Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE: April 12, 2018

FILE NO.: WR 150942

Assessed Person(s): Lionel Peter Margolin

Appellant(s): Lionel Margolin

Respondent(s): Municipal Property Assessment Corporation (“MPAC”) Region 9

Respondent(s): City of Toronto

Property Location(s): 27 Elfindale Crescent

Municipality(ies): City of Toronto

Roll Number(s): 1908-111-070-00700-0000

Appeal Number(s): 3225357

Taxation Year(s): 2017

Hearing Event No. 692366

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

Heard: January 30, 2018 in Toronto, Ontario

APPEARANCES:

Parties	Representative
Lionel Margolin	Self-represented
MPAC	Tyler Nastich
City of Toronto	No one appeared

DECISION OF THE BOARD DELIVERED BY DAN WEAGANT

INTRODUCTION

1The subject property was the site of a former ‘grow-op’, where illicit production of cannabis occurred. In 2012, the Appellant, Lionel Margolin purchased the property, despite the stigma attached to the property connected with its former use. Mr. Margolin submits that the stigma associated with the impacts of such an illegal use such as the additional difficulty of obtaining insurance or mortgage financing impacts the value of the subject property. Mr. Margolin believes the assessment of the subject property should be lower than the $992,000 returned on the roll for the 2017 taxation year

2MPAC agrees that an illegal ‘grow-op’ was formerly on the property, but that renovations since that time have eliminated much of the concern about the property’s former use. Tyler Nastich, representing MPAC, indicated that the subject property has a returned value below what the sales in the area would suggest and as a result, any lingering stigma related to the former grow–op use is already reflected in the returned value.

3The Board must decide two things in this appeal. Firstly, the current value of the subject property must be determined for the 2017 taxation year, based on the evidence at the hearing. Having reference to the assessments of similar properties in the vicinity, the Board must also determine if the current value found, needs to be reduced for the purpose of equitable assessment.

4In order to make these decisions, the Board must also determine if there is an impact on value resulting from the former grow-op use and if so, the amount of that impact.

DECISION

5The Board finds that the impact of the former grow-op at the subject property reduces the current value of the subject property by 21.75 % of the current value determined by MPAC.

6The Board finds that the current value of the property at 27 Elfindale Crescent is $840,000. The Board finds further that no reduction in this amount is necessary for the assessment of the subject property to be equitable with the assessments of similar properties in the vicinity.

7Accordingly, the assessment of 27 Elfindale Crescent is reduced for the 2017 taxation year from $992,000 to $840,000, in the Residential property class.

LEGISLATION

8In making its determination of these appeals, the Board must consider the relevant sections of the Assessment Act (“Act”).

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.(1) of the Act states:

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

11Section 44.(3) of the 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.

What is the Current Value of the Subject Property?

MPAC’S Evidence and Position

12Mr. Nastich testified that there were no known sales of former ‘grow-op’ properties for him to compare the subject property with. He proceeded, with the assumption that there was no indication in the market that former grow-op properties sold for any less than any other property.

13Mr. Nastich prepared a valuation report, whereby he compared five properties in the area of the subject property that sold in proximity to the January 1, 2016 valuation day stipulated in the Act. He stated that these five properties were compared to the subject property and where necessary, adjustments to sale values in the study were made so that a reasonable estimate of value could be determined for the subject property.

14Because market conditions and sale prices change over time, and because the comparable properties were not sold on the valuation day of January 1, 2016, Time Adjustment Factors (“TAFs”) are applied to adjust the sale value of each of the comparable properties to show their likely sale value as if they were sold on January 1, 2016. The TAFs in this case, according to Mr. Nastich are derived from 43 sales of residential properties in the market area, that took place between March 2015 and December 2016.

15Mr. Nastich used the sales of five properties in his analysis that he found to be the most comparable to the subject property while ignoring its history as a former ‘grow-op’. The range of the Time Adjusted Sale (“TAS”) values of these five comparables is $908,000 to $1,424,000. The details of the characteristics of Mr. Nastich’s comparable properties are summarized in Table A.

TABLE A

	Subject Property 27 Elfindale Crescent	Sale 1 8 Quincy Crescent	Sale 2 41 George Henry Boulevard	Sale 3 8 Skyview Crescent	Sale 4 2 Denver Crescent	Sale 5 75 George Henry Boulevard
Lot Area (acres)	0.16	0.14	0.15	0.14	0.36	0.14
Lot frontage	63	55	57	52	71	50.2
Living Area (sq. ft.)	1,666	1,700	1,642	1,721	1,690	1,710
Sale Price ($Mil)/Date		1.608/July 2016	1.225/August 2016	.900/June 2015	1.508/May 2016	1.000/June 2016
TAS Price ($Mil)		1.424	1.059	1.092	1.404	.908
2016 CVA ($)	992,000	957,000	892,000	1,498,000	1,207,000	907,000
Assessment to TAS Price (ASR)		.672	.842	1.372	.860	.999

All of the comparables are two storey structures within 500 metres of the subject property. They were all built between 1963 and 1966, with an assigned quality of construction rating of 6.0. Like the subject property, each of the comparables has an attached garage.

Appellant’s Evidence and Position

16Mr. Margolin testified that the property was the subject of a police raid in 2007 at which time the former illegal use was discovered. Since that time, the subject property is on a list accessible to mortgage and insurance brokers, making financing and insurance difficult, despite the complete renovation of the property to address the effects of the former ‘grow-op’.

17Mr. Margolin submitted that for the 2012 CVA, MPAC acknowledged a stigma value and reduced the returned value at that time, from $765,000 to $500,000, a 34.6% reduction. He submitted that it is not reasonable to apply a reduction of 0% for the 2016 CVA because the same stigma still applies, although he acknowledges the full impact may be somewhat reduced by the passage of time.

18To support his submissions that a stigma still applies, Mr. Margolin submitted a series of sales records and real estate listings for a property known as a former ‘grow-op’ on Pharmacy Avenue (‘comparable property’). Under cross examination, Mr. Margolin confirmed that he was not suggesting this comparable property and the subject property were either in the same neighbourhood or directly comparable. His only reason for including it was to develop a reasonable deduction as to the impact of the ‘grow-op’ stigma on property value when MPAC was unable to provide such a deduction and where much of the information required to do so is unavailable or protected for privacy reasons.

19The comparable property was compared to two others that sold within two months. These three properties were on the same block and sold in April, May and June of 2015; six to eight months from the valuation day. They are all bungalows. Mr. Margolin submitted that the only meaningful difference between them is that the comparable property was a known former ‘grow-op’. The other two properties sold for $525,000 and $575,000, despite having similar listing prices to the comparable of $459,0000 and $525,000 respectively. The comparable was sold for $409,900 after being listed for $469,900.

20Mr. Margolin submitted that the final sale price of the comparable was approximately 26% less than the sale prices on the two other properties, within eight months of the valuation day and that this would suggest the reduction required for the subject property to arrive at a reasonable current value.

Board’s Analysis

21In order to make a decision on the current value of the subject property, the Board must first decide what the impact of the former ‘grow-op’ is on the subject property’s value, if in fact there is one. Mr. Nastich was not able to come up with any directly comparable sales with the same ‘former grow-op’ condition. Mr. Margolin relied on listings and sale prices from 2015 in another neighbourhood, to suggest the value of the remaining stigma on the subject property.

22When reviewing the comparable properties used by MPAC, the Board finds that Mr. Nastich’s approach is the best evidence of the current value of the subject property, assuming there was no value reduction for the former grow-op stigma. The direct comparison approach is the most widely used approach to value for this type of property and Mr. Nastich’s findings were not refuted in any evidence submitted by Mr. Margolin. MPAC’s current value finding is $1,074,000, before any adjustment for the former ‘grow-op’ stigma..

23Mr. Margolin submitted that he understood Mr. Nastich’s data challenges, but that there was a demonstrable stigma value, based on the Pharmacy Avenue sales in his evidence. The Board notes the following in Mr. Margolin’s Pharmacy Avenue comparison:

• Sale 1 - $459,000 listing sold May 2015 for $525,000 (14% over asking);
• Sale 2 - $528,000 listing sold June 2015 for $575,000 (9% over asking);
• Comparable property - $469,900 listing sold April 2015 for $409,900

Sales 1 and 2 sold for an average of 11.5% over asking. When this percentage is applied to the comparable property’s list price, the value is $524,000 (rounded) which the Board considers to be a reasonable expected sale value in that neighbourhood if the comparable property had not been a former ‘grow-op’.

24When this expected sale value is compared with the actual sale value of $409,900, the difference attributed to the former grow-op stigma is $114,000 (rounded) or 21.75%. Mr. Margolin’s submissions on the value of the grow-op stigma are compelling. His submissions on this point were not refuted by Mr. Nastich.

25The Board finds that the reduction in value applied for the grow-op stigma in this case is 21.75%, based on the best evidence available at the hearing. When applied to the non-adjusted value of $1,074,000 determined by MPAC, the result is $840,405. The Board finds that the current value of the subject property is $840,000, (rounded).

Is a reduction in the current value necessary to achieve equitable assessment when reference is made to the assessments of similar properties in the vicinity?

Board’s Analysis

26The concept of reducing the current value determined to make the subject property’s assessment equitable with that of similar properties in the vicinity requires the Board to change a correct assessment finding to one that is incorrect to make it fair and equitable. Adjustments for this purpose cannot therefore be made without compelling evidence to do so.

27The only evidence submitted with respect to the equity question was the equity analysis prepared by Mr. Nastich.

28The Board finds that the equity study prepared by Mr. Nastich has a flaw that renders its findings unreliable in this case. None of the properties in the study suffer from the condition of having been a ‘grow-op’. The Board finds this to be a critical distinction in this case. Properties that are not a former grow-op, despite their similarity of classification, are simply too dissimilar to be used for the purpose of determining whether or not the subject property’s current value represents an equitable assessment.

29The Board finds, therefore that there is no evidence to support a reduction in the current value determined to make the assessment of the subject property equitable with that of similar properties in the vicinity.

CONCLUSION

30The Board finds that the impact of the former grow-op at the subject property reduces the current value of the subject property by 21.75 % of the current value determined by MPAC.

31The Board finds that the current value of the property at 27 Elfindale Crescent is $840,000. The Board also finds that there is no evidence to support a reduction in the current value to make the assessment of the subject property equitable with that of similar properties in the vicinity.

32Accordingly, the assessment of 27 Elfindale Crescent is reduced for the 2017 taxation year from $992,000 to $840,000 in the Residential property class.