Seddy Springer and Bryon Springer v. Municipal Property Assessment Corporation, 2016 CanLII 33707

Assessment Review Board / Commission de révision de l’évaluation foncière

ISSUE DATE: June 01, 2016

FILE NO.: WR 139894

Assessed Person(s): Seddy Springer

Appellant(s): Seddy Springer and Bryon Springer

Respondent(s): Municipal Property Assessment Corporation (“MPAC”) Region 05

Respondent(s): City of Kingston

Property Location(s): 206 208 Wellington Street

Municipality(ies): City of Kingston

Roll Number(s): 1011-030-090-02100-0000

Appeal Number(s): 2971506, 3018109, 3073043 and 3145639 (deemed 2016 appeal)

Taxation Year(s): 2013, 2014, 2015 and 2016 (deemed appeal)

Hearing Event No: 625129

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

Heard: April 27, 2016 in Kingston, Ontario

APPEARANCES:

Parties	Counsel+/Representative
Seddy Springer and Bryon Springer	Peter Radley+
MPAC	Rox-Anne Poulain+
City of Kingston	Maureen Petersen

DECISION OF THE BOARD DELIVERED BY JACQUES LAFLAMME

INTRODUCTION

1The subject property is classified as commercial (“CT”) and residential (“RT”). The property is a two-storey structure consisting of commercial retail space on the ground floor (2,739 square feet) with a residential unit (826 square feet) on the second floor. It was built in the early 1900s. The lot is 3,501.75 square feet and is zoned “C1-3 - Heritage Commercial.” MPAC used the cost approach to valuation for this property.

2The January 1, 2012 current value assessment for the subject property is $682,000, apportioned at $126,000 in the residential tax class (RT) and $556,000 in the commercial tax class (CT). This value is used for the 2013, 2014 and 2015 taxation years.

3The appellants have argued that the assessment should be reduced to $465,000.

ISSUE

4The Assessment Review Board (“Board”) must determine the subject property’s current value for the 2013, 2014 and 2015 taxation years and, once that is done, adjust the subject property’s current value assessment (“CVA”) to make it equitable with that of similar lands in the vicinity if such an adjustment would result in a reduction of the assessment.

DECISION

5The Board reduces the current value assessment of the subject property from $682,000 to $550,000 and the new apportionment is reduced from $126,000 to $101,500 in the RT and from $556,000 to $448,500 in the CT for the 2013, 2014 and 2015 taxation years.

REASONS FOR DECISION

Position of MPAC

6Rox-Anne Poulain, an advocate for MPAC, stated at the beginning of the hearing that she had made a recommendation to the owner to lower the current value from $682,000 to $628,000 based on a re-inspection and recalculation of the cost approach to the valuation for the subject property. The owner did not accept the recommendation. Ms. Poulain then stated that there was a further recommended reduction in the current value to $584,000 due to an equity analysis that MPAC had undertaken. The owner also declined the offer.

7The assessor, Art Merrill, submitted one exhibit only. Exhibit 1 is MPAC’s valuation report. This report contains a property description, a complete breakdown of the “Cost” approach to his valuation, maps, a picture of the subject property, a listing of five built on sold properties with accompanying pictures which he deems to be comparable and an equity analysis using 30 commercial properties. MPAC has used the “Cost” and “Direct Sales Comparison” approach to valuation.

Position of Appellants

8Peter Radley, counsel for the owner, introduced Stephen Rayner, an appraiser as his only witness.

9Mr. Rayner, an accredited appraiser with the “Appraisal Institute of Canada” stated that he disagreed with MPAC’s valuation for several reasons:

a) There is a question of a Right of Way (“ROW”) over a portion of this property. This ROW in Mr. Rayner’s opinion reduces the value of the land because development would be impeded. MPAC has made no allowance for the ROW.

b) The income approach to valuation should be one of the approaches used to value this property. Mr. Rayner has applied the “Income” and “Direct Sales Comparison” approach to valuation.

10Exhibit 2, submitted by Mr. Rayner is a valuation report which contains a property description, neighborhood data, maps of the neighborhood, zoning information, the “Income” approach to valuation and pictures with comments of the six properties that Mr. Rayner deems comparable to the subject property when using the “Direct Sales Comparison” approach to valuation.

11Exhibit 2(A) is a listing of January 01, 2012 current values that are applicable to the properties used in the “Income” and “Direct Sales Comparison” approach by Mr. Rayner. The listing was compiled by Maureen Petersen, an Assessment Review Analyst, with the City of Kingston.

The Legislation

12The following provisions of the Assessment Act (“Act”) instruct the Board in appeals of this nature.

13Section 1 of the Act 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.

14Section 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 40.(17) of the Act states:

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.

16Section 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.

17Section 44.(3)(a) and (b) 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.

The Board’s Analysis - Current Value

18Under the Act the Board is required to do three things:

1. Find the current value of the property.
2. Make reference to the value of which similar lands in the vicinity are assessed.
3. Adjust the assessment of the subject property if the adjustment will result in a reduction in the assessment.

19The Board, at the request of the parties, qualified both Mr. Merrill and Mr. Rayner as qualified experts in the field of commercial property valuation.

20Both parties agree that the “highest and best use” of the property is its current use.

Right of Way

21During the cross-examination of Mr. Merrill, Mr. Radley made much of the fact that the subject property is subject to a ROW and in his opinion this reduced the current value of the subject property. The appraiser Mr. Rayner makes mention of the “12 foot wide ROW along the entire southern boundary for access to adjoining properties” on page 13 of his appraisal report, Exhibit 2. At the beginning of his oral testimony, Mr. Rayner stated that “MPAC should have addressed this ROW in their valuation.” It is important to note that Mr. Rayner makes no attempt to quantify this so called “loss of value” in neither of the two approaches that he used to value this property.

22The Board has no evidence that this ROW reduces the property value.

Princess Street

23Another matter that was brought to the Board’s attention was the fact that Mr. Merrill did not use any sales on Princess Street as comparables. When asked during cross-examination as to why, Mr. Merrill stated that he considered Princess Street a “major arterial street, the busiest street with a greater visibility for commercial and retail tenants.” Because of this, he felt that Princess Street was a superior location and would not be comparable to Wellington Street.

24The Board notes that Mr. Rayner in his valuation report (Exhibit 2, page 7) stated that “Overall, in the past few years, the trend has been to upgrading and renovating many of the properties along Princess Street. A number of buildings have undergone complete renovations, and a number are currently under renovation.” On page 8, Mr. Rayner states “The subject is a secondary location along a secondary artery with metered street parking and adjacent to a municipal parking lot.”

25The Board agrees with Mr. Merrill and Mr. Rayner that Princess Street has greater visibility, attracts more retail tenants and is not comparable with Wellington Street.

Income Approach

26The Board will now look at the “Income Approach” to valuation that Mr. Rayner has submitted. The Board notes that the rent applied for the commercial area of the subject property was based on six leases for unidentified properties. The Board has no way of commenting on the comparability of these leases.

27The Board will now comment on the capitalization rate developed and applied to the subject property. The Board notes that the six sold properties used to establish a capitalization rate by Mr. Rayner vary greatly. Some of the six sold properties are multimillion dollar properties, one sale is of a multi residential building only with no retail tenants and the other five sales have a commercial/retail component only. For those reasons, the Board is uncomfortable in using the capitalization rate developed.

28In view of the above, the Board assigns little weight to the income approach.

Direct Sales Approach

29The Board will now deal with the approach that both parties have used, the Direct Sales Comparison. The Board will comment on all sales submitted by both parties.

30MPAC’s Comparables:

1. 175 Bagot Street - This property sold in 2014. The Board agrees with Mr. Radley that this sale, if unadjusted for time, is too far removed from the January 01, 2012 base year to be of help. The Board will not use it in its analysis.

2. 152 Bagot Street - Although Mr. Radley stated that the sale included laundry mat equipment, no evidence was submitted to the Board. The Board will use it in its analysis.

3. 232 Brock Street - MPAC stated that this sale was their best comparable. The Board will use it in its analysis.

4. 105 Clergy Street - This property sold in 2015. Same comments as Sale1. The Board will not use it in its analysis.

5. 15 Montreal Road - Both parties have used this property as a comparable. Mr. Rayner stated that this was the best comparable. The Board will use it in its analysis.

31Mr. Rayner’s Comparables:

1. 289 Princess Street - The Board has already made the determination that Princess Street is not a good comparison. The lot on this property is approximately one-third the size of the subject property. The Board will not use it in its analysis.

2. 35 Rideau Street - This property contains 12 residential units and two commercial units. The majority of the current value is in the multi residential tax class. Not comparable in the Board’s opinion. The Board will not use it in its analysis.

3. 183-185 Sydenham Street - This property has a building twice the size of the subject property. In Mr. Rayner’s valuation report on page 41, he states that “extensive renovations were completed in 1993-1994 including upgraded electrical, drywall, flooring, heating and A/C and plumbing. Later, further renovations were undertaken with the addition of a new commercial kitchen for the restaurant.” This property is not comparable and will not be used in the analysis.

4. 334/336 Princess Street - Princess Street is not a comparable location and the building is substantially larger. Mr. Rayner, in his valuation report on page 44, states “Private cash sale, at a below market sale price.” The Board will not use it in its analysis.

5. 15 Montreal Road - See MPAC Sale 5 for comments.

6. 218 Wellington Street - This building contains 24,915 square feet of leasable area. This is seven times bigger than the subject property. Mr. Rayner’s valuation report on page 46 states “Overall, the building is of excellent quality with a very attractive exterior, marble floors in the lobby……” This property is not comparable and will not be used in the analysis.

32The Board is left with Sales 2, 3 and 5 from MPAC and Mr. Rayner. On average the three sales indicate a selling price per square foot of $166. When this average selling price per square foot of $166 is multiplied by the subject property’s square footage of 3,565, the Board arrives at a current value of $591,790. The Board finds that the current value is $591,790.

Equity

33The Board had reference to the assessments of similar properties in evidence to try to discern if the current value determined is fair and equitable relative to those assessed values. The Board requires evidence that many similar properties are assessed at a lower level than the subject property in order to warrant an equity adjustment under s. 44.(3)(b). MPAC presented to the Board an “equity” analysis in Exhibit 1, using 30 sold properties in the neighborhood. When the assessor compared the CVAs to the time adjusted sales of the 30 sold properties, the median assessment to sales ratio was 0.93. This means that MPAC is slightly under assessing the neighboring properties. There is nothing to indicate that the subject property should not benefit equally from this systemic undervaluation. In fact MPAC had proposed a recommended reduced current value assessment based on a recalculated cost approach to value and a 7% adjustment to the value based on the equity analysis submitted in Exhibit 1. Consequently, the Board finds that the subject property’s current value ($591,790) should be similarly adjusted 7% to $550,364 or $550,000 rounded to make the current value assessment equitable with that of similar lands in the vicinity.

CONCLUSION

34The assessment is lowered to $550,000 for the taxation years 2013, 2014 and 2015. The new apportionment is based using the same percentage as calculated previously. The new apportionment is reduced from $126,000 to $101,500 in the RT and from $556,000 to $448,500 in the CT.

2016 DEEMED APPEAL

35An 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.

36Section 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.