Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE: October 22, 2018

FILE NO.: WR 155692

Assessed Person(s): Smita Jagrut Shah, Jagrut Kumar Shah

Appellant(s): Jagrut Kumar Shah, Smita Shah

Respondent(s): Municipal Property Assessment Corporation (“MPAC”) Region 09

Respondent(s): City of Toronto

Property Location(s): 189 Atlas Avenue

Municipality(ies): City of Toronto

Roll Number(s): 1914-021-060-00500-0000

Appeal Number(s): 3262480 and 3298137

Taxation Year(s): 2017 and 2018

Hearing Event No.: 703474

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

Heard: September 07, 2018 in Toronto, Ontario

APPEARANCES:

Parties Counsel+/Representative

Smita Jagrut Shah and Jagrut Kumar Shah Self-represented

MPAC Hassan Fereg

City of Toronto No one appeared

DECISION OF THE BOARD DELIVERED BY JEAN-PAUL PILON

INTRODUCTION

1Jagrut Shah and Smita Shah are the owners of 189 Atlas Avenue (the “Subject Property”) in the City of Toronto.

2Pursuant to the provisions of the Assessment Act, R.S.O. 1990, c. A. 31 (the “Act”), the assessment of land shall be based on its current value. The Act also provides that, for the 2017 to 2020 taxation years, MPAC is required to assess this value as of the valuation date, January 1, 2016 (“current value”).

3MPAC has returned a current value of the Subject Property of $664,000 in 2017 and $631,000 in 2018 but is recommending that the assessment for 2017 be reduced to $631,000. MPAC’s opinion of current value is $698,000.

4Jagrut Shah and Smita Shah (the “Appellants”) filed an appeal for the 2017 taxation year with the Assessment Review Board (the “Board”), and have been deemed to have brought the same appeal with respect to the Subject Property for the 2018 taxation year pursuant to section 40 of the Act. It is their position that MPAC’s assessment of current value is too high and that the correct current value is $598,000.

5Pursuant to subsection 40(11) of the Act, the City of Toronto was a party to the proceeding. However, it did not advise the Board of its position on the issues raised in these appeals, and no one appeared at the hearing on its behalf.

6Subsection 44(3)(b) of the Act directs the Board to reduce the current value of the Subject Property if similar lands in the vicinity have been assessed at a lower value (“equitable reduction”). The purpose of this provision is to fairly distribute the municipal tax burden according to the value possessed by each ratepayer. Both parties took the position that an equitable reduction is required.

7At the completion of the hearing, the Board reserved its decision. For the reasons that follow, the Board finds that current value of the Subject Property for the 2017 and 2018 taxation years is $663,130 and that pursuant to section 44(3)(b) of the Act, this value should be reduced to $618,000.

Relevant Legislation and Rules

8Section 1 of the Act states:

1. “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.

9Section 19.(1) of the Act states:

19.(1) Assessment based on current value. – The assessment of land shall be based on its current value.

10Section 19.2(1) of the Act states:

19.2(1) Valuation days – Subject to subsection (5), the day as of which land is valued for a taxation year is determined as follows:

3. For each subsequent period consisting of four consecutive taxation years, land is valued as of January 1 of the year preceding the first of those four taxation years.

11Section 40.(17) of the Act states:

40.(17) For 2009 and subsequent taxation years, where value is a ground of appeal, the burden of proof as to the correctness of the current value of the land rests with the assessment corporation.

12Section 44.(3) of the Act states:

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.

Issues

13The issues to be determined in this appeal are:

1. What is the correct current value of the Subject Property for the taxation years 2017 and 2018?

2. Should there be an equitable reduction of the current value of the Subject Property pursuant to s. 44(3)(b) of the Act and, if so, what the amount of this reduction should be?

Discussion, Analysis and Findings

Issue No. 1: What is the correct current value of the Subject Property for the taxation years 2017 to 2018?

MPAC’s Evidence

14Relying on MPAC’s Valuation Report prepared in anticipation of the hearing, MPAC’s representative, Hassen Fereg, testified that the Subject Property is a single family residential bungalow in Toronto.

15MPAC’s representative testified that there was a renovation to the Subject Property in 2009 prior to its acquisition by the Appellants that decreased its floor space from 861 square feet to 795 square feet. The Board was told that MPAC’s assessment of current value was based on the condition of the Subject Property prior to the renovation, and not after. MPAC’s representative testified that if this improvement to the Subject Property had been considered in MPAC’s assessment, along with the decrease in floor space, MPAC’s would be recommending a current value assessment of $643,000 and not $631,000.

16MPAC’s Valuation Report set out seven proposed comparable properties that had been the subject of sales transactions in 2015 and 2016, where the valuation date was January 1, 2016. The site area of each of these was almost identical to the Subject Property. Four of the seven proposed comparable properties had the same frontage as the Subject Property of 25 feet, and the frontage of the others was within two feet of that. Similarly, five of MPAC’s seven proposed comparable properties had the same depth as the Subject Property, where the sixth had a depth of 2.5 feet more and the seventh three feet more.

17There was more variation in total building area, which ranged from 654 square feet to 876 square feet, where the Subject Property’s total area is 795 square feet.

18MPAC’s representative testified that MPAC calculated square foot values by taking time adjusted sales amounts for each of the proposed comparable properties (where MPAC’s time adjustments were not disputed) and dividing each by the square footage. The median of those amounts was $900, and applied to MPAC’s view of the square footage of the Subject Property of 861, MPAC’s representative arrived at a value of $775,000. However, MPAC’s representative relied on his estimate of current value of $698,000 by taking the median of all seven of the time adjusted sale amounts, not the per square foot amounts.

MPAC’s Submission

19Relying on its evidence, MPAC submitted that the correct current value for the taxation years 2017 and 2018 is $698,000.

Appellants’ Evidence

20The Appellants noted that four of MPAC’s seven proposed comparable properties are on other streets than the Subject Property and testified they have higher values because those properties give access to better schools, are closer to better major streets, and have better public transit access.

21The Appellants further testified that the first of MPAC’s proposed comparable properties, which MPAC’s representative said was exactly the same as the Subject Property, had in fact another room and privacy fencing, neither of which the City of Toronto would allow to be added to the Subject Property. They further testified that a contractor had told them that an additional room would cost $125,000 to add to the Subject Property.

22The Appellants had six proposed comparable properties of their own to demonstrate that their assessment was disproportionately higher than the assessments of their neighbours. It was noted however that only two of those, both of which were also included in MPAC’s analysis, had been the subject of sales transactions.

Appellant’s Submission

23The Appellants submitted MPAC’s assessment of current value is too high and that the correct current value is $598,000.

Findings on Issue 1

24Starting with the issue of the renovation, MPAC’s position was that the 2009 renovation should not be considered, even though its effect was to diminish the square footage of the Subject Property from 861 square feet to 795 square feet. MPAC’s analysis was based on the former size, not the latter.

25On this point, the Board finds that it was open to MPAC to disregard the improvement, but that it was not open to it to pretend that the Subject Property remained larger than it actually was on the valuation date of January 1, 2016 when it would increase value. As of the date of the return of the roll for each of the 2017 and 2018 taxation years, the second Tuesday following December 1 of the previous year, the building on the Subject Property had a site area of 795 square feet.

26The Appellants’ primary argument was that MPAC’s proposed comparable properties were not, in fact, comparable because they were on better streets and allowed access to better schools. They argued that as a result, properties on other streets should be disregarded. They further argued that the first of MPAC’s proposed comparable properties was not comparable because it had another room and privacy fencing.

27At the same time, none of the Appellants’ proposed comparable properties had been the subject of sales transactions, and the sale prices of similar properties provide the best evidence of current value.

28The Appellants’ evidence of differing values on different streets went unchallenged on reply, and there was no explanation as to what, if any, difference privacy fencing or an additional room should have on value. Accepting the Appellants’ approach would leave two properties on the same street, 231 and 199 Atlas Road (the former which appeared only in MPAC’s submission with the latter appearing in both), with almost identical lot sizes, houses of similar vintage and almost the same floor space as the Subject Property. They were not only relatively comparable to the Subject Property, they were almost identical.

29The time adjusted sale amount for 231 Atlas was $621,094 and for 199 Atlas was $705,165. The average was $663,130. The Board finds to be the most likely current value of the Subject Property.

30The current value of the land is $663,130.

Issue No. 2: Whether there should be an equitable reduction of the current value pursuant to s. 44(3)(b) of the Act, and, if so, what the amount of this reduction should be.

MPAC’s Evidence

31MPAC chose 30 proposed comparable properties in its equity analysis in the vicinity of the Subject Property. All were the subject of arms’ length real estate transactions over four years from 2015 to 2016 within one kilometer of the Subject Property.

32MPAC’s representative testified that its level of appraisal was 0.932, indicating that an equitable adjustment was required.

MPAC’s Submission

33MPAC argued that an equity adjustment from a value of $650,000 to $631,000 was required.

Appellant’s Evidence

34Appellants testified that properties used in MPAC’s equity analysis were not comparable and that the assessment of the Subject Property was higher than those of their neighbours.

Appellant’s Submission

35It was assumed they sought an equity adjustment to reduce the current value of the Subject Property to the same $598,000.

Findings on Issue 2

36The purpose of an equitable reduction has been described by the Ontario Court of Appeal in Empire Realty Co. Ltd. and Assessment Commission for Metropolitan Toronto et al., 1968 CanLII 183:

A prime objective of municipal taxation is the equitable distribution of the burden according to the value of the property possessed by each ratepayer; in the system prevailing in Ontario, the tax levied on the ratepayer is determined by the application of a uniform mill rate upon the assessed value of the ratepayer’s taxable property set down in the assessment roll. If equity in taxation is to be achieved, it must result from equity in assessment.

37In addressing equity in assessment, the court noted that “an assessment made at the actual value of lands and buildings…would be an unequitable assessment if all similar lands in the vicinity were assessed at some percentage of actual value substantially less than one hundred.”

38However, the goal of the Act is to determine the correct current value. Any equitable reduction in the current value results in an incorrect current value. Consequently, an equitable reduction should only be made where there is clear evidence to support such a reduction. The burden of proof rests with the Appellant to establish on a balance of probabilities it is required.

39MPAC acknowledged that an adjustment in equity was required. The Appellants went further, arguing that MPAC’s proposed comparable properties were too dissimilar from the Subject Property to be considered, yet they proposed none of their own. The Appellants also argued neighbouring assessments were disproportionately lower than theirs.

40Properties in an equity analysis need not be identical, they only need be “similar” and in the same “vicinity”. MPAC’s search included residential properties other than detached single family homes, including multiple unit residential properties within one kilometer of the Subject Property. They were also chosen because they are properties that had been the subject of sales transactions, where the level of equity can be measured by comparing assessments by sales prices. Residential properties can be similar for this purpose, especially in such a tight radius.

41On the Appellants’ argument that the assessment of the Subject Property was higher than those of their neighbours, without sales data or detailed comparisons it would have been impossible to determine the accuracy of those assessments. It is possible that those properties are inferior in some way. The Board finds that no meaningful conclusions can be drawn from those submissions.

DECISION

42The correct current value of the Subject Property is $663,130 for the 2017 to 2018 taxation years.

43An equitable reduction of the current value of the Subject Property is required pursuant to s. 44(3)(b) of the Act. The assessment of the Subject Property is reduced from $664,000 to $618,000 for the 2017 taxation year and from $631,000 to $618,000 for the 2018 taxation year.