Assessment Review Board
Issue Date: August 22, 2017 File No.: WR 147143 Assessed Person(s): Real Property Management Inc. Appellant(s): Real Property Management Inc., Linda Floyd Respondent(s): Municipal Property Assessment Corporation (“MPAC”) Region 07, Township of Algonquin Highlands Property Location(s): 1017 Garland Lane Municipality(ies): Township of Algonquin Highlands Roll Number(s): 4621-030-000-24200-0000 Appeal Number(s): 3182959 Taxation Year(s): 2016 Hearing Event Nos.: 679566 and 681672 Legislative Authority: Section 40 of the Assessment Act, R.S.O. 1990, c. A.31, as amended Heard: May 29, 2017 in Minden, Ontario and July 7, 2017 by telephone conference
Appearances:
- Real Property Management Inc., Linda Floyd (Counsel/Representative: Linda Floyd)
- MPAC (Counsel/Representative: Mary Hennessey)
- Township of Algonquin Highlands (No one appeared)
DECISION OF THE BOARD DELIVERED BY BERNARD COWAN
INTRODUCTION
11017 Garland Lane (“the subject”) is a recreational property on Fletcher Lake, accessible by a private seasonal road. As described by Linda Floyd1, its 773 square foot structure was formerly a bunkie for an adjoining property, more akin to a shed in considerable disrepair when the property was purchased in June 2015 for $285,000. It lacked hydro, a bathroom and heating.
2MPAC’s representative, Mary Hennessey, concedes that the $317,000 assessment as returned for the 2016 taxation year is excessive, having proposed to reduce it to the subject’s $285,000 purchase price. She maintains that this is appropriate, as her evidence (Exhibit 1A) includes an Equity Analysis that has a median assessment to sales ratio (“ASR”) of 1.045. This ratio falls within MPAC’s acceptable range to demonstrate equity among assessments of similar properties.
3Ms. Floyd considers the value proposed by Ms. Hennessey to be excessive for several reasons. These are that: the value has not been time-adjusted from the 2015 purchase date to the January 1, 2012 valuation date set by the governing legislation; the impact of a post-purchase survey which purports to indicate an encroachment of the structure on an abutting site has not been addressed; and, MPAC’s assessment methodology is inappropriate and misleading, as Ms. Floyd’s ASR analysis of sales between mid-2010 to November 2013 appears to indicate over-assessment by an average of 71% for a group of properties nearest the subject and under-assessment for a more distant group.
4I must determine the correct market-based current value (“CV”) for the subject as of January 1, 2012. I must then refer to the assessments of other similar properties in the vicinity to determine if that value is equitable with those others’ assessments, or whether a reduction to the CV is required to achieve equity.
5The in-person hearing on May 29, 2017 was not completed that day and was reconvened on July 7, 2017 by telephone conference after the parties agreed to this method of hearing. Ms. Hennessey undertook to provide her written response regarding time adjusting and any available update on MPAC’s review of the encroachment issue to the Assessment Review Board (“Board”), with a copy to the appellant. This was sent to the Board and the Floyds on July 24, 2017 and entered into evidence as Exhibit 6.
DECISION
6The assessment is reduced from $317,000 to a CV of $251,000 for the 2016 taxation year. This outcome is not found to be inequitable with the assessments of similar lands in the vicinity, and accordingly no further reduction is necessary.
Current value
7Section 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.
8The Act establishes January 1, 2012 as the valuation date for 2013 to 2016 taxation, and defines current value to mean:
“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.
9The marketplace as of January 2012 is accordingly intended to be determinative of CV.
10The best evidence of a property’s CV is ordinarily its actual arms-length sale. In this instance, the subject did sell in June 2015 for $285,000. By statutory definition, that was its CV at that date.
11The only evidence as to time adjustments is in Exhibit 6, wherein MPAC’s Price Changes Over Time indicates that prices decreased by about 13.27% over the 24 months from January 2011 to December 2012 inclusive, based upon 240 sales of properties within the subject’s and adjacent neighbourhoods during that period. MPAC indicated that it lacks a comparable study into the years 2013, 2014 and 2015, as it only has calculated base year (2012) to base year (2016) overall percentage changes over the four year period, and the specific monthly changes for the shoulder years of 2011 and 2012 that surround the January 1, 2012 valuation date set by the Act.
12Time adjustments are open to adjudication, as may be introduced into evidence by the parties. In this instance, there is no such evidence from either party correlating sales values in January 2012 to the value levels of sales in the years 2013, 2014 or 2015.
13The time adjustment factors (“TAFs”) included in Exhibit 6 indicate, on the balance of probability, that little net change in the marketplace occurred during the year 2012. Indeed, little net change occurred between July 2011 and December 2012, inclusive, as the TAFs for both of those months were 0.988.
14Without TAFs beyond 2012, to extrapolate a TAF backward from the subject’s sale date would be more subjective than objective. But to do so could lead to a rational conclusion that little change in this particular marketplace may have occurred between December 2012 and June 2015; and consequently the CV for the subject at January 1, 2012 might approximate its $285,000 purchase price. I lack any evidence to definitively time adjust the subject’s 2015 sale price, but nevertheless consider this to be one reasonable indication that the subject’s $317,000 CV as returned may be excessive.
15The 240 sales listed in Exhibit 6 from which the TAFs are derived merit no weight in my comparative sales analysis. Aside from those few sales therein that are duplicated in the parties’ evidence and referred with specificity therein, these sales have no evidentiary characteristics (lot, structure and features) included to assist in any meaningful comparison for valuation purposes.
16The actual sales evidence other than that of the 240 properties in Exhibit 6 is from three sources: (1) the three sales in 2011 or 2012 introduced for comparative purposes in Ms. Hennessey’s Property Report section of her Exhibit 1A; (2) two additional sales in 2013 submitted by Ms. Floyd in her Exhibit 3; and (3) 24 sales in the document introduced for Ms. Floyd’s ASR evidence as Reference 2 in her Exhibit 1B.
17The three sales in Ms. Hennessey’s Exhibit 1A merit little weight in a comparative sales analysis, because all are superior to the subject and no quantifiable comparative analysis is in evidence that accounts for these differences. All have larger structures and equal or lesser water frontage than the subject. They all have year-round road access lacking for the subject; a feature that adds value according to Ms. Hennessey. These properties sold in 2011 or 2012 for prices between $265,000 and $332,500. Likewise the two additional properties in Exhibit 3 merit no determinative weight, being even more superior to the subject. These sold in 2013 for $325,000 and $485,000, are considerably newer than the subject, are of a higher quality class, and have larger structures. None are time-adjusted, and again there is no evidence to quantify any of these variances.
18I am nevertheless comfortable in finding that the obvious superior attributes of the five sold properties demonstrates that the subject’s CV at January 2012 should be less than $265,000, being the lowest of the five sale prices.
19I attribute no determinative weight to any of the 24 property sales introduced by Ms. Floyd. Having been introduced for an ASR analysis, the document lacks details for any comparative analysis, other than site frontages, lot areas and sale dates. These sales range broadly from $35,000 to $600,000. Introduced into evidence to address a different issue, these sales transactions provide no guidance for my determination of the subject’s CV.
20Considering the absence of sales evidence sufficient to definitively determine the subject’s CV, I find the best evidence of the CV to be Ms. Hennessey’s testimony. In it, and based upon the uncontested property description introduced by Ms. Floyd, Ms. Hennessey acknowledges that the subject’s quality class is more likely a 2 or 3, considering her exterior photographic evidence. She rejects outright Ms. Floyd’s suggestion that a quality class 1 should apply to the subject, and indicates that without her undertaking an interior inspection, she would not propose that the quality class should be below a 3. On my questioning, Ms. Hennessey advises that if assessed as a quality class 2 or 3, the subject’s CV would be reduced to $251,000 or $256,000 respectively.
21I find that the best evidence indicates that a CV in the range of $251,000-$256,000 is appropriate. This outcome is reasonably compatible with both the subject’s actual 2015 purchase price of $285,000 and the sales evidence that indicates that the CV should be less than $265,000.
22Ms. Floyd introduces another issue respecting the subject’s valuation. Her presentation, as outlined in Exhibit 1A, refers to a survey prepared after the purchase which indicates that the structure purportedly “…encroaches on the abutting property…a fact that devalues and complicates the footprint of the existing building for future use.”
23Copies of the survey were presented to MPAC, and introduced as evidence in Exhibit 6 by Ms. Hennessey. MPAC has concluded from its review that “…no adjustment is warranted for the encroachment of the structure on the neighbouring property.”
24I do not profess to have expertise in interpretation of surveys. However, I note that there are two such documents dated August 4, 2016. One is certified, signed by the Surveyor, and acknowledged by the Haliburton Land Titles representative; and the other is unsigned but otherwise appears identical, except that this latter one includes the outline of the subject’s structure. Based on this unsigned copy, it appears that a relatively small wooden landing below the rear door and abutting the structure protrudes noticeably over the indicated lot line. I have no reason to doubt the veracity of this circumstance, based on the credible testimony of Ms. Floyd, bolstered by the copy of the uncertified survey. Further, I would expect that if disclosed to any potential purchaser, the possibility of a price adjustment between buyer and seller for any such encroachment is likely.
25In this instance, no evidence has been presented respecting this apparent encroachment to quantify an appropriate adjustment to the CV otherwise determined. As I stated in my opening comments to the parties, I must be provided with evidence to demonstrate the impact of a problem or circumstance that likely diminishes the value of a property.
26I adopt the $251,000 lower range of CV established above in paragraph 18 as appropriate for the subject, in recognition of the probability that the encroachment, unknown to the Floyds when the purchase price was established, diminishes the subject’s current value. Nothing before me leads to determination of a lesser CV, as that is the lowest reasonable alternative value in evidence.
Equity with Similar Lands in the Vicinity
27Section 44.(3) of the Act states in part:
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.
28The burden of proof respecting equity of a property’s CV in relation to other nearby properties’ assessments rests with the appellants. In this instance, I find that Ms. Floyd has not introduced evidence that demonstrates that the CV determined by me is excessive in relation to other properties’ assessments, because her evidence respecting equity and its resultant conclusion are unreliable. This contrasts with Ms. Hennessey’s evidence which indicates by ASRs that the properties within 9.4 km from the subject property have generally been equitably assessed in relation to their CVs.
29Both Ms. Floyd and Ms. Hennessey relied upon evidence based upon an ASR analysis. This approach essentially evaluates the ASRs of properties having a like nature, character or function to ascertain the general relationship between multiple sold properties and their assessments. If the median ASR is near the ideal ASR of 1.00, equity among assessments within the geographic area is generally indicated to be reasonably satisfactory. If the preponderance of ASRs is at a high level, this is likely to indicate that the properties within the area are excessively assessed and that a downward reduction to the CV for the appealed property may be appropriate.
30Reference 2 in Ms. Floyd’s Exhibit 1B sets out dates and values of 23 property sales that transacted in each of the years from 2010 to 2013 inclusive, plus the subject’s sale in 2015. This document indicates, together with other detail, the related assessment values and the individual properties’ ASRs derived therefrom.
31Reference 3 in the Exhibit 1B is a map that plots all 24 properties, and encircles a group of 8 properties (including the subject) that are described by Ms. Floyd to be on the same Fletcher Lake as the subject, or the next closest lake on either side of it. The remaining group of 16 properties is described as being in close proximity to the subject, but about 10-12 km2 north of and closer to Dorset. Based thereon, Ms. Floyd has calculated the average ASRs for the groupings of 8 and 16 to be 1.71 and 0.71 respectively. As the subject falls within the ostensibly over-assessed group of 8 properties, and due to the substantial variance between the apparent ASRs of these two groups of properties, Ms. Floyd suggests that a I concur with her that MPAC’s assessment process, at least for the eight in the subject’s geographic area, is flawed. She maintains that as a minimum, the assessment should be reduced to the purchase price, time-adjusted.
32I do not accept Ms. Floyd’s premise that her ASR analysis demonstrates a flawed, misleading and inappropriate assessment process by MPAC, as it is her analysis that is flawed. I do however recognize that the task of analyzing ASRs undertaken by her was challenging, likely frustrating, and that her incorrect conclusion was not ill-intended.
33Ms. Floyd has co-mingled aspects of the evidence leading to many ASR calculations that incorporate incorrect/inappropriate CVs. Her outcome is a mixture of ASRs akin to the proverbial comparison of apples and oranges, whereby the numerators in the ASRs incorporate one of the “assessment as returned” base years of 2008, 2012, and 2016. Bearing in mind that the appeal before me is for the 2016 taxation year, which is legislated to be valued as of January 1, 2012, only the 2012 base year is appropriately applicable for my review. Excluding the subject, 10 of the 23 properties in Reference 2 utilize 2016 base year Current Value Assessments (“CVAs”) (applicable for 2017 to 2020 taxation) in the ASR numerator, and 10 of the 23 utilize 2008 base year CVAs (applicable for 2009 to 2012 taxation). The remaining 3 of the 23 properties’ ASRs correctly utilize the 2012 base year CVAs, and these are duplicated in Ms. Hennessey’s Equity Analysis. While this count may have one or two of the ASRs allocated to an incorrect base year due to my uncertainty where multiple base year options are indicated in Ms. Floyd’s document, this does not negate my conclusion that the preponderance of ASRs demonstrate that Ms. Floyd’s attempt to calculate ASR averages has not succeeded in providing meaningful evidence for my s. 44.(3)(b) reference.
34My conclusion respecting incorporation of the 2008 base year CVs by Ms. Floyd is applicable notwithstanding the fact that her Exhibit 1 Reference 2 document in this regard is from the lines therein labelled “FAV 2012 per MLS Listing”, and her resultant calculations of “ASR as of Sale Year”. One example corroborating this conclusion is Property 15 therein, that indicates the “FAV”, the Sale Amount, and the ASR as $268,000, $325,000 and 69% respectively. However, the real estate sales listing included for this property as part of the appellant’s Exhibit 2 indicates the Full Assessed Value (or FAV) and the Phased Assessment to be $268,000 and $224,000 respectively. Although Ms. Floyd has (likely inadvertently) calculated the 69% ASR by using the phased-in assessment value instead of the 2008 base year CV for 2009 to 2012 taxation, this ASR is clearly predicated upon the 2008 base year. Indeed, it must be, because the 2012 base year valuation applicable to the subject’s 2016 taxation year could not have been determined at the time of Property 15’s 2010 sale. This same concept applies to the other 9 sales introduced by Ms. Floyd from which the ASR she has calculated is likewise derived from the 2008 base year value.
35My reference for the subject’s CV in relation to other properties’ assessments must be founded in comparing other properties’ assessments having the same base year valuation date; 2012 in this instance. It is inappropriate to co-mingle ASRs derived from different base years’ assessments. This is strongly supported by a plethora of Board experience, and which I endorse as being universally applicable unless a cogent and compelling argument backed by extraordinary circumstances and related evidence is presented to the tribunal and is found to be the best evidence.
36In this instance, having found that little weight is attributable to Ms. Floyd’s “equity” evidence, I find the best evidence to be Ms. Hennessey’s Equity Analysis. This document lists 30 property sales in 2011 and 2012, and their time-adjusted ASRs. Unlike the lacking time-adjustment information between January 1, 2013 and the subject’s 2015 sale, this information is available from MPAC for the period between January 2011 and December 2012 inclusive, and has been utilized to more accurately establish the ASRs in the Analysis.
37The Analysis indicates a median ASR to be 1.045. This value falls within MPAC’s standard that deems any median ASR between 0.95-1.05 to demonstrate that equity has been achieved. It also obviously falls within the 0.90-1.10 standard of the International Association of Assessing Officers, a generally accepted external authority. My reference to the assessments of other properties’ assessments accordingly does not indicate the subject’s CV of $251,000 to be excessive in relation to other properties’ assessments.
CONCLUSION
38All indications from the sales evidence support my finding that Ms. Hennessey’s testimony is the best evidence from which to determine the CV for the subject. In the absence of definitive evidence of the impact of time on the 2015 sale price of the subject in relation to the statutory January 2012 valuation date, that value remains instructive with respect to its CV, but is not determinative thereof.
39I recognize the probable encroachment of a portion of the subject’s structure on an abutting site. Lacking a basis to quantify the impact of this circumstance on the subject’s current value, I have chosen the lowest quality classification value indicated by Ms. Hennessey, which varies only marginally by $5,000 from that which she accepts as being appropriate considering the evidence attested to by Ms. Floyd. The subject’s CV is accordingly determined as $251,000.
40My reference to other properties’ assessments does not indicate that the CV which I have established for the subject is excessive. No additional reduction is merited.
41The assessment for the subject is accordingly reduced from $317,000 to $251,000 for the 2016 taxation year.
“Bernard Cowan”
BERNARD COWAN MEMBER Assessment Review Board A constituent tribunal of Environment and Land Tribunals Ontario Website: www.elto.gov.on.ca Telephone: 416-212-6349 Toll Free: 1-866-448-2248