1241676 Ontario Inc. v. Municipal Property Assessment Corporation, Region No. 09, 2017 CanLII 7852

Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE: February 14, 2017

FILE NO.: WR 144892

Assessed Person(s): 1241676 Ontario Inc.

Appellant(s): 1241676 Ontario Inc. and Vincenzo Barrasso

Respondent(s): Municipal Property Assessment Corporation (“MPAC”) Region No. 09

Respondent(s): City of Toronto

Property Location(s): 2667 Kipling Avenue

Municipality(ies): City of Toronto

Roll Number(s): 1919-043-210-09700-0000

Appeal Number(s): 2968837, 2958290, 3034856, 3016404, 3079422 and 3148190

Taxation Year(s): 2013, 2014, 2015 and 2016

Hearing Event No. 656473

Legislative Authority: Sections 32 and 40 of the Assessment Act, R.S.O. 1990, c. A.31, as amended

Heard: December 9, 2016 in Toronto, Ontario

APPEARANCES:

Parties

Representative

1241676 Ontario Inc.

Vincenzo Barrasso

MPAC

Damian Bernacik

City of Toronto

No one appeared

DECISION OF THE BOARD DELIVERED BY J. L. WALKER

INTRODUCTION

1The subject property, 2667 Kipling Avenue, is improved by a 23-storey high-rise apartment building constructed in 1978. The building has a total of 228 units, consisting of 91 two-bedroom units and 137 three-bedroom units. For the 2013 - 2016 taxation years, the Municipal Property Assessment Corporation (“MPAC”) returned the assessment at $18,857,000 using the income approach to value. This approach relies upon a Gross Income Multiplier (“GIM”) applied to a calculation of the property’s Gross Potential Income (“GPI”) that is subject to standard allowances for vacancy and expenses.

2The Appellant, Vincent Bassaro, asserts that the subject property has been over-valued, as MPAC has not taken the building’s high maintenance costs and higher than average vacancy rate into account. He requests that the Assessment Review Board (“Board”) reduce the assessment by taking these factors into consideration.

ISSUE

3The Board must determine the current value of the land, and reduce that value if necessary to make it equitable with that of similar lands in the vicinity.

DECISION

4The Board finds that the current value of the subject property is $18,857,000 for the 2013 - 2016 taxation years, and that no further adjustment is required to this value to make it equitable with that of similar lands in the vicinity. The Board confirms the assessment for the 2013 - 2016 taxation years at $18,857,000.

REASONS FOR DECISION

Legislation

5In making its determination, the Board is governed by the following provisions of the Assessment Act (“Act”), R.S.O. 1990, c. A.31, as amended:

6Section 19.(1) states that “…the assessment of land shall be based on its current value.” Section 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.”

7Section 19.2(1) of the Act establishes January 1, 2012 as the valuation day for the 2013 – 2016 taxation years.

8Section 44.(3) of the Act provides the test that must be applied upon an appeal on any ground against an assessment:

Same, 2009 and subsequent years

(3) 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.

9Under s. 40.(17) of the Act, where value is the ground of an appeal, “…the burden of proof as to the correctness of the current value of the land rests with the assessment corporation.”

Current Value

10The Board determined that the best evidence before it of current value was that of the assessor Scott Wood (Exhibit 1), and finds that the current value is $18,857,000 for the 2013 - 2016 taxation years. Although Rosalyn Brown, Property Manager, provided a great deal of anecdotal evidence regarding the challenges faced by the subject property, the Board did not receive quantifiable evidence from the Appellant in support of a lower current value.

11For the mass appraisal of multi-residential properties MPAC relies on the income approach to value, applying a GIM to the GPI of a multi-residential building, with standard allowances for vacancy and expenses. The appellant reported a vacancy rate of 31% and expenses at 81.54% of GPI.

12A GIM of 6.85 was used in the assessment of the subject property. To test the assessment, Mr. Wood examined the GIMs of 26 multi-residential properties that transacted in the vicinity of the subject property at or near the valuation day (Exhibit 1, Table 2). The GIMs range from 7.94 to 9.05, with a median of 8.45. Table 2 included no other information such as the total number of units or the unit mix. Mr. Wood clarified that none of the properties have only two-bedroom and three-bedroom units. The assessment and sales values also were not provided.

13Mr. Wood submits that as the property was assessed using a “poor condition” GIM, this demonstrates that the higher than average vacancy rate and expenses have been accounted for. He stated that the median expenses for the subject property are 81.54% of PGI, as compared with 74.02% for 13 selected properties (Exhibit 1, Table 3). The expenses for this group of properties range from 59.48% to 95.89% of PGI.

14Mr. Wood also provided an analysis of the fair market rents (“FMR”) applied by MPAC to determine the GPI for the subject property, and concluded that the economic rents confirm that the property has been valued fairly. A number of new leases were signed in 2012 and the shoulder years. While the median actual rents demonstrated in the leases are $1,100 and $1,250 for the two-bedroom and three-bedroom units, MPAC used more conservative rents of $914 and $1,055 when it assessed the subject property.

15Mr. Wood then compared these rents with those achieved by a sample of 16 properties in the vicinity (Exhibit 1, Table1). While the Board was not provided with a breakdown of the unit mix for the properties, Mr. Wood confirmed that they include one-bedroom units. The median rent for the two-bedroom units is $1,167 and $1,301 for three-bedroom units. The actual rents achieved by the subject property are at the lower end of the range of values achieved in this sample.

16Mr. Wood states that these comparisons demonstrate that the subject property’s assessment is lower than its market value: the GIM of 6.45, when applied to the median FMR of comparable buildings in Table 1, yields a value of $23,425,520, and when applied to the actual rents achieved at the subject property, yields a value of $22,304,000 (rounded.

17Mr. Wood stated that the 2012 rent roll attests to a high vacancy rate of 30%, which Mr. Bernacik argues is attributable to the bad management of the property. Mr. Wood stated that this figure is well above the vacancy rate of 2.1% for the area determined by the Central Mortgage and Housing Corporation (“CMHC”). No data was presented in support of the CMHC vacancy rate. He asserts that a study of 13 multi-residential properties demonstrates a median vacancy rate of 1.32% for (Exhibit 1, Table 4).

18Mr. Wood clarified that his inspection of the property was restricted to an external view of the property, and that he did not contact the appellant to investigate further. Mr. Barrasso confirmed that he did not request an inspection, but stated that it would have helped MPAC to appreciate the issues in the building.

19Mr. Barrasso submits that his building is not comparable to those having bachelor and one-bedroom units in that they do not attract the same type of tenants and associated maintenance issues. Ms. Brown stated that the building accepted referrals for housing from COSTI Immigrant Services. Housing costs of these tenants are covered by the United Nations for a period of one year after which it is anticipated that they will be self-sufficient. Ms. Brown stated that at the end of this period some tenants skip out or are evicted for the non-payment of rent.

20Ms. Brown described the systemic issues faced by the building, stating that it was difficult to keep units in good repair due to (unsanctioned) overcrowding, and by virtue of the location of the building. Many other non-residents loiter at or within the building. The building is staffed with two security guards and has two surveillance cameras on each of the 22 floors.

21Mr. Barrasso entered into a partnership with the City of Toronto in 2014 whereby he received a substantial grant to effect major repairs on the subject property and the companion tower located at 2677 Kipling Avenue. Ms. Brown stated that the funds were used to make roof and boiler repairs to both the subject property and the companion tower. She objects to MPAC’s Exhibit 5, which lists the number of current building infractions, stating that it is authored by an advocacy group, which exploits tenants, and that in any event, the building is subject to constant repair.

22The Board did not find MPAC’s allegations regarding the landlord’s history to be helpful in determining current value; if anything, they appear to be contradicted by the City’s decision to work with the landlord to improve the state of the building. In his further submissions, Mr. Bernacik suggests that Mr. Barrasso should not be “rewarded” for his business decision to accept refugee tenants, but this is not the issue. The issue is the correct value of the subject property.

23The Board accepts Ms. Brown’s testimony regarding the building’s condition, but in the absence of supporting evidence has no way to determine whether MPAC has not fully accounted for the extraordinary expenses in its valuation of the subject property.

24The only evidence of current value before the Board is MPAC’s GIM study of the sales of 26 multi-residential buildings. The Board would have preferred more detailed information on these sales (the number of units and the unit mix; whether the properties are low-rise/mid-rise/high-rise multi-residential properties) to assess whether these buildings are indeed similar. No assessment or sales data was provided. The evidence only demonstrates what the GIMs are, not whether MPAC over or under-assessed these 26 properties. The saving grace is that the GIM of 6.45 used to assess the subject property is below the observed median of 8.45.

25However, MPAC’s survey of leases for both the subject property and those of similar buildings in the area demonstrates that the subject property, may, if anything may be under-assessed. The FMRs used to value the subject property are below the actual rents of both the subject property and leases of similar property.

26The Board determined that the higher than average income and vacancy issues faced by the subject property likely have been offset by the use of a lower GIM and FMRs. The Board finds the current value of the subject property is $18,857,000.

Equity

28Section 44.(3)(b) of the Act requires the Board to have reference to the value at which similar lands in the vicinity are assessed and to adjust the assessment to make it equitable with that of similar lands in the vicinity where such an adjustment would result in a reduction to the assessment.

29The parties state that equity is not an issue in the present case, but this does not exempt the Board from making its inquiry.

30Neither Mr. Barrasso nor MPAC provided the Board with evidence with regard to equity. As described above, no assessment or sales data was provided for the properties in the GIM study, which may have also assisted the Board in applying s. 44.(3)(b) as well as s. 44.(3)(a).

31The lower GIM and FMR applied by MPAC in its determination of current value suggest that the subject property may already be assessed at a value lower than its current value, but this does not necessarily lead to the conclusion that equity has also been achieved.

32In the absence of an evidentiary basis for its determination, no further reduction can be made by the Board.

Conclusion

33The Board confirms the assessment of the subject property at $18,857,000 for the 2013-2016 taxation years.