Khani v. Municipal Property Assessment Corporation, 2016 CanLII 48798

Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE:

July 26, 2016

FILE NO.:

WR 140692

Assessed Person(s):

Mehryad Mark Khani and Catherine Helena Eva Khani

Appellant(s):

Mehryad Khani and Catherine Khani

Respondent(s):

Municipal Property Assessment Corporation (“MPAC”) Region 07

Respondent(s):

Township of Algonquin Highlands

Property Location(s):

1267 Nu-Ne Lane

Municipality(ies):

Township of Algonquin Highlands

Roll Number(s):

4621-001-000-56300-0000

Appeal Number(s):

3123328 and 3145949 (deemed 2016 appeal)

Taxation Year(s):

2015 and 2016 (deemed appeal)

Hearing Event No.

622029

Legislative Authority:

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

Heard:

April 5, 2016 in Haliburton, Ontario

APPEARANCES:

Parties

Representative

Mehryad Khani and Catherine Khani

Mehryad Khani and Catherine Khani

MPAC

Matthew Sauder and Rebecca Bolton

Township of Algonquin Highlands

No one appeared

DECISION OF THE BOARD DELIVERED BY WARREN MORRIS

INTRODUCTION

[1] This appeal relates to the assessed value of a 1,287 square foot, single storey, lakefront recreational property located at 1267 Nu-Ne Lane (“subject property”) in Algonquin Highlands on Boshkung Lake near Carnarvon west of the town of Haliburton.

[2] For the 2013 to 2016 tax years, MPAC originally returned an assessed value for the subject property at $451,000, however, MPAC has agreed to reduce the Current Value Assessment (“CVA”) to $415,000. The property owner believed the assessment was still too high and appealed MPAC’s decision to the Board.

[3] At the hearing, MPAC presented four sales of purportedly comparable properties, all on the west side of Boshkung Lake. MPAC found all four sales to be inferior to the subject property. MPAC believes that a current value of $455,000 is reasonable since it is greater than the time adjusted sale amounts of all four inferior sales. MPAC agreed to adjust the assessment downward by nine per cent to arrive at a CVA of $415,000.

[4] The Appellant, Mehryad Khani, stated that the subject property was purchased in April 2014 for $337,000. He also presented evidence of over ten other allegedly comparable properties for sale in the vicinity, most of which had sale prices in the $300,000 to $399,000 range. Mr. Khani concluded that he believes the subject property should be valued somewhere between $350,000 and $380,000 as of the valuation date.

[5] A major area of disagreement between the parties is whether the sale of the subject property should be considered in determining current value given that the sale of the subject property occurred 27 months after the valuation date.

[6] At the completion of the hearing, the Board reserved its decision.

ISSUE

7The issues are to determine the current value of the property and to ensure that the current value is equitable relative to the assessed values of similar properties in the vicinity.

DECISION

8The Board finds that the current value of the subject property is $455,000.

9Further, the Board finds that there is evidence before it leading to the conclusion that the current value, as determined above, requires an adjustment in accordance with s. 44.(3)(b) of the Assessment Act (“Act”). The current value has therefore been adjusted downward.

10Accordingly, the assessment of the subject property for the 2015 taxation year is confirmed at $414,000.

REASONS FOR DECISION

The Legislation

11Section 19.(1) of the Act states:

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

12Section 1 of the Act defines “current value” as:

“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 19.2(1) of the Act states:

19.2(1) Valuation days – 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.

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.

Current Value

15The best indicator of current value is an arm’s length and market tested sale of the subject property on the valuation day, January 1, 2012 or close to it. If, as in this case, no such transaction took place near the valuation date, the next best measure of current value is arm’s length and market tested sales of comparable properties in the same vicinity and market on or close to the valuation day. To enable an estimate of value for the subject property to be derived from a comparable property there must be sufficient elements of similarity, in terms of location and physical factors such as total building area, lot area, water frontage, age/quality of construction and other features such as outbuildings, so as to enable a direct comparison to be made between the comparable property and the subject property.

16The Board reviewed the four property sales presented into evidence by MPAC.

17These four properties are summarized as follows:

Address

Sale Date

Sale Price

x TAF* =

Building (sq. ft.)

Lot (sq. ft.)

Frontage (ft)

Age/ Quality

Comments

Subject Property

1267 Nu-Ne Lane

April 2014

$337,000

** x 1.206 = $407,025

1,287

23,086

320

1945 /6.0

Sale A

1291 Quiet Place Lane

August 2011

$437,500

x 1.039 = $454,368

532

90,169

265

1964/ 5.5

Sale B

1018 Lingering Lane

February 2011

400,000

x 1.10 = $441,308

1,032

52,272

145

1944/ 5.0

Sale C

n/a

Oct. 2012

$143,000

x 1.108 = $158,491

131,986

280

LAND ONLY (no building)

Sale D

1008 Dies Trail

August 2011

$300,000

x 1.039 = $311,567

720

16,000

100

1969/ 4.5

clearly inferior

• MPAC’s “Price Changes over Time” study in Exhibit 1 showed that from January 2011 until February/March 2012, prices were increasing and then began falling through to December 2012. Thus sales generally required a Time Adjustment Factor (“TAF") be applied to it in order to make the sale comparable to the January 1, 2012 valuation date.

** The MPAC study only went to December 2012, which had the highest TAF. The December 2012 TAF was applied to the sale of the subject property since it was the best available evidence of price changes.

18In the Board’s view, the hearing produced very little evidence to rely upon to determine the current value, as of January 1, 2012, of the subject property, since none of the property sales presented share ample elements of similarity.

19As with all real estate valuation, the single biggest factor is location. Given that all the MPAC sales are on the west side of Boshkung Lake, the Board is satisfied that location of MPAC’s comparable sales is relatively similar to that of the subject property.

20The next most significant factors are building size, frontage/shoreline, lot size and year built/quality. The Board accepts the testimony of the Appellant whereby he stated that 100 feet of the subject property’s shoreline is unusable and the rest is quite rocky. There was no evidence presented regarding the shorelines of the comparable sales.

21Sale A has half the building size, similar frontage, almost four times the lot size of the subject property and is of slightly inferior quality. Sale B has relatively similar building size, half the frontage, more than double the lot size and slightly inferior quality. Sales C and D are not at all comparable to the subject property in any way but can be used as a lower boundary for value as both of these properties are clearly inferior to the subject property. None of these properties are reasonably similar to the subject property.

22The only property sale that has any semblance of similarity to the subject property is the subject property itself. Obviously, the subject property has identical building size, frontage and lot size to itself. Based on testimony at the hearing, the condition of the property at the time of sale in 2014 was likely inferior to that on valuation day, and for that reason, the time adjusted sale price of $407,025 forms a lower boundary of value. It should be noted that the sale price of the subject property was time adjusted as if the sale took place in December 2012, which assumes that values neither increased nor decreased between December 2012 and the sale date of April 2014. The assumption was made simply because there was no specific evidence presented at the hearing regarding the amount of price movement during this time period. The Appellant did acknowledge that the property was listed for eight months prior to the sale and required a drop in the asking price. This lends further confirmation that the current value on the valuation date must be higher than $407,025.

23Given that the best evidence of current value is the sale of the subject property itself, the Board is satisfied that the returned value of $455,000 is reasonable.

24The Appellant presented several other properties as evidence of value. All of the properties (except for one) presented were listings or asking prices, which are not good indicators of market value. The exception was Exhibit 2 which is a 1,000 square foot, three bedroom cottage located at 1049 Hewitt Road with 145 feet of frontage on Boshkung Lake. According to Mr. Khani’s testimony, it sold for $360,000 in 2014. Although the property may be reasonably comparable to the subject, the fact that it sold over two years after the valuation date makes the sale less reliable and has therefore not been considered. Nonetheless, if partially time adjusted ($360,000 x 1.206 = $434,160) this sale does appear reasonably consistent with current value of the subject property.

USE OF SALE OUTSIDE SHOULDER YEAR

25During its closing arguments, MPAC claimed that the sale of the subject property in April 2014 was not valid since the sale occurred out of the “shoulder year” (a year prior to, and a year after, the valuation date). MPAC presented the Board’s decision in Valiquette v. Municipal Property Assessment Corp. Region No. 7 [2016] O.A.R.B.D. No. 40 (Board Decision No. WR 137840 issued on February 5, 2016) as authority for their position. At paragraph 33 of that decision, Member Sharma states:

…(the Appellant’s Representative claimed) that the value of the subject property is best reflected in the price of $370,000 at which it was purchased in December 2014…..The Board cannot entertain this argument principally because the sale in 2014 is too far removed from the valuation date of January 1, 2012 and therefore cannot be considered a valid sale for the purpose of this hearing. (emphasis added).

26The Board rejects MPAC’s contention that Member Sharma’s decision WR 137840 stands for the proposition that sales occurring outside of the shoulder period are necessarily invalid. The Board distinguishes the current case in two ways. Firstly, in WR 137840, the sale of the subject property was 35 months after the valuation date, whereas in the current case it is 27 months after the valuation date. More importantly, WR 137840 differs from the current case in that there were two sales of reasonably similar properties (similar sized building and age) that took place within a year of the valuation date. In the case at hand, there was no evidence of reasonable comparable property sales within a reasonable time frame of the valuation date. As stated in paragraph [21] above, other than location, Sales A, B, C and D had very little, if any, similarity to the subject property. In such a situation, it is incumbent for the Board to consider all the evidence presented and determine what evidence is best. In this case, the sale of the subject property, albeit 27 months after the valuation date, was the best evidence as to value of the subject property on valuation date.

EQUITY

27The Act requires the Board to address the issue of equity by having reference to the assessment of similar lands in the vicinity of the subject property. The Appellant has the burden of proving that the CVA is not equitable relative to similar lands in the vicinity of the subject property.

28Although the Appellant did not present any evidence related to equity, MPAC presented an Equity Analysis on the final two pages of Exhibit 1. The Equity Analysis consisted of the assessment and time adjusted sales of 30 similar properties in the vicinity of the subject property, the sales of which took place in 2011 and 2012. When taking the assessments as a percentage of sales value, known as the Assessment Sales Ratio (“ASR”), MPAC determined the median ASR to be 0.91, which indicates that similar properties in the vicinity are generally under assessed by approximately 9%. Consequently, MPAC concluded that an equity adjustment may be warranted.

29The Board is satisfied that an equity adjustment is warranted and has applied a factor of 0.91 to the currently value of $455,000 to arrive at a current value assessment of $414,000 (rounded).

CONCLUSION

30The assessment of the subject property for the 2015 taxation year is reduced from $455,000 to $414,000.

2016 DEEMED APPEAL

31An 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 appeals before March 31, 2016. For that reason, this decision also applies to the 2016 taxation year.

32Section 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.