Kenneth Hale and Joanne Hale v. Municipal Property Assessment Corporation, 2016 CanLII 5578

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

ISSUE DATE: February 2, 2016

FILE NO.: WR 135987

Assessed Person(s): Kenneth Hale and Joanne Hale

Appellant(s): Kenneth Hale and Joanne Hale

Respondent(s): Municipal Property Assessment Corporation (“MPAC”) Region 07

Respondent(s): City of Kawartha Lakes

Property Location(s): 304 Indian Point Road

Municipality(ies): City of Kawartha Lakes

Roll Number(s): 1651-340-010-50600-0000

Appeal Number(s): 3068038

Taxation Year(s): 2015

Hearing Event No. 599382

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

Heard: October 27, 2015 in Lindsay, Ontario

APPEARANCES:

Parties	Counsel+/Representative
Kenneth Hale and Joanne Hale	Kenneth Hale
MPAC	Mary Hennessey
City of Kawartha Lakes	Melita Andrews

DECISION OF THE BOARD DELIVERED BY MARILYN SHARMA

INTRODUCTION

1The subject property is a single family detached residential property located on water in the City of Kawartha Lakes.

2The subject property is situated on a lot with an effective site area of 22,050 square feet and a water frontage of 90 feet.

3The building was constructed in 2002 with a total building area of 4,454 square feet with a finished basement area of 2,400 square feet.

4The building has a quality class designation of 7.

5The assessment of the subject property for the taxation year 2015 is $1,072,000. However, during the Request for Reconsideration (“RFR”) process, the Assessor indicated that for equity reasons MPAC agreed to reduce the assessment for the 2015 taxation year from $1,072,000 to $965,000.

6The Appellant argues that MPAC has over assessed his property and believes that the assessment is excessive in relation to similar properties in the neighbourhood because:

i. The water frontage is of poor quality.

ii. The property is not as marketable as a cottage because the building is too large.

iii. The building is situated at an elevated level in relation to the water which makes access difficult.

ISSUE

7The issue before the Assessment Review Board (“Board”) is to determine whether the subject property is over assessed.

DECISION

8The Board finds that the current value of the subject property for the 2015 taxation year is $1,072,000.

9The Board finds an adjustment is required for equity purposes under s. 44.(3)(b) of the Assessment Act (“Act”) and reduces the assessment from $1,072,000 to $996,960.

10The Board accepts and applies the Assessor’s previous offer to reduce the assessment from $1,072,000 to $965,000 for the 2015 taxation year.

11Accordingly, the assessment of the subject property is reduced from $1,072,000 to $965,000 for the 2015 taxation year.

REASONS FOR DECISION

The Legislation

12For the 2015 taxation year, in determining the value at which land shall be assessed, the Board must have regard to the following provisions of the Act:

13Section 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.

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 19.2(1)2 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.

16Section 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.

17Section 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.

18Section 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.

Analysis

19Under the Act the Board is required to do three things:

(1) Find the current value of the property.

(2) Make reference to the value at which similar lands in the vicinity are assessed.

(3) Adjust the assessment of the subject property if the adjustment would result in a reduction in the assessment.

Current Value

20The best measure of current value is an arm’s length and market tested sale of the subject property on the valuation date of January 1, 2012, or close to it. If no such transaction took place, a further measure of current value is arm’s length and market tested sales of comparable properties in the same vicinity and market. This measure acts as a benchmark and gauge of the correctness of the assessed value of the subject property. Section 40.(17) of the Act states that the onus for establishing the correctness of the current value lies with MPAC.

MPAC’s Evidence

21MPAC provided six suggested comparable properties as shown in Table 1:

Table 1 MPAC’s Suggested Comparable Properties

Address	Bldg. Area (sq. ft.)	Lot Size (sq. ft.)	Year Built	Time Adj. Sale Amt. ($)	Sale Date
304 Indian Point Road (Subject Property)	4,454	22,050	2002
322 Indian Point Road	1,017	27,503	1973	691,215	May. 2011
392 Indian Point Road	1,323	30,000	1980	660,838	Jul. 2011
480 Indian Point Road	1,983	100,200	1971	936,148	Nov. 2012
556 Indian Point Road	1,491	91,400	1952	827,534	Nov. 2012
734 Indian Point Road	2,359	33,000	1990	854,000	Jun. 2012
758 Indian Point Road	1,252	34,200	1973	609,192	Sept. 2012

22The Assessor contends that the above six suggested properties in the vicinity of the subject property provide a good comparison to the subject property for the following reasons:

i. They are all located on the same street as the subject property.

ii. They are all located on the same lake.

23The Assessor stated that the subject property is located at a point on the lake where it is narrower than the more open and wider portion of the lake. She indicated that although the narrow portion of the lake is considered slightly less desirable than the wider portion of the lake this does not diminish the desirability of the lakefront properties in that area nor does it negatively impact the value of properties as can be seen in the sales trend of properties on the subject street.

24The Assessor informed the Board that with the exception of the suggested comparable property at 734 Indian Point Road, (which is only a Quality Class 0.5 higher than the subject property), all the remaining five properties have a lower quality class than the subject property.

25The Assessor also stated that the properties that were sold at prices higher ($800,000 to $900,000) than the sale of the subject property have building sizes that are significantly smaller than the subject property. The properties that were sold for less than the subject property ($595,000 to $670,000) are of lesser quality and much less building square footage being between 1,000 and 1,300 square feet versus the subject at 4,454 square feet.

26The Assessor stated that the Board should not consider the sale of the subject property in 2014 as a valid sale because in her view the sale price of the subject property at $768,000 is not reflective of an arm’s length transaction and would therefore not be considered an open market sale for the purpose of analysis in the direct comparison approach to value. The main reason for her position is because Mr. Hale was the listing agent of the property and the subsequent buyer of the property. In addition, she stated that the sale which was in 2014 is too far removed from the valuation date of January 1, 2012 and therefore should not be considered a valid sale.

27The Assessor informed the Board that it is usually difficult if not impossible to find sales of cottage properties that are identical or similar. In her opinion, the suggested comparable she provided on the same street as the subject property provides a good indicator of sales in the area. Given that three of the six suggested comparable properties were sold at prices higher than the sale subject property despite all being of significantly smaller building sizes, and two of the three having a lower quality classification, she believes that the subject property’s current value at $1,072,000 is reasonable.

Appellant’s Evidence

28The Appellant submitted a package of documents (Exhibit 3) consisting mainly of Multiple Listing Service (“MLS®”) listings of various properties in the area and a copy of an “Agreement of Purchase and Sale” of the subject property.

29The Appellant indicated that in his opinion there are several factors that negatively impact the value of his property and which he believes have not been adequately taken into account by MPAC. The issues identified include the following:

i. The water quality of his property is affected by the seasonal growth of weeds in the area, which impedes swimming in the area.

ii. The subject property is located at the narrow area of the lake, which is considered a less desirable area to locate.

iii. The subject property is located at an elevated location in relation to the lake, which creates accessibility issues which affect the value and marketability of his property.

iv. There is no handrail along the path of the 28 steps, which makes access to and from the lake dangerous and supports his argument in (iii) above.

v. Potential buyers looking for seasonal homes are not interested in homes that are as large as the subject property because among other things, the cost of heating and maintaining such a large home (as a cottage) is a deterrent.

30The Appellant provided several MLS® listings of properties in the general neighbourhood of the subject property to demonstrate that there are properties superior to his which were sold at prices below or slightly higher than his property.

31The Appellant also provided a copy of a search he conducted for the subject property showing the listing history for the subject property. The listing history shows that:

i. The Appellant was the listing agent for the subject property in 2012, 2013 and 2014.

ii. The subject property was listed for $998,000 in 2012, $949,900 in 2013 and $948,800 in 2014 but subsequently bought by the listing agent (the Appellant) in 2014 for $768,000.

32The Appellant submitted a copy of a document titled “Agreement of Purchase and Sale” showing that Kenneth Hale and Joanne Hale purchased the subject property in June 2014 at a price of $768,000.

33The Appellant submitted a copy of a listing (Exhibit 5) of a vacant lot located next to the subject property at 302 Indian Point Road, which shows that it was sold for the sum of $315,000 in June 2012. The Appellant believes that this supports his position that his property is over assessed.

Analysis of MPAC’s Evidence

34The Board has reviewed the details of the six suggested comparable properties submitted by MPAC and accepts the Assessor’s analysis that:

i. Three of the six suggested comparable properties were sold at prices lower than the sale price of the subject property.

ii. Three of the six suggested comparable properties were sold at prices higher than the subject property.

iii. The three properties which were sold at prices higher than the subject property have building sizes of 1,012, 1,252 and 1,323 square feet respectively while the subject property is 4,454 square feet.

iv. Two of the three properties that were sold at prices higher than the subject property have a building classification lower than that of the subject property (the third being 0.5 per cent higher).

35The Board considered the Assessor’s argument in which she claimed that MPAC does not consider the sale of the subject property in June 2014 for the sum of $768,000 as an open market and arm’s length transaction because the purchaser (the Appellant) was the listing agent for the property in 2012 up to the time of purchase in 2014. The Board gives no consideration to this argument since the sale in 2014 is too far removed from the valuation date of January 1, 2012 to be considered a valid sale for the purposes of establishing current value.

Analysis of Appellant’s Evidence

36The Board reviewed the information submitted by the Appellant contained in Exhibit 3 consisting of the MLS®listings of various properties to support his claim that the properties are superior to his, some having larger lot sizes; some having larger water frontages and were sold at prices comparable to the purchase price of his property at $768,000. The Board is constrained to accept the information and details recorded in the various MLS® listings to establish similarity to the subject property because their accuracy and reliability cannot be ascertained. In addition, the Board notes that the listing carries a caution that the information may be incorrect, that it cannot be relied upon without verification and that the pertinent Real Estate Association assumes no responsibility for its accuracy.

37The Board considered the various issues raised by the Appellant, which in his view negatively impact the value of his property and have not been adequately taken into account by MPAC. The Board is of the view that all the issues identified by the Appellant were present at the time of sale and are factors that a willing buyer assesses before making an offer to purchase in an open market arm’s length transaction as envisage by the Act. Any potential impact on value is considered by the willing buyer as he or she perceives the manner in which such issues are likely to affect his/her enjoyment of the property and on such basis, makes an offer to purchase. The Board has no evidence before it to establish whether and to what extent these issues have any impact on the value of the property and as such, cannot assign weight to these issues.

38The Board also deliberated on the Purchase Agreement between the buyers Mr. Hale (the Appellant) and Mrs. Hale of the one part and the seller of the other part. The Appellant purchased the property in June 2014 for the sum of $768,000. The Board notes that the Appellant held the listing for the subject property from 2012 to 2014. The Board believes there is reason to support the Assessor’s claim which casts doubt on the eventual sale of the subject property to the Appellant, as an arm’s length and open market transaction as envisaged by the law. However, this issue was inconsequential since the Board considers the sale in July 2014 as too far removed from the valuation date of January 1, 2012 to be considered a valid sale to establish current value.

Board’s Analysis

39The Board accepts the Assessor’s analysis and conclusion that the three properties (480, 556 and 734 Indian Point Road) were sold at prices higher than the sale price of the subject property with all three having a much smaller building size than the subject property and this pattern is indicative of the trend in sale prices of properties in the vicinity of the subject property.

40The Board accepts the factual evidence that four of the six suggested comparable properties have similar lot sizes, similar water frontages and are located on the same street and their building sizes are considerably smaller than the subject with one being two times smaller, one being three times smaller and two being four times smaller.

41The Board could not place weight on the MLS® listings provided by the Appellant to establish comparability due to the unreliability of the information contained in the listings.

42The Board was not presented with any evidence to support the Appellant’s claim that the various issues he identified had a negative impact on the value of his property and that MPAC failed to give them any consideration. The Board therefore places no weight on this claim.

43The Board finds that the sale of the subject property in 2014 is too far removed from the valuation date of January 1, 2012 to be considered a valid sale.

Determination of Current Value

44The Board agrees that the best method to determine the current value of the subject property is based on the sales of similar properties in the neighborhood. The onus to establish the correctness of the assessment lies with MPAC. Section 40.(17) of the Act states: “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 lies with the assessment corporation….”

45The Board finds that the sales identified by the Assessor pertaining to the three properties that were sold at prices higher than the subject property is an acceptable indicator of the sales trend of properties in the neighborhood of the subject property.

46The Board finds that the three suggested comparable properties that were sold at prices higher than the sale price of the subject property support the argument that the current value of the subject property must be higher than the highest sale price of the three properties. This argument is presented in Table 2 below.

Table 2 Details of MPAC’s Comparable Properties

Addresses	Bldg. Area (sq. ft.)	Quality Class	Year Built	Finished Basement Area (sq. ft.)	Time Adjusted Sale Price	Sale Date
304 Indian Point Road (Subject Property)	4,454	7.0	2002	2,400	$768,000	2014
480 Indian Point Road	1,983	6.5	1971	471	$936,000	2012
556 Indian Point Road	1,491	5.5	1952	nil	$827,000	2012
734 Indian Point Road	2,359	7.5	1990	837	$854,000	2012

47The Board agrees with the assessor that the evidence presented in Table 2 points to a logical and reasonable conclusion that the current value of the subject property cannot be less than that of any of the three properties identified in Table 2 which show the following:

(a) Each of the three properties have significantly smaller building size than the subject property.

(b) Two of the three have a lower quality classification than the subject property, the third being 0.5 point higher.

(c) All three properties are considerably older than the subject property with the property at 734 Indian Point Road being 12 years older, the property at 480 Indian Point Road being 31 years older and the property at 556 Indian Point Road being 50 years older.

(d) Two of the three properties have finished basement areas of 471 and 837 square feet and are three to five times smaller than the finished basement area of the subject property at 2,400 square feet. The third property has no basement area.

(e) Despite the fact that the three properties are “inferior” to the subject property in some significant aspects, each was sold at a price higher than the sale price of the subject property.

48The Board concurs with the Assessor’s analysis and conclusion that against the backdrop of the characteristics of the three suggested comparable properties shown in Table 2, the establishment of the current value of the subject property at $1,072,000 is reasonable.

Equity with Similar Lands in the Vicinity

49The Board is required under s. 44.(3) sub-paragraph (b) of the Act, to 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. For purposes of establishing equity, properties do not need to be comparable; they need to be of a similar nature and within a reasonable proximity. To determine equity the Board may look at the Assessment to Sales Ratio (“ASR”).

50The ASR is a ratio of a property’s assessment to its sale price. If sales are in the same homogeneous neighborhood, the Board may infer that MPAC has used the same assessment methodology for the subject property as it did with comparable properties presented. Therefore, the review of ASRs may indicate whether MPAC has been under or over-assessing the area.

51For the purpose of establishing equity the Board considers the sales between January 2011 and December 2012 as valid sales. MPAC presented the sales of 30 properties within 2.72 kilometres of the subject property, which occurred between January 1, 2011 and December 2012. The median ASR of the 30 valid sales is 0.93. A value within five percentage points is usually considered an acceptable value. In this case the median ASR of 0.93 indicates that MPAC’s methodology may be producing assessments seven percentage points lower than sales. The Board finds that an adjustment is required and therefore reduces the assessment of the subject property from $1,072,000 to $996,960.

52The Board notes that during the RFR process MPAC made an offer to reduce the assessment for equity from $1,072,000 to $965,000. This amount is lower than the value found by the Board above. The offer was refused, however MPAC indicates that the offer remains in effect. The Board therefore applies MPAC’s offer and reduces the assessment from $1,072,000 to $965,000 for the 2015 taxation year.

CONCLUSION

53The Board finds that the current value of the subject property for the 2015 taxation year is $1,072,000.

54The Board finds an adjustment is required for equity purposes under s. 44.(3)(b) of the Act and reduces the assessment from $1,072,000 to $996,960.

55The Board accepts and applies the Assessor’s previous offer to reduce the assessment from $1,072,000 to $965,000 for the 2015 taxation year.

56Accordingly, the assessment of the subject property is reduced from $1,072,000 to $965,000 for the 2015 taxation year.