2049098 Ontario Inc. and 2427859 Ontario Inc. v. Municipal Property Assessment Corporation, 2016 CanLII 48797

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

ISSUE DATE: July 29, 2016

FILE NO.: WR 140799

Assessed Person(s): 2049098 Ontario Inc. and 2427859 Ontario Inc.

Appellant(s): 2049098 Ontario Inc

Respondent(s): Municipal Property Assessment Corporation (“MPAC”) Region 15

Respondent(s): Town of Milton

Property Location(s): 8611 Escarpment Way

Municipality(ies): Town of Milton

Roll Number(s): 2409-050-002-46550-0000

Appeal Number(s): 2996193, 3006783, 3083800 and 3153086 (deemed 2016 appeal)

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

Hearing Event No.: 617731 and 625891

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

Heard: March 16 and May 31, 2016 in Milton, Ontario

APPEARANCES:

Parties

Counsel⁺/Representative

2049098 Ontario Inc. and 2427859 Ontario Inc.

Robert Baranowski

MPAC

Roger Leroux and Ian Thow

Town of Milton

Steven Radenic (Observing)

DECISION OF THE BOARD DELIVERED BY TYRONE D. SKANES

INTRODUCTION

1The appeal before the Assessment Review Board ("Board") is an appeal by 2427859 Ontario Inc. and 2049098 Ontario Inc. in respect of the assessment of a daycare facility located at 8611 Escarpment Way, the subject property ("SP"), for the 2013, 2014 and 2015 taxation years.

2The one storey 18,500 square foot ("sq. ft.") structure was built in 2007 and is situated on a lot size of 66,647 sq. ft. The SP has been renovated to accommodate the daycare business. The lot is paved and marked for vehicle parking.

3Ian Thow, representing MPAC, testified that he used the Cost Approach to Value, utilizing the Automated Cost System ("ACS") to determine the current value of the SP, which he said was returned on the roll at $3,291,000.

4Mr. Thow said that although he determined the current value of the SP to be $3,291,000 he believed that the true value was actually $3,989,000. He said that he arrived at this value by determining the value of the SP's original improvements to be $2,299,298. He then determined the median residual land rate of the comparable property sales to be $24 sq. ft. and applied it to the square footage of the SP at 66,647, sq. ft., returning a value of $1,599,528. This value was added to the improvements value of $2,299,298 and returned a total value of $3,989,000. He said that the current value of the SP should not be any lower than $3,291,000.

5Robert Baranowski, representing the Appellants, testified that he believed the current value proposed by MPAC was too high. He introduced into evidence 10 comparables and an Appraisal Report in support of his submission that the SP's assessment should be reduced to $2,000,000.

ISSUE

6The issue before the Board for determination is whether the assessment of the SP for the 2013, 2014 and 2015 taxation years is at current value and whether the assessment is equitable with the assessment of similar lands in the vicinity.

DECISION

7The Board is required by s. 44.(3)(a) and (b) of the Assessment Act (“Act”) to determine the current value of the land and have reference to the value at which similar lands in vicinity are assessed and adjust the assessment 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.

8The Board finds that the current value of the SP as of January 1, 2012, is $3,367,000. However, MPAC has not applied for an increase to the assessment and the Board confirms the assessment as returned on the roll at $3,291,000 and that it is equitable with the assessments of similar lands in the vicinity.

REASONS FOR DECISION

Relevant Legislation

9Section 19.(1) of the Act states:

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

10Section 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.

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

Valuation days

19.2 (1) 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.

Exception

(5) 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 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.

13Section 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.

14Section 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.

Board's Deliberations - MPAC's Methodology

15The Board does not accept MPAC's methodology of determining current value in this case.

16MPAC said that it used the ACS model to determine the assessed value of the SP by determining a value for the structures on the comparable properties and deducting that value from the total assessed value to arrive at the residual land value. The land values were then used for all four comparable properties to arrive at a median value using the per sq. ft. factor. This factor was applied to the total site area of the SP to arrive at its land value, which was then added to the structure value that determined the current value assessment of the SP.

17The Board accepts that MPAC has a model for determining the cost of various aspects of valuation. However, in this instance, MPAC comes to the Board asking on faith to accept its evidence as it pertains to the values determined by the ACS. It presented no evidence of what data went into the model for it to return the values presented. Additionally, and most importantly to the Board, it was presented by an assessor who admitted under cross-examination that he did not understand how the ACS model worked. The Board does not expect assessors to provide a "nuts and bolts" explanation of how the model is constructed but the user must have at least a basic understanding of it and be able to explain the values returned.

18The Board does not accept evidence on faith. Evidence must be supported by hard facts that can be clearly explained. Therefore, in this instance, the Board will not consider MPAC's conclusions using the ACS methodology. This is because MPAC presented TAS prices for the comparable properties it used. The assessor did not provide the data that he used to develop the TAF, which he applied to arrive at the TAS prices. The Board agrees with Mr. Baranowski that the TAS prices should be excluded, as it has no confidence that the data is correct. Again, the assessor is asking the Board to accept evidence on faith instead of providing the data to substantiate his conclusions.

Board's Deliberations - Appellant's Submissions - General

19The Appellants submitted that the SP's current value assessment should be reduced to $2,000,000. Mr. Baranowski stated that this amount is the best evidence of current value as it is the medium of the current value range ($1,313,000 - $2,850,000) established by the 10 sales comparables (Exhibit 3) and an Appraisal Report (Exhibit 4) offered into evidence by the Appellants.

Board's Deliberations - Appellant's Appraisal Report

20The Appellants submitted an Appraisal Report and requested that it be entered into evidence as an Expert Report. Mr. Leroux objected to the report being accepted by the Board under any circumstances, expert or otherwise. He said that there was no evidence produced to prove the author was qualified to prepare such a report and he dismissed outright Mr. Baranowski's suggestion that it was MPAC's responsibility to call him as a witness to prove his qualifications, when it was Mr. Baranowski who was asking for the report to be accepted. He said that the Principles of Natural Justice would be perverted by allowing it to be entered.

21In support of his argument Mr. Leroux entered a prior decision of the Board that he asserted was on point. This decision is Jagtoo v. Municipal Property Assessment Corp., Region No. 14 [2007] O.A.R.B.D. No. 716 (“Jagtoo”) (Board File No. WR 61746), before Board Member B. Kowarsky, regarding admissible evidence.

22Mr. Leroux referred to paragraphs 5 and 6 in which Counsel for MPAC makes a similar argument regarding the admissibility of a report when the author is not present. Mr. Leroux then referred to paragraphs 10 and 11 where the Member found the certain evidence in that hearing inadmissible. Based on this decision Mr. Leroux asked the Board to not admit this report into evidence.

23Mr. Baranowski responded by repeating that MPAC knew this report was going to be entered into evidence and if they had objections or concerns about the author's qualifications then they should have subpoenaed him.

24In regards to admissibility of evidence the Board refers to the Statutory Powers Procedure Act R.S.O. 1990, c. S. 22 ("SPPA"), the Act that governs administrative tribunals.

25Section 15 describes what may be entered or excluded as evidence by a tribunal. It reads:

(1) - What is admissible in evidence at a hearing.--- Subject to subsections (2) and (3), a tribunal may admit as evidence at a hearing, whether or not given or proven under oath or affirmation or admissible as evidence in court,

(a) any oral testimony; and

(b) any document or other thing,

relevant to the subject-matter of the proceeding and may act on such evidence, but the tribunal may exclude anything unduly repetitious.

(2) - What is inadmissible in evidence at a hearing.--- Nothing is inadmissible in evidence at a hearing,

(a) that would be inadmissible in a court by reason of any privilege under the law of evidence, or

(b) that is inadmissible by the statute under which the proceeding arises or any other statute.

26It is quite obvious that the section allows for the report to be entered into evidence. However, the absence of the author or his CV causes the Board to pause when determining the weight to give the document. The Board would have gained comfort if Mr. Baranowski had provided the Board with the author's education, work history and experience so as to consider if the conclusions reached had any validity. The Board rejects Mr. Baranowski's assertion that it was MPAC's responsibility to call the author to qualify his expertise. Mr. Baranowski ought to know that, as the one putting forward the report for acceptance, it is his sole responsibility to ensure that the Board is convinced of its validity.

27Lastly, the report is dated, having been written in July, 2014. There is no way of determining if the conclusions reached at that time are still relevant today.

28In view of the above, the Board allows the report into evidence, as Exhibit 4, but not as expert. Furthermore, the Board places little weight on the report because it has no confidence in the conclusions given, owing to the fact that no evidence was provided as to the author's education, experience or work history that would inform the Board of his qualifications to prepare such a report. The Board rejects Mr. Baranowski's backward argument that MPAC was responsible for calling the author as a witness, if it disputed his qualifications. As the party seeking to have the report accepted into evidence, the responsibility to prove its value falls solely on the party presenting it.

Board's Deliberations - Appellant's 10 Sales Comparables

29The Appellants submitted 10 comparable properties for consideration. Eight of those properties were located quite some distance from the SP. Two were in Toronto, two in Aurora and one each in Barrie, Mono, Newmarket and Oshawa. The Board will, on occasion, consider comparable properties from an expanded vicinity when the parties have clearly demonstrated that there are no similar lands in the vicinity of the SP. However, the party must also demonstrate why it was necessary to expand the vicinity and how the chosen vicinity is similar to the vicinity in which the SP is located. The Board does not find that to be the case in this instance. The Appellants had submitted a number of properties for consideration without explaining to the Board's satisfaction why it was necessary to do so and how they relate to the SP's vicinity.

30Therefore, the Board will not consider these eight properties submitted by the Appellants.

31The Appellants submitted a comparable property located at 250 Martin Street, Milton for consideration. MPAC pointed out that this property was sold under a Power of Sale, something which Mr. Baranowski testified he was not aware of. The Board is wary of accepting a power of sale property owing to the possibility that it may not have been an arms' length transaction.

32The Board compared this property with MPAC's Sale 1 and Sale 2, which is a common comparable property with the Appellants. Sales 1 and 2 sold within six weeks of each other and realized sales prices of $1,525,000 and $1,580,000. The Martin Street property sold approximately four months later and despite being in the same vicinity and having a floor area very similar to Sale 2, sold for $800,000, or 49 per cent less than Sale 2. This lends credence to the belief that the Martin Street Power of Sale transaction was not a valid current value sale as defined by the Act. Therefore, the Board will not consider this property.

Board's Deliberations - Current Value

33The best evidence of current value is the sale of the SP, if the sale meets the definition of current value on or near the valuation day. When no such sale occurs, as in this instance, the Board looks to the sale of similar properties in the vicinity to determine current value. The Board, when comparing properties, does not expect exactness or sameness. Therefore, the Board looks at similarity of characteristics, amenities and location to determine comparability.

34The Board usually considers sales of comparable properties that have occurred within one year on either side of the valuation date as the ideal time period for consideration.

35The Board will consider MPAC's Sale 1 and the one remaining property submitted by the Appellants, located at 69 Main Street, Milton which is common with MPAC's Sale 2.

36The Appellants argued that similar lands means similar or same use and Mr. Baranowski argued with a great deal of passion that only those properties used as daycare facilities should be considered.

37The Board disagrees. The Board believes that Mr. Baranowski has confused use with similarity. When the Board compares commercial comparable properties to a SP it looks to similarity in age of construction, type of property, parking area, lot and structure size, number and types of structures if any, and then looks to locational similarities such as proximity to major access routes. There is nothing that proscribes that use must be considered.

38However, the Board will sometimes consider the highest and best use for which a property may be utilized. The author of Exhibit 4 opined that the highest and best use of the SP was as a daycare facility. However, the parties advised the Board that the SP is no longer being used as a daycare facility. This defeats the argument that a daycare facility is the highest and best use, as apparently it was converted to another use.

39The two sale comparables left for consideration are listed in Table 1 below:

Table 1

Property	Address	Sale Date	Sale Price	Floor Area (sq. ft.)	Sale Price per sq. ft.
SP	8611 Escarpment Way	N/A	N/A	18,500	N/A
Sale 1 MPAC	174 Mill Street	June 26, 2012	$1,525,000	6,481	$235.30
Sale 2 MPAC and Appellants	69 Main Street	Aug. 3, 2012	$1,580,000	12,111	$130.45
Average	N/A	N/A	N/A	N/A	$182.87

40The Board is normally reluctant to use a small sample size of comparable properties but it has to deal with the evidence put before it. The Board is not responsible for the poor quality of evidence presented by the parties.

41The Board is equally reluctant to use only one aspect of similarity when comparing comparable properties to the SP but, again, it must deal with the evidence placed before it.

42Therefore, the Board will utilize the floor per square foot rate of the two comparable properties using the sale price. The Board finds that the average rate per square foot is $182 (rounded). By applying $182 to the square footage of the SP at 18,500 sq. ft. a value of $3,367,000 is returned.

43The Board finds that the current value assessment of the SP is $3,367,000. As MPAC has not applied for an increase the Board will confirm the assessment of the SP at $3,291,000, as returned on the roll.

Board's Deliberations – Equity

44The parties did not present any evidence on equity nor has the Board found any evidence of an inequity from its review of the evidence. The Board therefore finds that the assessment as returned is equitable and no adjustment is necessary.

CONCLUSION

45The Board finds the current value of the SP to be $3,367,000. However, MPAC has not applied for an increase to the assessment. Therefore, the Board will confirm the assessment as returned on the roll at $3,291,000 for the 2013, 2014 and 2015 taxation years and finds this value is equitable with the assessments of similar lands in the vicinity.

2016 DEEMED APPEAL

46An 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.

47Section 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.