Formula Honda, Boatswain Nial v. Municipal Property Assessment Corporation ("MPAC") Region 09, 2017 CanLII 55874

Assessment Review Board

Commission de révision de

l’évaluation foncière

ISSUE DATE:

August 24, 2017

FILE NO.:

WR 147042

Assessed Person(s):

The Joseph Lebovic Charitable Foundation

The Wolf Lebovic Charitable Foundation

Appellant(s):

Formula Honda, Boatswain Nial

Respondent(s):

Municipal Property Assessment Corporation (“MPAC”)

Region 09

Respondent(s):

City of Toronto

Property Location(s):

2240 Markham Road

Municipality(ies):

City of Toronto

Roll Number(s):

1901-123-500-00201-0000

Appeal Number(s):

3176356

Taxation Year(s):

2016

Hearing Event No.:

674086

Legislative Authority:

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

Heard:

May 30, 2017 in Toronto, Ontario

APPEARANCES:

Parties

Counsel⁺/Representative

Formula Honda

Boatswain Nial

Rae Buchan

MPAC

Damian Bernacik

City of Toronto

No one appeared

DECISION OF THE BOARD DELIVERED BY ANTHONY LaREGINA

INTRODUCTION

1The subject property is located at 2240 Markham Road, one traffic light south of Finch Avenue on the west side of Markham Road. The subject is a Commercial Automotive Dealership called Formula Honda. The parcel of land is 4.11 acres with a frontage of 350 feet and a depth of 512 feet. The parcel is irregularly shaped but the entire frontage is on Markham Road. The subject has two commercial buildings with a gross floor area of 25,680 square feet which were constructed in two phases, one in 1991 and the other in 1997. The classification of the entire property is Commercial (CT).

2Damian Bernacik, representing MPAC, has taken the position that the assessment should be confirmed at $6,111,000 based on his analysis using the cost approach for the building structure and the sales comparison approach for the land portion.

3Rae Buchan, representing the Appellant, agrees with the cost approach and does not dispute the building value of $1,968,605 as determined by MPAC. Mr. Buchan’s issue is the land value which he claims should be $756,382 per acre equivalent to the land value of the Kia dealership across the street. Mr. Buchan requests the current value be set at $5,077,335 and that there be a further equity adjustment based on the equity study he presented of three auto dealerships with a median adjusted Assessment to Sales Ratio (“ASR”) of 0.945 to a Current Value Assessment (“CVA”) of $4,798,081.

ISSUES

4What is the current value of the subject property based on the evidence provided?

5Is the current value equitable or does it require a further adjustment to ensure it is equitable with the assessments of similar properties in the vicinity?

DECISION

6The Assessment Review Board (“Board”) finds that the current value of the subject property as of January 1, 2012 is $5,659,000.

7The Board also finds that no further adjustment to the subject property’s current value is required to make it equitable with the assessment of similar properties in the vicinity.

8The Board therefore reduces the CVA of the subject property from $6,111,000 to $5,659,000 and confirms the classification of Commercial (CT) for the 2016 taxation year.

REASONS FOR DECISION

Determination of Current Value

9The 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.”

10Section 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…”

11Section 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.”

12The issue for the Board’s determination is the current value of the subject property as of January 1, 2012.

MPAC’s Case

13Tom Tracey, the valuation witness for MPAC, presented his report identifying the cost approach as the most suitable method for establishing the value of the building structure at $1,968,605 with full agreement from Mr. Buchan.

14Mr. Tracey presented the sales comparison approach to establish the land value of the subject property. Mr. Tracey established the median unadjusted sale value per acre of $1,091,477 based on four vacant land sales in the vicinity of the subject property. Applying the sale value per acre to the 4.11 acres results in a total land value of $4,485,970.

15Therefore, the current value based on a combination of the cost approach for the building and the sales comparison approach for the land results in a current value for the entire property of $6,465,000.

16Mr. Tracey concluded that the land rate used to establish the CVA of $6,111,000 was $1,008,059 per acre and therefore the assessed value of land as returned is fair and reasonable.

Appellant’s Case

17Mr. Buchan introduced the same four comparable land sales as MPAC and also added the sale of 2201 Markham Road which occurred in October 2014 consisting of a 1.5 acre parcel across the street from the subject property ultimately used to build the KIA dealership. Mr. Buchan also made a number of adjustments to the sale values which included time adjustments of 6% per year as well as corner, size/scale, and superior development potential adjustments. The following chart is a listing of all six properties including the adjustments recommended by Mr. Buchan.

Subject

Comparable 1

Comparable 2

Comparable

3

Comparable 4

Comparable 5

2240 Markham Road

2201 Markham Road

30 Ironside Crescent

3132 Eglinton Avenue

846 Milner Avenue

69 Lebovic Avenue

Site Area Acres

4.11

1.507

5.0

5.35

1.34

3.51

Sale Date

10/2014

12/2012

10/2010

11/2013

04/2010

Sale Value $

1,500,000

4,750,573

5,690,000

1,500,000

4,500,000

Unadjusted $/Acre

995,355

950,115

1,063,551

1,119,403

1,202,051

Time Adjust $/Acre

840,428

897,858

1,170,598

1,006,735

1,415,782

Corner of Intersection

No

No

Yes

No

Yes

No

Corner Adjustment $/Acre

808,072

906,062

Size Scale Adjustment $/Acre

756,385

808,072

1,170,598

906,062

1,415,782

Superior Development Potential Adj $/Acre

756,385

808,072

877,948

906,062

840,460

Median adjusted $/Acre - $840,460

Most Comparable – Kia dealership 2201 Markham Road adjusted $/Acre - $756,385

18Mr. Buchan requests that the land value be established at $756,385 per acre when adjusting for time and size/scale based on the sale of the property across the street at 2201 Markham Road used as a Kia dealership. Applying that to the 4.11 acre site of the subject yields a total land value of $3,108,743. Further adding the agreed to building cost of $1,968,605 results in a current value of $5,077,348. Mr. Buchan requests that the current value be set at $5,077,348 based on a January 1, 2012 valuation day.

Analysis – Current Value

19The best evidence of current value is the sale of the subject property on or near the valuation date of January 1, 2012. When no such sale occurs, as in this appeal, the Board looks to the recent sale of other similar properties in the vicinity to determine current value.

20During the course of the hearing Mr. Bernacik objected to Mr. Buchan appearing as an expert witness because Mr. Buchan was also acting as the advocate for the Appellant, quoting BCE Place Ltd. v. Municipal Property Assessment Corp., Region No. 9, [2007] O.A.R.B.D. No. 237: “for opinion evidence to be admitted it must be provided by a properly qualified expert witness.” While the Board agreed not to qualify Mr. Buchan as an expert witness the evidence was allowed to proceed based on its merits.

21The Board agrees with the use of adjustments when evidence is submitted to support such adjustments. In support of a reasonable time adjustment factor Mr. Buchan presented the increase in assessments for 18 auto dealerships in the vicinity of the subject property showing an annual increase in assessments of 5.7% between 2008 and 2012 and 5.5% between 2012 and 2016 therefore rounding it to 6%. In the absence of any other time adjustment evidence the Board will accept the time adjustment factor of 6% as a reasonable annual time adjustment.

22Mr. Buchan did not present any other quantitative or documentary evidence in support of the additional adjustments that he proposed. The Board will reject all other adjustments including corner, size/scale and superior development adjustments as they were strictly Mr. Buchan’s opinion not quantitatively supported with factually based evidence.

23The Board will base the determination of current value on the time-adjusted sale value of the five properties presented by both MPAC and the Appellant. The time adjusted sale range per acre for the five property sales is between $840,428 and $1,415,782. Based on the analysis of the evidence presented, the Board concludes that the two properties at the lower end of the range are very close to the location of the subject property in the Finch Avenue and Markham Road area while the three properties at the upper end of the range are in totally different business areas further away from the subject property and closer to the city center. For these reasons the Board will therefore set the current value of the subject property at the lower end of the range or $897,858 per acre which is in line with the sale of 30 Ironside Crescent. This property has a site area of 5.0 acres which is the most similar to the subject property at 4.11 acres and sold December 21, 2012, less than 12 months from the January 1, 2012 valuation day, requiring the least time adjustment. The other comparable property sales were further removed from the valuation day requiring larger time adjustments.

24Based on a land value of $897,858 per acre and a site area of 4.11 acres the Board finds the land value to be $3,690,196. Further adding the agreed to building value of $1,968,605 the Board will set the current value of the subject property at $5,658,801.

Analysis – Equity

25Section 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 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.”

26The 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 prices.

27Mr. Tracey presented an equity analysis based on 13 sales of commercial properties all located in the vicinity of the subject property all costed using the automated cost system. These properties sold in the time frame between January 1, 2011 and December 31, 2012 yielding a median ASR of 1.04 based on unadjusted sale values. Mr. Bernacik submits that MPAC standards indicate that the median ASR should fall between 0.95 and 1.05, which is in line with the International Association of Assessing Officers (“IAAO”) standards, which state that the median ratio should fall between 0.90 and 1.10. If the median ratio falls within this range, this reveals that the CVAs are reflective of sale prices in the vicinity. Mr. Bernacik concluded that similar properties in the vicinity have been assessed at their current values and consequently there is no need for an equity adjustment.

28Mr. Buchan objected to the fact that the 13 properties were not auto dealerships and therefore should not be used as similar properties in the vicinity. The Board is in agreement with MPAC and the Ontario Court of Appeal decision, Devald et al and Regional Assessment Commissioner, Region No. 16 et al., 1977 CanLII 1246 (ON CA), 15 O.R. (2d) 212 that for equity purposes the properties need to be of “the same general nature, character and function” and that they do not become dissimilar because they differ in appearance or use.

29Mr. Buchan provided the Board with the time-adjusted sales of three car dealerships which sold in Scarborough between July 12, 2011 and September 5, 2014 yielding a median ASR of 0.945. Based on the above Mr. Buchan requested that the Board make a further 5.5% downward adjustment to the current value to $4,798,000.

30The ASR evidence does not lead the Board to the conclusion that the assessment of the subject property should be reduced below its current value to make it equitable with the assessments of similar lands in the vicinity. MPAC presented 13 properties showing that no adjustment is required to current value while Mr. Buchan presented only three properties which the Board considers a very small sample to justify an equity adjustment. Furthermore, in both cases while the sample size of 13 or 3 is less that the Board considers acceptable the median ASR values of 1.04 and 0.945 rounded to 0.95 are within the reasonable range not requiring an equity adjustment.

CONCLUSION

31Based on all of the evidence, the Board determines the current value of the subject property to be $5,658,801 and finds this value to be fair and equitable. Consequently, the Board reduces the returned CVA from $6,111,000 to $5,658,801 rounded to $5,659,000 for the 2016 taxation year.