815488 Ontario Inc. v. Municipal Property Assessment Corporation, 2017 CanLII 11481

Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE:

February 28, 2017

FILE NO.:

WR 143793

Assessed Person(s):

815488 Ontario Inc.

Appellant(s):

815488 Ontario Inc.

Respondent(s):

Municipal Property Assessment Corporation (“MPAC”)

Region 19

Respondent(s):

City of Hamilton

Property Location(s):

1489-1495 Upper Gage Avenue

Municipality(ies):

City of Hamilton

Roll Number(s):

2518-060-731-02780-0000

Appeal Number(s):

3059027, 3059028, 3059029, 3059030, 3089085 and 3156140

Taxation Year(s):

2013, 2014, 2015 and 2016

Hearing Event No.

636089

Legislative Authority:

Sections 34 and 40 of the Assessment Act, R.S.O. 1990, c. A.31, as amended

Heard:

October 17, 2016 in Hamilton, Ontario

APPEARANCES:

Parties

Counsel⁺/Representative

815488 Ontario Inc.

Rocco Oliverio

MPAC

Karey Lunau⁺

City of Hamilton

No one appeared

DECISION OF THE BOARD DELIVERED BY MARGARITA OKHOVATI

INTRODUCTION

1The appeal before the Assessment Review Board (“Board”) is filed by Rocco Oliverio (the “Assessed”) in respect of the returned assessment of $5,287,000 for the 2013, 2014, 2015 and 2016 taxation years for the subject property at 1489-1495 Upper Gage Avenue in the City of Hamilton.

2The subject property is a four-storey low rise multi-residential apartment building with 59 units in the City of Hamilton. It is in proximity to public transit, hospitals, shopping and Highways 403 and the Queen Elizabeth Way (“QEW”). It was constructed in 2012 and occupied in 2013.

ISSUES

3There were six appeals advanced by the Appellant including appeals under s. 34 and s. 40 of the Assessment Act (“Act”) as follows:

• Appeal 3156140 - s. 40 appeal for 2016 taxation year for $5,287,000

• Appeal 3089085 - s. 40 appeal for 2015 taxation year for $5,287,000

• Appeal 3059030 - s. 40 appeal for 2014 taxation year for $5,287,000

• Appeal 3059027 - s. 34 appeal for 2013 taxation year for $ 174,000

• Appeal 3059028 - s. 34 appeal for 2013 taxation year for $ 497,000

• Appeal 3059029 - s. 34 appeal for 2013 taxation year for $4,616,000

4Karey Lunau, counsel for the MPAC, introduced Jennifer Bouchard as an expert witness and multi-residential Valuation Analyst with MPAC. Ms. Bouchard stated that she is of the view that a fair and equitable assessed value for the subject property is $5,287,000 for the 2013-2016 taxation years by using income approach to value.

5Mr. Oliverio, for Assessed person/Appellant, 815488 Ontario Inc. contests that the current value assessment (“CVA”) of the subject property is too high. He testified that based on his analysis the CVA of the subject property should be $ 4,200,000.

6The City of Hamilton was not in attendance in the hearing.

7The Board has to decide:

• Whether the returned assessment of $5,287,000 for the 2013-2016 taxation years for the subject property is the correct current value as of the January 1, 2012 valuation date and if not to determine the correct current value; and

• Whether the correct current value so determined is inequitable with the assessments of similar lands in the vicinity and if so to adjust it.

DECISION

8The Board determined that the current value of the subject property is $5,287,000 and that no further adjustment is required to make this value equitable with that of similar properties in the vicinity.

9Therefore, the Board confirms the assessment of the subject property at $5,287,000 for the 2013-2016 taxation years.

The Legislation

10In determining the value at which land shall be assessed, the Board must have regard to the following provisions of the Act:

11Section 1 of the Act states:

“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.

12Section 19.(1) of the Act states:

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

13Section 19.2(1)2 of the Act states:

19.2 (1) Valuation days. – 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.

(5) Exception. – 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.

14Section 40.(17) of the Act states:

40.(17) Burden of proof. – For 2009 and subsequent taxation years, where value is a ground of appeal, the burden of proof as to the correctness of the current value of the land rests with the assessment corporation.

15Section 40.(19) of the Act states:

40.(19) Board to make determination. – After hearing the evidence and the submissions of the parties, the Board shall determine the matter.

16In determining the value at which any land shall be assessed, s. 44.(3)(a) and (b) of the Act requires the Board to do two things:

44.(3) Same, 2009 and subsequent years. – For 2009 and subsequent taxation years, in determining the value at which any land shall be assessed, the Board shall,

(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.

17Section 34(1) of the Act states:

34(1) Supplementary assessments to be added to collector’s roll. – If, after notices of assessment have been given under section 31 and before the last day of the taxation year for which taxes are levied on the assessment referred to in the notices, improvement of any building, structure, machinery, equipment or fixture or any portion thereof that commences to be used for any purpose;

(b) land or a portion of land ceases,

(i) to be exempt from taxation,

(ii) to be farm lands the current value of which is determined in accordance with subsection 19 (5),

(iii) to be conservation land or managed forests land the current value of which is based on current use under subsection 19 (5.2),

(iii.1) to be land in the managed forests property class the current value of which is determined under subsection 19(5.2) or (5.2.1),

(iv) to be land the current value of which is based on current use under regulations made under subsection 19 (2), or

(v) to be classified in a subclass of real property;

(c) Repealed: 1997, c. 5, s. 22 (1).

(d) a pipeline increases in value because it ceases to be entitled to the reduction provided for in subsection 25(9),

the assessor may make the further assessment that may be necessary to reflect the change, and the clerk of the municipality upon notification thereof shall enter a supplementary assessment on the tax roll and the amount of taxes to be levied thereon shall be the amount of taxes that would have been levied for the portion of the taxation year left remaining after the change occurred if the assessment had been made in the usual way.

REASONS FOR DECISION

Current Value

MPAC’s Evidence

18At the outset of the hearing, Ms. Bouchard stated that at the time of the inspection of the subject property in July 2015, she reported that the subject property had only 57 units but missed two one bedroom units. Later, she added the two missing units by bringing the total number of the units to 59. She stated further that by adding two additional units the CVA of the subject property became $5,666,382. She stated that the MPAC is not seeking an increase in value and is asking the Board to confirm the subject property’s CVA at $5,287,000.

19Ms. Bouchard submitted that MPAC’s assessment and property class partitioning is as follows:

Tax Year Assessment Property Class

2013 $ 671,000 RU/RT (changed to NT by the two s. 34’s

2013/05/01)

2013/05/01 $4,616,000 RU/NT

2014 $5,287,000 RU/NT

2015 $5,287,000 RU/NT

20Ms. Bouchard presented a Market Value Report, 2012 CVA of the subject property and Appendix A consisting of nine comparable sales in the vicinity of the subject property (Exhibit 1). She stated that all the comparable properties were built between 1956 and 1975 whereas the subject property was constructed in 2012 and occupied in 2013. She asserted that MPAC uses Gross Income Multiplier (“GIM”) method to value rental apartment buildings. She stated further that this is a mix of the income approach and the direct sales comparison approach because it involves a comparison of sales of apartment buildings and their Potential Gross Annual Income (“PGAI”).

21Ms. Bouchard submitted that the GIM of all nine comparable sales is ranging from 6.60 to 10.04. The GIM applied to the subject property is 10.60.

22Ms. Bouchard stated that MPAC has calculated the value of the subject property as follows:

PGAI = $498,867 x GIM 10.60 = $5,287,990

23Furthermore, Ms. Bouchard stated that MPAC has analyzed all leasing information collected from owners of the comparable properties in 2011 and based on MPAC’s information, fair market rent (“FMR”) for the subject property is as follows:

UNIT FMR

1 Bedroom $700

2 Bedroom $825

Parking $ 40

24Ms. Bouchard testified that a government grant was allowed for constructing the subject property. She stated that the City of Hamilton has passed a by-law applying a substantially lower tax rate to newly constructed multi-residential properties therefore, the subject property is benefiting from this property tax savings. To compensate for the differences, MPAC has added a 20% positive adjustment because the rents provided by the Appellant for the subject property are 20% lower than FMR. Ms. Bouchard stated further that new multi-residential buildings have also minimal capital expenditures required and therefore, they are profitable to the owner and consequently, they do not sell as often.

25Ms. Bouchard submitted that MPAC did not consider the CVA and the sale price of the units in suggested comparable properties. As well, she did not consider the government grant in assessing the subject property. (Exhibit 1, Appendix A).

26Ms. Bouchard submitted that the subject property’s Pro-Forma Income based on 2012 CVA is as follows (Exhibit 2):

REVENUE

Rental Income $404,304

Plus 20% adjustment $ 80,861

Parking $ 13,920

PGAI $499,085

Less vacancy 2% $ 9,982

Effective Gross Income: $489,103

TOTAL EXPENSES $110,589

Net Operating Income: $378,514

Cap Rate - 5.25%

Effective Tax rate - 1.43%

Overall Cap Rate - 6.68%

INDICATED VALUE: $5,666,382

Appellant’s Evidence

27Mr. Oliverio presented Exhibit 3a, 3b, 3c and 8) consisting of four comparable properties to the subject property. He submits that most of the MPAC’s comparable properties are in the West of Hamilton where most of the properties are expensive and prestigious whereas the subject property is in the Mountain zone, where the properties are cheaper.

28Mr. Oliverio stated that he obtained and applied the information generated by Canada Mortgage and Housing Corporation (“CMHC”) to reach FMR for one and two bedroom units in his suggested comparable properties which is different from MPAC’s methodology. In doing so, he submitted that MPAC’s CVA of the subject property is higher than his suggested comparable properties.

29Mr. Oliverio submitted the following information regarding his suggested comparable properties (Exhibit 6):

480 Stone Church Rd. Market Rent Difference in Market Rent % Difference

One bedroom 0 0

Two bedroom $806 - $840 ($36) 4.47%

260 King Street

One bedroom $655 - $688 ($33) 5.04%

Two bedroom $771 - $861 ($90) 11.67%

37 Strathcona Ave.

One bedroom $626 - $738 ($112) 17.89%

Two bedroom $737 - $889 ($152) 20.62%

30No sales of properties were presented by Mr. Oliverio.

Board’s Analysis and Conclusion

31The 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.”

30The best evidence of current value is the sale of the subject property on or close to the valuation day of January 1, 2012. If, no such sale occurred, the sales of similar properties in the vicinity will be considered to establish current value of the subject property.

32In reviewing MPAC’s and Appellant’s evidence, the Board has considered the following in reaching its decision:

a) MPAC’s comparable properties are closer to the subject property than the Appellant’s suggested comparable properties.

b) MPAC’s suggested comparable properties were sold between 2011 and 2012. As mentioned above, the Appellant did not present any sale to the Board.

c) The subject property was built in 2012 and MPAC’s nine comparable properties were built between 1956 and 1975 therefore, the subject property is a newer building than the comparable properties and therefore, should have a greater value.

d) Appellant’s argument regarding the location of MPAC’s suggested comparable properties when he stated that they were mostly located in the West of Hamilton where the houses are more expensive, the Board notes that the Appellant’s suggested comparable properties are in different Wards other than one property, 480 Stone Church Road East, which is in the same Ward as the subject property.

e) Appellant argues that CMHC’s information regarding the FMR are more correct than MPAC’s methodology. MPAC brought the following to the Board’s attention:

• CMHC’s average FMR for one and two bedroom apartments in Mountain is $702 and $840 and MPAC’s calculated FMR for one and two bedroom apartments in the subject property is $700 and $825 respectively. (Exhibit 4).

33Moreover, the Board prefers MPAC’s methodology for analyzing FMR over Appellant’s information obtained from CMHC which shows rents in local areas.

34Furthermore, MPAC submits that they take information from the property owners directly with respect to the rents after inspecting the premises and they do not rely on the information on the website. In this respect, MPAC referred to Appellant’s evidence regarding the number of units at 260 King Street East, which is one of Appellant’s comparable properties. The information taken from website shows the number of units at 260 King Street East is 123 (Exhibit 7) but MPAC’s information shows the number of units in that building is 85 (Exhibit 3c).

Equity

35Section 44.(3)(b) 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 determine whether the correct current value is inequitable compared to the assessed values of similar lands. The Assessment to Sale Ratio (“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.

36No evidence was adduced by the Appellant regarding equity.

37MPAC submitted an equity analysis, Exhibit 1, indicating that the median ASR is 0.96 based on nine sales of similar properties in the vicinity. This indicates that the level of assessments of similar properties is reasonably in line with the level of sales values. Therefore, the Board finds that no equity adjustment is required.

CONCLUSION

38As mentioned, MPAC added two more units to the subject property after inspecting in July 2015. By adding the extra units, MPAC’s assessor has assessed the subject property at $5,666,000.

39Rule 30 of the Board's Rules of Practice and Procedure dictates that notice must be sent to parties and the Board if a party intends to seek an increase to an assessment. Since notice was not sent, MPAC proposed that the assessment of the subject property be confirmed at $5,287,000.

40The Board finds no compelling reason not to accept this recommendation. Therefore, the assessment of the subject property is confirmed at MPAC's recommended value of $5,287,000 for the 2013, 2014, 2015 and 2016 taxation years and that this value is equitable with the assessments of similar lands in the vicinity.