Avenue Place Ltd. v. Municipal Property Assessment Corporation, 2016 CanLII 621

Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE:

January 6, 2016

FILE NO.:

WR 135086

Assessed Person(s):

Avenue Place Ltd.

Appellant(s):

Piotr Sitkiewicz

Respondent(s):

Municipal Property Assessment Corporation (“MPAC”) Region 09

Respondent(s):

City of Toronto

Property Location(s):

534 Birchmount Road

Municipality(ies):

City of Toronto

Roll Number(s):

1901-023-150-04900-0000

Appeal Number(s):

3043522 and 3073932

Taxation Year(s):

2014 and 2015

Hearing Event No.

596153

Legislative Authority:

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

Heard:

September 24, 2015 in Toronto, Ontario

APPEARANCES:

Parties

Counsel⁺/Representative

Avenue Place Ltd and

Khanna (Peter) Prakash

Piotr Sitkiewicz

MPAC

Ashtyn Rank, Tanya Djurdjevic

City of Toronto

No one appeared

DECISION OF THE BOARD DELIVERED BY MARK SPRAGGETT

INTRODUCTION

1The subject property, 534 Birchmount Road, is described as a four storey walk-up, multi-residential building, with seven or more self-contained units (excluding row-housing), with outside parking accommodation on a site area of 0.80 acres. The building was constructed in 1960, containing one bachelor, one one-bedroom and 32 two-bedroom units for a total of 34 unit apartments in the City of Toronto.

2Ashtyn Rank, appearing on behalf of MPAC, stated that the issue before the Assessment Review Board (“Board”) is not about an incorrect property classification, but a s. 40 on current value only. Ms. Rank is of the view that the returned assessment of $3,261,000 for the subject property is reasonable, particularly given that it sold for $3,250,000 just four months after the January 1, 2012 valuation date.

3Khanna Prakash, representing the appellant, is appealing the assessment as being too high. Mr. Prakash is of the view that factors other than rental income, such as the condition, the vicinity and unit vacancies of the property have negatively impacted on the value of the property. The appellant argues that the subject property should have a current value of $3,000,000 as of January 1, 2012, for the taxation years 2014 and 2015.

4The Board has to decide whether the returned assessment of $3,261,000 for the 2014 and 2015 taxation years for the subject property is at current value as at the valuation date of January 1, 2012, and whether the value is equitable with the assessments of similar lands in the vicinity.

DECISION

5For the reasons stated below and as directed by s. 44.(3)(a) of the Assessment Act (“Act”), the Board finds that the current value as at the valuation day January 1, 2012, to be $3,261,000.

6The Board finds that the evidence before it does not support the conclusion that an equity adjustment is required under s. 44.(3)(b) of the Act.

7Accordingly the assessment of the subject property as at the valuation day, January 1, 2012, is confirmed at $3,261,000.

REASONS FOR DECISION

Current Value Analysis

8The initial task for the Board is to determine the current value of the subject property as required by s. 44.(3)(a) of the Act “…the Board shall…determine the current value of the land…”

9Section 19.(1) of the Act states that “…the assessment of land shall be based on its current value…” and s. 1 of the Act defines current value as “…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…”

10The best test 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. In this instance the subject property sold four months after the valuation day, for the amount of $3,250,000. Both parties agreed the sale was an open market, arm’s length transaction between a willing seller and a willing buyer. The Board finds this recent transaction to be the best evidence to make a determination of current value, noting that the subject sale involves minimal time adjustments to the valuation date.

11In the event no such transaction took place, the next best measure of current value would be arm’s length and market tested sales of comparable properties in the same vicinity and market, on or close to the valuation day. This measure acts as a benchmark and a gauge of the accuracy for the assessed value of the subject property and comparable properties.

12To enable an estimate of value for the subject property to be derived from a comparable property(s), there must be sufficient elements of similarity, in terms of physical factors such as building type, number of units, age of construction, physical condition, etc.; and in terms of vicinity characteristics such as access to amenities, type and nature of housing etc., so as to enable a comparison to be made between the comparable property(s) and the subject property.

13Furthermore, to be indicative of both the market and values on the valuation day, a sale of a suggested comparable property should occur close to the valuation day. Generally, the Board prefers the sale of properties that occur within six months on either side of the valuation day. When such evidence is either limited or not available, the Board has accepted sales of properties up to 18 months on either side of the valuation day, or in exceptional circumstances, greater time periods.

14The subject property is a multi-residential building generating rental income. Sales of this type of property in the market place are determined on the income they generate. For this reason MPAC uses the Gross Income Approach to determine current value, (see Exhibit 1, sec. 4, p.2).

15Tanya Djurdjevic presented on behalf of MPAC her analysis based on the Gross Income Approach. Ms. Djurdjevic used six comparable properties to derive a Gross Income Multiplier (“GIM”) for the subject property to determine current value. The derived GIM of 9.63 was slightly higher than the mass appraisal GIM value of 9.02 used by MPAC to calculate its current value assessment. Although lower than the comparable sales GIM, MPAC chose to use 9.02 in calculations for the subject property.

16Applying the Fair Market Rents (“FMR”), to a GIM of 9.02, MPAC arrived at a current value of $3,261,000. Ms. Djurdjevic noted that MPAC’s fair market rents ($361,634), were the lowest of two other sources, (see Exhibit 1, sec. 4, p.3), namely Mysak Realty and Real Net, with FMR of $399,042 and $421,092 respectively.

17MPAC noted that the information provided by the appellant was not useful to calculate net operating income or create any meaningful pro forma, as the financials, income and expenses were for several properties and not specific to the subject. However, the rent rolls information provided for the period from time of sale (April 2012) to 2015, indicated that the owner of the property is able to achieve higher rents than what the market was delivering. Based on the Potential Gross Incomes (“PGI”) derived from these rent rolls, MPAC calculated (Exhibit 1, sec. 8, p.1) market value for the subject property between $3,630,000 and $3,850,000. Given the sale price in 2012 was $3,250,000 and MPAC’s returned assessment value of $3,261,000, MPAC argued that the evidence supports its returned assessment value as correct.

Appellant’s Arguments

18Mr. Prakash submitted that factors other than rental income have impacted negatively on the property. Mr. Prakash agreed with the rental income calculations presented by MPAC during this hearing, including the FMR, PGI and the GIM. Factors such as the vicinity of the property, condition of the property and the issue of vacancies, formed the basis of the appellant’s position for requesting a downward adjustment in the subject’s property assessment. The Board accepts the findings presented by MPAC and agreed upon by the appellant, on FMR, PGI and GIM calculations resulting in the values noted above, undisputed by the appellant.

19Mr. Prakash argued that the property has deteriorated over the past few years, including the need to repair the elevator. He estimated the owner needs to spend $400,000 to $500,000 to attend to the condition of the property. Mr. Prakash, when asked repeatedly by the Board if he had any documentary evidence to support these estimates and repair issues, replied that he takes his client’s word.

20The appellant argued that the vicinity of the subject property affects its value, with recurring vacancies being the result. Mr. Prakash, upon cross-examining MPAC during the hearing, suggested that the property was not close to transit, schools or convenience stores, thus making rental of units more difficult. Evidence from the rent rolls presented to MPAC by the appellant during disclosure revealed no vacancy issue as characterized by the appellant, other than normal turnover. MPAC’s evidence also indicated that vacancy in the vicinity of the subject property is in decline, (see Exhibit 1, sec. 4, p.4).

The Board’s Analysis and Decision

21In reviewing all of the above evidence, the Board finds the best evidence to be the sale of the subject property shortly after the valuation date, as a measure of current value.

22The Board also accepts the income approach to value as the best method in this instance, to determine the current value of the subject property. The Board notes that MPAC’s calculated GIM is lower than the sales GIM of 9.63, and accepts MPAC’s GIM of 9.02 in arriving at a current value assessment of $3,261,000.

23The Board finds no reason to alter the Current Value Assessment as returned, of $3,261,000 as the appellant agreed with the FMRs and MPAC’s calculations using the GIM of 9.02.

24Accordingly, the Board finds there is no evidence before it to conclude that the current value of the subject property, as determined above, requires a further adjustment and concludes that the assessment as returned is reasonable as of the January 1, 2012 valuation day, for the taxation years 2014 and 2015.

25The appellant submits that the vicinity and the condition of the building warrants a reduced assessment. The Board finds no documentary evidence from the appellant, other than oral testimony, to corroborate his claims of building repairs or condition of the property. No estimates, quotes, work orders, or permits were provided to demonstrate that work was needed to be done, or was in the process of being done to remedy the alleged deficiencies. The Board therefore, finds that there is insufficient evidence to support his allegations. Moreover, MPAC’s evidence, which the Board accepts, does not support any vacancy issues that would support a reduced assessment.

Equity Analysis

26The Act was amended for taxation years beginning with 2009, to require the Board to lower an assessment below current value if required to make the assessment equitable with the assessments of similar properties in the vicinity.

27Section 44.(3)(b) of the Act states that “…the Board shall…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 land.”

28MPAC presented no evidence in support of equity.

29No other evidence was presented by the appellant.

30As neither party submitted equity evidence, the Board is unable to make a finding that the subject property’s current value would need to be reduced in order to make it equitable with the assessed values of similar properties in the vicinity.