Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE: May 27, 2016

FILE NO.: WR 139892

Assessed Person(s): D. Murray Ventures Inc., Robertson Abbey Bishop

Appellant(s): D. Murray Ventures Inc.

Respondent(s): Municipal Property Assessment Corporation (“MPAC”) Region 23

Respondent(s): City of London

Property Location(s): 775 Waterloo Street and 777 Waterloo Street

Municipality(ies): City of London

Roll Number(s): 3936-020-240-06300 and 3936-020-240-06100

Appeal Number(s): 3129027, 3129028, 3158137 and 3158799 (deemed 2016 appeals)

Taxation Year(s): 2015 and 2016 (deemed appeal)

Hearing Event No. 620490

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

Heard: April 11, 2016 in London, Ontario

APPEARANCES:

Parties Representative

D. Murray Ventures Inc. Patrick Prendergast

MPAC Toban Edmunds

City of London No one appeared

DECISION OF THE BOARD DELIVERED BY DAN WEAGANT

INTRODUCTION

1The subject properties lie adjacent to one another on Waterloo Street in the City of London, just north of Oxford Street. 775 Waterloo Street (“775”) is a commercial building comprised of 4,436 square feet (“sq. ft”.) on two levels with a lot area of 4,678 sq. ft. The building was constructed in 1962.

2777 Waterloo Street (“777”) was constructed in 1899 and is a single family dwelling comprised of 1,525 sq. ft. of living area on a lot of 6,106 sq. ft.

3Both properties have a history of contamination, dating back to 2000 when an environmental investigation was undertaken on the adjacent property known as 316 Oxford Street East. An additional investigation report was issued in 2005 on the subject properties owing to the results of the earlier investigation. Since 2005, an ongoing monitoring and recovery program has been undertaken to mitigate the contamination on the subject properties. The recovery program ceased in 2011 when the former owners of the subject properties, Shell Canada, purchased the properties from their neighbours. Both properties are in proximity to a previous gas station/automobile repair facility. The adjacent property is now a fully modernized gas station/convenience store.

4For the 2015 taxation year, the assessments returned by MPAC, based on the January 1, 2012 valuation date, are $362,000 in the Commercial tax class and $267,000 in the Residential tax class on 775 and 777 respectively. There is no dispute among the parties with respect to classification.

5The Appellant, represented by Patrick Prendergast, believes that these assessments are too high and that the correct assessments are $275,000 and $125,000 for 775 and 777 respectively.

6Evidence on each property was heard by the Board independently. On consent of the Parties, the Board is rendering both decisions together, owing to the similarity of the evidence and the relevant issues to be determined.

7The Board must determine two things in these appeals. Firstly, the Board must decide on the current value of the subject properties as of January 1, 2012, the statutory valuation day for the 2015 taxation year. Secondly, the Board must determine when reference is made to the assessments of similar properties in the vicinity, if the assessments determined by the Board should be reduced for them to be equitable.

DECISION

8The Board finds that the current values of 775 and 777 are $275,000 and $125,000 respectively for the 2015 taxation year.

9Further, the Board finds that it has no evidence before it to make the determination that the current value determined should be reduced further for the purposes of establishing equitable assessment.

10Accordingly, the assessment of 775 Waterloo Street is reduced from $362,000 to $275,000 in the Commercial Tax Class and the assessment of 777 Waterloo Street is reduced from $267,000 to $125,000 in the Residential Tax Class for the 2015 taxation year.

LEGISLATION

11In making its determination of these appeals, the Board must consider the relevant sections of the Assessment Act (“Act”):

12Section 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.

13Section 19.(1) of the Act states:

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

14Section 40 of the Act states:

40.(1) Appeal to Assessment Review Board. Any person, including a municipality, a school board or, in the case of land in non-municipal territory, the Minister, may appeal in writing to the Assessment Review Board,

(a) on the basis that,

(i) the current value of the person’s land or another person’s land is incorrect,

(ii) the person or another person was wrongly placed on or omitted from the assessment roll,

(iii) the person or another person was wrongly placed on or omitted from the roll in respect of school support,

(iv) the classification of the person’s land or another person’s land is incorrect, or

(v) for land, portions of which are in different classes of real property, the determination of the share of the value of the land that is attributable to each class is incorrect; or

(b) on such other basis as the Minister may prescribe.

15Section 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.

MPAC’S EVIDENCE

16In support of the values returned by MPAC, Toban Edmunds carried out valuation studies for both properties, based on the Direct Comparison Approach to value.

17For 775, Mr. Edmunds selected three commercial properties in the City of London, known as 783 Richmond Street, 36 York Street and 204 Oxford Street West. Mr. Edmunds testified that these properties were selected owing to their similarity to the subject property and that they are all considered to be small office buildings, generally single tenant or owner occupied with a leasable area of under 7,500 sq. ft.

18783 Richmond Street has a lot area of 5,500 sq. ft., slightly larger than the subject property and a building of 2,762 sq. ft. It was constructed in 1990 and sold in August of 2012 for $380,000 with a current value assessment (“CVA”) of $404,000.

1936 York Street was constructed in 1979 and has a commercial building comprised of 2,001 sq. ft. on a lot measuring 12,078 sq. ft.; substantially larger than the subject property. There is no sale information for 36 York Street. The CVA is $371,000.

20204 Oxford Street West, a 2,096 sq. ft. building, was constructed in 1992 on a lot area of 4,766 sq. ft. The CVA for 204 Oxford Street West is $338,000 and MPAC has no sale record available.

21Mr. Edmunds testified that the CVA per sq. ft. of his three comparables range from $146.27 to $185.41, with a median of $162.23, while the CVA per sq. ft. of the subject property is $163.21. The sale value of the Richmond Street comparable equates to $137.58 per sq. ft.

22In his valuation study (Exhibit 1-775), Mr. Edmunds references two sales of the subject property. The first is a sale dated December 2011, from a previous owner to Shell Canada, for $600,000. The second is a sale dated January 2014 for $275,000 from Shell Canada to the present owner, D. Murray Ventures Inc. Mr. Edmunds characterized the latter sale as being connected with the sale of the property at 777 as the real estate listing at the time included the phrase “Offered as a package deal on an ‘As Is’ basis.” Mr. Edmunds considered this to mean that the sale of both properties at the same time would, in his opinion, cast doubt on the reliability of the price paid on each, for the purposes of valuation.

23For 777, Mr. Edmunds selected the sales of six single family dwellings of similar character and all in the same homogeneous neighbourhood.

24933 Waterloo Street sold in January 2010 for $365,000. It is a 1½ storey dwelling with 1,990 sq. ft. of living area on a lot size of 6,020 sq. ft. The time adjusted sale (“TAS”) value is $371,531 and the CVA is $381,000. 933 Waterloo Street was constructed in 1939 and was renovated in 1988.

25953 Colborne Street sold in March of 2010 for $295,000. It has a 1½ storey dwelling, with 1.667 sq. ft. of living area on a lot measuring 10,890 sq. ft. The dwelling was constructed in 1945 and was renovated in 1991. The TAS value is $294,533 and the CVA is $308,000.

26262 Cheapside Street is also a 1½ storey dwelling on a lot of 5,917=8 sq. ft. The dwelling includes 1,915 sq. ft. of living area and sold in September of 2011 for $320,000. The TAS value is $309,379 and the CVA is $317,000.

27991 Colborne Street has a lot area of 5,738 sq. ft. and a 1 ½ storey dwelling with 1,799 sq. ft. of living area. The dwelling was constructed in 1929 and was renovated in 1980. This property sold in September of 2010 for $349,500 and MPAC applies a TAS value on that sale of $334.753. The CVA is $344,000.

281060 Colborne Street was constructed in 1937, renovated in 1980 and sold in November 2010 for $349,000. It has a CVA of $328,000 and a TAS value of $331,665. It is a 1½ storey dwelling with 1,675 sq. ft. of living area on a lot of 5,600 sq. ft.

29987 Maitland Street sold in June 2010 for $290,000 and has a TAS value of $282,693. It has a CVA of $285,000. The dwelling was constructed in 1930 and was renovated in 1980. It has 1,764 sq. ft. of living area on a lot size of 6,226 sq. ft.

30Mr. Edmunds summarized his submissions by pointing out that the average CVA per square foot of the six residential comparables is $181.72, while the CVA per square foot of the subject property is $144.63 as returned. Mr. Edmunds submitted that this indicates the CVA returned for the subject property is reasonable and correct. To support his opinion of equity, Mr. Edmunds indicated that the Assessment to Sale Ratio (“ASR”) of the six properties in his comparison range from 0.988 to 1.045 with a median ASR of 1.016, which falls well within the range commonly used in assessment to reflect equity.

31Under cross-examination from Mr. Prendergast, Mr. Edmunds testified that, to his knowledge, none of the comparable properties in either of his valuation studies had experienced contamination issues either currently or in the past.

APPELLANT’S EVIDENCE

32Mr. Prendergast essentially presented a case for both properties under appeal that relies on the same evidence. His chief submission is included Exhibit 5-777, a copy of the agreement of purchase and sale between D. Murray, the purchaser and Shell Canada Products, the vender. This agreement is dated October 9, 2012, which Mr. Prendergast points out is within 10 months of the valuation date.

33The purchase and sale agreement covers the terms and conditions of the sale of both properties. Clause 18 of this agreement includes specific apportionment of value to each property, with a further breakdown for each address with respect to land price and building price. Clause 18 stipulates a total price for 775 of $275,000 and a total price for 777 of $125,000.

34Mr. Prendergast further explained that, while the agreement was dated in October 2012, the sale did not actually close until January of 2014. The reason for the delay, according to Mr. Prendergast, is that when Shell Canada purchased both buildings, they did so under the same name, causing the two properties to be merged in title. The October 2012 agreement and transfer could not be registered because the local zoning regulations do not permit a commercial building and a residential building to exist on the same lot. This led to an application for consent under the Planning Act, to ‘re-create’ the two original lots that existed prior to their merger. The consent to sever was approved and the transfer was completed shortly after, in January 2014.

35This situation was also put forward by Mr. Prendergast to explain why the listing for sale was worded specifically to offer the two buildings and associated land as a package.

36Mr. Prendergast submitted that the price agreed to in the purchase and sale agreement should be considered as the best evidence of current value for the year under appeal for the following reasons:

• The properties were listed on the open market.
• The parties to the sale are in no way connected.
• The prices in the agreement were negotiated between a willing buyer and a willing seller.
• The property was free of encumbrances.

37Mr. Prendergast did not dispute that the agreed-to sale values might be considered to be lower than what might otherwise be expected in the area covered by MPAC’s valuation studies. However, he stressed that the lower price is reasonably indicative of the history of contamination on the subject properties and the on-going ‘stigma’ of contamination.

ANALYSIS

38The courts have been clear in the past in that the best indication of current value of a property is a sale of that property on or near the valuation date stipulated in the Act. Where no such sale exists, the next best indication of a property’s current value is the sale or sales of comparable properties.

39The Board has before it, an agreement of purchase and sale that clearly sets out separate prices for the two subject properties under appeal. Mr. Edmunds sought to impugn this agreement from three perspectives. First, he submits that the sale prices are invalid for use as determinants of current value because the properties were sold together. Secondly, he surmises from the listing of the property, that the properties were to be sold ‘as a package’ and as a result, the ensuing agreement should not be considered a valid sale.

40The Board does not agree with these points. The agreement of purchase and sale in evidence clearly shows separate prices for the two properties under appeal. Secondly, Mr. Edmunds points out the folly of using listings as opposed to sales and sale agreements for the determination of current value. Listings can be misleading and unclear as to their purpose. It is the final agreement that leads to the transfer that indicates a property’s value.

41Lastly, Mr. Edmunds submitted an excerpt from a local media outlet (Exhibit 2-775) that summarized the comments from a representative of the vendor, stating “In brief, the conditions continue to improve and levels of hydrocarbons that they are sampling are reducing. Their operation will continue and they will keep us updated. Shell’s environmental consultants confirm that the system is operating within design parameters and that it is unlikely that the soil and groundwater impacts identified within the study area pose an unacceptable risk for vapour intrusion into buildings at 775 and 777 Waterloo Street”. This summary was dated August 2012. Mr. Edmunds submits that this statement indicates that the contamination issue is either solved or close to being solved and that the prices negotiated in October of the same year ought to have reflected this improvement. He suggests that the site is vastly improved and as a result, the values in the agreement should not be viewed as reliable indicators of current value.

42The Board does not consider the statement reported to constitute an ‘all clear’ with respect to contamination of the property. There is no assurance given for the future and the statement itself is vague with respect to what was found, what has been removed and what might be found in the future. If anything, the Board views the statement as solidifying the ‘stigma’ of contamination cited by Mr. Prendergast in his testimony.

43Mr. Prendergast cited three cases that were decided by the Board on similar issues. In each case, the Board accepted a sale of contaminated property that occurred near the valuation date as the current value of the property. What distinguishes those cases from this situation is that in those cases, the extent of contamination was not known at the time of the sale. There had been no effort to remove contamination or to even specify what the contamination consisted of. In their application to this case, the Board views those cases as having significant weight in that the presence of contamination was not deemed to be an ‘encumbrance’ as the word is used in s. 1 of the Act. Contamination is a condition of the property for sale. The Board finds that it is reasonable to consider all conditions of a property when determining current value and further finds that in the case of the subject properties, it is reasonable that contamination would impact a negotiated sale price.

44The Board finds that the evidence of the Appellant, with respect to current value, is most compelling as the sale price agreed-to occurred within 10 months of the valuation date. Mr. Edmunds’ valuation reports did not make any adjustment for contamination and, accordingly, is given less weight than the agreement of purchase and sale in evidence.

45With respect to the equity of assessment, the Board finds that it has no evidence before it to reduce the assessment of the subject properties below the current value determined.

DECISION

46The Board finds that the current values of 775 Waterloo Street and 777 Waterloo Street are $275,000 and $125,000 respectively for the 2015 taxation year.

47Further, the Board finds that it has no evidence before it to make the determination that the current value determined should be reduced further for the purposes of establishing equitable assessment.

48Accordingly, the assessment of 775 Waterloo Street is reduced from $362,000 to $275,000 in the Commercial Tax Class and the assessment of 777 Waterloo Street is reduced from $267,000 to $125,000 in the Residential Tax Class for the 2015 taxation year.

2016 DEEMED APPEALS

49Appeals for the 2015 taxation year are 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 appeals before March 31, 2016. For that reason, this decision also applies to the 2016 taxation year.

50Section 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.