland Road
Municipality(ies): Township of Severn
Roll Number(s): 4351-010-009-00200-0000
Appeal Number(s): 2971016, 3023022 and 3087831
Taxation Year(s): 2013, 2014 and 2015
Hearing Event No.: 613929
Legislative Authority: Section 40 of the Assessment Act, R.S.O. 1990, c. A.31, as amended
Heard: February 25, 2016 in Severn, Ontario
APPEARANCES:
Parties
Counsel+/Representative
1512467 Ontario Limited
Allan Holmes
MPAC
David Zhao
Township of Severn
No one appeared
DECISION OF THE BOARD DELIVERED BY LESLIE FLEMMING
INTRODUCTION
13331 McClelland Road is a property located on the shore of Lake Couchiching used commercially as a marina with a residence as well. The property comprises 5.26 acres with an additional area measuring half an acre in size over the water. The assessment was returned in the amount of $1,439,000 for 2013, comprised of $1,250,000 for the land in the commercial class and $189,000 for the land in the residential class. In 2014 and 2015 the assessment was returned in the amount of $1,237,000 for the commercial portion and $189,000 for the residential portion for a total value of $1,426,000. On January 1, 2015, MPAC also filed an omitted assessment in respect of the construction of a garage on the property. While originally appealed, this matter was settled prior to the hearing.
2Allan Holmes represented the Appellant. He advised that the Appellant does not contest the current value of the residential portion of the property but rather seeks a reduction of the commercial portion.
3MPAC advised that the cost method was used in assessing the value of the property, a methodology to which Mr. Holmes objects.
4Mr. Holmes also submitted that MPAC had made a significant error in failing to remove a portion of water lot measuring over five acres in size from the assessment, despite the fact that the license to use this portion of the bay had in fact been cancelled in 1999. Mr. Holmes submitted that MPAC’s failure to update its records should now result in a reduction in value. MPAC conceded the earlier error in the size of the water lot, but advised that the subsequent correction did not change the overall value of the land.
ISSUES
5The Assessment Review Board (“Board”) must determine the current value of the commercial portion of the subject property, which includes approximately one-half acre of water lot leased from the Ministry of Natural Resources and Forestry (“MNRF”), for a total area of 5.76 acres improved by a showroom/office and other ancillary buildings. Having determined the current value, the Board must have reference to the assessed value of similar lands in the vicinity and to adjust the value of the subject property if necessary in order to make it equitable with those similar lands.
DECISION
6The Board finds that the current value of the subject property as at the valuation day is $1,439,000, apportioned as follows: $189,000 for the residential portion of the land and $1,250,000 for the commercial portion of the land. This is the current value of the land for the 2013 taxation year.
7The Board finds that the current value was reduced commencing January 1, 2014, due to the destruction of an improvement. The value was reduced to $1,426,000, apportioned as follows: $189,000 for the residential portion of the lands; $1,237,000 for the commercial portion of the lands.
8The Board finds that there is no evidence before it supporting the conclusion that the value of the subject property requires an adjustment in accordance with s. 44.(3)(b) of the Assessment Act (“Act”) in order to make it equitable with the assessed values of similar properties in the vicinity.
9The Board therefore confirms the current value as assessed for the 2013, 2014 and 2015 taxation years.
Evidence
10MPAC was represented by David Zhao, who called as his witness Joan Manley, a Property Valuation Analyst with MPAC and the author of the Valuation Report of the subject property tendered as Exhibit 1. Ms. Manley inspected the subject property in October, 2014. She testified that the current value was assessed at $1,439,000 as of the valuation day, January 1, 2012. This value was adjusted subsequently following the destruction of a barn on the property which burned in 2013.
11The subject property consists of 4.40 acres of dry land plus a registered deed for water lot of 0.86 acres. In addition, the Appellant leases .5 acres of water lot from the MNRF, for which it pays an annual rent. There was some discussion of the exact nature of the contract between the Appellant and the Ministry. However, Exhibit 6 provided by MPAC is a copy of the Memorandum of Understanding (“MOU”) between Boating Ontario Association (formerly the Ontario Marine Operators Association) and the MNRF setting out rental rates and other terms for the occupancy of beds of Crown water bodies. Exhibit 2 provided by MPAC included a copy of the annual “rental” paid by the Appellant to the Ministry for use of the MNRF lands for 2015. Whether a lease or a licence, the half-acre water lot belonging to the MNRF but used by the Appellant is assessable to the Appellant both under the legislation and in the specific provisions of the MOU.
12The entire parcel is therefore 5.76 acres in size. Ms. Manley provided a number of photographs of the property in Exhibit 1, as well as aerial photographs, a copy of the survey map and other maps in which she outlined the various components of the lands. She testified that an area of water lot of approximately six acres in size had been added to the property assessment in previous years. This section, shown as Part I on the survey map, was the subject of a proposal for development by the Appellant. The development was not carried out, and MPAC deducted this portion of the property from the assessment.
13MPAC chose to use the cost approach in order to assess the subject property, and supported their findings by providing evidence of three comparable sales. Ms. Manley testified that MPAC assessed the value of the land at a rate of 50% the residential rate per linear foot of frontage. MPAC chose this method for the reason that the key value in a marina property is the water frontage, but the marina has more frontage than the average residential property. Economies of scale require assessing that frontage for less than the residential rate. MPAC submits that 50% of the residential rate is reasonable and fair. Providing three comparable sales gives supporting evidence of the fairness of this assessment as well as the acceptable assessment to sales ratios (“ASR”) which confirm MPAC’s achievement of correct and accurate valuations. MPAC assessed the value of the buildings at $258,035 and the land at $1,168,651 using the linear frontage rate of $1,800 per foot over an estimated 650 feet of frontage.
14In support of the current value obtained through the cost approach, MPAC then provided three comparable sales occurring in the vicinity in 2008, 2010 and 2011:
Sale 1: 4351-040-009-43800 - This marina is located in Severn Township in Port Severn and fronts on Georgian Bay. It sold in March, 2011, for $1,385,535. This property includes a store/snack bar, a garage and a storage warehouse, along with many covered and open slips. The property is only 2.48 acres in size.
Sale 2: 4351-040-009-47100 - This property sold in 2008 for $1,400,000. Ms. Manley testified that it has been subdivided and developed since that sale, which worked out to $4,076 per foot of water frontage. This comparable property, located on Georgian Bay, was provided for reference only, given that the sale took place quite a long time before the valuation day.
Sale 3: 4351-010-008-80700 - The third property sold in March, 2010 for $1,386,000. Located on Sparrow Lake, it sold for $1,783 per foot of frontage. This comparable differs from the other two comparable properties and the subject property because it is not strictly just a marina but offers other forms of accommodation as well.
15In cross-examination, Mr. Holmes queried the apparent lack of value of the approximately five acre water lot inadvertently included in the assessment up until 2014. This land had been designated by the owner for development, but the plan was never carried out. When MPAC realized that no structured use was being made of this land, it removed it from the current value. The lack of a change in the overall value of the property was explained by Ms. Manley as a result of MPAC not having incorporated a true value for the five acre water lot in the first place because it would have increased the current value of the property to over $2,000,000. MPAC reduced the value of the water lot, which remained unused and undeveloped for the 2013 to 2016 period.
16Mr. Holmes’ evidence challenged the evidence by MPAC on several points. They were:
(a) An assessment using the income approach would have been superior.
(b) The current water lot (0.86 acres) is wrongly included in the assessment for the reason that the Appellant pays rent to the MNRF for the occupation of these lands. Mr. Holmes further submitted that, if this land is assessable, only the portion of the water lot upon which fixtures such as docks were attached was assessable, and not the open water beside and around those docks which is free of attached structures.
(c) The rate used to estimate the value of water frontage (at 50% of the residential rate in the area) is excessive.
(d) A 40-foot section to the north of the property is not actually part of the subject property and should not be included in the assessment, despite the Appellant’s use of the docks affixed to this portion of the land.
Analysis
17In determining the issues before it, the Board is governed by the following sections of the Act.
18Section 44.(3)(a) of the Act requires the Board to first “determine the current value of the land.” The definition of “current value” is contained in s. 1 of the Act:
“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.
19Section 19.(1) states that:
19.(1) Assessment based on current value. – The assessment of land shall be based on its current value.
20Three methods are available for assessing the value of lands: the comparable sales method, whereby sales of similar properties are compared; the cost approach, where the cost of the components of the property, including replacement value of improvements where appropriate, are set out. Lastly, the income approach looks at the income derived from the property. In the cost approach and income approach, comparable sales are often examined as well as a means of testing both the comparable values of similar properties and the accuracy of MPAC’s assessments when compared with sale prices (the assessment to sale ratio or “ASR”).
21In this case, MPAC chose to use the cost approach and to support its conclusions by introducing three comparable property sales. The sales did not all occur within this same assessment cycle with a valuation day of January 1, 2012; however, MPAC has used them simply as references.
22The Appellant has chosen to refute both the assessment approaches selected by MPAC and some of the evidence submitted. However, with the exception of a lawyer’s letter and a copy of a survey, entered as Exhibit 5 for the Appellant, the Appellant did not provide contradictory evidence in order to support it’s positions. Nor did the Appellant provide evidence related to the income approach or any other approach that was different from the evidence provided by MPAC.
23Section 40.(17) provides:
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.
24In this case, MPAC’s analysis of value, supported by the three comparable sales, met the burden of proof. The Appellant raised the issue of the lack of change in value that arose as a result of MPAC’s correction of the inclusion of Part I from the survey, a water lot of over 6 acres in size. However, MPAC’s assessor explained why the mistake occurred and also why there was no increase in value arising in connection with this water lot. The Appellant failed to provide any evidence to the contrary respecting the value of the water lot in past years. The Appellant also failed to appeal the inclusion of the water lot in past assessment cycles, despite its decision not to develop the lands in question quite a long time ago. The Board therefore accepts MPAC’s analysis of this portion of the assessment as correct.
25The Appellant challenged the assessment of the other, smaller water lot, which measures 0.86 of an acre. However, the copy of the MOU entered as Exhibit 6 by MPAC confirms the tenant’s obligation to pay any taxes assessed against the land. Section 18.(1)(a) of the Act also addresses this requirement:
18.(1) Assessment of Crown lands. – Despite paragraph 1 of subsection 3 (1),
(a) the tenant of land owned by the Crown shall be assessed in respect of the land as though the tenant were the owner if rent or any valuable consideration is paid in respect of the land; and
(b) an owner of land in which the Crown has an interest shall be assessed in respect of the land as though a person other than the Crown held the Crown’s interest.
26The evidence provided at hearing, Exhibit 2 from MPAC, included the invoice from the MNRF to the Appellant for annual rental of the water lot for 2015 for the amount of $1,374.00 plus $178.62 in HST. This is the valuable consideration paid in respect of the land, which brings it within the ambit of s. 18.(1) of the Act.
27As far as Mr. Holmes’ submissions respecting the assessability only of the sections of underwater land over which docks were affixed, the Board rejects this argument for the reason that occupancy of the water lot includes the entire parcel. The marina operator must guarantee its clients exclusive use of not only the docks themselves but also the slips where the boats are kept. If the marina operator were only licensed to use the dock area, it could not provide its customers the safe and exclusive mooring for which they are paying, along with access to and from the slips.
28Mr. Holmes also refuted MPAC’s use of 50% of the residential rate for water frontage in determining the value of the lands. He provided the Board with no assistance in the form of other Board decisions or other clear evidence that this method of valuing commercial frontage was incorrect. Because the comparable sales used by MPAC supported the value derived from this formula, the Board prefers MPAC’s reasoning on this point.
29Lastly, there was a lengthy discussion during the hearing about a small segment of land and water on the north edge of the marina property. The lot line is not even with the shoreline, giving rise to the situation where the Appellant leases lands that are primarily under water for approximately 40 feet, and where several of the Appellant’s docks are attached to property not part of the subject property. However, no evidence was led by Mr. Holmes respecting any decrease in value of the leased lands arising as a result of the location of the lot line, or, in the alternative, any additional costs faced by the Appellant as a result of the irregularity. Therefore, in the absence of evidence as to the value of this irregularity and its effect on the overall assessment, the Board can make no other ruling on this point.
30Because MPAC was able to provide a reasonable explanation of the current value for each of the years in question, and because the Appellant provided no contradictory evidence, the Board finds that the current value of the subject property is $1,439,000 as of the valuation day, inclusive of the residential and the commercial portions. The current value was reduced for 2014 and 2015 due to the destruction of a barn by fire to the amount of $1,426,000 for both the residential and the commercial portions.
Equity
31Once the Board has determined the current value of the land, it is required by s. 44.(3)(b) of the Act to:
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.
32The only evidence provided in respect of equity was the evidence of three comparable sales provided by MPAC and the assessments of those properties. The ASRs recorded were 1.02, 1.06 and .96, with an average ASR of 1.01. While there are few similar lands in the vicinity to compare with the subject property, the only evidence presented gives rise to a conclusion that a reduction in the assessment of the subject property is unnecessary in order to make it equitable with similar properties in the vicinity.
CONCLUSION
33The Board finds that the current value of the subject property as at the valuation day is $1,439,000, apportioned as follows: $189,000 for the residential portion of the land and $1,250,000 for the commercial portion of the land. This is the current value of the land for the 2013 taxation year.
34The Board finds that the current value was reduced commencing in January 1, 2014, due to the destruction of an improvement. The value was reduced to $1,426,000, apportioned as follows: $189,000 for the residential portion of the lands; $1,237,000 for the commercial portion of the lands.
35The Board finds that there is no evidence before it supporting the conclusion that the value of the subject property requires an adjustment in accordance with s. 44.(3)(b) of the Act in order to make it equitable with the assessed values of similar properties in the vicinity. The Board therefore confirms the assessments of the subject property for the 2013, 2014 and 2015 taxation years.
“Leslie Flemming”
LESLIE FLEMMING
MEMBER
Assessment Review Board
A constituent tribunal of Environment and Land Tribunals Ontario
Website: www.elto.gov.on.ca Telephone: 416-212-6349 Toll Free: 1-866-448-2248```