Hafele Canada Inc. v. Municipal Property Assessment Corporation, 2016 CanLII 9985

Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE:

February 24, 2016

FILE NO.:

WR 138337

Assessed Person(s):

Hafele Canada Inc.

Appellant(s):

Hafele Canada Inc.

Respondent(s):

Municipal Property Assessment Corporation (“MPAC”) Region 15

Respondent(s):

City of Burlington

Property Location(s):

5323 John Lucas Drive

Municipality(ies):

City of Burlington

Roll Number(s):

2402-090-904-01520-0000

Appeal Number(s):

2956795, 3006854 and 3086205

Taxation Year(s):

2013, 2014 and 2015

Hearing Event No.

598231

Legislative Authority:

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

Heard:

January 8, 2016 in Burlington, Ontario

APPEARANCES:

Parties

Representative

Hafele Canada Inc.

Mathias Hintikka

MPAC

Raj Rakhara

City of Burlington

No one appeared

DECISION OF THE BOARD DELIVERED BY FAUSTO SAPONARA

INTRODUCTION

1Hafele Canada Inc. is the owner and occupant of the property located at 5323 John Lucas Drive in the City of Burlington.

2The property is located within the Queen Elizabeth Way and Burloak cluster of industrial properties, in the City of Burlington. It consists of a warehouse and office building, which was built in 2000. The building is situated on a 4.25 acres lot and it has a total area of 54,778 square feet, of which 11,646 square feet is office space and the rest is used for warehousing.

3The subject property was assessed at $5,813,000 for the 2013, 2014 and 2015 taxation years.

ISSUES

4Raj Rakhara, representing MPAC, submits that based on the prices realized on the sales of three comparable properties, the subject property has been correctly assessed at the current value of $5,813,000 as of January 1, 2012. It is MPAC’s position that the sale prices of these comparable properties need to be adjusted for the differences in lot size, building age and building height in order to make a meaningful comparison between the subject property and the comparable properties.

5Mathias Hintikka, representing the Appellant, agrees that the sales of comparable properties on the open market, provide a valid indicator of the subject property’s current value. However, he submits that the properties proposed by MPAC are not comparable to the subject property and that furthermore, the adjustments made by MPAC to the sale prices are unsubstantiated. It is the Appellant’s position that, based on the sales of three comparable properties identified by the Appellant, the correct current value of the property is $5,041,000.

6The main issues for the Assessment Review Board (the “Board”) are to determine which of the comparable properties proposed by the parties provide a valid indicator of the subject property’s current value as of January 1, 2012, and whether a reduction to the assessment of the subject property is required in order to make it equitable with the assessment of similar lands.

DECISION

7The Board finds that the current value of the subject property as of January 1, 2012 is $5,478,000.

8Further, the Board finds that no adjustment to the subject property’s current value is required to make it equitable with the assessment of similar lands in the vicinity.

9The Board therefore, reduces the assessment from $5,813,000 to $5,478,000 for the 2013, 2014 and 2015 taxation years, of which $416,000 is apportioned to the Commercial Excess Land property class and $5,062,000 is apportioned to the Commercial (Full) property class.

REASONS FOR DECISION

Determination of Current Value

10The initial task for the Board is to determine the current value of the subject property as required by s. 44.(3)(a) of the Assessment Act, R.S.O. 1990, c.A.31, as amended (“Act”), which in part states that “…the Board shall…determine the current value of the land.”

11Section 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…”

12Section 40.(17) of the Act stipulates that “…the burden of proof as to the correctness of the current value of the land rests with the assessment corporation.”

13The issue for the Board’s determination is the current value of the subject property as of January 1, 2012.

MPAC’s Comparable Properties Evidence

14Mr. Rakhara has provided the Board with the sales of three properties as the basis for establishing that the current value of the property is correct as assessed. The details on these properties are found on page 4 of Exhibit 1. Two of the properties are located within two kilometres of the subject property. The third property, located at 1387 Cornwall Road, is outside the City of Burlington near the Ford automotive assembly plant. The building sizes are in the range of 47,467 to 71,376 square feet and the lot sizes are in the range of 3.16 to 4.0 acres.

15The comparable properties proposed by MPAC had been sold on the open market during the period of May 2011 and March 2012 at prices ranging from $4,500,000 to $5,825,000. The median sale price per square foot of the three properties is $93.

16To bridge the differences in building area, lot size, building age, building height and existence of mezzanine space, MPAC has adjusted the sale prices of the comparable properties. As a result of these adjustments, the median sale price of the properties is $107 per square foot. MPAC did not provide the Board with the details on how the adjustments had been determined other than to state in response to the Appellant’s cross examination of this evidence that it came from MPAC’s data base.

17By applying the median adjusted sale price per square foot of $107 to the subject property building area of 54,778 square feet (excluding mezzanine space), Mr. Rakhara submits that the subject property’s resulting value of $5,861,246 is sufficiently close to the property assessment value of $5,813,000, to make the returned assessment correct.

Appellant’s Comparable Properties Evidence

18Mr. Hintikka submits that the properties proposed by MPAC are not similar to the subject property and consequently do not provide a valid indicator of its current value. Ms. Fionnuala Fordham was called by Mr. Hintikka to testify as an expert witness. After considering Ms. Fordham’s qualifications which are found in Exhibit 2, and hearing no objections from MPAC, the Board accepted that Ms. Fordham is qualified to provide expert opinion on the valuation of industrial and commercial properties.

19Ms. Fordham’s testimony is based on her valuation report, per Exhibit 3. According to this witness, the best indicator of the subject property’s current value is provided by the sale prices of the three comparable properties detailed on page 1 of Exhibit 3.

20The Appellant’s proposed comparable properties are located within 5.1 kilometres of the subject property. These properties had been sold on the open market at prices ranging from $1,980,000 to $4,851,852, during the period of June 2010 to November 2012. The adjusted median sale price per square foot of these properties is $82.

21By applying the median adjusted sale price per square foot of $82 to the subject property’s total area of 61,758 square feet (including mezzanine space), Ms. Fordham submits that the subject property’s correct current value is $5,041,000.

Board’s Findings

22Both MPAC and Appellant have made their determinations of the subject property’s current value using the Direct Sales Comparison approach. This commonly used valuation methodology essentially entails the identification of similar properties sold on the open market as the basis for calculating a value indicator for the properties. Based on the evidence provided by the parties, the Board needs to first determine which of the comparable properties proposed by the parties are similar to the subject property. Secondly, once the valid comparables have been determined; the Board needs to determine the validity of the adjustments made by MPAC and Appellant to the sale prices of their proposed comparable properties.

23To determine the validity of the comparable properties proposed by the parties, the Board considers location, building main characteristics, building size, lot size and building age, as being the key comparability criteria. In addition to the physical characteristics of the properties, the Board considers whether the sales of the properties took place on the open market, were arm’s length sales and whether they took place within an acceptable period of the valuation date.

24As noted earlier, MPAC has submitted three comparable properties. The Board finds that all three properties meet the open market, arm’s length and sale date criteria. In regards to the physical characteristics comparability criteria, the Board finds that the properties located at 4335 Mainway and 965 Syscon Road are sufficiently similar in location, characteristics and sizes to provide a valid indication of the current value of the subject property. However, the Board finds that MPAC’s third proposed comparable property, located at 1387 Cornwall Road, Oakville, is not similar to the subject property. This property is located in another municipality and is over 12 kilometres away. The Board finds that the location of the property is not in the vicinity of the subject property and its value is influenced by its proximity to the Ford assembly plant.

25The Appellant has provided three comparable properties to establish a current value indicator. The Board finds that two of the properties had been sold on the open market. The third property, located at 1150 Corporate Drive, sold at a price significantly below the price of the other proposed comparable properties. It is MPAC’s position that this may have been a tenant sale. The sale price of $31 per square foot, is more than 50 per cent lower than the sale prices of other properties. Therefore, the Board finds that this property sale does not provide a valid current value indicator of the subject property.

26In applying the other comparability criteria established above to the two remaining properties, the Board finds that the sales of the properties located at 1140 Pioneer Road and 5330 South Service Road, do not provide a valid indicator of the value of the subject property. The buildings of both properties are over 20 years older than the subject property. In addition, the sale of 1140 Pioneer Road occurred in June 2010, being 18 months prior to the valuation date of January 1, 2012.

27Based on the above review of the comparable properties proposed by the parties, the Board has determined that there are two properties sufficiently similar to the subject property to provide a valid indicator of its current value. The properties found to be similar and their particulars are summarized in the following table:

Property Address

Building Size

Sale Date

Sale Amount

Price/ Square Foot

4335 Mainway

62,700

May 2/2011

$5,825,000

$93

965 Syscon

71,376

April 29/2011

$4,500,000

$63

28Although, the above properties are similar, they are not identical as they do differ in some aspects from the subject property. It is an established valuation practice to identify the key differences and quantify their impact on value. There is agreement about this practice as both MPAC and the Appellant have proposed adjustments to the sale prices of their proposed comparable properties. The Appellant has made adjustments to compensate for the timing difference between the sale dates and the valuation date and adjusting for the difference in building ages. MPAC has adjusted the sale prices of the comparable properties to account for the differences in lot sizes, building age, height and mezzanine.

29The approach taken by the parties reinforces the Board’s view that it makes sense for a property with a bigger lot to be valued higher than a comparable one with a smaller lot area. On this basic principle, there was no dispute amongst the parties. However, as both parties’ submissions to the Board were short on the details of how the parties had quantified their adjustments, the Appellant submits that given the large amounts of MPAC’s adjustments, the Board should disregard them.

30In support of his position, Mr. Hintikka cited 721380 Ontario Ltd v. Municipal Property Assessment Corp., Region No. 05, [2011] O.A.R.B.D. No. 407, J. L. Walker, Member. The Board’s attention was drawn to paragraph 24. Member Walker in the case before her, found that while she found three properties to be relatively similar, she was unable to rely on the unsupported scheme of adjustments proposed by one of the parties. The second authority cited was Westburne Plumbing & Waterworks v. Municipal Property Assessment Corp., Region No. 32, [2010] O.A.R.B.D. No. 560, R. D. Butterworth, Vice-Chair. The Board’s attention was drawn to paragraph 21 (3) of the decision where Vice-Chair Butterworth states that the burden of proof rests in the first instance with MPAC.

31The Board does agree with the Appellant that MPAC could have been more forthcoming in explaining the source of the adjustment data, other than to state that the adjustments were based on a statistical analysis of its database. On the other hand, the Board takes the view that if the Appellant deemed this evidence to be crucial to its case, he could have requested MPAC to produce the evidence prior to the hearing. Alternatively, the Appellant could have provided the Board with its own evidence on how the comparable sale prices should have been adjusted to bridge the differences between the properties. Therefore, notwithstanding the reservation on lack of details, the Board finds that the adjustments made to the comparable properties sale prices are reasonable and consistent with the underlying physical differences of the properties.

32Accordingly, the Board finds that the sale prices of the two comparable properties need to be adjusted for the differences in lot sizes, building age, height and mezzanine value, as submitted by MPAC on page 4 of Exhibit 1. The adjusted prices of the comparable properties are as follows:

Property Address

Sale Amount

Lot Size Adjustment

Building Adjustment

Height Adjustment

Mezzanine Adjustment

Adjusted Sale Price

Price per Square Foot

4335 Mainway

$5,825,000

$528,581

$0

$380,620

$0

$6,734,201

$107

965 Syscon

$4,500,000

$214,147

$797,685

$1,129,350

-23,613

$6,608,589

$93

33Based on the above sale prices and applicable adjustments, the Board finds that the average sale price per square foot of the two comparable properties is $100. By applying this value indicator to the subject property building area of 54,778 square feet, the Board finds that the current value of the subject property is $5,477,800, which the Board rounds to $5,478,000.

Determination of Equity

34Having established the current value of the property, the next task is for the Board to determine whether a reduction should be made to lower the assessment below current value in order to make it equitable with the assessments of similar lands in the vicinity.

35Section 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.”

36The Board was not provided with assessment evidence of similar lands in the vicinity of the subject property, to make a determination under s. 44.(3)(b) and infers that equity is not an issue for any party. Relying on this inference, the Board finds that equity has been achieved and no further adjustment to the current value of the subject property as determined above is necessary.

37Accordingly, the assessment for the subject property for the taxation years 2013, 2014 and 2015 is reduced from $5,813,000 to $5,478,000. Based on the returned assessment being allocated 7.6% to the Commercial Excess Land property class and 92.4% to the Commercial (Full) property class, the Board apportions $416,000 to the Commercial Excess Land property class and $5,062,000 to the Commercial (Full) property class.