Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE: March 27, 2018

FILE NO.: WR149944

Assessed Person(s): Henry Walker

Appellant(s): Henry Walker

Respondent(s): Municipal Property Assessment Corporation (“MPAC”) Region 16

Respondent(s): Town of Innisfil

Property Location(s): 607 Rogers Place

Municipality(ies): Town of Innisfil

Roll Number(s): 4316-010-007-17800-0000

Appeal Number(s): 3256746

Taxation Year(s): 2017

Hearing Event No.: 689783

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

Heard: December 5, 2017 in Innisfil, Ontario

APPEARANCES:

Parties

Representative

Henry Walker

Robert Baranowski

MPAC

Adam Parker, Brittany Allen (Van Der Paelt) and David Zhao

Town of Innisfil

No one appeared

DECISION OF THE BOARD DELIVERED BY SUBUOLA AWOLERI

INTRODUCTION

1The Appellant appeals his 2017 current value assessment (“CVA”) of the subject property on the grounds that the assessment is too high. Robert Baranowski argues that the assessed value should fall within a range of $654,624 to $756,624 with a further equitable reduction. He further submits that the subject property is incorrectly assessed by MPAC as a waterfront property.

2The subject property was assessed by MPAC as a Seasonal/Recreational Dwelling first tier on water, located indirectly on the waterfront of Cook’s Bay. The parties agree that the dwelling was built in 2014 and it has a construction quality of 7.0. It has a lot with 75 feet of effective frontage, 173 feet of depth, an effective site area of 0.3 acres and a building total area of 3,071 square feet (“sq. ft.”). The parties agree that the unfinished basement area is 1,620 sq. ft.

3For the 2017 taxation year, the CVA was returned at $995,000. David Zhao, MPAC’s advocate requested that the Assessment Review Board (“Board”) confirm this assessment based on the five comparable property sales within the vicinity of the subject property, which reveals that the assessed value of the subject property is reasonably correct.

ISSUES

4The issues to be determined are:

i.) Is the subject property correctly assessed as an indirect waterfront property?

ii.) What is the correct current value of the subject property for the 2017 taxation year?

iii.) Is the current value as determined by the Board equitable in reference to the assessments of similar lands in the vicinity?

DECISION

5The Board finds that the subject property is correctly assessed as a waterfront property with indirect waterfront access.

6The Board determines that the current value of the subject property for the 2017 taxation year to be $871,000 (rounded).

7The Board determines that a further downward adjustment to the current value to $819,000 (rounded) is required to ensure that the assessment of the subject property is equitable with the assessments of similar lands in the vicinity.

8The Board reduces the returned assessment from $995,000 to $819,000 (rounded) for the 2017 taxation year.

REASONS FOR DECISION

Is the Subject Property Correctly Assessed as a Waterfront Property?

9The Board will first determine whether the subject property is a waterfront property with indirect access to the waterfront as this will have an impact on its findings on the correct current value of the subject property.

MPAC’s Position

10Adam Parker, (“MPAC’s Assessor”), testified that he inspected the subject property on September 21, 2017 and he did not see a defined boundary such as a fence between the subject property and the waterfront. MPAC’s Assessor provided the Board with Exhibit 2, which is a photograph he took of the subject property from the waterfront, which shows a boat house, two docks and a stairwell between the subject property and the water. He testified that these structures have been historically used by the seven waterfront properties in the area; including the subject property to access the water and that these properties have a right to use the water. He submitted that the subject property has a waterfront value but its lack of proximity to the water makes it an indirect waterfront access. He further testified that since the subject property has indirect waterfront access, MPAC applies a reduction in valuation in the amount of $102,000 to the assessed value. He testified that he arrived at this amount by applying the valuation of the subject property into MPAC’s database and removing the indirect water code, which the system calculated as $102,000. By removing this amount, the CVA was $1,097,000. MPAC’s advocate, Mr. Zhao further supported this reduction by submitting that the subject property is assessed as an indirect waterfront property with no ownership of the waterfront because it has a waterfront value but its proximity to the water makes it indirect.

11To support MPAC’s position, Ms. Van Der Paelt, the other advocate for MPAC, provided the Board with the following relevant case law: Love v. Municipal Property Assessment Corp., Region. 25, [2003] O.A.R.B.D. No. 299 (“Love”), Zorzi v. Municipal Property Assessment Corp., Region. No. 25, [2004] O.A.R.B.D. No. 410 (“Zorzi”) and Sinkins v. Municipal Property Assessment Corp., Region No. 25, [2003] O.A.R.B.D. No. 300 (“Sinkins”). In these cases, the appellants argued amongst other reasons that MPAC had incorrectly assessed their homes as waterfront properties, despite the fact that they did not own the adjacent properties lying in between their homes and the water. These appellants had unrestricted access to these adjacent properties and therefore gave them access to the waterfront.

12In Love, evidence was tendered to show that the appellant’s boat was hauled up on the vacant sandy beach lying between the subject property and Georgian Bay, showing unrestricted usage. In Zorzi, the complainant had unrestricted use and enjoyment of the neat landscape yard between the subject property and the water and in Sinkins, the complainant had ongoing and current use of the access lane; a sandy beach between the subject property and the water and had never been denied access across this property.

13In these three appeals, the Board determined that the appellants had current and ongoing use of the properties lying in between the three subject properties and the water, which is a marketable and assessable feature of the location of the subject properties. Consequently, the Board determined that these properties were correctly assessed as waterfront properties.

Appellant’s Position

14Mr. Baranowski argues that the subject property is not a waterfront property and MPAC should have assessed it as a single family detached not on water. He disputes the common usage of the structures such as the two docks and a tennis court close to the subject property, as these structures are not owned by the Appellant and there has been no easement granted by the owners to legally permit usage. Furthermore, he submits that there has been no evidence to prove common usage only historical records which have not been tendered in evidence. He further argues that if there is a structure/property in between the subject property and the water, the subject property cannot be a waterfront property and that all it has is a view of the lake. He concludes that the difference between direct and indirect waterfront properties is the high and low levels of the beach. Sequel to this, the subject property does not have access to the high and low water level and it does not have unlimited enjoyment of the water, therefore it is not a waterfront property.

15Mr. Baranowski submits that the Love decision was from 2003 tax year, and at this time the Assessment Act (“Act”) provided no guidelines on modeling of waterfront properties. In Zorzi, the appellant had unrestricted use of the property between the subject property and the water and that the Sinkins decision has no relevance to the present appeal.

16In support of his position, Mr. Baranowski presented the case of Atia v. Municipal Assessment Corp., Region No. 15, [2013] O.A.R.B.D. No. 32 (“Atia”). In this appeal, the subject property’s profile described the property as a single – family detached (not on water), but was assessed to include a premium of 6% as a waterfront property. MPAC’s witness in this appeal testified that there is a river at the rear of the subject property and there are two strips of land between the rear of the subject property and the river bank. Under cross-examination, the witness admitted that he had not inspected the property, the distance of the subject property from the river did not justify additional market value and that the two comparable properties presented by MPAC also have the same 6% premium although neither is on a waterfront. The Board relied on the assessor’s testimony and determined there was no basis for the added premium of 6% for waterfront.

Analysis

17The Board accepts and agrees with MPAC that the subject property is correctly assessed as a waterfront property, with indirect access to the waterfront.

18The three relevant cases cited by MPAC reveals that ownership of the adjacent properties lying in between the subject properties and the waterfront is not a determining factor of the issue of whether the subject properties are waterfront properties, since the owners of these subject properties enjoy unrestricted access to these adjacent properties. The fact that the owners enjoy the use of the properties lying in between their homes and the water makes it a marketable and assessable feature of the location of these homes. This is the situation in the present appeal. The subject property does not own the two decks, the boat house, tennis court or stairwell, this does not prevent the Appellant from having access to it. Mr. Baranowski did not provide any evidence to contradict MPAC’s evidence of common usage other than submitting that a person cannot have unrestricted enjoyment of another person’s property. Furthermore, he admitted to the Board when asked that he does not know if the Appellant has access to the lake, submitting that it is irrelevant. The Board disagrees, it is relevant. The Board determines that on the balance of probabilities it is more likely than not that the Appellant has access to the lake using these properties, which reveals that the Appellant enjoys the use and access to the lake using these properties regardless of their ownership. This as determined by the Board in the three cases cited by MPAC is in fact a marketable and assessable feature of the location of the subject property making it a waterfront property.

19In Atia, evidence was not presented regarding the Appellant’s use and enjoyment of the two properties between the rear of the subject property and the river. In fact the assessor admitted under cross-examination that he did not know if the subject property had an interrupted view of the river. Hence, the Board did not make a determination on the Appellant’s use and enjoyment of these two strips of land. In the current appeal, Mr. Baranowski did not furnish evidence to contradict MPAC’s evidence of the Appellant’s use and enjoyment of the properties between the subject property and the lake.

20Having determined that this property is a waterfront property, MPAC has further assessed it as having an indirect access to the waterfront as opposed to direct access, due to its distance to the lake and therefore benefiting from a $102,000 reduction in its assessment. Mr. Baranowski submits that this reduction does not exist and it should be assessed as a single family detached not on water. He further alleges that MPAC has misled the Board in its distinction between an indirect and direct waterfront property and submits that this distinction has nothing to do with the subject property’s proximity to the lake but the high and low levels of the lake. Using MPAC’s evidence in Exhibit 1, which shows the aerial view of the subject property and Exhibit 2, which shows a view of the subject property from the waterfront, the Board accepts the evidence of MPAC’s Assessor, as these two photographs reveal a distance between the subject property and the waterfront. In Atia, MPAC added a 6% premium to the subject property due to its distance of approximately 150 feet away from the river. In this appeal, MPAC is deducting a value of $102,000, for proximity, which Mr. Baranowski also ironically used in one of the submissions he presented to the Board in determining the correct current value of the subject property.

21On the balance of probability, it is more probable than not that the subject property has an indirect waterfront access, based on its proximity and access to the waterfront.

Current Value – Evidence and Analysis

22In accordance with s. 44.(3)(a) the first mandate of the Board is to determine “the current value of the land.” Section 1 of the Act defines current value as “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.” That is, for the 2017 taxation year, the Board must determine what the subject property would have sold for in an arm’s length transaction on the January 1, 2016 valuation day set by the Act.

23Section 19.2(1) of the Act prescribes the valuation days, which provides:

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 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.

Exception

(5) Subsection (1) does not apply in respect of the valuation of land for a taxation year after 2004 if the Minister prescribes a different day as of which land is valued for that year.

24Section 40.(17) of the Act places “the burden of proof as to the correctness of current value on MPAC.”

MPAC’s Evidence

25MPAC’s Assessor presented the Board with five comparable property sales within the vicinity of the subject property. He testified that Sales 1 to 4 are inferior to the subject property due to the smaller building size and the year built and Sale 5 is considered superior to the subject property, as this property has a boat house, a detached garage and a cabin as secondary structures. The five properties are assessed as having direct waterfront access. The Time Adjusted Sale (“TAS”) prices for the five properties range from $756,624 to $1,656,233 with sale dates from December 2012 to February 2017. The building total area of the five properties range from 2,067 to 2,869 sq. ft., with year built from 1980 to 2004. All five properties have the same construction quality of 7.0, as the subject property. Four of these properties have lot areas bigger than the subject property ranging from 0.17 to 0.55 acres, while Sale 3 has an effective site area of 0.3 acres, same as the subject property. Only Sale 4 has a finished basement area.

26He concluded that the subject property falls between the inferior and superior range of values of the five sales and that these sales test the assessment of the subject property as being reasonable. During cross-examination, he admitted that he could not show the Board how he arrived at the calculation of the returned CVA for the subject property based on the five sales. However, MPAC’s advocate submits that MPAC’s onus is not to reconstruct the value or to demonstrate how it is calculated but to demonstrate whether the value is reasonably correct. Furthermore, he submitted that the direct comparison approach using these five sales is to test whether the returned assessment is correct.

Appellant’s Evidence

27Mr. Baranowski did not provide his disclosure prior to the hearing in accordance to Rule 45 and 48 of the Board’s Rules of Practice and Procedure (“Rules”), which provides:

All parties must provide a copy, in paper or electronic form, of all relevant documents in their possession, control or power to all other parties in the proceeding, except for privileged documents.

A document, including an expert report, will only be admitted into evidence at a hearing event if it has been disclosed, and filed with the Board, in accordance with these Rules, unless the Board determines that there are exceptional circumstances.

28Mr. Baranowski did not provide any reason why the disclosure was not made in accordance with the Rules.

29MPAC objected to the introduction of his evidence at the hearing.

30In accordance with Rule 48 and the principles of procedural fairness, the Board ruled that this evidence cannot be introduced late at the hearing. Mr. Baranowski agreed and relied on MPAC’s evidence to provide the Board with what he believes the correct current value of the subject property should be. He made the following submissions on the correct CVA for the subject property:

i. Using Sale 3, which he identified as the most identical to the subject property, and s. 44.(3)(a) of the Act, the CVA of the subject property should be reduced to $756,624, which is the TAS for Sale 3; or

ii. The CVA of the subject property be established based on the TAS of Sale 3 of $756,624 and further reduce it by $102,000 (MPAC’s adjustment for indirect waterfront access), which provides a CVA of $654,624; or

iii. If the Board determines that the five comparable sales are not meaningful, the Board should establish the CVA of the subject property based on the 2016 assessment of Sale 3, which is $729,000.

31For the three submissions identified by Mr. Baranowski, he further provided equity argument to be applied to the current value he determined, which shall be addressed in the equity section of this decision.

32The best evidence of current value is the sale of the subject property on or near the valuation date of January 1, 2016. When no such sale occurs, as in this appeal, the Board looks to the recent sale of other similar properties in the vicinity to determine current value. The Board prefers sales of comparable properties within 12 months on either side of the valuation date of January 1, 2016, although the Board can also go as far back as 18 months on either side of the valuation date of January 1, 2016. The caution being that the further the sale is from the valuation date, the less likely it reflects the market value on the valuation date.

33MPAC’s Sale 1 and 5 with sale dates of December 2012 and May 2014 respectively, are too far removed from the valuation date to reflect the market. Furthermore, Sale 5 which sold on May 15, 2014 is superior to the subject property due to its secondary structures (boathouse, detached garage and cabin) and its larger effective lot size of 0.55 with five bedrooms, compared with the subject property which has four bedrooms. MPAC did not advise the Board if any adjustments were made to the subject property assessment based on these superior features.

34The Board determines that Sales 2, 3, and 4 are relatively comparable to the subject property. Although the subject property has the largest building total area and it is newer, these qualities have been accounted for in the secondary structures of these three properties, having attached and detached garages and the extra bedrooms in Sale 2 and 4. In addition; Sale 2 has a larger effective lot size of 0.44 acres with building total area of 2,780 sq. ft. Sale 3 has the same effective lot size as the subject property with building size of 2,067 sq. ft. Sale 4 has an effective lot size of 0.19 acres with building size of 2,199 sq. ft. and it is the only sale with a finished basement. All three sales have the same quality of construction as the subject property.

35The Board determines the CVA of the subject property based on the current value range established by these three relatively comparable sales. As illustrated in table 1 below:

Table 1

36The mid-point of the current value range is $972,809. The three relatively comparable sales have direct waterfront access, the Board has determined that the subject property has an indirect waterfront access; therefore the Board has further applied the reduction of $102,000 used by MPAC, which provides a current value of $871,000 (rounded).

Equity Analysis

37Section 44.(3)(b) mandates and 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.”

38The Assessment to Sales Ratio (“ASR”) is a tool often used to determine if a reduction in the assessment below current value is required to make an assessment equitable with the assessments of similar lands in the vicinity. The ASR is determined by dividing the assessment as returned by the TAS price.

MPAC’s Evidence and Position

39MPAC’s Assessor, presented an equity analysis of 30 residential sales of single family detached on water, seasonal/recreational dwelling – first tier on water from January 1, 2013 to December 31, 2016 within 14.88 kilometers of the subject property with a median ASR of 0.944. He submits that the International Association of Assessing Officers standards states that the median ratio should fall between 0.90 and 1.10. He indicated that from his analysis similar real property in the vicinity have been assessed at a level of 0.94. In order to test the equitability of MPAC’s returned CVA, he multiplied the returned CVA of $995,000 by the median ASR of 0.94, which resulted in an equitable assessment of $935,000 (rounded). He therefore recommended that in order to achieve equity, the CVA of the subject property be reduced to $935,000 to make it equitable with the assessment of similar properties in the vicinity.

40To further support MPAC’s equity analysis, Mr. Zhao submits that all sales used are similar, as they are all waterfront properties and meet the requirement of s. 44 (3) (b) of the Act. Furthermore, as determined by case law, “for equity purposes, properties only need to be of the same general nature, character or function in relation to the subject property.” Ms. Van Der Paelt further presented the case of Ross v. Municipal Property Assessment Corp., Region 5, [2017] O.A.R.B.D. No. 16, where the Board determined that “for the purposes of establishing equity, properties do not need to be comparable; they need to be of a similar nature and within a reasonable proximity.”

Appellant’s Position

41Mr. Baranowski, presented his equity argument using the average ASR of the five sales presented by MPAC, which he submits as 0.86. He applied this average ASR of 0.86 to the three submissions he provided the Board in determining the correct CVA of the subject property:

i. Option 1: upon finding the CVA of the subject property as $756,624, the Board should reduce it by the average ASR of 0.86, resulting to $650,696; or

ii. Option 2: Apply the average ASR of 0.86 to the CVA of $654,624, resulting to $563,000 (rounded);or

iii. Option 3: Apply the average ASR of 0.86 to the CVA of $729,000, resulting to $627,000.

42He submits that if the Board does not apply the average ASR of 0.86, the Board should use MPAC’s median ASR of 0.94 to the CVA he determined in the three submissions above. However, he argued that the sales used by MPAC in its equity analysis are not similar, that the same criteria used for similarity in current value should be the same for determining equity. He submits that in Atia, the Board determined that “…the best evidence presented is the two comparable properties proposed by MPAC and the express testimony of the assessor that both properties are similar to the subject property and therefore good evidence as to equity.”

Board’s Analysis

43The best evidence of equity is the equity analysis presented by MPAC; a larger sample size of 30 residential single family detached on water and Seasonal/Recreational – first tier on water sales was presented to the Board. Mr. Baranowski’s evidence is based on five properties. MPAC’s selection of these residential sales on water reveals they are of the same general nature, character and function as the subject property. In Atia, the Board was persuaded by the express testimony of the assessor. Moreover, It will be difficult for the Board to establish equity based on the ASR of only five properties, as the purpose of s. 44.(3)(b) of the Act is to ensure that the Municipal tax burden is shared fairly and equally among similarly situated taxpayers. The Board notes that while Mr. Baranowski argues against the use of MPAC’s equity analysis, he presents MPAC’s median ASR as part of his submissions for the Board to determine equity.

44Using MPAC’s equity analysis, the Board applies the median ASR of 0.94 to the current value of $871,000, in order to achieve equity with the assessment of similar properties in the vicinity and reduces the CVA to $819,000 (rounded).

CONCLUSION

45Based on all of the evidence, the Board determines the subject property has been correctly assessed as a waterfront property with indirect waterfront access.

46The Board finds the current value for the 2017 taxation year to be $871,000 and determines that this current value be reduced to $819,000 to make it fair and equitable. Consequently, the Board reduces the returned assessment of the subject property from $995,000 to $819,000 for the 2017 taxation year.