Assessment Review Board
Commission de révision de l’évaluation foncière
ISSUE DATE:
October 29, 2018
FILE NO.:
WR 154944
Assessed Person(s):
Paul Koshty
Appellant(s):
Paul Koshty
Respondent(s):
Municipal Property Assessment Corporation (“MPAC”)
Region 18
Respondent(s):
City of St. Catharines
Property Location(s):
4 Chopin Road
Municipality(ies):
City of St. Catharines
Roll Number(s):
2629-030-027-05300-0000
Appeal Number(s):
3269872 and 3309495
Taxation Year(s):
2017 and 2018
Hearing Event No.
702864
Legislative Authority:
Section 40 of the Assessment Act, R.S.O. 1990, c. A.31, as amended
Heard:
August 20, 2018 in St. Catharines, Ontario
APPEARANCES:
Parties
Representative
Paul Koshty
Self-represented
MPAC
George Kaldenbach
City of St. Catharines
No one appeared
DECISION OF THE BOARD DELIVERED BY TYRONE D. SKANES
ISSUE
1The appeals before the Assessment Review Board ("Board") were filed by Paul Koshty (the “Appellant”) in respect of the assessment of a single, detached, family home located at 4 Chopin Road, the subject property (“SP”), for the 2017 and 2018 taxation years.
2The single storey 1,050 square foot ("sq. ft.") home was built in 1962. It is situated on an irregularly shaped lot with a frontage of 62 feet (“ft.”) and a depth of 123.06 ft. It has a basement of 1,050 sq. ft. of which 500 sq. ft. is finished. The Quality Class (QC) is 6.0. There is an attached garage measuring 386 sq. ft. There are no sidewalks on the street.
3George Kaldenbach, representing MPAC, testified that the SP had been purchased by the Appellant from his parents on August 7, 2015. He said that upon investigation he did not believe that this was not an open market sale and classified it at as a family sale. Therefore, he did not consider this sale during his file preparation.
4Mr. Kaldenbach entered six sales of comparable properties that he said were good comparators to the SP. He said he used the direct sales comparison approach to value to determine the current value assessment (“CVA”) of the SP at $242,000 for both taxation years. He said that further investigation changed his opinion of value of the SP and he was now proposing a CVA of $237,000. He asked that the Board reduce the assessment of the SP from $242,000 to $237,000 for both taxation years.
5Paul Koshty, representing himself, presented the Board with a voluminous amount of material, which included numerous real estate listings of what he claimed were comparable sales. He also included many newspaper articles to support his argument that the SP was located in an at-risk neighbourhood with a high crime rate. He said that some consideration ought to be given for living in this area that included a reduction to the assessment of the SP for the high crime rate. He also addressed the fact that the SP had a recent sale in 2015. He admitted that he purchased the SP from his parents but he did not receive any special consideration from them. He said that the sale should be considered an open market sale and that the assessment of the SP should be reduced to $210,000, the price he paid for it some five months prior to the valuation date.
6The issue before the Board for determination is whether the assessment of the SP for the 2017 and 2018 taxation years is at current value and whether the assessment is equitable with the assessment of similar lands in the vicinity.
DECISION
7The Board is required by s. 44.(3) of the Assessment Act (“Act”) to determine the current value of the land and have reference to the value at which similar lands in 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.
8The Board finds that the current value of the SP as of January 1, 2016, is $210,000 and reduces the assessment to $210,000 from $242,000 for the 2017 and 2018 taxation years and finds that no adjustment is required for equity. This is the purchase price of the SP on August 7, 2015 and MPAC was unable to prove to the Board’s satisfaction that this was not an arm’s length, open market transaction.
REASONS FOR DECISION
Relevant Legislation
9Section 1 of the Assessment 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.
10Section 19.(1) of the Assessment Act states:
19.(1) Assessment based on current value. – The assessment of land shall be based on its current value.
11Section 44.(3) of the Assessment 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, determine the current value of the land; and 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.
MPAC's Position and Evidence
12Mr. Kaldenbach’s valuation report was entered into evidence as Exhibit 1 and his Equity Analysis as Exhibit 2. He testified that the direct sales comparison approach to value was used in determining the current value of the SP.
13Mr. Kaldenbach entered the sales of six comparable properties that he opined were good comparators to the SP. He said that all of the comparable properties were in the same homogenous neighbourhood. He said that all were the same structure type, had the same QC rating of 6.0, and were built within eight years of each other. All of the properties had recent sales that had been time adjusted (“TAS”) to the valuation date.
14Mr. Kaldenbach commented on the fact that MPAC had classified the 2015 sale of the SP as a family sale. He said that he had only been able to conduct an exterior inspection of the SP. He did not know if there were other considerations involved in the sale.
15Mr. Kaldendbach also commented on the SP being located in an area where there was significant, reported criminal activity. He said that MPAC currently does not apply negative adjustments to assessments of properties for this nuisance.
16Mr. Kaldenbach’s Equity Analysis Report examined the sales of 31 similar lands located within 0.4 of a kilometre of the SP. He testified that the median Assessment to Sales (“ASR”) ratio returned at 0.98, which indicated to him that similar lands in the vicinity were being assessed at or near their correct current values.
17Mr. Kaldenbach summed up his presentation by asking the Board to reduce the CVA for of the SP from $242,000 to $237,000.
18On cross-examination Mr. Koshty asked Mr. Kaldendbach why he believed that the 2015 purchase of the SP was not an open market sale. Mr. Kaldendbach replied that he was unable to inspect the SP and that he could not confirm that it had been an open market sale. Therefore, he classified it as a family sale.
Appellant’s Position and Evidence
19Mr. Koshty, representing himself, entered a documentary package into evidence as Exhibit 3. There was voluminous material contained in the document that included numerous real estate listings for properties that had sold in the prior few years. There were also numerous media reports and newspaper articles relating to serious criminal activity that had occurred in the SP’s immediate area and had been widely reported in the Niagara region.
20Mr. Koshty said that the SP is located in a dangerous area and that there ought to be some consideration given to what a high crime rate does to property values. He said potential buyers would look at the area before buying and upon learning of the high crime rate would either not buy or would offer a lower price.
21Mr. Koshty testified that when he purchased the SP from his parents in 2015 there were no preferential considerations applied to the purchase price. He paid what he believed was fair market value for the property. He summed up his presentation by asking the Board to reduce the CVA of the SP to the 2015 purchase price of $210,000.
Board's Deliberations - Current Value
22The best evidence of current value is the sale of the SP if the sale meets the definition of current value on or near the valuation day.
23The Board usually considers the sales of comparable properties that have occurred within one year on either side of the valuation date as the ideal time period for consideration.
24The Board has carefully considered the testimony of the parties and the documentary evidence tendered as exhibits.
25The Board does not often encounter a situation such as is being considered in this appeal. There was a sale of the SP that occurred some five months prior to the valuation date of January 1, 2016, very near to the valuation date, whereby the Appellant purchased the SP from his parents.
26The Board recognizes that there is a presumption that sales of property between family members cannot be at arm’s length due to the inherent close relationship between the parties. The lack of distance, in relative terms, negates the idea of arm’s length, as defined by the legislation. It is presumed that a non-arm’s length sale is not a reflection of market value. That presumption must be rebutted by evidence for a sale between family members to be considered evidence of market value..
27MPAC’s position is that because this sale occurred between family members, namely the Appellant and his parents, that this should not be considered a fair market sale. Consequently, MPAC has classified it as a family sale.
28MPAC held to the presumption that this could not be an arm’s length transaction because the sale was between family members. The only evidence the assessor offered was his testimony that he did not inspect the property. The Board questions what would have further informed his opinion if he had been able to inspect the SP.
29Mr. Koshty testified that this was an open market sale and that there were no other considerations given by his parents that affected the sale price. He said that he paid what the SP was worth. He testified that his parents had limited income and required the proceeds from the sale to fund their retirement. Therefore, he neither sought nor was given a preferential price.
30The Board has to be satisfied, on a balance of probabilities, that the sale was reflective of market value before it considers a non-arm’s length sale. That balance cannot be mere suspicion; it has to be supported by evidence.
31Current value is defined as “the amount of money, the fee simple … if sold at arm’s length, by a willing seller to a willing buyer”. Sales between related parties do not meet that definition. However, parties can provide evidence to show that the sale value is an indication of the market value of the property.
32The Board recognizes that caution must be used when considering sales between family members, particularly between a parent and a child. The SP was not listed for sale but then again; why would it be if the intention was to sell it to the Appellant? The Appellant was steadfast and definite in his testimony when he said that he paid his parents what the property was worth.
33The Appellant testified that the house was in a state of disrepair as his parents had been unable to deal with the upkeep of the house. He said that this would have affected the selling value of the home. The assessor admitted that he had been unable to inspect the SP and could not confirm or deny the interior state of the house.
34Additionally, the Board examined both the assessments and the unadjusted sales prices of the six comparable properties entered into evidence by MPAC. The assessments ranged from a low of $222,000 for properties one and six to a high of $238,000 for property three. The unadjusted sales prices for those properties ranged from a low of $212,500 for property one to a high of $310,000 for property four. These ranges demonstrate that the purchase price of $210,000 by the Appellant for the SP is near the low end of the range for both the comparable properties assessed values and their unadjusted sales prices. The only savings realized by the Appellant by purchasing from his parents was the real estate fees, as this was a private sale. If the real estate fees had been added to the SP’s sale price the gap between the assessed and unadjusted sales values would have been even smaller.
35The Board finds that the Appellant’s strong testimony and the evidence regarding the narrow gap between the selling price of the SP, with real estate fees added, and the assessed values and unadjusted sales values of the comparable properties rebuts the presumption that this non-arm’s length transaction did not reflect market value.
36Therefore, the Board accepts that the August 7, 2015 sale of the SP in the amount of $210,000 was an indication of the market value of the SP on the valuation day.
37The Board finds that no equity evidence was introduced by either party that would warrant a further reduction for equity.
CONCLUSION
38The Board finds that the current value of the SP as of January 1, 2016, is $210,000 and reduces the assessment to $210,000 from $242,000 for the 2017 and 2018 taxation years and finds that it is equitable with the assessments of similar lands in the vicinity.
“Tyrone D. Skanes”
TYRONE D. SKANES
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```