David Sheppard v. Municipal Property Assessment Corporation, 2016 CanLII 67443

Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE: October 4, 2016 FILE NO.: WR 141842

Assessed Person(s): Scott Sheppard Estate Appellant(s): David Sheppard Respondent(s): Municipal Property Assessment Corporation (“MPAC”) Region 28 Respondent(s): The Municipality of West Nipissing

Property Location(s): WL 114-1 Municipality(ies): The Municipality of West Nipissing Roll Number(s): 4852-090-001-26300-0000 Appeal Number(s): 3136091 and 3160149 Taxation Year(s): 2015 and 2016 Hearing Event No.: 635056

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

Heard: August 02, 2016 in Sturgeon Falls, Ontario

APPEARANCES:

Parties	Representative
Scott Sheppard Estate	David Sheppard and Mike Sheppard
MPAC	John Hyatt
The Municipality of West Nipissing	No one appeared

DECISION OF THE BOARD DELIVERED BY MARCELLE BOURASSA

INTRODUCTION

1The property is a Seasonal/Recreational Dwelling – First Tier on Water, located east of Middle West Bay and close to the entrance to the West Arm on Lake Nipissing, in West Nipissing. It is a 7.5 acre water access island. The single storey cottage, built in 1940, has 532 square feet (“sq. ft.”) of total building area. It has a woodstove as a source of heat. There is no hydro and water is drawn from the lake. There are also four small cabins built in 1940 and docking. It is used during the summer months of June, July and August. According to MPAC records, it was last inspected in September 2013.

2Assessments were returned for the 2015 and 2016 taxation years at $231,000. John Hyatt, representing MPAC, stated that the property receives a negative variable due to its northern exposure.

3Mr. Hyatt stated that MPAC assessed the current value of the property using the direct sales comparison approach and provided information on four sales of island properties in proximity to the subject property. He noted that the Valuation Report (Exhibit 1) was completed by another assessor. The sales information provided to the Assessment Review Board (“Board”) included key features of these properties, in order to compare them with the subject property. The actual sale price of each property was listed, along with a time-adjusted price (except for Sale D as its sale occurred in 2013) showing the likely value of those properties on the valuation date of January 1, 2012. He considers Sales A and B to be relatively comparable to the subject property. He is of the opinion that a current value assessment of $231,000 is reasonable. He noted that MPAC does not add a variable for pine false web worm. He recognized that there is some sort of bug there. However, there is no sales evidence to quantify its impact on value.

4Mr. Sheppard takes the position that the assessment of the property is too high and should be assessed at $180,000.

5He maintains that his property is unique in that its white pine trees (which make up the majority of the trees on the island) are infected with the pine false web worm. He stated that he participated in a Ministry of Natural Resources pheromone experiment program four years ago to treat the infection on the island. He described it as a sizable experiment that took place over the course of a weekend. Unfortunately, it did not work. The only known remedy involves aerial spraying but the substance is toxic to fish. He produced a series of photographs taken on his island in 2015 and 2016 (Exhibit 3) that show the presence, progression and impact of the infection of the pine false web worm. Pine trees are dying. He has already lost 100 trees. The tall pine trees are breaking off at eight to 10 feet in the air. In 2015, a sizable pine tree came down and damaged a cabin; the rafter and the sheeting on the roof had to be replaced. He estimates that he spent $2,000 on building materials; they provided their own labor to remove the tree from the roof and make the repairs over several days. Another pine tree came down this past spring causing damage to another cabin but the damage was not as extensive. He produced photographs (Exhibit 4) of damage and fallen pine trees.

6Mr. Sheppard stated that he visited the islands that make up MPAC’s comparables in July 2016 and there is no indication of the pine false web worm infection. Other infected islands are in the West Arm including Crown land. He added that some are significantly affected.

7Mr. Sheppard produced an appraisal completed by Brad Minogue of Morland Real Estate Appraisals Ltd. in North Bay, dated August 27, 2015. Mr. Minogue inspected the island and valued it at $200,000. Mr. Sheppard stated that he obtained the appraisal as he wanted a bench mark.

8This appeal raises two issues: does the assessment of $231,000 reflect the current value of the land; and should the assessment be adjusted to make it equitable with the assessments of similar lands in the vicinity.

DECISION

9For the reasons stated below and as directed by s. 44.(3)(a) of the Assessment Act (the “Act”), the Board sets the current value of the property, as of the valuation day of January 1, 2012, at $216,000 and finds that it does not require a further adjustment under s. 44.(3)(b) of the Act in order to make it equitable with similar lands in the vicinity.

10Accordingly, for the 2015 and 2016 taxation years, the assessment of the subject property is reduced from $231,000 to $216,000.

REASONS FOR DECISION

The Legislation

11The 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.

12Section 19.(1) of the Act states that the assessment of the land shall be based on its current value. Current value is defined in s. 1 to mean, 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)(3) of the Act provides that for the period consisting of the four taxation years from 2013 to 2016, land is valued as of January 1, 2012.

14In determining the value at which the land shall be assessed, s. 44.(3) of the Act requires that the Board (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.

15Section 40.(17) of the Act provides that, where value is the ground of appeal, the burden of proof as to the correctness of the current value of the land rests with the assessment corporation.

16After hearing the evidence and the submissions of the parties, the Board shall determine the matter pursuant to s. 40.(19).

The Board’s Analysis

Current Value

17The initial task of the Board is to use the best evidence available to determine the current value of the property as required by s. 1 and s. 19.(1) and s. 44.(3)(a) of the Act.

18The best evidence the Board can receive of current value is an arm’s length and market tested sale of the subject property on the valuation day or close to it. If, as in this case, no such transaction took place the next best measure of current value is arm’s length and market tested sales of comparable properties located nearby, as close as possible to the valuation date of January 1, 2012. The measure acts as a benchmark and a gauge of the accuracy for the assessed value of the subject property and comparable properties.

19To enable an estimate of value for the subject property to be derived from suggested comparable properties there must be sufficient elements of similarity, in terms of physical factors such as building area, land area, land frontage, age of construction, physical condition, etc., so as to enable a direct comparison to be made between a suggested comparable property and the subject property.

20The Board has seven sales to consider.

21Mr. Hyatt referred to four sales:

• Sale A – Island WL 105 -1 has a lot size of 5.0 acres that is relatively similar to that of the subject property at 7.5 acres. It is improved with a slightly larger structure of the same quality class (Class 3) and about the same age having been built in 1948. It has two secondary structures as opposed to the subject property’s four cabins. Like the subject property, it is a water access only, has a bathroom, no hydro, water is drawn from lake and there is a holding tank. MPAC’s Valuation Report (Exhibit 1) does not mention any permanent docking. It sold for $216,000 in April 2012 and has a time adjusted sale price of $210,979. It is relatively comparable to the subject property.

• Sale B – Island WM7-1 has a lot size of 0.75 acre and is significantly smaller than the subject property. It is improved with a quality class 5 structure that is 34 years newer and 332 sq. ft. larger. It has two boathouses, a cabin and a shed. Like the subject property, it is a water access only, there is no hydro and water is drawn from lake. There is no holding tank. It sold for $205,000 in August 2010 and has a time adjusted sale price of $215,998. It is not directly comparable. The subject property’s substantially larger lot is not, in the opinion of the Board, offset by Sale B’s newer, better and larger dwelling in addition to two boathouses and a cabin.

• Sale C – Island WM9 -1 has a lot size of 0.67 acre and is significantly smaller than the subject property. It is improved with a quality class 4 structure that is 28 years newer and 332 sq. ft. larger. Like the subject property, it is water access only, has no hydro and water is drawn from the lake. There is no holding tank, no bathroom and no secondary structures. MPAC’s Valuation Report (Exhibit 1) does not mention any docking. It sold for $184,000 in August 2010 and has a time adjusted sale price of $189,247. It is not directly comparable. It has a significantly smaller lot and the dwelling is a somewhat newer and larger and of slightly better construction. There is neither permanent docking or a boathouse or any cabins.

• Sale D – WB269 -1 has a lot size of 1.2 acres and is significantly smaller than the subject property. It is improved with a quality class 4 structure with an effective age making it 26 years newer and 127 sq. ft. larger. Like the subject property, it is a water access only, there is no hydro, water is drawn from lake and it has docking. There is no holding tank, no bathroom and no secondary structures. It sold for $165,000 in June 2013; there is no time adjusted sale price. The Board will not consider this sale as it is too far removed from the January 1, 2012 valuation date and there is no time adjustment factor available.

22There were also three sales referred to in Mr. Minogue’s appraisal report (Exhibit 2) including an island property in Monetville and an island property near Temagami. Both sales were in 2013 and no time adjustment factors are available. The other sale involving an island property on the French River occurred in 2015 which is too far removed from the valuation date. These three sales will not be considered.

23The Board finds Sale A to be relatively comparable to the subject property. It is located in the immediate vicinity. It is sufficiently similar to the subject property in terms of lot size and its dwelling is of the same quality class, albeit slightly newer and larger, which would be offset by some of the cabins on the subject property. In any event, as noted in Mr. Minogue’s appraisal (Exhibit 2), the additional cabins on the subject property add minimal value as they are small and require updating. Sale A differs from the subject property in that it does not have any permanent docking. In the Board’s opinion, there is value to permanent docking on an island property. Mr. Minogue’s appraisal notes a depreciated value of $5,000 for the dock.

24Sale A also differs from the subject property, according to Mr. Sheppard’s testimony, in that there is no visible sign of infection of the pine false web worm on this island. The Board found Mr. Sheppard to be a credible witness and his photographs (Exhibit 3) clearly show the presence of the pine false web worm on the white pine on the subject property and a clear progression of the infection from 2015 to 2016. Many of the very tall pine trees are dying and some have become hazards as evidenced in his photographs (Exhibit 4). Mr. Sheppard recounted how sizable pine trees came down in 2015 and 2016 causing damage to two of the cabins. He stated that he spent about $2,000 on materials and relied on a team of volunteers to make the repairs over several days.

25The Board acknowledges Mr. Sheppard’s concerns respecting the infection of the pine false web worm on his island. Mr. Hyatt also recognized that there is some sort of bug there. However, it is insufficient to merely prove its existence. Evidence must be introduced to enable the Board to quantify its impact on the property’s current value. Mr. Sheppard submitted an appraisal (Exhibit 2) completed by Mr. Minogue who inspected and valued the property at $200,000 as of August 2015, which is too far removed from the January 1, 2012 valuation date. It was pointed out to Mr. Sheppard that the appraisal does not mention the pine false web worm or its impact on value. Nor was Mr. Minogue present at the hearing. Mr. Sheppard was of the opinion that Mr. Minogue obviously saw it and that it had to figure in the appraised value. The Board cannot speculate as to the impact on value that Mr. Minogue may have attributed to the pine false web worm infection. The Board does have some evidence as to the cost of building materials (labor was voluntary) to repair damage to two of the cabins caused by two sizeable pine trees that came down. Given the number of pine trees that are infected and/or dying, more are likely to come down.

26Putting all of this together, the Board is of the opinion that the current value for the subject property should not be higher than the time adjusted sale value of the best comparable, Sale A, of $211,000 (rounded) plus the value of permanent docking valued at $5,000, for a total value of $216,000.

Equity with Similar Lands in the Vicinity

27The Board must also consider the assessments of similar properties in the vicinity and determine whether the correct current value as established is inequitable relative to those assessments. If so, it should be adjusted to make it equitable, as required by s. 44.(3) of the Act.

28For purposes of establishing equity, properties do not need to be comparable, they need to be of a similar nature and within a reasonable proximity. The assessment to sale ratios (“ASR”) from a reasonable sample of sold properties is usually the best indicator for that purpose. Mr. Hyatt submitted an Equity Analysis (Exhibit 1) that considered 30 arm’s length sales of residential properties within 7.46 kilometers of the subject property that took place between January 2009 and December 2012. They produced a median ASR of 1.03, which is within the acceptable standard of 0.95 to 1.05 required to establish that properties have been assessed at their current value.

29The Board, therefore, finds that no adjustment is required for equity in accordance with s. 44.(3)(b) of the Act.

CONCLUSION

30The Board finds the current value of the subject property, as of the valuation day of January 1, 2012, is $216,000.

31The evidence does not support the conclusion that the current value of the property as determined above requires an equity reduction.

32Accordingly, for the 2015 and 2016 taxation years, the assessment of the subject property is reduced from $231,000 to $216,000.