Engineered Sound Systems Limited v. Municipal Property Assessment Corporation, 2017 CanLII 11480

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

ISSUE DATE: February 28, 2017

FILE NO.: WR 145542

Assessed Person(s): Engineered Sound Systems Limited

Appellant(s): Engineered Sound Systems Limited

Respondent(s): Municipal Property Assessment Corporation (“MPAC”) Region 15

Respondent(s): City of Mississauga

Property Location(s): 1606 Sedlescomb Drive Unit 11

Municipality(ies): City of Mississauga

Roll Number(s): 2105-030-069-11160-0000

Appeal Number(s): 2971798, 3006602, 3082519 and 3153655

Taxation Year(s): 2013, 2014, 2015 and 2016

Hearing Event No.: 646875

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

Heard: January 11, 2017 in Mississauga, Ontario

APPEARANCES:

Parties	Representative
Engineered Sound Systems Limited	Thomas Bain
MPAC	Maria Schmitchen
City of Mississauga	No one appeared

DECISION OF THE BOARD DELIVERED BY SUBUOLA AWOLERI

INTRODUCTION

1The subject property is a single storey industrial building located within Peel Condominium Plan 293, a complex of freestanding industrial condominiums, built in 1986. It has a total building area of 2,279 square feet (“sq. ft.”), 20 feet in height with an interior office area of 822 sq. ft. An inspection of the subject property on September 13, 2016, confirmed that it has a mezzanine area of 822 sq. ft.

2The returned assessment for the subject property for January 1, 2012 was $371,000.

3The current value assessment (“CVA”) was determined using the Direct Comparison Approach to value.

ISSUE

4Maria Schmitchen, the assessor from MPAC, reviewed the sales of six industrial condominium properties and submits that based on the analysis of these sales the subject property is under assessed. She submits that the revised CVA should be $379,000, however, MPAC did not file a notice of intention to seek a higher assessment, as required by Rule 30(1) of the Assessment Review Board’s (“Board”) Rules of Practice and Procedure (“Rules”), she therefore urged the Board to confirm the value as returned.

5Thomas Bain, the owner of the subject property, believes that the assessment as returned is too high, based on the assessment of a similar unit next to the subject property, which was assessed at $341,000. Mr. Bain believes that the subject property should be assessed the same as this similar property and submits that the CVA of the subject property should also be $341,000.

6In addition to determining what the current value of the subject property is, the Board must determine if the assessment of the subject property is equitable with that of similar properties in the vicinity.

DECISION

7The Board confirms the current value as returned at $371,000 and determines that this assessment at current value is equitable with the assessments of similar lands in the vicinity; hence no further reduction is required to achieve equity.

REASONS FOR DECISION

Legislation

8Section 19.(1) of the Assessment Act (“Act”) states:

19.(1) Assessment based on current value. – The assessment of land shall be based on its current value.

9Section 19.2(1) of the Act provides:

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.

10Section 44.(3)(a) of the Act requires the Board to “determine the current value of the land.” Current value is defined in s. 1 as “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.” That is, for the 2013, 2014, 2015 and 2016 taxation years, the Board must determine what the subject property would have sold for in an arm’s length transaction on the January 1, 2012 valuation day set by the Act.

11Section 44.(3)(b) of the Act requires that the Board “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.”

Current Value - Evidence and Analysis

12Ms. Schmitchen provided the Board with the sales of six industrial condominiums, in close proximity to the subject property. She submits that five of these sales are considered to be inferior to the subject property. The total building area of these properties ranges from 1,780 to 2,480 sq. ft. Five of these properties were built in 1988 and one has the same year built as the subject property. They are all one storey buildings with heights ranging from 19 to 21 feet, with sale dates from April 29, 2011 to April 2, 2012. The sales prices range from $250,000 to $482,500. The sales price per sq. ft. range from $138 - $213. Ms. Schmitchen provides the median sale price per sq. ft. for the sales comparables as $172, while the average sale price per sq. ft. as $176. Further applying these to the subject property’s square footage provides a CVA of $392,000 (rounded) and $401,104 respectively. Ms. Schmitchen submits that since five of these sales are inferior to the subject property, this reveals that the assessment for the subject property is low and the Board should confirm the assessment as returned.

13Mr. Bain presented no sales to the Board. He presents the assessment of 1606 Sedlescomb Drive, Unit 12 (“reference property”), which was assessed at $341,000. He submits that this reference property has the same size, construction, location and age as the subject property and should be assessed the same. He confirmed that the reference property also has an office area measuring 800 sq. ft. and a mezzanine as the subject property. This fact could not be verified by MPAC as MPAC’s records do not reveal this and Ms. Schmitchen was unable to have access to inspect the reference property. Furthermore, Mr. Bain also testified that in three different taxation years prior to the January 1, 2012 cycle, MPAC had reduced the CVA of the subject property to the same as the reference property through minutes of settlement and amended notices.

Board’s Analysis and Decision

14After a consideration of all of the evidence, I determine the current value of the subject property to be $371,000.

15The thrust of the Act is to rely on current value as the basis for assessed value. 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.”

16The best evidence of current value is the sale of the subject property on or close to the valuation day of January 1, 2012. If, as in this case, no such sale occurred, the sales of similar properties in the vicinity will be considered to establish current value of the subject property.

17In Exhibit 3, the property profile of the reference property, MPAC’s records show that it does not have a street exposure, while the subject property has a street exposure. Ms. Schmitchen testified that a street exposure is where a property feeds off a main street and this has an impact on assessment but she could not quantity it. The Appellant submits that the subject property and the reference property do not have a street exposure and that the reference property profile is accurate. Neither party provided the Board with evidence to show how a street exposure will affect the value of the property and how to quantify the impact on the value of the subject property. The Board cannot arbitrarily assign a negative or positive adjustment to value without quantitative evidence.

18In determining the CVA for the subject property, the Board used the six sales presented by MPAC. The Board reviewed the characteristics of each of the comparables and determines that four of these sales are inferior to the subject property, while the other two are superior to the subject property in terms of age and size. Therefore the current value range of the subject property is illustrated in figure 1 below:

Figure 1

Sale A, B, C & D Inferior Comparables → $250,000 $357,500 →

Subject Property’s Current value range $371,000

Sale E & F Superior Comparables ← $442,000 $482,500 →

19The subject property’s current value range tilts to the left, more towards the inferior comparables and not at the midpoint of the range. The high end of the range of superior comparables sold at $482,500 and is almost relatively comparable to the subject property in terms of size, being only 10 sq. ft. smaller. In essence, the subject property is superior to the inferior comparables in terms of size. Sale A, located at 1605 Sedlescomb Drive, which has total building area of 1,780 sq. ft., with the same year built and height as the subject property sold in April 29, 2011 at $357,500. This property is also considered to be inferior to the subject property. Given that these sales are inferior to the subject property, and the high end of the superior comparable is almost relatively comparable to the subject property, the Board agrees with MPAC that the subject property is under assessed and confirms the assessment as returned.

20The Appellant questions MPAC’s comparable sales based on economies of scale. Economies of scale does not always line up with the market and moreover the average Assessment to Sales Ratio (“ASR”) for these sales is 0.98 and the median ASR is 1.02. This measures how MPAC’s valuation methodology is reflecting sales within this vicinity. It further depicts that the subject property’s assessment similarly reflects the market. I determine the current value of the subject property to be $371,000.

Equity Analysis

21Section 44.(3)(b) of the Act mandates and directs that after determining current value, the Board shall have reference to the value at which similar lands in the vicinity are assessed to consider whether that current value is not equitable relative to the assessments of those similar lands. The ASR is a tool often used to determine if a reduction in the assessment below current value is required to make an assessment equitable with the assessments of similar lands in the vicinity. The ASR is determined by dividing the assessment as returned by the time-adjusted sale price.

22Ms. Schmitchen presented an equity analysis of 28 industrial condominiums which could also be used for office space, in Mississauga, which sold from February 2011 to October 2012. In Exhibit 1, MPAC’s Valuation Report, Ms. Schmitchen erroneously provided that these were sales of commercial condominium units, which the Appellant suggested commands more value than industrial space. Ms. Schmitchen testified that this was an error which was not detected by her prior to the hearing, however was corrected during the hearing. The Board finds Ms. Schmitchen credible in this regard and made the necessary corrections at the hearing.

23Mr. Bain submits that MPAC’s equity analysis does not support the market analysis for the subject property, since the median sale for the 28 properties is $260 per sq. ft. Ms. Schmitchen explained that in accordance to the mandate of the Board under s. 44.(3) of the Act, MPAC’s equity analysis assists the Board in determination of fairness in taxation, to ensure that property owners are paying their fair share of the municipal tax burden and it does not have anything to do with current value under s. 19 of the Act. Sequel to this, Ms. Schmitchen provides the median ASR of these sales as 1.00, which she submits reveals that the CVA’s are reflective of sales prices in the vicinity and that similar properties in the vicinity have been assessed at their current values and are equitable, consequently, there is no need for an equity adjustment.

24The Appellant’s equity argument is based on the assessment of the reference property assessed lower than the subject property, at $149 per sq. ft., based on a CVA of $341,000. Ms. Schmitchen argues that the Appellant’s submission on equity is based on s. 44(2) of the Act under the old cycle. The Board notes that in Exhibit 2 of the Appellant’s evidence, for three taxation years prior to the January 1, 2012 cycle, MPAC had assessed both properties the same through minutes of settlement and amended notices, but have not done this for the taxation years in question. The reason for this action by MPAC was unclear to the Board save from the Appellant’s submission that they are both similar properties and should be assessed the same.

25The Board agrees with MPAC. The purpose of s. 44.(3)(b) of the Act is to ensure that the municipal tax burden is shared fairly and equally among similarly situated taxpayers. Properties need not be as similar as they need to for valuation purposes; however, they need to be of the same general nature, character or function. Mr. Bain basically used only one property to establish equity. Only one property does not establish a trend in assessment to determine if equity has been achieved. MPAC’s evidence shows that 28 other industrial condominiums are assessed at or near the CVA. The evidence shows that the reference property may be under assessed and for the Appellant to request to equalize with one incorrect assessment is not equity. It is irrelevant what happened in a previous cycle and this appeal is based on a new cycle, based on the evidence presented at the hearing. The evidence does not lead the Board to the conclusion that the assessment of the property should be reduced below its current value to make it equitable with the assessments of similar lands in the vicinity.

CONCLUSION

26Based on all of the evidence, the Board confirms the current value as returned at $371,000 for the 2013, 2014, 2015 and 2016 taxation years and finds this value to be fair and equitable.