Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE: October 22, 2018 FILE NO.: WR 153943

Assessed Person(s): Ian Free, Christiane Bergauer Free Appellant(s): Ian Free, Christiane Bergauer Free Respondent(s): Municipal Property Assessment Corporation (“MPAC”) Region 14 Respondent(s): City of Markham

Property Location(s): 145 Krieghoff Avenue Municipality(ies): City of Markham Roll Number(s): 1936-020-142-02900-0000 Appeal Number(s): 3266159 and 3302503 Taxation Year(s): 2017 and 2018 Hearing Event No.: 700281

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

Heard: June 22, 2018 in Markham, Ontario

APPEARANCES:

Parties	Counsel+/Representative
Ian Free, Christiane Bergauer Free	Self-represented
MPAC	Tong Li
City of Markham	No one appeared

DECISION OF THE BOARD DELIVERED BY MARCELLE BOURASSA

INTRODUCTION

1Ian Free and Christiane Bergauer Free (the “Appellants”) are the owners of a residential property located at 145 Krieghoff Avenue in the Varley Village subdivision in the City of Markham. The dwelling has 2,886 square feet (“sq. ft.”) of building area and 340 sq. ft. of finished basement area. It was originally built in 1967 and a second floor consisting of 1,627 sq. ft. was added in 2005. It has an effective year of build of 2002. It is located on a site area of 0.19 acres that abuts a public walkway.

2MPAC returned the assessment for the property at $1,422,000 for 2017 taxation year and at $1,414,000 for the 2018 taxation year.

3The Appellants appealed the assessment for the 2017 taxation year to the Assessment Review Board (“Board”). Mr. Free, on behalf of the Appellants, takes the position that MPAC’s assessment of the subject property is too high as compared to other properties in his subdivision of Varley Village. His opinion of current value of $1,100,000 is based on its land value.

4Under the Assessment Act, R.S.O. 1990, c. A.31 (“Act”), the onus of proof as to the correctness of the current value of the property rests with MPAC. For the period consisting of the four taxation years from 2017 to 2020, a property is valued as of the legislated valuation date of January 1, 2016. MPAC’s representative, Tong Li, estimates the current value of the property to be $1,456,710, based on the direct comparison approach.

5Ms. Li also conducted an equity study. It is her position that an equitable reduction is not required. Ms. Li concludes that the assessment should be reduced from $1,422,000 to the revised assessed value of $1,411,000 for the 2017 taxation year from $1,414,000 to the revised assessed value of $1,411,000 for the 2018 taxation year.

6Mr. Free is also of the opinion that the subject property is inequitably assessed in relation to similar properties and should be assessed at $1,100,000.

ISSUES

7The issues to be determined are:

a) What is the correct current value of the property as of the January 1, 2016 valuation date?

b) Whether there should be an equitable reduction of the current value as determined by the Board and, if so, what should the amount of this reduction be?

DECISION

8The Board finds that the current value of the property, as of the January 1, 2016 valuation date, is $1,376,622 under s. 44.(3)(a) of the Act. Furthermore, the Board finds that the evidence supports the conclusion that the current value requires an equity adjustment under s. 44.(3)(b )of the Act. Therefore, the subject property‘s current value of $1,376,622 is reduced to $1,129,000.

9The assessment of the property located at 145 Kreighoff Avenue is reduced from $1,422,000 to $1,129,000 for the 2017 taxation year and from $1,414,000 to $1,129,000 for the 2018 taxation year.

RELEVANT LEGISLATION

10Section 1 of the Act states:

“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.

11Section 19.1(1) of the Act states:

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

12Section 19.2(1) of the Act states:

Valuation days

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

1. For the 2006, 2007 and 2008 taxation years, land is valued as of January 1, 2005.

2. For the period consisting of the four taxation years from 2009 to 2012, land is valued as of January 1, 2008.

3. For the period consisting of the four taxation years from 2013 to 2016, land is valued as of January 1, 2012.

4. For the period consisting of the four taxation years from 2017 to 2020, land is valued as of January 1, 2016.

13Section 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.

14Section 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.

Analysis and Findings

What is the correct current value of the property as of the January 1, 2016 valuation date?

MPAC’s Evidence and Submissions

15Ms. Li states that she inspected the subject property on February 12, 2018 and determined that there is 340 sq. ft. of finished basement. She updated the assessed value to $1,411,000.

16Ms. Li provided information on the subject property and the sales of six properties. She stated that they were selected based on lot size, building area, age, quality of construction and location. Sales have been time adjusted. Ms. Li stated that she conducted a Sales Ratio Trend Analysis (“SRTA”) study based on 503 sales from the subject property’s neighbourhood and adjacent areas from January 9, 2014 to December 20, 2017.

17Key points of comparison of the subject property and the six sales comparables are set out below.

Property	Site Area (acres)	Year Built (effective)	Renovation	Quality	Building Area (sq. ft.)	Other	Sale (TAS)
145 Krieghoff Avenue (subject property)	0.19	1967 (2002)	2005 Added 1,627 sq. ft.	6.5	2,886	Finished basement (340 sq. ft).
25 Emily Carr Street (Sale 1)	0.19	1972 (2004)	2008	6.5	2,962	Finished basement (400 sq. ft.)	1,772,791 (08/2016)
25 Emily Carr Street (Sale 2)	0.19	1972 (2004)	2008	6.5	2.962	Finished basement (400 sq. ft.)	1,936,953 (04/2017)
19 Emmeloord Crescent (Sale 3)	0..14	1974 (2010)	2016	6.5	2,928	Finished basement (1,270 sq. ft).	1,526,862 (02/2016)
41 Sciberras Road (Sale 4)	0.22	1967 (2010)		6.5	2,612	Finished basement (718 sq. ft.)	2,226,582 (09/ 2016)
7 Tuscay Court (Sale 5)	0.15	1967 (1979)		6.5	2,526	Finished basement (836 sq. ft.)	1,656,360 (07/2017)
29 Jeremy Drive (Sale 6)	0.23	1969 (1992)		6.5	2,423	Finished basement (673 sq. ft.)	1,856,829 (11/2016)

18Ms. Li considers the property at 25 Emily Carr Street to be similar the subject property. It had two sales. She stated that differences between 25 Emily Carr Street and the subject property resulted in a computer generated adjusted value for the subject property of $1,478,583.

19Ms. Li considers the property at 19 Emmeloord Crescent to be superior to the subject property based on age. The subject property’s current value should be lower.

20Ms. Li considers the property at 41 Sciberras Road to be similar to the subject property. She stated that differences between 41 Sciberras Road and the subject property resulted in a computer generated adjusted value for the subject property of $1,434,838.

21Ms. Li considers the property at 7 Tuscay Court to be inferior to the subject property based on age, lot size and building area.

22Ms. Li considers the property at 29 Jeremy Drive to be inferior to the subject property based on age and building area.

23Ms. Li states that 25 Emily Carr Street and 41 Sciberras Road are most similar properties to the subject property and she determined her opinion of the subject property’s current value as $1,456,710. This value is the average of the adjusted values of $1,478,583 and $1,434,838.

Appellants’ Evidence and Submissions

24Mr. Free states the subject property is a one and three quarter storey backsplit. He stated that a second floor consisting of 1,627 sq. ft. was added over the existing foundation. The original footprint of the house was not changed. The house does not have a full basement; and there is a crawl space under the front part of the house. The house has not been renovated, has it original heating system and no air conditioning.

25Mr. Free states that the property at 25 Emily Carr Street has undergone a complete renovation and is now a custom built home with a quality class of construction rating of 8. He produced a photo of this property.

26Mr. Free also states that the property at 19 Emmeloord Crescent has undergone a complete renovation and is now a custom home with a quality class of construction rating of 8. Also, it is not located in his subdivision of “Varley Village.”

27Mr. Free also states that the property at 41 Sciberras Road has been renovated both inside and out and is now a custom home.

28Mr. Free also states that the property at 7 Tuscay Court has been renovated both inside and out and is now a custom home.

29Mr. Free states that the property at 29 Jeremy Drive has undergone some minor renovations and was the same as the subject property prior to its addition. He adds that it is now owned by a developer who overpaid for the property. The property is now back on the market.

30Mr. Free expressed his concern that MPAC’s SRTA study is based on a large area that includes his original subdivision of Varley Village, heritage homes in Unionville, a new subdivision and high end homes. He added that developers have been buying up properties in Varley Village for their lot values to build new large “monster” homes, as this area is not currently subject to a by-law with design and height restrictions. He added that the properties are rented out cheaply until the properties are developed. Mr. Free indicated that he did not have an alternate method to calculate time adjusted sale prices.

31Mr. Free relies on three sales comparables in support of his opinion of current value of $1,100,000.

32The property at 143 Kreighoff Avenue is next door to the subject property. It has a smaller lot size at 7,759 sq. ft. or 4.6% smaller than the subject property. However, Mr. Free states that there is an unusable area of approximately that size at the rear of the subject property due to a drainage ditch, installed by the City, to alleviate continual flooding. Mr. Free states that 143 Kreighoff Avenue was built in 1967 and is similar in size at 2,728 sq. ft. and structure to the subject property. Unlike the subject property, it is a full two storey dwelling with a full basement that includes 728 sq. ft. or 50% more finished basement area. It underwent an earlier addition of the same quality as the subject property that added space over the garage and family room. Unlike the subject property, it has a high efficiency furnace, air conditioning and a pool. It sold for $1,688,000 in January 2017. Ms. Li provided the time adjusted sale (“TAS”) value of $1,349,730. Mr. Free stated that it has a 2016 current value assessment (“CVA”) of $1,218,000 which should be more than the subject property’s assessed value. Mr. Free states that the subject property’s assessment should be lower.

33The property at 144 Kreighoff Avenue is across the street from the subject property. It has a larger lot size at 14,182 sq. ft. that is 74% larger than the subject property at 9,119 sq. ft. It has a larger frontage at 78.3 ft. Mr. Free states that 144 Kreighoff Avenue was built in 1969, has a smaller building area at 1,994 sq. ft. and a full finished basement even though that information does not appear on MPAC’s site. It sold for $910,000 in September 2013. Ms. Li provided the TAS value of $1,234,393. Mr. Free stated that it has a 2016 CVA of $1,273,000 that is less than the assessment as returned for the subject property.

34The property at 22 Worsley Court is two doors behind the subject property and also backs onto the public walkway. It was built in 1967. It has a larger lot size at 11,029 sq. ft. that is 35.6% larger than the subject property at 9,119.11 sq. ft. Mr. Free states that it has a building area that is 18.6% larger at 3,424 sq. ft. It also has an in ground pool and high efficiency heating and air conditioning. It also has a full finished basement even though that information does not appear on MPAC’s site. It sold for $1,870,000 in November 2016 (TAS $1,585,760) and is currently being demolished to build a new 5,500 sq. ft. house. Mr. Free opined that it was a “tear down.” Mr. Free stated that this property has a 2016 CVA of $1,307,000 that is lower than the subject property’s even though it has a bigger lot size. He opined that, as the subject property’s lot size is 65% of 22 Worley Court’s lot size, the current value and assessed value should not be higher than 65% of the original selling price ($1,215,000).

35Mr. Free is of the opinion that the subject property’s current value is $1,100,000 and this value reflects its land value as the house is a ‘tear down.” He opined that he would not even be able to sell it. Currently there are about 15 houses listed for sale in their area but there are no offers to purchase. Furthermore, there are also five infill houses valued at $3,000,000 plus for sale. Similarly, there are no offers to purchase.

Board’s Analysis and Findings

36Under s. 44.(3)(a) of the Act, the Board must first determine “the current value of the land.” The best evidence the Board can receive of current value is an arm’s length and market-tested sale of the property on the valuation date or close to it. If, as in this case, no such transaction took place, the next best measure of current value is arm’s length and market-tested sales of comparable properties located nearby, as close as possible to the legislated valuation date of January 1, 2016.

37The Board has considered the properties with sales. To enable an estimate of value for the property to be derived from suggested comparable properties, there must be sufficient elements of similarity, in terms of physical factors such as building area, land area, land frontage, age of construction, physical condition, etc. so as to enable a direct comparison to be made.

38Based on Mr. Free’s evidence, the Board does not find the properties at 25 Emily Carr Street, 41 Sciberras Road, 9 Emmeloord Crescent and 7 Tuscay Court that has undergone complete renovations and are custom built homes with higher quality class of construction ratings to be comparable to the subject property.

39The Board does not find the property at 29 Jeremy Drive to be comparable to the subject property given the differences in effective age and the 29 Jeremy Drive’s smaller building area.

40The Board does not find the property at 144 Kreighoff Avenue to be comparable to the subject property given the vast differences in lot size and building areas.

41The Board finds the properties located at 143 Kreighoff Avenue and 22 Worsley Court are the most comparable properties to the subject property. Both were originally built in 1967 like the subject property and have the same quality class of construction rating of 6.5. Mr. Free states that 143 Kreighoff also underwent an earlier addition of the same quality as the subject property and that 22 Worsley Court has added a full finished basement. They have an average lot size of 9,394 sq. ft. (versus the subject property at 9,119 sq. ft.) and an average building size of 3,076 sq. ft. (versus 2,886 sq. ft. for the subject property). They have an average TAS of $1,467,745 and an average TAS value per sq. ft. of $477 (rounded). Applying this value to the subject property’s building area of 2,886 sq. ft. results in a value of $1,376,622.

42The Board sets the subject property’s current value at $1,376,622.

Whether there should be an equitable reduction of the current value pursuant to s. 44.(3)(b) of the [Act](https://www.canlii.org/en/on/laws/stat/rso-1990-c-a31/latest/rso-1990-c-a31.html), and, if so, what should the amount of this reduction be

MPAC’s Evidence and Submisions

43Ms. Li relies on an Equity Analysis Report that considered the time adjusted sales of 30 single family detached properties that occurred between January 1, 2014 and December 31, 2017 all located within 1.0 kilometre of the subject property.

44In his report, Ms. Li states that the level of appraisal is established by determining the median Assessment to Sale Ratio (“ASR”) in the sales sample. She highlighted that, in this instance, the sales sample produced a median ASR of 1.003. For purposes of the equity test, MPAC takes the position that equity is achieved if the median ASR falls between 0.95 and 1.05. In this case, the median ASR of 1.003 falls within an acceptable range.

45Therefore, she concludes that an equity adjustment is not required.

46Ms. Li concludes that the assessment for the subject property should be reduced from $1,422,000 to the revised assessed value of $1,411,000 for the 2017 taxation year from $1,414,000 to the revised assessed value of $1,411,000 for the 2018 taxation year.

Appellants’ Evidence and Submissions

47Mr. Free is also of the opinion that the subject property is inequitably assessed in relation to similar properties and should be assessed at $1,100,000.

48Mr. Free referred to 143 Kreighoff Avenue’s 2016 CVA of $1,218,000 and opined that the subject property’s assessment should be lower.

49Mr. Free referred to 144 Kreighoff Avenue’s 2016 CVA of $1,273,000 and opined that the subject property’s assessment should be lower.

50Mr. Free referred to 22 Worsley Court’s 2016 CVA of $1,307,000 and opined that the subject property’s assessment should be lower.

51Mr. Free also opined that existing homeowners in the subdivision of Varley Village are subsidizing the developers of in-fill housing who are not being taxed appropriately. He provided some examples including the properties with custom built home at 167 Krieghoff Avenue that sold in May 2017 for $3,575,000 but has a 2016 CVA of $2,516,000 and the property at 165 Krieghoff Avenue that sold in December 2015 for $3,135,000 but has a 2016 CVA of $2,466,000.

Board’s Analysis and Findings

52Section 44.(3)(b) of the Act 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.”

53The purpose of equitable adjustment has been described as the equitable distribution of the tax burden according to the assessed value of property owned by taxpayers as follows by the Ontario Court of Appeal in Empire Realty Co. Ltd. and Assessment Commissioner for Metropolitan Toronto et al., 1968 CanLII 183 (ON CA) at page 2:

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 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.

54In addressing equity in assessment, the Court, at page 6, also 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 [emphasis added].”

55The term “vicinity” is not defined in the Act but refers to the appropriate geographical area that will yield a meaningful number of comparables (see Ontario Regional Assessment Commissioner, Region No. 3 v. Graham, 1993 CanLII 8621 (ON CA) at page 6).

56The test set out in s. 44.(3)(b) of the Act, requires that the Board refer to similar lands in the vicinity. Similar property relates to the same general nature and character. Use as a point of similarity, may be, but is not necessarily determinative of similarity. In determining whether other lands are similar, the Ontario Divisional Court, in Municipal Property Assessment Corp. v. Loblaw Properties Ltd., [2017] O.J. No. 1010 ONSC 1299, 276 A.C.W.S. (3d) 220, 2017 ONSC 1299, 62 M.P.L.R. (5th) 253, 2017 CarswellOnt 2861, applied the decision of the Ontario Divisional Court in Trizec Equities Ltd. v. Ontario (Regional Assessment Commissioner, Region No. 27), [1988] O.J. No. 182, 27 O.A.C. 203, 37 M.P.L.R. 175, 8 A.C.W.S. (3d) 399. The Court stated at paragraph 23:

…All points of comparison must be considered. The Board must make a factual finding based on such a consideration. One point of similarity such as use may be, but is not necessarily, determinative. Some similarities may be overridden by other characteristics and some differences may be subordinated.

57The ASR analysis of a reasonable sample of sold properties is one method used to determine if properties in the vicinity are assessed below their current value. If other properties are assessed substantially below their current value then a reduction is required to make the assessment of the subject property equitable with the assessments of similar lands in the vicinity. The ASR is determined by dividing the assessment as returned by the sale price.

58Ms. Li relies on an Equity Analysis Report that considered the time adjusted sales of 30 single family detached properties that occurred between January 1, 2014 and December 31, 2017 all located within 1.0 kilometre of the subject property. In this instance, the sales sample produced a median ASR of 1.003.

59The Board finds that the median ASR of 1.003 falls within MPAC’s generally acceptable standard of 0.95 and 1.05 and indicates that the level of current value assessments of similar properties is in line with the level of sales prices in the vicinity.

60However, in this case, the Board rejects MPAC’s equity study based on a sample of residential properties located within a larger radius of 1.0 kilometres of the subject property. Instead, the Board has considered an ASR analysis using residential properties located in the subdivision of Varley Village as a point of comparison as it finds they are most similar for purposes of direct comparison. Unlike other parts of the City of Markham including nearby Unionville, these properties, including the subject property, are not subject to a by-law with design and height restrictions. Mr. Free stated in his evidence that developers have been buying up properties in the pocket of Varley Village for their lot values to build new monster homes as this area as it is not currently subject to a by-law with design and height restrictions.

61The Board has included MPAC’s five properties located in the Varley Village subdivision. Mr. Free stated that 19 Emmeloord Crescent is not located in his subdivision of “Varley Village” and so the Board has excluded this property. The Board also included 143 and 144 Kreighoff Avenue and 22 Worsley Court. The Board also included the custom built infill properties located at 148, 140 and 165 Kreighoff Avenue. The Board was unable to consider the custom built infill properties located at 167, 154 and 146 Kreighoff Avenue and 3 Gainsville Avenue as no time adjustment factors were available to adjust the sale prices.

62The 11 properties are summarized below. They have a median ASR of 0.82.

Property	Sale (TAS)	2016 CVA	ASR
145 Krieghoff Avenue (subject property)
25 Emily Carr Street	1,772,791	1,478,000	0.834
25 Emily Carr Street	1,936,953	1,478,000	0.763
41 Sciberras Road	2,226,582	1,434,000	0.644
7 Tuscay Court	1,656,360	1,188,000	0.717
29 Jeremy Drive	1,856,829	1,341,000	0.722
143 Kreighoff Avenue	1,349,730	1,218,000	0.90
144 Krieghoff Avenue	1,234,393	1,273,000	1.03
22 Worsley Court	1,585,760	1,307,000	0.82
148 Krieghoff Avenue	1,881,000	2,395,000	1.273
140 Krieghoff Avenue	1,408,500	2,378,000	1.688
165 Krieghoff Avenue	3,163,215	2,466,000	0.779

63The Board finds that the median ASR of 0.82 indicates that the residential properties included in this sample of properties located in the subdivision of Varley Village are assessed substantially below their current values. Applying the ASR of 0.826 to the subject property’s current value as determined above of $1,376,622 results in a value of $1,128,830 or $1,129,000 (rounded).

64For these reasons, the Board finds that the evidence before it supports the conclusion that an equity adjustment is required under s. 44.(3)(b) of the Act. Therefore, the subject property‘s current value of $1,376,622 is reduced to $1,129,000.

CONCLUSION

65The Board finds that the current value of the property, as of the January 1, 2016 valuation date, is $1,376,622 under s. 44.(3)(a) of the Act. Furthermore, the Board finds that the evidence supports the conclusion that the current value requires an equity adjustment under s. 44.(3)(b )of the Act. Therefore, the subject property‘s current value of $1,376,622 is reduced to $1,129,000.

66The assessment of the property located at 145 Kreighoff Avenue is reduced from $1,422,000 to $1,129,000 for the 2017 taxation year and from $1,414,000 to $1,129,000 for the 2018 taxation year.