Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE:

October 31, 2018

FILE NO.:

WR 155244

Assessed Person(s):

William Gray Reid

Appellant(s):

William Reid

Respondent(s):

Municipal Property Assessment Corporation (“MPAC”)

Region 17

Respondent(s):

Township of Muskoka Lakes

Property Location(s):

474 Lake Joseph

Municipality(ies):

Township of Muskoka Lakes

Roll Number(s):

4453-040-012-04300-0000

Appeal Number(s):

3259678 and 3308937

Taxation Year(s):

2017 and 2018

Hearing Event No.

702370

Legislative Authority:

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

Heard:

August 23, 2018 by Telephone Conference Call

APPEARANCES:

Parties

Representative

William Gray Reid

Tim Reid

MPAC

Pam Mulligan

Township of Muskoka Lakes

No one appeared

DECISION OF THE BOARD DELIVERED BY ANTHONY LaREGINA

Background

1William Reid (the “Appellant”) is the owner of 474 Lake Joseph (the “subject property”), which is a 9.37 acre parcel of land classified as seasonal/recreational first tier on water. The property has a total actual frontage of 1,870 feet which is broken up into three sections because of two neighboring lots that abut the subject property. The property has three waterfront exposures, 720 feet of actual frontage facing west southwest, 270 feet facing south, and 880 feet facing east. The effective frontage facing south west is 697.5 feet, facing south is 235 feet, and facing east is 830 feet. MPAC calculates the total effective site area by adding the full southwest exposure plus one half of the total south and eastern exposure. Therefore, the effective lakefront is 697.5 feet plus 532.5 feet (235 feet plus 830 feet divided by 2) for a total effective frontage of 1,230 feet.

2The subject property has a cottage with an effective age of 1935 listed and a quality of construction of 5.0. The cottage has a total building area of 1,702 square feet with 1,292 on the main level and 410 square feet on the second level. The cottage has five bedrooms, one bath, and is listed as average condition. The property also has a boathouse built in 1935 with a total of 1,443 square feet which includes 995 square feet on the main floor for boat storage and 448 square feet on the second floor used for general storage and not considered as living area. The boathouse has a quality of construction of 2.0. While the subject property is attached to the main land, there is no road access therefore the only access is via water. The property has hydro, electric heaters, no air conditioning, and is located on a septic bed. MPAC has listed the topography as having a slight slope.

3Pursuant to the provisions of the Assessment Act (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”).

4MPAC’s has assessed the current value of the subject property at $2,359,000.

5The Appellant has filed appeals for taxation years 2017 and 2018 with the Assessment Review Board (the “Board”), pursuant to s. 40 of the Act. It is his position that MPAC’s assessment of current value is too high and that the correct current value is $1,784,000. At this hearing, MPAC takes the position that its assessed value is correct.

6Pursuant to s. 40(11) of the Act, the Township of Muskoka Lakes is a party to this proceeding. However, it did not advise the Board of its position on the issues raised in these appeals although Pam Mulligan, representing MPAC, did advise at the hearing that it supported MPAC`s valuation. No one appeared at the hearing on behalf of the Township of Muskoka Lakes.

7Section 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 of the property possessed by each ratepayer.

8MPAC takes the position that an equitable reduction is not required. The Appellant did not assert that an equitable reduction is required. Therefore, in this proceeding, this ground for appeal is not in issue.

9At the completion of the hearing, the Board reserved its decision. For the reasons that follow, the Board finds that the current value for 2017 and 2018 tax years is $2,651,000. Pursuant to s. 44(3)(b) of the Act, an equitable reduction of this value is not required.

10MPAC is not requesting an increase in assessment therefore the Board confirms the assessment of $2,359,000 for the 2017 and 2018 taxation years.

Relevant Legislation

11The 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.

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

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.

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.

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.

Issue

12The issue to be determined on this appeal is the correct current value of the subject property for the taxation years 2017 and 2018.

Discussion, Analysis and Findings

MPAC’s Evidence

13Ms. Mulligan, representing MPAC, prepared both a Valuation and Equity Report respecting the subject property, dated October 11, 2017, which she submitted into evidence.

14Ms. Mulligan identified five comparable property sales which sold between 2013 and 2106 in the vicinity of the subject property. These properties are illustrated in the following table.

Subject Property

Property 1

Property 2

Property 3

Property 4

Property 5

Address

474 Lake Joseph

2 IS Home J7

1223 Lake Rosseau

5 IS North Bohemia

I IS Keewaydin

16 IS Fairhaven

Neighborhood

Lake Joseph

Lake Joseph

Lake Rosseau

Lake Rosseau

Lake Muskoka

Lake Muskoka

Current Value Assessment

$2,359,000

$2,401,000

$2,827,000

$1,359,000

$1,429,000

$1,039,000

Sale Date

Oct 2013

Sept 2015

Aug 2013

Jan 2014

Aug 2016

Sale Value $

2,400,000

2,850,000

1,410,000

1,280,000

1,060,000

TAS Value $

2,651,445

2,887,585

1,577,163

1,402,578

1,031,236

Effective Site Area - Acres

9.37

4.12

2.98

1.84

1.14

1.3

Eff. Frontage Ft.

1,230

943

655

472

425

420

Act Frontage Ft.

1870

1785

770

745

460

420

On site variables Topography

Slight Slope

Slight Slope

Slight Slope

Slight Slope

Slight Slope

Slight Slope

Year Built

1935

1888

1955

1957

1930

1903

Eff Yr. Built

1935

1936

1955

1957

1930

1903

Quality

5

5

7

6

7

5

Total Building Area S.F.

1,702

2,728

1,788

2,380

2,351

2,346

1st Floor Area S.F.

1,292

1,538

1,788

2,380

2,351

1,338

Boathouse 1 S.F. Area

1,443

896

2,240 with Res above

485

736

Boathouse 2 S.F. Area

480

448

Boathouse 3 S.F. Area

271

Cabin 1 S.F. Area

128

269

946

Cabin 2 S.F. Area

1,421

Shed S.F. Area

288

365

306

Comparability to Subject

Most Similar

Superior

Inferior

Inferior

Inferior

15Ms. Mulligan points out at the beginning of the hearing that the Muskoka Lakes area is a very desirable vacation spot that is in demand. She further states that while property values are based on all characteristics, a large part of the value is directly related to the size of the lot, the amount of water frontage, and the exposure of the lot on the lake.

16As part of Ms. Mulligan’s submission, she submitted a Time Adjustment Study (“TAS”) based on the sale of 597 properties over a 47 month period starting January 9, 2013 until December 31, 2016. Ms. Mulligan plotted all the sales and determined from the best fit line that the market rose 20.14 percent over the 47 month period. Ms. Mulligan applied the TAS factors to the comparable properties as demonstrated in the above chart to reflect the valuation day of January 1, 2016.

17Ms. Mulligan states that the best comparable to the subject property is sale number one, 2 Island Home J7, located on the Lake Joseph; the same lake as the subject property. This property has the largest effective frontage of all the comparables at 943 feet and an actual frontage of 1,785 feet. Ms. Mulligan further states that 2 Island Home J7 also has a larger home at 2,728 square feet compared to the subject property at 1,702 square feet, but this is balanced off by the smaller boathouse and substantially smaller lot at 4.12 acres compared to the subject property which has 9.37 acres and an actual frontage of 1,870 feet.

18Ms. Mulligan also pointed out that Comparable 2, 1223 Lake Rosseau, is considered to be superior to the subject property even though it has one half the effective lake frontage, because it has superior structures which are 20 years newer than the subject property, making it a quality 7 as opposed to the subject property which is a quality 5. While the main residential structure is about the same size as the subject property, the boathouse has a 2,240 square feet and a residence on the second floor. Ms. Mulligan points out that the superiority of 1223 Lake Rosseau is reflected in the sale price of $2,850,000 which occurred in September 2015, three months from the valuation day.

19Ms. Mulligan has identified Sale 3, 4, and 5, which are 5 Island North Bohemia, 1 Island Keewaydin, and 16 Island Fairhaven, as all being inferior to the subject property based on the substantially smaller lot sizes and lake frontages as compared to the subject property.

MPAC’s Submissions

20Relying on its evidence, MPAC’s submits that the correct current value for the taxation years 2017 and 2018 is $2,359,000.

21Ms. Mulligan submits that the best comparable property is Home Island which sold for $2,400,000 in November 2013 with a time adjusted value based on January 1, 2016 of $2,651,445. MPAC requests that the Board find that the current value of the subject property is $2,359,000 based on the sale of Home Island.

22MPAC submits that the Board should put little weight on Mr. Reid’s comparable properties as the sales were registered in 2017 and have no time adjustments. MPAC also submits that little weight should be put on Mr. Reid’s slope calculations as Mr. Reid has no experience in property valuation and calculating slope of the land. MPAC submits that they have the expertise to determine the slope of land and that the Board should rely on MPAC’s slope determinations. Furthermore, MPAC says that the Appellant has not submitted any evidence to quantify the impact of the slope on value. MPAC submits that the properties submitted in evidence by both parties are considered not to be steep and that any adjustment for slope of land would create an inequity in assessments and would not be fair to other property owners in the area.

23Once again MPAC submits that no quantitative evidence was provided to determine the effect on value for density or boat traffic and therefore MPAC requests that the Board apply no weight on any evidence relating to boat traffic and cottage density.

24MPAC further submits that there has been no evidence to quantify the impact of a non-contiguous waterfront and therefore once again MPAC requests that the Board put no weight on Mr. Reid’s claim that this feature results in devaluation of the subject property. MPAC submits that this is a positive feature for the subject property in that having three different waterfronts has resulted in a lower calculation of effective frontage for the subject property.

25MPAC also submits that Mr. Reid has utilized the sale value per square feet of building area to support his claim of current value of $1,784,000. MPAC requests that this calculation be given little weight as these values do not take the amount of waterfront or the lot size into consideration. MPAC submits that a large part of value for waterfront properties is in the amount of waterfront and the size of the land and that the comparable properties are all somewhat unique and therefore a rate per square foot approach is invalid.

Appellant’s Evidence

26Tim Reid represented the Appellant William Reid, his father, in the appeal of his property value. Mr. T. Reid has no training in property valuation but has appeared in previous assessment appeals hearings. Mr. T. Reid enjoys his father’s property on a yearly basis and also owns the adjoining property on the south west side which is one of the two properties splitting the waterfront of the subject property into three sections. In support of Mr. T. Reid’s case, he prepared and presented an information package, Exhibit 4. Mr. T. Reid’s disclosure package and oral evidence highlights four main area, density or water traffic, elevation and slope of the land, configuration of the waterfront and finally the presentation of comparable property sales which he believes are the best comparables to the subject property.

27Mr. T. Reid describes the subject property as a 1,702 square foot cottage with 1.25 storeys built in 1935. He refers to the second floor of the main residence as an attic and described the boathouse having two slips with a small storage room on the second floor. Mr. T. Reid claims that the lot has an effective site area of 9.37 acres and the effective waterfront is in fact 1,230 feet although the waterfront is broken up into three sections as two abutting lots interrupt the continuity of the shoreline. One lot that is owned by Mr. T. Reid abuts on the south west and a second lot abuts on the southeast leaving a 270 feet portion of the subject property with southern exposure on the water separating the two abutting properties as well as the eastern exposure with 880 actual feet of waterfront and the western exposure with 720 actual feet of waterfront.

28Mr. T. Reid points out that the subject property is located on the same bay with 22 cottages and that all the boats accessing those properties must travel past the subject property. Mr. T. Reid believes that this is a high density traffic area therefore negatively impacting the value of the subject property. During cross examination, Mr. T. Reid admitted that he had no way of quantifying the impact of the increased boat traffic on value other than finding comparable properties with similar boat traffic.

29Mr. T. Reid also describes the topography of the subject property as being variable with the cottage and boathouse being located on even terrain on the south and side of the property. Beyond the buildings, down the centre of the subject property, there is a hill and ridge, as per the topography map, with an elevation change of 20 metres or 65 feet from the shoreline to the top of the hill. Mr. T. Reid points out that the majority of the property past the buildings on the shoreline has a steep slope with a 15.49% to 19.57% gradient. Mr. T. Reid believes that the majority of the backside of the property with similar gradients is unusable. Mr. T. Reid does admit that the land around the shoreline, pretty much the entire property is reasonably flat. Again Mr. Reid believes that the topography of the land also negatively impacts the value of the property. During cross examination, Mr. T. Reid stated that the slope and hill occupies 67% of the subject property and also admitted that he has no way of quantifying the impact of the slope on value other than trying to find properties that have comparable features.

30Mr. T. Reid states that the property line of the subject is not contiguous along the waterfront in two sections. In the middle there is a separate pie-shaped property which interrupts the shoreline by 460 feet. The lot line of the separate property starts close to the existing cottage on the subject property and is in direct line of site from the subject cottage. Mr. T. Reid believes that if the abutting property is sold and a cottage built, it would directly impact the privacy and views for the subject property. During cross examination, Mr. T. Reid admitted that this is currently a vacant lot which he owns personally and has no intention of selling.

31Mr. T. Reid introduces the sale of two properties which he feels are very comparable to the subject property outlined in the following chart.

Subject Property

Property 1

Property 2

Address

474 Lake Joseph

37 Is. Penman R3

20 Is. Burgess 131

Neighbourhood

Lake Joseph

Lake Rosseau

Lake Joseph

C.V.A. $

2,359,000

1,907,000

1,822,000

Sale Date

May 2017

Sept 2017

Sale Value $

1,918,000

1,650,000

Eff. Site Area Acres

9.37

3

2.8

Eff. Frontage Feet

1,230

690

710

Act. Frontage Feet

1,870

780

850

Access

Water Access Only

Water Access Only

Water Access Only

Topography

Slight Slope

Level

Level

Res Structure

Single Family

Single Family

Single Family

Year Built

1935

1989

2013

Quality

5

7

6.5

Building Area S. F.

1,702

2,050

1,501

Boat House 1 S.F.

1443

2,736 with res

1,624 with res

Year Built

1935

1990

1970

Boat House 2 S.F.

312

Year Built

1970

Comparison to subject property

Similar

Similar

32Mr. T. Reid believes that Penman Island property which sold for $1,918,000 in October 2016 and closed in May 2017 is similar and a good comparable to the subject property. He points out that the similarities include Penman having water on two sides like the subject property, the lot is smaller but, unlike the subject property, the shoreline is contiguous with no breaks in the shoreline. Mr. T. Reid points out that the residence is 54 years newer and 348 square feet larger than the subject property with a quality of construction of 7 versus 5 for the subject property. The boat house is also 55 years newer and substantially larger at 2,736 square feet with two slips and a two room residence above. Based on the topographic maps in evidence, Mr. T. Reid points out that the elevation changes on Penman Island also indicate a 20 metre or 65 feet change in elevation from the water to the highest point. Mr. T. Reid also points out that Penman Island also has a deeded docking facility on the main land which is a very valuable feature as docking rentals are difficult to find as there are long waiting lists of individuals looking for docking facilities.

33Mr. T. Reid also believes that Burgess Island is a good comparable to the subject property. He states that even though the cottage is smaller at 1,501 square feet, it is only three years old as of January 1, 2016 valuation date as compared to the subject property which was built in 1935. There are two boathouses, the first has 1,624 square feet with a residence built in 1970 and the second boathouse built in 1970 with 312 square feet. Mr. T. Reid points out that the land is only 2.8 acres as compared to the subject property of 9.37 acres, but Burgess Island is located on a nice bay in a quit channel 1.3 kilometres from the subject property and the property, like the subject property, is bordering on two sides. Furthermore, the lot is contiguous with no breaks in the shoreline unlike the subject property. Finally, Mr. T. Reid points out that the elevation, like the subject property is 15 metres or 49.21 feet therefore, similar to the subject property of 65 feet.

34Mr. T. Reid is suggesting that the current value of the subject property should be the midpoint between the sale values of Penman Island at $1,918,000 and the sale value of Burgess Island of $1,650,000 which results in a current value of $1,784,000.

35Mr. T. Reid determined the sale values per square foot for Penman Island and Burgess Island sale at $935 and $1,099. Applying these values to the building area of the subject property yielded $1,592,000 and $1,870,000. Mr. T. Reid therefore concluded that the mid-point of the two sales at $1,784,000 is a reasonable value for the subject property.

Appellants’ Submissions

36Relying on his evidence, the Appellant submits that the correct current value for taxation years 2017 and 2018 is $1,784,000

37The Appellant submits that he has introduced two comparable properties, Penman Island and Burgess Island, that are similar to the subject property with similar problems relating to slope of the land as well as having two sides with exposure to the lake. Mr. Reid submits that the midpoint of these two sales very much reflects the current value of the subject property.

38The Appellant also submits that Home Island, which is MPAC’s best comparable, is a superior property because the lot has gradual slope with an elevation change of only 5 metres or 16.4 feet compared to the 65 feet for the subject property, a contiguous water frontage surrounded by water on three sides creating a private setting with uninterrupted views of the lake. The Appellant further submits that both the cottage and the boathouse are substantially larger and 36 years newer than the subject property. The Appellant concludes that based on all these superior features plus the fact that Home Island sold in 2013, it is not a good comparable to the subject property.

39The Appellant submits that MPAC has overstated the value of the subject property and has not considered the density of cottages and boat traffic, the steep slope, and the fact that 67% of the subject property is inclining as well as the fact that the subject property does not have a contiguous waterfront. Furthermore, MPAC has not considered that someone can buy the pie-shaped lot and build a cottage and boathouse therefore, impeding the privacy of the subject property.

40The Appellant submits that the mid-point of the sale values of Penman Island and Burgess Island of $1,784,000 is the best market value for the subject property. Furthermore, the Appellant applied the sale value per square foot for both Penman Island and Burgess Island properties to the building area of the subject property getting a range of value from $1,592,000 to $1,870,000. The Appellant concludes that this value range supports his current value of $1,784,000.

Board’s Findings

41The Board has reviewed and analysed all the comparable properties and agrees with MPAC that the best comparable from the five submitted by MPAC is Property 1— 2 Island Home J7. The lot with 4.12 acres is smaller than the subject property with 9.37 acres but still the largest lot of all the comparable properties. It also has an effective frontage of 943 feet versus the subject effective frontage of 1,230 feet and an actual frontage of 1,785 feet versus 1,870 feet. The effective year built is almost identical to the subject property at 1936 versus 1935 but the residence is 1,026 square feet larger than the subject property and the boathouse and cabin combined are 419 square feet smaller than the subject property. It is clear that the structures of 2 Island Home J7 are superior to the subject property but this is offset by the larger lot of the subject property. The Board finds that the time adjusted sale value of $2,651,445 for Home Island property is likely the current value of the subject property. The Board understands Mr. T. Reid’s concern that the sale of this property occurred in 2013, however this is the best and most comparable property to the subject property and it has been properly time adjusted to compensate for the changing market.

42The Board is also in agreement with MPAC that Property 2—1223 Lake Roseau is not a good comparable to the subject property. While the land size is smaller than the subject property, this property has a second residence above the boathouse as well as two boathouses and a shed. It is clearly superior to the subject property. The Board will therefore reject Property 2 for the purposes of determining the current value of the subject property. The only conclusion that you can draw from this sale is that the subject property would likely have sold for less than $2,887,000.

43The Board also concludes that MPAC’s comparable Properties 3, 4 and 5 as inferior to the subject property. These properties have lots between 1 and 2 acres versus the subject property at 9.37 acres and effective lake frontages between 420 feet and 472 feet versus the subject property with 1,232 feet. The conclusion that can be drawn from Sale 3, 4 and 5 is that likely that the subject property would have sold for more than $1,577,000.

44The Board has analyzed the two comparable properties submitted by the Appellant, Penman Island and Burgess Island, and concludes that they are both inferior to the subject property. The subject property is a substantial property with 9.37 acres, 1,870 feet of actual frontage, and 1,232 feet of effective frontage while both Penman Island and Burgess Island have 3.0 and 2.8 acres of land, actual water frontage of 780 feet, and 850 feet and effective frontages of 690 feet and 710 feet. The subject property has waterfront exposure on the west, south, and east while Penman Island has only a western exposure and Burgess Island a southern exposure. The subject property has more than 1,000 feet actual frontage and more than 500 feet of effective frontage compared to both Penman Island and Burgess Island. With regards to the structures, the subject property structures were built in 1935 while both Penman Island and Burgess were built in 1989 and 2013 with quality levels of 7 and 6.5 versus the quality of construction of the subject residence of 5. This again supports very little similarity to the subject property. When comparing the boathouses, the subject property has a boathouse built in 1935 with 1,443 square feet while Penman Island boathouse has a residence above built in 1990 with 2,736 square feet of building area and Burgess Island has two boat houses built in 1970 with a total of 1,936 square feet. Both Penman Island and Burgess Island have substantially larger and newer boathouses than the subject boathouse and therefore these properties are once again not comparable to the subject. The Board concludes that both Penman Island and Burgess Island are inferior to the subject property and therefore concludes that subject property would have likely sold for more than $1,918,000.

45The Appellant has put a lot of weight on slope of the land and concluded that both Penman Island and Burgess Island have elevation increases of 65 feet and 49 feet while Home Island only has a 15.9 feet but the Board fails to understand the impact that slope has on value. There is no evidence to demonstrate or correlate the effect of slope on value. Is the impact negative or positive? There is no market evidence to demonstrate the impact of slope of the land on value. Furthermore it appears that the only point of comparability between the subject property and Penman Island and Burgess Island is the rise of the land because the land size, waterfront and building structures are not similar to the subject property.

46The Appellant has also argued that boat traffic and cottage density also have an impact on market value and once again has provided no evidence to quantify this impact.

47Finally, the Appellant submitted that the lack of continuity in the waterfront also has a negative impact on the valuation of the subject property, arguing that if the pie-shaped lot sold and the new owner built a cottage and boathouse on the property, it would affect the privacy of the cottage on the subject property. The pie-shaped lot is owned by Mr. T. Reid and its currently vacant and not for sale and therefore not impacting the value of the subject property at this time and for the foreseeable future. I am in agreement with Mr. Reid that if that were the case this situation has the potential of impacting the market value of the subject property. Unfortunately, we do not have any quantitative evidence to show what that impact on value would be.

48I find that the features of the subject property and Sale 1, 2 Island Home J7 offset each other, and that the subject property would likely sell for nearly the same amount as Sale 1. I therefore find that the current value of the subject property to be $2,651,445 rounded to $2,651,000which is supported by the time adjusted sale value of Sale 1.

DECISION

49The correct current value of the subject property is $2,651,000 for the 2017 and 2018 taxation years. MPAC has not filed a notice of intention to seek a higher assessment, as required by Rule 40 of the Board’s Rules of Practice and Procedure. I therefore confirm the assessment at $2,359,000 for the 2017 and 2018 taxation years.