Jong Kyu Huh v. Municipal Property Assessment Corporation, 2017 CanLII 49741

Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE: July 28, 2017 FILE NO.: WR 146793

Assessed Person(s): Jong Kyu Huh, Kyung Soon Huh Appellant(s): Jong Kyu Huh Respondent(s): Municipal Property Assessment Corporation (“MPAC”) Region 09 Respondent(s): City of Toronto

Property Location(s): 893 Bloor Street West Municipality(ies): City of Toronto Roll Number(s): 1904-044-380-04500-0000 Appeal Number(s): 3113253 and 3148272 Taxation Year(s): 2015 and 2016 Hearing Event No.: 673466

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

Heard: May 5, 2017 in Toronto, Ontario

APPEARANCES:

Parties	Counsel+/Representative
Jong Kyu Huh	Andrew Attard, Advocate Joseph Castro, Witness
MPAC	Roberto Boccia
City of Toronto	No one appeared

DECISION OF THE BOARD DELIVERED BY ANTHONY LaREGINA

INTRODUCTION

1The subject property is located at 893 Bloor Street West on the south side between Dovercourt and Shaw in the City of Toronto. As of January 1, 2012 the subject property consisted of a single retail unit on the first floor with six or less residential units on the second and third floors. The structure was built in 1908 with approximately 5,202 square feet of total building area situated on a regular lot with frontage of 33.91 feet and a depth of 120.00 feet. The total Current Value Assessment (“CVA”) on the property is $1,361,000 with $831,000 apportioned to full Commercial and $530,000 apportioned to full Residential classification.

2The property has been vacant and under renovation for the last 10 years. The property owner has filed an appeal under the Municipal Act for a refund of taxes due to the vacancy.

3MPAC is requesting a confirmation of the CVA based on a sales comparison analysis showing that the current value of the subject property at $1,361,000 is fair and reasonable in comparison to the sales of similar properties in the vicinity as of January 1, 2012.

4Mr. Attard also presented the sales comparison approach and indicated that based on the fact that the building has been vacant for 10 years he concludes that the current value should fall between $939,000 and $1,040,000 to compensate for chronic vacancy.

ISSUES

5What is the proper current value of the subject property based on the evidence presented?

6Does the current value require any further adjustment to ensure it is equitable with the assessments of similar properties in the vicinity?

DECISION

7The Assessment Review Board (“Board”) finds that the current value of the subject property as of January 1, 2012 is $1,361,000.

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 properties in the vicinity.

9The Board therefore accepts MPAC’s recommendation to confirm the assessment of the subject property at $1,361,000 for the 2015 and 2016 taxation years with an apportioned value of $530,000 in the Residential and $831,000 in the Commercial classifications.

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 Evidence

14The assessor, Roberto. Boccia provided the Board with a comparable sales analysis of six properties as the basis for establishing the current value of the subject property. The details on these properties are found on Exhibit 2. All six properties are non-corner lots located on Bloor Street West and therefore considered by Mr. Boccia to be comparable to the subject property.

15Using the time-adjusted sale values for each property as well as total building area and lot area, Mr. Boccia determined the time-adjusted sale value per square foot for both lot and building. With this information Mr. Boccia established the median time-adjusted sale value per square feet of site area of $435 and for building area at $305.

16Mr. Boccia further applied these two factors to determine the predicted market value of the subject property at $1,678,000 based on a split of 50% for lot area and 50% for building area.

17Mr. Boccia acknowledged that the subject property has been vacant for 10 years while the comparable properties he presented were all occupied. He therefore further presented the sale of 883 Bloor Street West located directly across the street from the subject property. This property sold vacant in a pre-renovated state with 10,800 square feet of building area for $1,950,000 April 1, 2011 and was scheduled to undergo an $850,000 renovation in 2013. Mr. Boccia admitted that this is a larger site area and building area than the subject property but is an indicator of relative value directly across the street.

18Mr. Boccia then expanded his search in order to find a more similar situation to the subject property and located the sale of 1040 and 1042 Queen Street West which sold as one property February 27, 2012 for $1,200,000. This property consisted of a lot with 29.66 frontage and 100 feet of depth for a total lot area of 2,966 square feet and a building area of 2,963 square feet. Mr. Boccia submits that while the lot and building areas are slightly inferior to the subject property, Queen Street is an inferior location as compared to Bloor Street West and yet this property sold vacant for redevelopment at $1,200,000 time-adjusted to $1,180,800.

19Using the time-adjusted sale value for 1040/1042 Queen Street of $1,180,800 yielded a time-adjusted sale value per square foot of lot and building area of $398 and $399. Applying these values on a basis of 50% lot and 50% building area to the subject dimensions yields a current value for the subject property at $1,619,860.

20Finally as an indicator of relative value Mr. Boccia also presented the sale of 45 Ossington Avenue claiming that this is an inferior property and inferior location to the subject, selling for $1,101,800 on December 1, 2011. This property has a frontage of 15.16 feet representing less than half that of the subject frontage at 33.91 feet and 90 feet of depth which is only 75% of subject’s and yet sold for only $250,000 less than the CVA of the subject property.

21Mr. Boccia summarized by stating that he acknowledges that the subject property has been under renovation for the last 10 years and is vacant. He further submits that the owner has filed an appeal under the Municipal Act for vacancy and that the owner has made no attempt to lease the property.

22Mr. Boccia concludes that based on the median time-adjusted sale analysis of the six occupied comparable properties resulting in a current value for the subject of $1,678,530, the vacant sale of 1040/1042 Queen West resulting in a current value for the subject of $1,619,860 and the relative sale values of 883 Bloor Street West and 45 Ossington Avenue, he requests that the CVA as returned at $1,361,000 or $262 per square foot of building area is fair and equitable and should therefore be confirmed.

Appellant’s Evidence

23Mr. Castro conducted the property valuation on behalf of the appellant and presented Exhibit 12 into evidence which included two analyses, one to determine the residual land value and the other to determine the current value of the subject property. Both analyses utilized the sales of the same six comparable properties. In addition, Exhibit 12 included photographs of each of the comparable properties and maps showing their locations relative to that of the subject property. Lastly, the document included a detailed description of 883 Bloor Street West which Mr. Castro determined was the best comparable to establish the current value of the subject property.

24Mr. Castro attempted to establish the residual land value of the subject by taking the unadjusted sale value for each of the six comparable properties and dividing by the lot area and concluded that based on a median rate of $8,849,348 per acre the subject has a land value of $708,000. Mr. Castro failed to make adjustments for the value of the existing improvements on each property as these properties were not vacant land sales.

25Mr. Castro then used the same six comparable properties to determine whether the CVA of $1,361,000 was reasonable. Mr. Castro determined that the median unadjusted sale value per square foot of building area for the six comparable sales was $291 and concluded that the subject property with CVA rate of $262 dollars per square foot appeared to be reasonable

26Mr. Castro then presented 883 Bloor Street West as the best comparable property to establish the current value of the subject. Mr. Castro determined that based on an unadjusted sale value of $1,950,000 and the building area of 10,800 square feet the unadjusted sale value per square foot computed at $181. Mr. Castro concluded that this is a reasonable rate for the subject property and applied this rate to building area of the subject of 5,202 square feet to establish a current value of $939,000.

27Mr. Attard the advocate for the appellant submitted that the reasonable range of values for the subject property should be somewhere between $181 and $200 per square foot yielding a current value of between $939,000 and $1,040,000. Mr. Attard asserts that this value is 23% to 31% below the returned value which is a reasonable adjustment for a property with chronic vacancy similar to the subject property. Mr. Attard equates this adjustment to the 27% and 30% downward adjustment made in two previous Board decisions to adjust for chronic vacancy: Falconwin Holdings Limited v. Municipal Property Assessment Corp., Region 9, [2010] O.A.R.B.D. No. 229 (WR 85820) and Karl Estate v. Municipal Property Assessment Corp., Region 7, [2010] O.A.R.B.D. No. 662 (WR 85065).

Board’s Findings

28The 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.”

29The best evidence of current value is the sale of the subject property on or close to the valuation day of January 1, 2012 which in this case did not occur.

30The Board acknowledges that this is a unique situation where the property has been under construction for the better part of 10 years. The owner is improving this property from a 5,202 square foot structure to a 10,387 square foot structure. According to Mr. Boccia’s documentary evidence there were building permits issued in 2008 and 2014 and the building was still under renovation and vacant as of his inspection on April 5, 2017. Clearly this is not a chronic vacancy situation. This owner has made a conscious decision that he is not going to rent his property until he had completed his renovation, regardless of how long they take.

31Mr. Boccia struggled to find a set of comparable sales in a similar unique situation to the subject property. His initial analysis of six occupied comparable sales yielded a current value of $1,678,530 for the subject property. Mr. Boccia then presented 883 Bloor Street West which he admitted was a much larger structure but one that was sold vacant and was scheduled for an $850,000 renovation similar to the subject. Mr. Boccia then found the sale of 1040/1042 Queen Street which sold for $1,200,000. This property is slightly smaller in lot size and building size and in an inferior location, Queen Street as opposed to Bloor Street. Finally Mr. Boccia presented the sale of 45 Ossington Avenue for $1,101,800 in December 2011. 45 Ossington Avenue has a lot area 33.5% the size of the subject and a building area 65.4% that of the subject property and is therefore substantially inferior to the subject property.

32Based on Mr. Boccia’s analysis the Board is satisfied that MPAC has made a reasonable attempt to determine a fair market value of the subject property with the sales analysis of occupied structures yielding a current value on the higher end of the range for the subject property of $1,678,530. The Board is also satisfied that on the lower end of current value range should be the sale of 1040/1042 Queen Street at the adjusted sale value of $1,180,800 which is clearly inferior in size and location to the subject and sold as a vacant structure for renovation purposes. The Board finds that the current value of the subject property is $1,361,000, a reasonable and fair value and within the range of values between $1,180,800 and $1,678,530.

33The sale of 65 Ossignton Avenue, around the corner from the subject, for $1,101,800 is also very much in support of the $1,361,000 current value of the subject property. The property on Ossington Avenue is substantially smaller and in an inferior location to the subject property and yet sold for only $250,000 below the current value of the subject property.

34The Board rejects Mr. Attard’s argument that the current value of the subject should be set based on the sale of 883 Bloor Street West because this property is substantially superior to the subject property. This property has a building area of 10,800 square feet which is twice that of the subject at 5,202 square feet. Using the square foot analysis tends to skew the adjusted sale value per square foot analysis to a lower value than it should be for a 5,202 square foot building due to economies of scale and therefore artificially reducing the current value of the subject of $939,000. This is further supported by Mr. Castro himself in the 2012 CVA sales analysis on page 4 of Exhibit 12 showing a median adjusted sale rate per square foot of $291 yielding a current value for the subject property at $1,513,782. It is also interesting to note that the median adjusted sale rate per square foot of building area of $291 further corroborates MPAC’s $305 per square foot.

35The Board also rejects the residual land analysis presented by Mr. Castro as the comparable properties have structures which were ignored by Mr. Castro in his analysis. This analysis shows an improvement value of 0 and a 2012 CVA for the subject of $708,000 totally ignoring the value of the structure. The Board is very much in agreement with Member Light’s decision, Frank Raso v. Municipal Property Assessment Corp., Region 9, [2014] O.A.R.B.D. No. 433 (WR 125282), that the value of the structure cannot be ignored when determining the current value of a property.

36The Board also rejects the notion that this case falls under chronic vacancy. The subject property has not been leased for the last 10 years and has undergone continuous renovation. The Board decisions submitted by Mr. Attard were appropriately decided by their respective panels. They were chronic vacancy cases based on properties utilizing the income approach to value with serious vacancy issues. In the cases presented, management of the properties attempted to lease those properties but had difficulties because of poor conditions. Those properties were not totally vacant or under renovations as is the subject property. On the other hand the owner of the subject property has made no attempt to lease the units, instead filing an appeal for vacancy under the Municipal Act to compensate for his vacancy issue.

Determination of Equity

37Once current value has been established, the Board must determine whether a further adjustment 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.

38Section 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.

39Mr. Boccia introduced an equity study of 30 property sales in the vicinity of the subject property yielding a median assessment to adjusted sale ratio of 0.99 which falls within the reasonable range of 0.95 to 1.05 indicating that no further downward adjustment is required to the current value to ensure equity between the subject and similar properties in the vicinity.

40Mr. Attard presented no evidence in support of an equity adjustment.

CONCLUSION

41Based on the best available evidence, the Board will therefore confirm the assessment of the subject property for the 2015 and 2016 taxation years at $1,361,000 with $530,000 in Residential and $831,000 in the Commercial classifications.