Siddhartha Ramanathan v. Municipal Property Assessment Corporation (“MPAC”) Region 09 and City of Toronto, 2018 CanLII 113007

Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE: November 20, 2018

FILE NO.: WR 156492

Assessed Person(s): Siddhartha Ramanathan

Appellant(s): Siddhartha Ramanathan

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

Respondent(s): City of Toronto

Property Location(s): 15 Grenville Street, PH 03

Municipality(ies): City Toronto

Roll Number(s): 1904-068-060-02290-0000

Appeal Number(s): 3317207

Taxation Year(s): 2018

Hearing Event No. 705064

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

Heard: October 24, 2018 by teleconference call

APPEARANCES:

Parties	Representative
Siddhartha Ramanathan	Self-represented
MPAC	Winston Williams
City of Toronto	No one appeared

DECISION OF THE BOARD DELIVERED BY JEAN-PAUL PILON

BACKGROUND

1Ramanathan Siddhartha (the “Appellant”) is the owner of 15 Grenville Street, Suite PH03 (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 assessed the current value of the Subject Property at $778,000 but is recommending that the assessment be reduced to $731,000.

4The Appellant filed an appeal for the 2018 taxation year with the Assessment Review Board (the “Board”) pursuant to s. 40 of the Act.

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. MPAC took the position that an equitable reduction is not required. The Appellant asserted 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 2018 taxation year is $763,000. Pursuant to s. 44.(3)(b) of the Act, an equitable reduction is not required. The returned assessment of $731,000 should therefore be confirmed.

Relevant Legislation and Rules

8The Act states that:

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.

ISSUES

9The issues to be determined in this appeal are:

1. What is the correct current value of the Subject Property for the 2018 taxation year?
2. Whether there should 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 1: What is the correct current value of the Subject Property for the 2018 taxation year?

MPAC’s Evidence

10Relying on MPAC’s Valuation Report prepared in anticipation of the hearing, MPAC’s representative Winston Willams testified that the Subject Property is a corner penthouse unit on the top floor of a 51 floor condominium building in downtown Toronto with southern and western exposure. The unit’s floor space of 819 square feet (“sq. ft.”) and it includes an underground parking space and a locker.

11MPAC’s representative testified that he inspected the property on September 4, 2018 and did not see any of the damage or any indication of the ongoing issues raised by the Appellant at the hearing.

12The Appellant purchased the Subject Property on December 20, 2016 for $628,862 in a builder sale transaction negotiated in 2012.

13MPAC’s representative testified that MPAC retrieved data from 345 sales over a four year period to adjust purchase prices for inflation with the passage of time. Neither the use of the direct comparison approach to determine value, nor MPAC’s time adjustment factors, were contested by the Appellant.

14MPAC had six proposed comparable properties for comparison, two in the same building as the Subject Property and four in a nearby building at 386 Yonge Street in Toronto. None of MPAC’s six proposed comparable properties were penthouse units, and purchase prices were increased by $6,000 to account for the difference. In addition, for those units not including a locker, MPAC increased prices by either $5,000 or $5,500. The difference between these amounts was unexplained but materially insignificant. For another unit, one of two in the same building as the Subject Property, MPAC increased the sale price by $50,000 because that unit did not include a parking space like the Subject Property. These adjustments to purchase prices were also not disputed by the Appellant.

15The median time adjusted sale amounts for MPAC’s six proposed comparable properties was $730,907, which divided into a per sq. ft. amount of $892.44. Applied to the Subject Property’s 819 sq. ft., MPAC arrived at a current value of the Subject Property of $730,907, explaining its recommendation of $731,000. MPAC’s representative further testified that its opinion of current value was in fact $778,000, not significantly different from $774,762, which is $730,907 plus the 6% penthouse adjustment.

MPAC’s Submission

16Relying on its evidence, MPAC submitted that the correct current value for the 2018 taxation year is the value returned of $778,000 with a recommendation of $731,000.

Appellant’s Evidence

17The Appellant had seven proposed comparable properties of his own, all of which were units ending with “03” and in the same building as the Subject Property. All of his proposed comparable properties were directly below the Subject Property.

18The Appellant did not challenge MPAC’s later evidence that, other than the same two proposed comparable properties relied upon by MPAC in the same building, the remaining five in the same building had been builder sales.

19The Appellant testified that the median sales price for all of these units was $661,000, not including any time adjustments.

20The Appellant also made reference to unit 3903, one of the two in the same building referred to by MPAC, which had a current value assessment of $651,000. He testified this should be the starting point in determining his current value assessment. With the penthouse adjustment, he testified that a current value of $690,000 or $695,000 would be correct, subject to his further submissions.

21These related to a number of serious deficiencies to the rental unit, including window and roof leaks, and flooring repairs which he testified the builder has not been able to remedy for 1½ years. He further testified that these issues would affect the sales price of the Subject Property if he chose to sell it, and he relied on a letter entitled “Opinion of Value” commissioned from a real estate broker which repeated the same opinion. “This could be upwards of a $125,000 reduction in the assessed value noted above”, it said, of $680,000 to $700,000.

22The author of the letter did not testify at the hearing, nor was it contested that all of these issues remain the subject of an ongoing Tarion new home warranty claim.

Appellant’s Submission

24The Appellant submitted MPAC’s assessment of current value is too high and that the correct current value is $550,000 to $575,000.

Findings on Current Value

25The direct comparison approach uses the sale prices of similar properties to determine what the Subject Property would have sold for on the valuation date. It is not a comparison of the Subject Property’s assessed value with other assessed values, where factors not before the Board might have affected those assessments. The Appellant’s submissions relating to assessed values were instead considered in the context of the equity analysis that follows later in this decision.

26The Appellant was correct that the most similar proposed comparable properties would have been the units identical to his in the same building with the penthouse adjustment of 6%. However, other than the two proposed comparable properties relied up on by both parties, units 3903 and 4603, the other five in the Appellant’s submission were sales from the builder to first purchasers.

27The Board is generally reluctant to consider builder sales as indicators of current value because, as noted by the Board in Roitman v. Municipal Property Assessment Corp. Region No. 9, [2013] OA.R.B.D. No.138, builder sales prices can be distorted by incentives and there can be uncertainties as to the total consideration paid. In a situation where there are arms’ length sales other than builder sales to consider, there should be no need to resort to those sales in the analysis.

28Although not specifically argued, by relying only on the “03” units in the building, the Appellant implied that MPAC’s other proposed comparable properties at 386 Yonge Street should not be considered. Accepting that submission, the average of the time adjusted per sq. ft. prices for units 3903 and 4603 is $879.14. Multiplied by the square footage of the Subject Property of 819, a value of $720,000 is obtained. With the further addition of the 6% unexplained yet uncontested penthouse adjustment, the result is $763,000 where MPAC’s opinion of value is $778,000.

29The Appellant’s testimony relating to the Subject Property’s deficiencies was contested, where the Appellant filed photographs and the broker’s letter, and MPAC’s representative testified these issues were not seen on inspection. The larger question was whether these existing issues should reduce the current value assessment of the Subject Property by the cost to cure them.

30The answer, in the Board’s view, should be no, because they remain the subject of an outstanding Tarion new home warranty claim that has yet to be resolved. There was no reason before the Board, apart from the passage of time, to believe these issues would not eventually be remedied. There was no mention of the warranty claim in the real estate broker’s letter relied upon by the Appellant and he was not present at the hearing to be asked whether he even knew about it. The insurer’s obligation would be to restore the Appellant and/or successors in title to the position they would have been in had the deficiencies not existed. It should not, therefore, also result in a reduction to the assessed value, where the cost to cure would be borne by the insurer.

31The Board therefore determines the most likely current value of the Subject Property is $763,000.

Issue 2: Whether there should be an equitable reduction of the current value pursuant to [s. 44(3)](https://www.canlii.org/en/on/laws/stat/rso-1990-c-a31/latest/rso-1990-c-a31.html#sec44subsec3_smooth)(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.

MPAC’s Evidence

32MPAC chose thirty proposed comparable properties in its equity analysis in the vicinity of the Subject Property. They were all the subject of arms’ length real estate transactions in 2015 to 2016, in three buildings within one kilometer of the Subject Property, and included the same two proposed comparable properties in the Subject Property building.

33MPAC representative testified that its level of appraisal and coefficient of dispersion measures indicated that similar properties in the vicinity of the Subject Property were assessed at or near their current values. MPAC reported a level of assessment (LOA) of 0.993, where its target range is between 0.95 and 1.05, and a coefficient of dispersion of 6.2, where its goal is not to exceed 15 for residential properties.

MPAC’s Submission

34MPAC determined that no equity adjustment was required.

Appellant’s Evidence

35The Appellant’s approach was to point out that the median of the assessments of the 03 units below his (including the builder sales) was $661,000, which should result in an equity reduction of his current value assessment of $731,000.

Appellant’s Submission

36The Appellant’s position was that there should be an equitable reduction to the correct current value.

Findings on Equity

37The 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.

38In 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.”

39However, 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.

40An equity analysis requires data relating to sales prices and assessments of similar lands in the vicinity of the Subject Property. To this end, MPAC identified 30 condominium units that had been the subject of arms’ length sales in 2015 and 2016 in the Subject Property’s building and two other buildings nearby. The Appellant argued that the vicinity to be considered should be his building and that similarity should be taken to mean identical units to his on lower floors in the “03” range.

41“Vicinity” is not a term defined in the Act, but refers to the appropriate geographic 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 (C.A.)). On the question of “similarity”, the Board noted in Tse v. Municipal Property Assessment Corporation, Region 09, 2018 CanLII 62978:

…for the purposes of determining equity, properties only need be of the same general nature, character or function in relation to the Subject Property. For statistical purposes, the more properties used in an equity analysis produces stronger evidence of a general trend in the vicinity.

42The Appellant took a limited view of both terms in referring only to the ’03’units below his. However, this approach would have left only two non-builder transactions for comparison, not enough with other transactional data available to the Board of similar condominium properties sold in this densely populated area of downtown Toronto.

43The Appellant submitted his own list of properties that had been sold in the same building culled from MPAC’s time adjustment analysis of 345 properties that was filed more in passing than in reference to the equity question. In an attempt to apply the Appellant’s narrower view of similarity and vicinity, the Board referred to that document and recalculated the LOA using only the data from sold properties in that list from the same building.

44There were 117 sales in the building in this list recompiled by the Appellant. The median LOA from those transactions was 1.1695, which would not have resulted in an equitable reduction of the value. Moreover, that list again appeared to include builder sales, because included in the list were the same units identified as such referred to by the Appellant ending in ’03’. Considering those transactions would not have yielded a meaningful result, and there was insufficient information to determine which of these transactions were builder sales and which were not.

45There was therefore no evidence to support a reduction in value to make it equitable with the assessments of similar properties in the vicinity.

DECISION

46The correct current value of the Subject Property is $763,000.

47An equitable reduction of the current value of the Subject Property pursuant to s. 44.(3)(b) of the Act is not required.

48MPAC has not served a notice of intention to seek a higher assessment as required by Rule 40 of the Board’s Rules of Practice and Procedure. Therefore the assessment of the Subject Property at $731,000 is confirmed for the 2018 taxation year.