1230093 Ontario Inc. v. Municipal Property Assessment Corporation, 2016 CanLII 82354

Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE: November 25, 2016

FILE NO.: RRD 2016M11

Assessed Person(s): 1230093 Ontario Inc. c/o Limestone Property Mgmt.

Appellant(s): 1230093 Ontario Inc.

Respondent(s): Municipal Property Assessment Corporation (“MPAC”) Region No. 05

Respondent(s): City of Kingston

Property Location(s): 303 Bagot Street

Municipality(ies): City of Kingston

Roll Number(s): 1011-030-090-00100-0000

Appeal Number(s): 2948266, 3018357 and 3073039

Taxation Year(s): 2013, 2014 and 2015

Hearing Event No.: 591533

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

Request by: Jason Ruffolo, Limestone Property Management (“Requester”)

Request for: A review of the Board’s Decision WR 133686 issued on September 1, 2015

Heard: By written submission

DECISION OF THE BOARD DELIVERED BY PAUL MULDOON

ISSUES AND ORDER SOUGHT

1Jason Ruffolo of Limestone Property Management, the Requester, seeks a review of the decision of the Assessment Review Board (the “Board”) (WR 133686) by Member Scott McAnsh issued on September 1, 2015. This request for review was filed with the Board on September 29, 2015.

2The issue before the Board at the hearing was whether the property at 303 Bagot Street, City of Kingston, was at current value for the 2013 through to 2015 taxation years.

3At the hearing, both parties agreed that the Board should apply the income approach to reach a finding of current value. However, the appellant and MPAC differed in the values assigned to the factors (such as gross income, vacancy allowance and capitalization rate) which cumulatively informed the current value calculation. The Board ultimately reduced the current value assessment of the subject property from $5,838,000 to $5,410,000.

4The issues raised by the Requester in his request for review pertains to the admissibility of an appraisers’ report at the original hearing and the application of the income approach when calculating the subject property’s current value. He submits that the Board erred in giving no weight to an appraisers’ report introduced as evidence and erred in calculating current value. But for these errors in fact and law, the Requester submits that the current value should be between $3,000,000 - $3,600,000 for the 2012 taxation cycle. Mr. Ruffolo of Limestone Property Management requests a rehearing.

5Submissions were sought from all parties for this request for review. Submissions were not received from MPAC or the City of Kingston. Therefore, in this instance, the Board’s decision (WR 133686) and the Requester’s request for review materials and affidavit formed the record reviewed by the Board.

RELEVANT RULES

6The Board’s rules respecting request for review are set out in Rules 141 to 146 of the Board’s Rules of Practice and Procedure (the “Rules”).

7A request for review is received pursuant to Rule 144 which grants the Board with the following authority:

144. Receipt of Request for Review

(1) Where a request for review has been received, the Board may:

(a) seek written submissions from the parties on the issue raised in the request;

(b) grant a motion to argue the question;

(c) grant a re-hearing without a motion; or

(d) confirm, vary, suspend or cancel the decision.

(2) The Board will determine initially whether the request has met one or more of the eligible grounds for such a review without providing notice to the other parties. The Board may review or grant a motion request without submissions from other parties.

8The grounds for review are stated in Rule 145:

145. Grounds for Review

(1) The Board may consider reviewing its decision if the grounds for the request raise a convincing and compelling case that the Board:

(a) acted outside its jurisdiction;

(b) violated the rules of natural justice or procedural fairness, including allegations of bias;

(c) made an error of law or fact such that the Board would likely have reached a different decision;

(d) should consider new evidence, which was not available at the time of the hearing, but that is credible and could have affected the result; or

(e) heard false or misleading evidence from a party or witness, which was discovered only after the hearing and could have affected the result.

9Rule 146 outlines the procedure for a re-hearing by the Board:

146. Motions and Re-hearings Procedure

(1) Where the Board will hear a motion to argue the question or has granted a re-hearing, unless otherwise directed, the requester must:

(a) obtain a motion date or re-hearing date within 90 days of the Board letter granting the motion or re-hearing, or the decision will be nullified. (This means that the requester must secure a date for the motion or re-hearing within 90 days, not that the motion or re-hearing must be head within 90days.) The requester must serve notice of the motion and any supporting material on the other parties who attended the hearing at least 30 days before the date set for the motion, unless the Board directs otherwise. The Rules regarding notices of response also apply to a review motion; and

(b) serve Notice of Motion and supporting materials on the other parties who attended the hearing, at least 30 days before the date set for the motion.

(2) At the motion hearing, the parties will be expected to address whether the request meets the grounds for review.

(3) Motions will generally be heard by a different Member than the one who made the original decision, unless the request is based on new evidence that was not available at the time of hearing, but is credible and could have affected the result; or is otherwise ordered by the Board.

(4) Other than as stated in this Rule, the general motions procedure applies to parties to review motions.

DISCUSSION AND REASONS

10The Board grants the request for review in this case and orders a rehearing of the appeals for the 2013 to 2015 taxation years. The Requester has raised a convincing and compelling case under Rule 145(1)(c) that but for the Board’s error of law or fact, a different decision would likely have been reached.

Uniqueness of the Subject Property

11The Requester seeks to correct the Board’s decision (WR 133686) which stated that the subject property was comprised of a three-storey limestone section, dating to the 1880s and a five-story hotel section built in 1976. Instead, the Requester submits that the limestone section dates to the early 1800s and the hotel, to the 1880s. Adjoining these separate buildings is a structure constructed in 1976.

12As a result of this “disjointed configuration of the property,” the Requester notes that there are more exposed, exterior surfaces and thus greater costs for maintenance, heating and cooling. In this request for review, the Board finds that the unique and historical attributes of the property should be considered in making a finding of current value.

Weighing of Evidence and the Appraisal Report

13The Requester submits that the Board erred by dismissing an appraisal report submitted as evidence because the author of the report was not present at the hearing. The decision notes that there was some disagreement as to the extent to which the data collected by the appraisers reflected the physical attributes of the subject property.

14The Member did not err in not putting weight on this appraisal report. The weighing of evidence is a judicial function and as found by the Divisional Court noted in Marathon Realty Co. v. Ontario (Regional Assessment Commissioner, Region No. 7), [1979] O.J. No. 1090 (QL) at para. 33, “the members of the Board do have a certain degree of expertise in assessment matters which assists in understanding, assessing and weighing evidence” (Municipal Property Assessment Corp., v. Azar, 2016 CanLII 13000 (ON ARB); Spire Properties Ltd. v. Municipal Property Assessment Corp., Region 09, [2013] O.A.R.B.D 77, 76 O.M.B.R. 62).

Income Approach to Current Value Assessment

15The Board’s decision notes that the income approach to value was agreed upon by the parties as being the best approach to reaching a determination of current value. As explained by the Board:

8The income approach assumes that certain properties are purchased solely for their income generating potential and that a prudent investor will expect returns comparable to or better than other forms of investment. There are four factors in the calculation of value: (1) the gross income expected from rents at the property; (2) the appropriate vacancy adjustment to that amount; (3) appropriate expense adjustments; and (4) the appropriate capitalization rate, or expected rate of return.

16When reaching a finding of gross income, the Requester notes that the Board makes reference to a net rent of $13.25 per square foot on the main floor and $12 per square foot on the upper floors. The Board then multiplies these net rents by the total square footage to reach a gross income for all floors. Mr. Ruffolo submits that multiplying a net rental rate by the applicable square footage cannot create a “gross” figure.

17The materials in the request for review clarify that net rent is income attributable to a property after all operating expenses are addressed while gross rent is the sum of net rent and operating expenses. Therefore, gross rent has a ceiling which is determined by market conditions while net rent is a characteristic specific to the property.

18In this request for review, the Board agrees with Mr. Ruffolo that the gross rent referred to in the decision is not a true gross rent and erroneously informs the calculations subsequently made in order to reach a finding of current value. As submitted by Mr. Ruffolo, relying on an erroneous gross rent inflated the fair market rent attributed to each square foot of building space. The Requester submits that the confusion of gross vs. net rent has increased the current value found by the Board by $2,850,000.

ORDER

19For all these reasons, the Board orders that this request for review be granted and the matter set down for a rehearing.