Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE: March 09, 2017

FILE NO.: ID 145347

Assessed Person(s): EMD Canada Acquisition Co. and 2467913 Ontario Inc.

Appellant(s): EMD Canada Acquisition Co.

Respondent(s): Municipal Property Assessment Corporation (“MPAC”) Region 23

Respondent(s): City of London

Property Location(s): 2021 2033 Oxford Street East

Municipality(ies): City of London

Roll Number(s): 3936-030-320-01500-0000

Appeal Number(s): 3098330, 3123431 and 3158661

Taxation Year(s): 2014, 2015 and 2016

Hearing Event No.: 666778

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

Heard: January 25, 2017 in London, Ontario

APPEARANCES:

Parties	Representative
EMD Canada Acquisition Co.	Bob Patterson
MPAC	William Somerville
City of London	No one appeared

INTERIM DECISION OF THE BOARD DELIVERED BY DAN WEAGANT

INTRODUCTION

1The subject property is an industrial site in London. It was formerly used as a facility for the manufacturing and maintenance of locomotives and rolling stock for the railroad business. The property was listed for sale in 2013 and this listing resulted in a sale of the property on June 9, 2015. The previous owner, EMD Canada Acquisition Co. ceased operations in 2012 and by 2013 most of the equipment related to its previous use had been sold and removed from the property, with the exception of 10 crane structures, which remain.

2An appeal of the 2014 assessment was filed and was subsequently deemed for the 2015 and 2016 taxation years. MPAC returned a value of $5,995,000 for the 2014 taxation year. The Appellant believes the returned value is too high and that the current value of the subject property should be what the property sold for in 2015 ($4,000,000).

3At the outset of the hearing, the parties made submissions with respect to the issues in dispute. They agreed that, in order for the Assessment Review Board (“Board”) to make a decision on current value and equity of assessment, a preliminary decision has to be made on whether or not the 2015 sale meets the requirements of the Assessment Act (“Act”) for the purposes of determining current value, specifically:

• Section 1.(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.

4There is no dispute between the parties regarding the nature of the transaction itself. It is agreed that the two parties of the sale were ‘arm’s length’ and that both parties were ‘willing’. The Board relies on the unrefuted evidence of the Appellant’s witness, Evan Prendergast, who systematically went through the post-sale interview he had with the listing broker’s representative to determine the specific nature of the purchase and sale.

5The question is whether or not the terms of the purchase and sale agreement constitute an ‘encumbrance’ as referenced in the Act. MPAC submits that the terms of the sale indicate the subject property is encumbered and accordingly the sale cannot be considered to be an indicator of its current value. The Appellant submits that there is no encumbrance in the terms of the sale and that the sale represents a reasonable indication of the current value of the property for the 2014, 2015 and 2016 taxation years.

6The parties agreed that if the Board determines the sale to be a reasonable indication of the current value, it should be accepted as such. If the Board determines that the terms of the sale is encumbered as the term is used in the Act, the parties agree that the hearing should be re-convened to determine the current value of the subject property and whether or not the current value represents an equitable assessment when it is compared to the assessments of similar properties in the vicinity.

INTERIM DECISION

7The Board finds that the contaminated nature of the subject land is part of the essence of the property. The property is not encumbered by this condition when the term is used in the context of s. 1.(1).

8The Board finds that the sale was for the land as encumbered by a use restriction and an easement. This does not, however, mean the Board will completely disregard the subject sale as a determining factor of the current value of the subject property. Rather, the sale must be considered together with evidence of the impact of the easement on the property and the restriction on use in the purchase and sale agreement.

9Accordingly, the hearing is to be re-convened for the purposes of determining the current value of the subject property and whether or not its assessment should be reduced, when reference is made to the assessments of similar properties in the vicinity.

REASONS FOR THE DECISION

10The decision as to the validity of the subject sale, as an indicator of current value turns on the application of the term “if unencumbered” as the term is used in s. 1.(1) of the Act.

11Mr. Somerville submits that the purchase and sale agreement includes three elements that encumber the subject property:

• The property is contaminated and this fact is acknowledged;
• The property is subject to an easement or easements that require access and egress to the property jointly with an adjoining property; and
• The property is subject to restrictions of specific use; namely that the manufacture or maintenance of locomotives or other railroad rolling stock is prohibited for a period of 20 years from the date of the sale.

12In summary Mr. Somerville submits that these conditions of the sale represent encumbrances and that the purchase price would have been higher if they were not present.

13Mr. Patterson submits that “if unencumbered” as the term is used in s. 1.(1) is not related to conditions of the property itself, but to external conditions that are applied to the property and that are essentially temporary in nature and not part of the essence or nature of the property. He suggests that a property that has a lien or judgement against it is encumbered. He cites a foreclosure sale, where a lender may take legal control of a property where money is owed to them. The institution may choose to sell at a price acceptable to address their monetary interest and the property then emerges from the sale, free of the foreclosure. The sale in this example would have less to do with the property’s value and more to do with the interest of expediency of the sale to recoup a specific financial interest. Mr. Patterson reminded the Board that no such encumbrance exists in the subject purchase and sale agreement.

14With respect to contamination, the Board has been consistent in previous decisions that while contamination may affect a purchase price, it represents a condition of the land or property being sold. This type of condition is viewed by the Board as being akin to other property conditions, like the presence of treed areas or significant sloped areas that might restrict the use of a property.

15Mr. Patterson cited Samuel’s v. Municipal Property Assessment Corp., Region 9 [2015], O.A.R.B.D. No. 200 and D. Murray Ventures Inc. v. Municipal Property Assessment Corp., Region 23 [2016], O.A.R.B.D. No. 107; both decisions of the Board where contamination was recognized by the parties to the sale and was considered a physical condition of the land sold. In addition, the contamination of these properties was considered to ‘ride with the land’ insofar as there was no indication that there was any external influence that would serve to eliminate the condition. Contamination of land in these cases is considered to be permanent and part of the essence of the property. This is the same situation as the present case.

16The Board finds that the presence of contamination of the site does not constitute an encumbrance.

17With respect to the easement in favour of the adjoining property, MPAC submits that without the easement, the value of the subject property would be higher. Easements are specifically addressed in s. 9.(1) of the Act, which states:

Where an easement is appurtenant to any land, it should be assessed in connection with and as part of the land at the added value it gives to the land as the dominant tenement, and the assessment of the land that, as the servient tenement, is subject to the easement shall be reduced accordingly.

18In his submission, Mr. Somerville did not make specific reference to s. 9.(1), nor did the Board hear any evidence regarding the impact on the current value of the subject property from the presence of the easement. Mr. Patterson was also silent on s. 9.(1) and offered no specific value of the easement.

19The Board finds that the resolution of the value of the easement can only be determined through evidence from the parties.

20With regard to the restriction of use in the purchase and sale agreement, it is reasonable to place value on permitted uses on any given property. In this case, a certain subset of uses that would otherwise be permitted by the City’s zoning regulations is prohibited in the purchase and sale agreement. It is reasonable to conclude that, all other influences being equal, the subject property would have a different (presumably higher) value if the uses restricted by the purchase and sale agreement were permitted.

21For the Board to determine the value of the use restriction, it requires specific evidence from the parties to consider.

22The Board finds that the easement and the use restriction both have a particular impact on the subject property’s value that is not reflected in the sale price of $4,000,000.

23In summary, the Board agrees with Mr. Patterson with regard to his submissions on contamination. The contaminated nature of the subject property is part of the essence of the property. The property is not encumbered by this condition when the term is used in the context of s. 1.(1).

24The Board finds that the sale is encumbered by the easement and the use restriction in the purchase and sale agreement. The sale of the property provides some indication of the current value of the property. But the impacts of these encumbrances must also be considered.

25Accordingly, the hearing is to be re-convened for the purposes of determining the current value of the subject property and whether or not its assessment should be reduced, when reference is made to the assessments of similar properties in the vicinity. The parties are directed to contact the Board with mutually convenient dates for the hearing to be re-convened. This Member is seized.