Claude Lauzon Group Limited v. Municipal Property Assessment Corporation, 2016 CanLII 47202

ISSUE DATE: July 22, 2016

FILE NO.: WR 140892

Assessed Person(s): Claude Lauzon Group Limited

Appellant(s): Claude Lauzon Group Limited and Lise Lauzon

Respondent(s): Municipal Property Assessment Corporation (“MPAC”) Region 03

Respondent(s): City of Ottawa

Property Location(s): 86 Beechwood Avenue

Municipality(ies): City of Ottawa

Roll Number(s): 0614-900-401-46800-0000

Appeal Number(s): 3117828, 3117831, 3117829 and 3117830

Taxation Year(s): 2013 and 2014

Hearing Event No: 625603

Legislative Authority: Section 33 of the Assessment Act, R.S.O. 1990, c. A.31, as amended

Heard: June 07, 2016 in Ottawa, Ontario

APPEARANCES:

Parties

Counsel

Claude Lauzon Group

Glen Lucas

Laura Kelleher

City of Ottawa

No one appeared

DECISION OF THE BOARD DELIVERED BY JACQUES LAFLAMME

INTRODUCTION

1The subject property is classified as commercial (“CT”). The property is a pre-fabricated 3,150 square foot (“sq. ft.”) one-storey structure resting on concrete piers. The building contains a sales office and a model suite for a residential condominium project being constructed at 222 Beechwood Avenue. The sales office was moved to the existing site in 2013. The Municipal Property Assessment Corporation (“MPAC”) used the cost approach to valuation for this property.

2The January 1, 2012 total current value assessment (“CVA”) for the subject property is $677,000, ($346,000 for land and $331,000 for the building).

3The omitted assessments issued under s. 33 of the Assessment Act (“Act”) for the land and building was effective from September 1, 2013 and all of 2014. The property class assigned was “commercial full”.

4The appellants have agreed to the land valuation of $346,000. They disagree with the building valuation of $331,000. They argue that the building should not be assessed but if the Assessment Review Board (the “Board”) finds it to be assessable, no current value was expressed by the appellants.

ISSUE

5The Board must first determine if the building is assessable under s. 1. (1) of the Act.

6If the Board determines that the subject building is assessable, then the Board must determine the proper current value for the structure for the 2013 and 2014 taxation years.

7Once that is done, the Board must decide if an adjustment is needed to the 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

8The Board finds that the building is assessable under s. 1.(1). of the Act. The Board reduces the CVA of the subject building from $331,000 to $324,000, confirms the land valuation at $346,000 and confirms the CT property class for the 2013 and 2014 taxation years.

REASONS FOR DECISION

Position of MPAC

9Catherine McDonald, an assessor with MPAC, stated that she had a recommendation to lower the building value from $331,000 to $324,000 because upon review, a 15 year life table should have been used in the cost approach to valuation instead of a 50 year life table. The owner did not accept the recommendation.

10Ms. McDonald submitted two exhibits.

11Exhibit 1 is a resume of Ms. McDonald’s education and professional development.

12Exhibit 2 is MPAC’s valuation report. This report contains a property description, maps, pictures of the subject property as well the seven presentation/sales offices that Ms. McDonald deems to be comparable, a table showing time adjustment factors and accompanying sales used to develop the table, an equity analysis using 30 commercial properties, a listing of three built on sold properties on Beechwood Avenue, an equity analysis using 30 commercial properties and a copy of the building permit. MPAC has used the “Cost” approach to valuation for the building and “Direct Sales Comparison” approach to value the land.

13Laura Kelleher summed up MPAC’s presentation by providing the Board with the following Authorities:

Ancaster-Rose Homes Inc. v. Municipal Property Assessment Corp. Region 19 [2014] O.A.R.B.D. No. 463 (WR 126835) before Member Oliveira heard on February 12, 2014, held that the sales office and presentation centre was correctly classified wholly in the commercial property tax class.
1688528 Ontario Ltd. v. Municipal Property Assessment Corp. Region No. 13 [2013] O.A.R.B.D. No. 20 (WR 117933) before Member Sharma heard November 23, 2012 held that as long as there is a degree of permanency whether temporary or permanent, it is land by definition.
Mason v. Municipal Property Assessment Corp. Region No. 02 [2011] O.A.R.B.D. No. 104 (WR 100768) before Member Laflamme heard December 14, 2010 held that as long as there is a degree of permanency to the structure, it falls within the definition of land.
R. Difruscia Holdings Ltd. v. Ontario Property Assessment Corp. Region No. 18 [2001] O.A.R.B.D. No. 485 (WR 6074) before Member Castel heard March 29, 2001 held that functional obsolescence refers to “loss in value to the structure because of an inability of the structure to perform its function effectively”.
KTH Shelburne Mfg. Inc. v. Municipal Assessment Corp., Region No. 22 [2005] O.A.R.B.D. No. 651 (WR 42630) before Member Young heard June 13, 2005 held that “Functional obsolescence is defined as : Loss of value of real property caused by modernization or changing tastes or standard; e.g. change of building use.”
Ontario (Assessment Commissioner York) v. Office Specialty Ltd. Supreme Court of Canada heard before C.J. Laskin May 1, 1974. Held that “I think that in ascertaining “actual” or “market” value, an assessor has to regard the owner as the possible purchaser or estimate what he would expend on a building to replace that which is being valued.”
Fairbanks v. Municipal Assessment Corp., Region 09 et al. [2008] O.A.R.B.D. No. 306, (DM 68210) before Member Wyger on April 08, 2008 held that “to support a finding on the accuracy of the model requires that an average and/or median ASR be derived from many properties.”

Position of Appellants

14Glenn Lucas, a licensed paralegal with Property Tax Review Services, who represented the owner, introduced David Chick, Senior Vice President with Domicile Developments Inc. as his witness.

15Mr. Chick indicated to the Board that his company which builds condominiums is selling the condominium units from the subject property sales and presentation office. He stated that his company had an original two year lease on the property but was now on a month to month lease with a 90 day notice to vacate. He stated that there was no sales activity at this site now and that the actual sales office was now located in the actual building being sold. Mr. Chick said that the subject property had been built specifically as a sales/presentation centre with a replica of a one and two bedroom condo unit and a small area of approximately 200 sq. ft. as an office.

16Mr. Lucas submitted Exhibit 2 which contains pictures of the subject sales/presentation building being moved from 222 Beechwood Avenue to the current location of 86 Beechwood Avenue. During cross-examination of Mr. Chick by Ms. Kelleher of MPAC, Mr. Chick stated that the moving of the sales/presentation centre was done at night time with special permits under police escort and removing hydro wires and traffic lights where necessary to facilitate the move. All this was done at great expense as indicated in Exhibit 3.

17Garth Allen, a licensed paralegal also with Property Tax Services representing the owner, introduced Roch Chevrier, Vice President of construction for Domicile Developments Inc. as a witness. Mr. Chevrier submitted Exhibit 4. This exhibit is a “best guess” of the costs involved in moving the subject “sales/presentation centre” to the existing site and making it permanent. The total costs were listed as being $222,500. During cross-examination by Ms. Kelleher, Mr. Chevrier indicated that some of his estimated costs were based on the costs of the previous move.

18No one representing the appellants submitted any sales or current value evidence for the Board to consider.

19Mr. Lucas summed up his presentation by providing the Board with the following Authorities:

Winzen Ancaster Homes Ltd. v. Municipal Property Assessment Corp., Region No. 19 [2013] O.A.R.B.D. No. 176 (“Winzen Ancaster Homes”), (WR 118289) before Member Skanes heard on January 23, 2013 held that “the subject property should be classified in the commercial and residential property tax classes and apportioned”.
Cherry v. Municipal Property Assessment Corp., Region No. 04 [2014] O.A.R.B.D. No. 428, (WR 126208) before Member Levasseur heard on June 19, 2014 held that the degree of permanency of the home must be taken into consideration when valuing the building.
Oz Optics Ltd. v. Ottawa (City) [2015] O.A.R.B.D. No. 173 (“Oz”). (WR 130738A) before Member McAnsh heard on February 23, 2015 held that there was functional obsolescence for a property that “has not been used for its intended purpose”.

The Legislation

20The following provisions of the Act instruct the Board in appeals of this nature.

21 Section 1 of the Act defines “current value” and “land” 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.

“land” real property” and “real estate” include,

(a) land covered with water,

(b) all trees and underwood growing upon land,

(d) all buildings, or any part of any building, and all structures, machinery and fixtures erected or placed upon, in, over, under or affixed to land,

(e) all structures and fixtures erected or placed upon, in, over, under or affixed to a highway, lane or other public communication or water, but not the rolling stock of a transportation system; (“biens-fonds”, “biens immeubles”, “biens immobiliers”)

22Section 19.(1) of the Act states:

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

23Section 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.

24Section 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.

25Section 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

26Under the Act the Board is required to do three things:

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

Assessability of the Building

27The Board has determined that this “sales/presentation centre” is assessable and liable to taxation. The Board heard evidence that there was a degree of permanency to the structure. The building rests on concrete piers, is hooked up to hydro, water and sewage. Unlike a trailer, this building does not have a trailer hitch, nor does it rest on wheels. Although in evidence we heard that this building was actually moved from another location, it was at great expense and fanfare. The Domicile blog with pictures, Exhibit 3, clearly shows that this is not your typical “trailer” move. It is clear that it was cheaper to move this building a few blocks than to build a new one. The definition of “land” in s. 1. (1) of the Act is clear. Section (d) states “all buildings, or any part of any building, and all structures, machinery and fixtures erected or placed upon, in, over, under or affixed to land.”

28The building permit indicates this building is to be “temporary”. Obviously this is to accommodate the “Traditional Main Street T.M.8” zoning. This zoning allows for retail, institutional and mix use.

29The commercial property class was applied because it is used as a sales/presentation centre and as such it is not recognized as a residential purpose. By default it falls into the commercial property class. Classification is based on s. 5 of O. Reg. 282/98.

Current Value

30It was stated at the beginning of the hearing that the land value was not an issue.

The finding of this Board is that the building is assessable.

31MPAC submitted seven other sales/presentation centres with their accompanying current value assessments. There are no sales of “sale/presentation centres”. The seven comparables presented to the Board do not show the building sizes. This makes the current value assessment comparisons on a per square foot basis impossible.

32MPAC also presented as comparables, two built on neighboring commercial properties on Beechwood Avenue that sold to support the overall value of the subject property at $670,000 (land and building). Although the Board is not totally comfortable with this very raw measure of comparison, it has no other evidence. The appellants chose not to express their own opinion as to the building value. During the hearing, the Board heard from Mr. Lucas that maybe there should be market or functional obsolescence applied to this type of property. They supplied no evidence other than case law. The Board is aware that this property was built and designed as a “sales/presentation centre” and is used as such. In other words it is used for exactly what it was constructed for. How could it suffer from obsolescence? The case law presented by Mr. Lucas to persuade the Board of obsolescence for the subject property such as the Oz case deals with a property that has not been used for its intended purpose. This is not the case with the subject property. There is no obsolescence in this case.

33Mr. Lucas presented the Winzen Ancaster Homes case to support a residential property class for the entire property. The subject property sits on a “commercial” zoning and the property has no residential activity. The replica of a condo suite within a sales office is no more residential than the kitchen sales area in a Home Depot store.

34Based on the limited evidence of MPAC and the absence of current value evidence from Mr. Lucas, the Board will accept the recommended lower value by MPAC of $324,000 for the building and confirm the land value of $346,000 for a new total current value of $670,000.

Equity

35The 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 ASR was 1.02. This means that MPAC is slightly over assessing the neighboring properties. The ASR is within an acceptable range.

36The appellants did not submit anything for equity analysis.

37Consequently, the Board finds that there is no need for an equity adjustment.

CONCLUSION

38The total current value assessment is lowered to $670,000 for the taxation years 2013 and 2014. The omitted assessments under appeal should read as follows:

Appeal No.

Section No.

Taxation Date

‘From’ Value

‘To’ Value

3117828

September 01, 2013

$331,000

$324,000

3117831

September 01, 2013

$346,000

Confirmed

3177829

January 01, 2014

$331,000

$324,000

3117830

January 01, 2014

$346,000

Confirmed

“Jacques Laflamme”

JACQUES LAFLAMME

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