Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE: November 07, 2018

FILE NO.: WR 152495

Assessed Person(s): Qiang Xu and Haoye Lan

Appellant(s): Qiang Xu and Haoye Lan

Respondent(s): Municipal Property Assessment Corporation (“MPAC”) Region 15

Respondent(s): City of Mississauga

Property Location(s): 5252 Adobe Court

Municipality(ies): City of Mississauga

Roll Number(s): 2105-150-070-16326-0000

Appeal Number(s): 3216986 and 3305326 (deemed 2018 appeal)

Taxation Year(s): 2017 and 2018 (deemed appeal)

Hearing Event No.: 697275

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

Heard: April 12, 2018 in Mississauga, Ontario

APPEARANCES:

Parties	Counsel+/Representative
Qiang Xu and Haoye Lan	Qiang Xu
MPAC	Laurie DeWinter
City of Mississauga	No one appeared

DECISION OF THE BOARD DELIVERED BY LESLIE FLEMMING

REASONS

Background

1Qiang Xu and Haoye Lan are the owners of 5252 Adobe Court (“the Subject Property”) in the City of Mississauga, a single family residential property not on water. They purchased this two-storey, 3,600 square-foot home in 2014 for $990,000.

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 assessed the current value of the Subject Property at $1,156,000 in the residential class.

4Mr. Xu and Ms. Lan (the “Appellants”) have filed appeals for the taxation year 2017 with the Assessment Review Board (the “Board”) pursuant to s. 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 $1,050,000. It is the MPAC’s position that the current value is $1,156,000.

5Pursuant to s. 49(11) of the Act, the City of Mississauga is a party to this proceeding. However, the City of Mississauga did not advise the Board of its position on the issues raised in this appeal, and no one appeared at the hearing on the Municipality’s behalf.

6Section 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.

7It is MPAC’s position that the current value of the Subject Property should be reduced to $1,077,000 in accordance with s. 44.(3)(b). The Appellants did not make any submissions on the issue of equity.

DECISION

8At the completion of the hearing, the Board reserved its decision. For the reasons that follow, the Board finds that the current value for the 2017 and 2018 tax years is $1,156,000. Based on evidence presented by MPAC, because there is evidence of similar properties in the vicinity having been assessed at amounts lower than their current values, the Board reduces the assessment to $1,077,000.

RELEVANT LEGISLATION

The [Act](https://www.canlii.org/en/on/laws/stat/rso-1990-c-a31/latest/rso-1990-c-a31.html)

9Section 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.

10Section 19.2(1) of the Act states:

19.2(1) Valuation days. – Subject to subsections (2) and (5), the day as of which land is valued for a taxation year is determined as follows:

1. For the 1998, 1999 and 2000 taxation years, land is valued as of June 30, 1996.

2. For the 2001 and 2002 taxation years, land is valued as of June 30, 1999.

3. For the 2003 taxation year, land is valued as of June 30, 2001.

4. For the 2004 and 2005 taxation years, land is valued as of June 30, 2003.

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

6. For the 2009 and subsequent taxation years, land is valued as of January 1 of the year preceding the 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:

Issue 1: What is the correct current value of the Subject Property for the taxation years 2017 and 2018; and

Issue 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?

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

MPAC’s Evidence and Submissions

14Laurie DeWinter gave evidence on behalf of MPAC. She is a Property Valuation Analyst, and the author of the Equity Analysis Report and the Valuation Report, both of which were submitted as evidence in this appeal.

15Ms. DeWinter testified that this single family detached dwelling, not on water, has 40 feet frontage and a depth of 109.9 feet, giving the site area a measurement of 0.1 acres. The home has four bedrooms, 3.5 bathrooms, a fireplace, air conditioning, a finished basement and an attached garage. The home is 3,600 square feet (“sq. ft.”) in area. It is situated in an area of similar homes and condominiums, bounded by Highways 403 and 407.

16MPAC uses a system of real property trend analysis to calculate the changes in prices over time in an effort to make the values comparable despite sales evidence deriving from different points in time. Ms. DeWinter chose to rely on evidence which had been adjusted to show price changes over time, thereby determining the values of the Subject Property and comparable properties as of the valuation day which is January 1, 2016. The Appellants did not object to the time adjustments proposed by MPAC.

17To determine current value in respect of residential properties, MPAC uses a method of direct comparison of similar properties and their selling prices close to the valuation day, which in this case is January 1, 2016. Generally, the Board prefers sales that have taken place within a few months either side of the valuation day. Sometimes that evidence is not available, which forces MPAC to look at sales somewhat farther away in time from the valuation day. In that case, more adjustments must be made to bring the value in line with the value of the land on January 1, 2016, which can erode the utility of comparison if the value has changed dramatically.

18In the current case, MPAC used four residential properties within the same neighbourhood (identified as C93-142 in MPAC’s materials). Three of the four comparable sales are located on the same street as the Subject Property; the fourth is located several blocks away. The four properties are relatively similar in size, and all have the same quality of construction (7.5 out of 10). Ms. DeWinter described one property as superior to the Subject Property (5244 Adobe Court), one as inferior (3501 Stonecutter Crescent), and two as similar (5193 Adobe Court and 5268 Adobe Court). A chart below sets out some of the details of these properties when compared to the Subject Property.

19Using a technique called bracketing, Ms. DeWinter submitted that the Subject Property’s current value would lie between the values of the superior and the inferior comparable properties, and be equivalent to the value of the two similar comparable properties. She used time-adjusted sales prices to demonstrate that the Subject Property’s current value would be in the area of $1,185,146 (the time-adjusted sale value of 5193 Adobe Court) and $1,260,652 (the time-adjusted sales value of 5268 Adobe Court). Using the direct comparison approach, she recommended a current value for January 1, 2016, of $1,156,000 for the Subject Property.

20MPAC had also prepared an Equity Analysis Report, which determined that, based on 30 sales of similar properties in the vicinity between January 1, 2015 and December 31, 2016 - in other words, 12 months either side of the valuation day. As a result of this study, MPAC concluded that the level of appraisal in the vicinity of the Subject Property was 0.93, or somewhat below the optimal value of 0.95 to 1.05. This means that the level of appraisal was below or less than the values of the properties selected, on balance. Ms. DeWinter recommended a reduction in the assessed value of the Subject Property to $1,077,000, in order to keep make the value of the Subject Property equitable with those in the study.

21Relying on its evidence, MPAC submits that an equitable reduction is required and the current value for the 2017 and 2018 taxation years should be reduced to $1,077,000.

Appellants’ Evidence and Submissions

22Mr. Xu presented evidence on behalf of the Appellants. He provided two comparable sales: 5248 Adobe Court, sold in May, 2014, and 3217 Erin Centre Boulevard, sold in November, 2016. One of these properties is approximately the same size as the Subject Property. The other, 3217 Erin Centre Boulevard has a somewhat smaller residence than the other comparable sales but it is situated on site that is over three times the area of the other comparable sales. It is approximately six years older than the other comparable sales and is ranked by MPAC as having a quality 7 out of 10 construction. The Appellants’ home is ranked a bit higher at 7.5.

23Mr. Xu’s evidence is that his home is assessed too high because it is in the middle of the street, fully surrounded by other houses, and therefore lacking in sunlight due to the height of the surrounding structures. Mr. Xu argued that his home should be assessed at a lower value because the surrounding buildings block sunlight and result in an impediment to the feng shui of the building. The Appellants noted that the one of the homes across the street from his, 5253 Adobe Court, has a basement walk-out, a lot of sunshine, and a clear view to the park. The assessment of this property as at January 1, 2016, is $1,128,000, which is lower than the value that MPAC asserts is the correct current value.

24Mr. Xu referred to MPACs time-adjustment tables and pointed out that the overall increase in prices, as determined by MPAC, for the two years surrounding the valuation day, was 34.29%. However, MPAC’s assessment of the value of his home is 50% higher. Mr. Xu submits that this increase is out of line with the other properties in his subdivision. He submits that the correct current value of the Subject Property $1,050,000 would be more appropriate.

Findings on Issue 1

25The proposed comparable properties produced by both parties assisted the Board in determining whether or not the current value of the Subject Property as determined by MPAC, is correct. The determination of value by the direct comparison method is based on the principle of substitution: a potential owner will pay no more for a property than the amount for which a property of like utility may be purchased; that a property's value tends to be set by the cost of acquiring an equally desirable substitute.

26Mr. Xu provided sufficient information on his two proposed comparable properties. While one was a smaller house on a larger lot (3217 Erin Centre Boulevard) and the other was purchased outside of the preferable period of time near the valuation day (5248 Adobe Court), the Board finds that these two properties are comparable to the Subject Property. The Board also finds that MPAC’s four comparable property sales are also comparable. Together, these six properties provide a good comparison of value for determining current value.

27One method of testing the valuation of similar properties is to calculate the per-square-foot value of the most important feature. In this case, the photograph provided by the Appellants depicting an aerial view of the neighbourhood shows that the homes are large, filling a substantial portion of each lot. By this means, it is apparent that the primary value of the Subject Property and the comparable properties lie in the residences themselves. Therefore, a comparison of the values of the square footages of the Subject Property and the six comparable homes is a useful means of checking the accuracy of the valuation.

28The seven residential buildings have many similarities, which include:

(a) They all have four or five bedrooms and three or more bathrooms;

(b) All have between 40 feet to 45 feet frontage, with the exception of 5268 Adobe Court which has effective frontage of 56.17 feet and actual frontage of 30 feet; and

(c) All have two storeys.

29Using the final adjusted value of the Subject Property as proposed by MPAC, the following chart compares the value per square foot of the dwellings.

5252 ADOBE COURT: COMPARABLE PROPERTIES BY ASSESSED VALUE PER SQUARE FOOT

	Subject	5244 Adobe	5193 Adobe	5268 Adobe	3501 Stonecutter	5248 Adobe	3217 Erin Centre
Sale Price	$990,000	$1,576,000	$1,162,500	$1,385,000	$1,050,000	$1,000,088	$1,120,000
Sale Date	2014/11	2016/09	2015/11	2016/08	2016/03	2014/05	2016/11
Building total area	3,600 sq. ft.	3,819 sq. ft.	3,608 sq. ft.	3,608 sq. ft.	2,845 sq. ft.	3,560 sq. ft.	3,212 sq. ft.
2017 Assessment	$1,077,000	$1,217,000	$1,173,000	$1,193,000	$1,005,000	$1,149,000	$1,048,000
Assessed value per sq. ft.	$299.16	$318.67	$325.11	$330.65	$353.25	$322.75	$326.28

30By this analysis, the Subject Property has the lowest per-square-foot value among all seven properties, despite 3501 Stonecutter and 3217 Erin Centre Boulevard having slightly smaller areas. This supports MPAC’s assessment, and mitigates against a lower current value.

31Mr. Xu raised an interesting point when he testified that the location of the home in the middle of the neighbourhood resulted in a lack of sunshine, which had a negative effect on the feng shui of the home. “Feng shui” is defined in the Oxford Paperback Dictionary and Thesaurus as:

“an ancient Chinese system of designing buildings and positioning objects inside buildings to ensure a favourable flow of energy”.

32In this case, Mr. Xu may in fact be correct in this supposition that the location of his home interferes with the feng shui. It certainly interferes with his enjoyment of the house. However, in order to have it affect the value of the home for assessment purposes, Mr. Xu would need to provide evidence which would give the Board a generally accepted method of valuing the presence or absence of feng shui in a particular building. He did not do this.

33Based on the above analysis, the Board finds that the current value proposed by MPAC at $1,156,000 is reasonable and supportable when using the direct comparison method. The comparable property sales were similar to the Subject Property, and no evidence provided by the Appellants supports a conclusion that the current value should be lower.

Issue 2: Should there be an equitable reduction of the current value of the Subject Property pursuant to [s. 44(3)](https://www.canlii.org/en/on/laws/stat/rso-1990-c-a31/latest/rso-1990-c-a31.html) (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 the amount of this reduction should be?

Evidence and Submissions

34The evidence and submissions of the parties are not in dispute. MPAC’s representative Laurie DeWinter provided an equity analysis which demonstrates that, that properties in the vicinity are being assessed at amounts lower than their current values, based on the assessment to sale ratios of 30 similar properties in the vicinity. Therefore, MPAC recommends the current value of the Subject Property should be reduced to $1,077,000. The Appellants do not assert that a greater reduction is required on the ground of equity.

Findings on Issue 2

35The purpose of an equitable reduction has been described by the Ontario Court of Appeal in Empire Realty Co. Ltd. and Assessment Commissioner for Metropolitan Toronto et al., [1968] 2 O.R. 388, 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 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.

In 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]”.

36However, 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 that such a reduction is warranted. In this regard, the burden of proof rests with the Appellants to establish, on a balance of probabilities, that an equitable reduction is required.

37The term “vicinity” is not defined in the Act, but refers to the appropriate geographical area that will yield meaningful comparable properties (see Ontario Regional Assessment Commissioner, Region No. 3 v. Graham, 16 O.R. (3d) 83, 1993 CanLII 8621 (Ont. C.A.) at page 6).

38MPAC has carried out a detailed equity analysis based on 30 sales in the vicinity, and, as a result of this analysis, recommends a reduction in the current value of the Subject Property to $1,077,000, which is not disputed by the Appellants. The Board also notes that this reduction is consistent with the evidence respecting comparable properties presented by both parties. Consequently, the Board accepts that an equitable reduction is required, and the Board reduces the current value to $1,077,000.

CONCLUSION

39The correct current value of the Subject Property is $1,156,000 for the 2017 and deemed 2018 taxation years.

40An equitable reduction of the current value of the Subject Property is required pursuant to s. 44.(3)(b) of the Act. The current value of the Subject Property is reduced to $1,077,000.

2018 DEEMED APPEAL

41An appeal for the 2017 taxation year is presently before the Board. Section 40.(26) of the Assessment Act provides that the appellant is deemed to have made the same appeal for the subsequent taxation year if the appeal is not finally disposed of before March 31 of the subsequent taxation year. The Board has not disposed of the 2017 appeal before March 31, 2018. For that reason, this decision also applies to the 2018 taxation year.

42Section 40.(26) of the Act directs:

Deemed appeals, 2009 and subsequent years

(26) For 2009 and subsequent taxation years, an appellant shall be deemed to have brought the same appeal in respect of a property,

(a) in relation to the assessments under sections 32, 33 and 34 for the year; and

(b) in relation to the assessment, including assessments under sections 32, 33 and 34, for a subsequent taxation year to which the same general reassessment applies, if the appeal is not finally disposed of before March 31 of the subsequent taxation year or, if an assessment has been made under section 32, 33 or 34, before the 90th day after the notice of assessment was mailed.