Assessment Review Board
Commission de révision de l’évaluation foncière
ISSUE DATE: July 25, 2016
Assessed Person(s): Farhi Holdings Corporation
Appellant(s): Public Works Government Services Canada and County of Lambton
Respondent(s): Municipal Property Assessment Corporation (“MPAC”) Region 26
Respondent(s): City of Sarnia
Property Location(s): 520 Exmouth Street
Municipality(ies): City of Sarnia
Roll Number(s): 3829-300-002-20710-0000
Appeal Number(s): 3053858, 3028118, 3092233 and 3094007
Taxation Year(s): 2013, 2014 and 2015
Hearing Event No.: 623829
Legislative Authority: Section 40 of the Assessment Act, R.S.O. 1990, c. A.31, as amended
Heard: May 3, 2016 in Sarnia, Ontario
APPEARANCES:
Parties
Representative
Farhi Holdings Corporation
No one appeared
Public Works Government Services Canada
No one appeared
County of Lambton
Donald Davies and Gaetano Tudino
MPAC
John Taraborrelli
City of Sarnia
Donald Davies and Gaetano Tudino
MEMORANDUM OF ORAL DECISION OF THE BOARD DELIVERED BY DAN WEAGANT
INTRODUCTION
1The subject property is a two-storey office building on 1.79 acres of land, constructed in 1999. It comprises 34,760 square feet (“sq. ft.”) of floor area, leased by a single tenant, and is described as being in fair condition.
2For the 2013 taxation year, MPAC returned a value of $3,101,000, apportioned as follows:
Commercial - $2,216,000
Office - $885,000
3There are two Appellants in this case. Public Works Government Services Canada (“PWGSC”) appealed the 2013 current value assessment (“CVA”) returned by MPAC and this appeal was subsequently deemed for the 2014 and 2015 taxation years. PWGSC appealed the assessment as being too high.
4PWGSC believes the assessment should be at or near the assessment returned by MPAC, and in response to the appeal by the County of Lambton (“County”), suggests that the assessment should be no greater than $3,316,000.
5The second Appellant is the County. In 2015, the County filed an appeal for the 2015 taxation year. The County’s position was that the assessment returned for 2015 was too low. In accordance with Rule 30, a Special Notice of Request for Higher Assessment was submitted to the owner of the property in March of 2015 for the 2013, 2014 and 2015 taxation years.
6The County believes the assessment should be increased, from $3,101,000 as returned, to $5,175,000, apportioned as follows:
Commercial - $3,722,000
Office - $1,453,000
PRELIMINARY MATTER
7At the outset of the hearing, Gaetano Tudino and Donald Davies were present, representing the County and the City of Sarnia (the “City”). John Taraborrelli was in attendance, representing MPAC. At that time, no one was in attendance representing PWGSC. In accordance with the Assessment Review Board’s (the “Board”) Rules of Practice and Procedure (“Rules”), and in particular Rule 15.(1), the Board recessed until 10 a.m.; 30 minutes after the time given for commencement of the hearing.
8At 9:58 a.m., the Board received an email communication from the Case Coordinator, forwarding an email message from PWGSC indicating that they would not be in attendance, that they would not be sending a representative and that it was requesting an adjournment. The Board re-convened the hearing at 10 a.m. and advised the parties in attendance of PWGSC’s request for adjournment of the appeals to a later date, and the Board’s consideration of the request as a Motion to Adjourn.
9Mr. Tudino objected to the adjournment request. He indicated that PWGSC had a significant amount of time to prepare for the hearing and that the County had met all of the procedural requirements of a third party seeking a higher assessment, including the requirement to provide notice to the owner in advance of the hearing date. Mr. Tudino submitted that PWGSC’s representative, AEC Paralegal (“AEC”) had received disclosure from the County as far back as September 2015. Disclosure documents in evidence from both AEC and MTE are dated April 12, 2016, 21 days before the hearing date, in accordance with Rule 45. Both Mr. Tudino and Mr. Taraborrelli submitted that they relied on AEC’s April 12, 2016 submission to prepare their case, adding that a response document was submitted by MTE to AEC and MPAC on April 28,2016 in preparation for the hearing.
10Mr. Tudino referenced Rule 96 and submitted that:
PWGSC did not provide notice to seek an adjournment as so as practicable;
PWGSC did not provide sufficient reasons for adjournment except that they were “…not able to send their agent to attend…”
11Referencing Rule 95, Mr. Tudino submitted that the Board should not grant last minute adjournments, except for unavoidable emergencies such as illness and that PWGSC’s failure to enter into an agreement with AEC to attend is clearly not an emergency in the context of the rule, but simply a failure to fulfill their obligations as an Appellant.
12Finally, Mr. Tudino submitted that his clients, both the County and the City had invested significant resources preparing for the hearing and they did so with the clear and understandable perception that PWGSC was ready to proceed, based on their exchange of documents in April.
13Mr. Taraborrelli added that the matters before the Board, precipitated by the original 2013 appeal had been previously dismissed for similar reasons (non-attendance by PWGSC or their Representative and had subsequently been reinstated by the Board. He further submitted that he was in agreement with Mr. Tudino; that the hearing should proceed in the absence of PWGSC or their representative.
Disposition of Motion
14In considering this Motion to adjourn, the Board must apply the Board’s Rules.
15Rule 1 states:
Application of Rules
The Rules apply to all proceedings with the Assessment Review Board on or after April 2, 2013. The forms referred to herein are available on the Board’s website and may be changed administratively from time to time.
All Statements, Notices, Orders and Decisions apply to deemed appeals unless otherwise ordered by the Board or requested by the parties.
16Rule 2 states:
Interpretation and Directions
These rules shall be liberally interpreted to ensure the just, most expeditious and least expensive determination of every proceeding on its merits. In applying these Rules, the Board shall make orders and give directions that are proportionate to the importance and complexity of the issues.
The Board may issue practice directions from time to time which may be posted on the Board’s website and available on request.
17Rule 95 states:
Hearing Dates Fixed
Hearing events will take place on the date set unless the Board agrees to an adjournment. The main consideration is whether an adjournment is necessary to permit a fair hearing, versus the cost of any delay for all parties. The Board will not grant last minute adjournments, except for unavoidable emergencies such as illnesses so close to the hearing date that another representative or witness cannot be obtained. The Board must be informed of the emergencies as soon as possible.
18Rule 96 states:
Requests for Adjournment
(1) A party seeking an adjournment shall provide:
(a) Notice to the Board and all the parties as soon as practicable; and
(b) Written submissions and documentary evidence in support of the request that includes:
i. Whether the request for adjournment is on consent;
ii. Suggested new dates for the hearing event, that are no longer than 6 months after the date to be adjourned; and
iii. Reasons for the adjournment.
(2) Where an adjournment request has been made, the Board may convene an electronic or in-person hearing for the parties to speak to the request. Further, the Board may refuse to consider written requests that arise 10 days or less before the hearing, and may require the parties to attend on the scheduled hearing date to speak to the request. Parties should be prepared to proceed with the hearing in the event that the request is denied.
19Rule 97 states:
Powers of the Board upon Adjournment Request
The Board may:
(a) Grant the request;
(b) Grant the request and fix a new date; or where appropriate, the Board will schedule a pre-hearing conference about the status of the matter;
(c) Grant a shorter adjournment than requested;
(d) Deny the request, even if all parties have consented;
(e) Direct that the hearing proceed as scheduled but with a different witness, or evidence on another issue;
(f) Convert the scheduled date to a mediation or pre-hearing conference; or
(g) Make any other appropriate order.
20The Board has the submissions of the Parties in attendance and the email communication from Mr. Philip Yu, a Senior Valuation Analyst with PWGSC. This email, with the time indicated as 9:57 a.m. on the day of the hearing states:
Good morning, thanks for returning my call…As discussed, we are not able to send our agent (AEC) to attend today’s hearing (due to contract issues). To this end, we would like to request for an adjournment of the hearing.
21This email was added to a previous email, dated May 2, 2016 at 3:36 p.m. to Mr. Taraborrelli and to Mr. Tudino, stating:
We’ve been referred by AEC to contact you regarding the captioned subject. FYI, we have left the case coordinator a message about our intention to adjourn tomorrow’s hearing. However she has not returned our call yet. We are working feverishly to reinstate our contract with our representative in vain. Therefore, we will not be able to attend tomorrow’s hearing.
22The Rules are specific with respect to requests for adjournment. Timeliness of such requests is of significant importance and Rule 95 refers to ‘last minute adjournments…’ While it is true that Mr. Yu attempted to contact the other Parties the day before the hearing, he did so by email only, relatively late in the day and as the Board learned at the hearing, he used the incorrect email address for Mr. Tudino. Further, there is no reference in Mr. Yu’s request as to why someone from PWGSC could not have attended to submit an argument in support of the motion to adjourn. PWGSC relies entirely on a representative with which they, admittedly, have no contract for service, as indicated in the email communication.
23In the interests of timeliness and fairness, it is incumbent upon all Parties to not only apply the rights of appeal, but also the obligations that come with those rights. By appealing an assessment, an Appellant assumes certain obligations to the other Parties to undertake the procedural requirements of the appeal process and to act in accordance with principles of natural justice. The actions of PWGSC in these appeals do not meet these obligations in the Board’s view.
24The Board finds as follows:
The request for adjournment does not meet the definition of ‘emergency’ in Rule 95.
The request for adjournment was not made as soon as practicable by PWGSC.
The written submission received by the Board at 9:58 a.m on the day of the hearing did not provide sufficient reason for the request.
25Accordingly, the Motion to adjourn is dismissed and as provided for under Rule 97 g), the Board orders as follows:
- Evidence on the appeals shall be heard, with consideration by the Board of the disclosure submitted by AEC Paralegal on behalf of PWGSC.
MPAC’S Evidence
26Mr. Taraborrelli submitted his valuation report where he used the market data approach to value. He testified that this approach resulted in a CVA of $3,101,000 or 489.29 per sq. ft. of building area. He tested this result three different ways:
By comparing the assessment per sq. ft. to that of two other nearby commercial / office properties. These two comparable properties has per sq. ft. assessments of $117.00 and $87.20, showing that the assessment for the subject property lies toward the lower end of this range by his analysis.
By applying the modified cost approach of Automated Cost System (“ACS”) employed by MPAC. This approach serves as a ‘back-up’ to the findings if market data is lacking. The cost valuation method resulted in a value of $3,410,000.
By applying the income approach, which provides a value of $4,140,000 based on a fair market rent of $13.50 per sq.ft. with a standard vacancy adjustment of 8%, expenses adjustment of 4% and a capitalization rate of 10%; all consistent in the local real estate market.
27Mr. Taraborrelli testified that, because the subject property has a single tenant, the most appropriate valuation method is the market data approach. He was satisfied that his findings are reasonable when compared to the results of the other methods and testified that he believes the returned value is correct as a result.
County’s Evidence
28Mr. Davies is an experienced appraiser with MTE. He describes the subject property as being in good condition and that it is currently leased to a single tenant, the Canadian Coast Guard. Mr. Davies applied the sales approach to value to arrive at his opinion of current value of the subject property. In doing so, Mr. Davies reviewed the sales of comparable properties in Sarnia and made adjustments for the time of sale and the differences between the comparable properties and the subject property related to age, size, location and other characteristics. Finally, Mr. Davies compared his findings of current value with the assessments of similar properties in the vicinity.
29Mr. Davies relied on the sales of three properties:
340 Front Street is a single storey office building of 7,490 sq. ft. on a lot of 0.53 acres. It was built in 2002 and sold in November of 2013 for $1,800,000. The sale value represents $240.32 per sq. ft.
1315 Michigan Avenue is a single-storey commercial building with office tenants. It has 28.754 sq. ft. of building area on a lot of 2.06 acres. It was built in 2010 and sold in October of 2014 for $5,433,561. The sale value represents $188.97 per sq. ft.
171 Kendal Street is single-storey office building with a single tenant, of 8,150 sq. ft. on a lot of 1.93 acres. It was built in 1981 and sold in January 2011 for $1,292,018, representing a sale value of $158.53 sq. ft.
30After adjustments for age, size, time of sale as compared to the valuation date and the density of the building as a percentage of the land, Mr. Davies arrived at per sq. ft. of building values of $212.43, $157.70 and $187.29 respectively for his three comparables.
31In addition to the three comparables in his study, Mr. Davies also considered the sale of the subject property which took place in December 2014 for $8,288,000, with a per sq. ft. sale value of $238.43. Mr. Davies recognized the time between the sale of the subject property and the valuation date and, rather than relying solely on a sale three years after the valuation date, he combined the data from that sale with the sales of the three comparables to arrive at an adjusted per sq. ft. value of all four sales to mitigate any inaccuracies of any one property over the sample as a whole. The sale price of the subject property is $238.43 per sq. ft. and was reduced to $212.97 per sq. ft. after a time of sale adjustment.
32Including all four properties in his analysis, Mr. Davies concluded that the median adjusted per sq. ft. sale value is $199.86. He applied this value to the 34,760 sq. ft. of area in the subject building to arrive at a total value of $6,947,133. Mr. Davies indicated that the Assessment to Sale Ratios (“ASR”) of the three comparable properties in the analysis range from 0.429 to 0.781, with a median ASR of 0.745. Mr. Davies testified that this median ASR indicates that similar properties in the vicinity of the subject property are regularly assessed below sale or market value. He therefore applied this median ASR to the value determined in the sales comparison of $6,947,133 to arrive at an assessment of $5,175,614 or $5,175,000 rounded.
33Mr. Davies concluded by explaining he applied the same ratios in the returned assessment to arrive at the apportionment for the property, resulting in:
Commercial - $3,722,000
Office - $1,453,000
PWGSC’s Evidence
34In making its determination of current value, AEC considered the sales of seven properties in the Sarnia area, deemed to be comparable to the subject property. The findings of the AEC report indicate that the properties selected for comparison range in size from 6,600 sq. ft. to 51,867 sq. ft. AEC determined that the sales analysis lead to a median adjusted sale price per sq. ft. of $90.50. By applying this value to the subject property, the resultant current value determined is $3,145,000.
35Of the seven properties in evidence, only two, 1150 Pontiac Drive and 340 Front Street North are stand-alone office buildings. They sold for $7,525,600 and $1,800,000 respectively. Two of the properties had sales that were irregular in that they involved a sale and lease back and a purchase by a tenant. Without details of these sales, the Board can make no decision on whether or not they meet the definition of current value. The remaining three properties are buildings with multiple tenants, with retail and residential uses in addition to office uses.
36The two stand-alone office properties in the AEC study have time adjusted sale values of $7,074,064 and $1,728,000, with per sq. ft. adjusted sale values of $208.06 and $256.38 respectively. Without an AEC representative present for examination, there is no evidence of the specific nature of these buildings to make a determination of comparability. However, the Board can rely on the general descriptions in the study submitted on April 12, 2016.
37AEC also undertook a valuation based on the assessments of similar properties in the vicinity. This analysis used 11 properties within the City in the Commercial classification. The assessment values per sq. ft. of these similar properties range from $66.47 to $167.29 with a median of $90.17. This method was used to determine the current value of the subject property by AEC. By using the median assessment value of similar properties the value arrived at for the subject property is $3,134,309 which AEC submitted is a further indication of the correct current value.
38With respect to equity of assessment, AEC determined a median ASR of 0.68, meaning that assessments in the vicinity of the subject property for similar properties is approximately 68 per cent of the market value. No data to support this ASR was provided in AEC’s documentary evidence.
Analysis
39The Board must make its determination of current value and equity of assessment based on the evidence at the hearing. In order to meet the requirements of the Act, the Board must decide upon the current value of the subject property, then, when reference is made to the assessments of similar properties in the vicinity, determine if the current value determined should be reduced for the purposes of equity.
40In determining current value, the Board has before it three separate approaches forwarded by the parties. MPAC provided a market data analysis that compared the subject property to two other properties it deemed to be comparable. Neither of these two comparable properties had an associated sale price or date in evidence. MPAC did not provide any data that allowed a meaningful comparison between these two properties and the subject property for comparison. AEC submitted sales data for seven properties, but only two meet the requirements of comparison with the subject property based on the data presented in its documentary evidence.
41Only MTE submitted comparable sales of three properties. When the adjustments for differences in density, age, size and time of sale are made, the Board finds that their findings are logical and reasonable in determining a per sq. ft. value that can be applied to the subject property. While two of the properties submitted by AEC had similarly comparable data, when those findings are added to the findings of the MTE analysis, the resulting median per sq. ft., adjusted values only serve to increase the value determined by MTE.
42Accordingly, the Board finds that the best evidence of current value is that of MTE which results in a current value of $199.86 per sq. ft. or a total of $6,947,133, ($6,947,000 rounded). The Board notes that this median value includes the time adjusted sale value of the subject property.
43With respect to equity of assessment, only MTE submitted documentary evidence to apply to the current value determined. By analyzing the ASRs for the three properties that sold in their analysis, MTE determined a median ASR of 0.745. When applied to the current value determined, the result $5,175,515 ($5,175,000 rounded). The Board finds this to be the best evidence of equitable assessment received at the hearing.
DECISION
44The Board finds that the current value of the subject property at 520 Exmouth Street is $6,947,100. When reference is made to the assessments of similar properties in the vicinity, the Board finds that the assessment of the subject property is reduced to $5,175,000. Therefore, the assessment is increased from $3,101,000 to $5,175,000, for the 2013, 2014 and 2015 taxation years, apportioned as follows:
Commercial Tax Class – $3,722,000
Office Tax Class - $1,453,000
“Dan Weagant”
DAN WEAGANT
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```