Deprophetis v. Municipal Property Assessment Corporation, 2018 CanLII 43330

Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE:

May 9, 2018

FILE NO.:

WR 150492

Assessed Person(s):

Steven Deprophetis, Nancy Deprophetis

Appellant(s):

Steven Deprophetis, Nancy Deprophetis

Respondent(s):

Municipal Property Assessment Corporation (“MPAC”) Region 18

Respondent(s):

Town of Niagara-On-The-Lake

Property Location(s):

4 Bunny Glen Drive

Municipality(ies):

Town of Niagara-On-The-Lake

Roll Number(s):

2627-020-025-21602-0000

Appeal Number(s):

3259664 and 3309243 (deemed 2018 appeal)

Taxation Year(s):

2017 and 2018 (deemed appeal)

Hearing Event No.:

693871

Legislative Authority:

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

Heard:

January 17, 2018 in Virgil, Ontario

APPEARANCES:

Parties

Counsel⁺/Representative

Steven Deprophetis and Nandy Deprophetis

Steven Deprophetis

MPAC

Peter Benner

Town of Niagara-On-The-Lake

No one appeared

DECISION OF THE BOARD DELIVERED BY WARREN MORRIS

REASONS

Background

1Steven Deprophetis (the “Appellant”) is the owner of 2 Bunny Glen Drive (the “Subject Property”), a 2,179 square foot, one story single-family residence on a 79.07 by 105.18 foot lot, built in 2010.

2Pursuant to the Assessment Act (“the Act”), for the period consisting of the four taxation years from 2017 to 2020, the Subject Property is valued as of the legislated valuation date of January 1, 2016. MPAC has determined that the value of the Subject Property on this valuation date is $647,000. Therefore, for the 2017 taxation year under appeal, MPAC has assessed the Subject Property as having a current value of $647,000.

3The Appellant has appealed the assessment for the 2017 taxation year to the Assessment Review Board (the “Board”), pursuant to s. 40 of the Act. It is his position that MPAC’s assessment of the 2017 current value is too high and that correct value for the 2017 taxation year is $532,626. At this hearing, MPAC takes the position that the correct current value for this taxation year is $647,000.

4Pursuant to s. 40.(11) of the Act, the Municipality, (in this case, the Town of Niagara-On-The-Lake) is a party to this proceeding. However, no one from the Municipality appeared at the hearing.

5Section 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 of the municipal tax burden according to the value of the property possessed by each ratepayer. MPAC takes the position that the current value of $647,000 should be reduced to $593,000 in order to achieve equity. The Appellant takes the position that if his position on current value is accepted, then no equitable reduction is necessary. Alternatively, if the Board finds that the current value is higher, then an equitable reduction is required and the current value should be reduced to $570,000.

6At the completion of the hearing, the Board reserved its decision. For the reasons that follow, the Board finds that the current value of the Subject Property is $660,000. Pursuant to s. 44.(3)(b) of the Act, this value should be reduced to $605,000.

Relevant Legislation

7Section 1 of the 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.

8Section 19.(1) of the Act states:

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

9Section 19.2(1) of the Act states:

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.

10Section 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.

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.

ISSUES

12The issue(s) to be determined on this appeal are:

1. What is the correct current value for the 2017 taxation year;

2. Whether there should be an equitable reduction of the current value 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 No. 1: What is the correct current value of the Subject Property for the 2017 taxation year.

MPAC’S Evidence

13Peter Benner represented and testified on behalf of MPAC. Regarding current value, he presented three exhibits: i) a Valuation Report, iii) a Property and Sales Information Package, with photographs, and ii) a one-page Property and Sales Information sheet showing six comparable property sales, with handwritten figures for frontage and depth for each property.

14MPAC’s Valuation Report included a description of the Subject Property, an explanation of the valuation approach used (Direct Comparison Approach), and a list of six property sales that that MPAC alleges are comparable to the Subject Property. In the Valuation Report, MPAC included a chart with details of the Subject Property compared with their six comparable property sales. Under the subtitle “Price Changes Over Time”, the MPAC representative states that he conducted a Sales Ratio Trend Analysis consisting of 240 sales during the period of January 1, 2015 to December 31, 2016 indicating an upward trend in the market of 23% during this period. In the body of the Valuation Report, reference is made to an Appendix C containing a list of the sales used in the time analysis. However, there was no Appendix C to be found.

15The six comparable property sales proposed by MPAC are summarized in the following Chart A:

Chart A

Address

Sale Date

Sale Price/ Time-Adjusted Sale Price ($)

Current Value Assessment ($)

Lot size (frontage x depth, ft.)

House size (square feet)

Other features

Subject Property

4 Bunny Glen Lane

$647,000

79.07 x 108.18

2179

3.5 bathrooms

1

137 Paxton Lane

Oct 28/16

$838,000 / $757,114

$642,000

56.43 x 114.83

2049

3 bathrooms; Walkout basement

2

20 Bunny Glen Lane

Sept 24/16

$567,000 / $590,231

$538,000

70.97 x 106.26

1797

2 bathrooms

3

17 Bunny Glen Lane

July 15/15

$609,000 / $649,150

$584,000

68.90 x 96.75

1905

2 bathrooms; Walkout basement;

4

19 Creekside Drive

Feb 27/15

$630,000 / $714,350

$642,000

59.74 x 152.92

2069

2.5 bathroom; Walkout basement;

5

24 Angels Drive

Dec 14/15

$718,900 / $722,965

$669,000

N/A

2151

2 bathrooms

6

133 Paxton Lane

Sept 1/15

$690,000 / $718,271

$584,000

55.77 x 114.83

1926

2 bathrooms; Walkout basement

Based on the time adjusted sales of the properties in Chart A above, Mr. Benner expressed his opinion that the correct current value is $647,000. In support of this conclusion, he stated that all six properties are in the same neighbourhood, are similar in size and have the same quality of construction as the subject property. He noted that all the sales took place within a year of the valuation date of January 1, 2016. Of the six properties, he described three as slightly inferior, one as superior and two as virtually the same value as the Subject Property. He stated that, as the highest time-adjusted sale price of the inferior properties was $718,271, and that the two most similar properties sold for $714,350 and $757,114, he believes that a current value of $647,000 is very reasonable.

16In response to the Appellant’s evidence that Sale 5 (24 Angels Drive) was a private sale, having never been listed or exposed to the market, Mr. Benner agreed that this sale should not be included in his analysis.

MPAC’s Submissions

17Relying on Mr. Benner’s evidence, MPAC submits that the correct current value is $647,000.

Appellant’s Evidence

18The Appellant represented himself. The Appellant presented information and pictures for seven property sales he believes are comparable to the Subject Property. The Appellant’s evidence is summarized in the following Chart B:

Chart B

Address

Sale Date

Sale Price

Current Value Assessment ($)

Lot size (frontage x depth, ft.)

House size (square feet)

Sale Price per square foot

Subject Property

4 Bunny Glen Lane

$647,000

79 x 105

2179

1

36 Goring Way

April 2013

$370,000

$426,000

40 x 104

1569

$235.82

2

67 Tanbark Road

April 2015

$575,000

$747,000

100 x 219

2455

$234.21

3

6 Bunny Glen Drive

June 2012

$510,000

$614,000

79 x 105

2039

$250.01

4

7 Angels Drive

Dec 2012

$423,334

$493,000

60 x 120

1879

$225.29

5

27 Hickory Avenue

Aug 2012

$342,500

$422,000

50 x 105

1405

$243.77

6

25 Hickory Avenue

March 2013

$433,500

$486,000

50 x 105

1662

$260.83

7

3 David Secord Drive

Oct 2012

$540,000

$576,000

50.85 x 126.67

2090

$258.37

19The Appellant also presented a package containing pictures, information and handwritten notes relating to five of the six properties presented by MPAC.

20The Appellant, in presenting his seven proposed comparable properties, stated that his comparable sales are far more similar to the Subject Property than those presented by MPAC since all his comparable sales are bungalows constructed of similar material and quality to his home. To account for differences in floor area, the Appellant calculated the sale price per square foot (“psf”) of each sale. After discarding the highest and lowest sale per square foot (potential “outliers”) the remaining five sales formed a range between $234.21 and $258.37 psf with an average of $244.44 psf.

Appellant’s Submissions

21The Appellant submits that the correct current value for 2016 taxation year is $532,626.04. The Appellant calculates this figure by taking an average of the sale price psf for five of his comparable properties (removing 4 and 6, being the highest and lowest, or “outliers”) and then multiplying by the Subject Property’s square footage ($244.44 / sf x 2,179 sf = $532,626.04).

22The Appellant submitted that none of the property sales presented by MPAC were comparable to the Subject Property. He stated that all MPAC’s comparable sales were custom built homes whereas the Subject Property was built by a speculator builder. The Appellant made submissions detailing why he believes custom built homes are of superior quality and therefore not comparable to the Subject Property. The Appellant indicated a number of issues with his home, including water seepage and roofing issues that required $24,000 in repairs. He claims that a custom built home would not experience the same issues.

23The Appellant also submits that MPAC’s six comparable sales are not at all comparable to the Subject Property since they are not bungalows. He describes the comparable properties as having two floors since the basements were fully above grade in the back. He also describes these walkout basements as being situated on ravines.

24The Appellant made submissions indicating that the sale of 24 Angels Drive (MPAC Sale 5) should not be considered since it does not meet the “current value” definition in the Act, that being of “a market sale.” As noted above, he testified that Sale 5 was a private sale and was never exposed to the market.

25Further, the Appellant submitted that sales occurring after the valuation date should not be used for comparison purposes since such sales would not have been known on January 1, 2016, thereby being unfairly speculative.

Findings on Issue 1

26The best indicator of current value is an arm’s length and market tested sale of the Subject Property on the valuation day, January 1, 2016 or close to it. If, as in this case, no such transaction took place near the valuation date, the next best measure of current value is arm’s length and market tested sales of comparable properties in the same vicinity and market on or close to the valuation day. To enable an estimate of value for the Subject Property to be derived from a comparable property there must be sufficient elements of similarity, in terms of location and physical factors such as total building area, lot area, age/quality of construction and other features such as garages so as to enable a direct comparison to be made between the comparable property and the subject property.

27After reviewing the 13 property sales put in as evidence (6 from MPAC and 7 from the Appellant), the Board finds that five of MPAC’s sales are useful to establish current value. MPAC Sales 1, 2, 3, 4 and 6 were all market sales occurring within 11 months of the January 1, 2016 valuation date. The Board rejects MPAC Sale 5 since there was evidence showing this property was not exposed to an open market. The Board also rejects all the Appellant’s sales as useful comparable properties. Particularly during times of changing real estate values, sales occurring more than a year from the valuation date are not reflective of the market at the valuation date. Even sales within a year of the valuation date may need adjustments to reflect price changes over time. Generally, the more adjustments required to be made to a sale, the less reliable it is in establishing current value of the Subject Property. In regards to time adjustments to sale price, the only evidence adduced was MPAC’s statement that there was a 23% increase in prices between January 1, 2015 and December 31 2016. There was no Sales Ratio Trend Analysis to support MPAC’s time adjustment factors. For this reason, the Board finds that only actual sale prices (not time adjusted sale prices) will be considered, and the Board gives more weight to sales occurring closer to the valuation date. No weight is being given to any of the Appellants sales as all (with the exception of one) took place at least 32 months prior to the valuation date. Due to the date of sales, these sales did not transact in the same market as the market on January 1, 2016.

28The Board finds five of the MPAC properties to contain sufficiently similar characteristics to be reasonably comparable to the Subject Property. Of the five properties, one property, 20 Bunny Glen Drive, is clearly inferior. While the location, age/quality and lot size are somewhat similar, the floor area of the house is more than 20% smaller, which is significant. For this reason, the Board finds current value of the Subject Property must be more than the sale price of 20 Bunny Glen Drive, that being $567,000.

29The remaining four properties (MPAC Sales 1, 3, 4 and 6) are all reasonably comparable in value to the Subject Property. All four properties and the Subject Property are one-storey homes of similar quality construction built within a few years of each other. All have a garage and fireplace. Although the Board acknowledges that the Subject Property is the only one that does not have a walkout basement, the Board does not accept the Appellant’s submissions that the other comparable properties are on ravine lots, as there is no evidence that they are situated next to a ravine. The Board finds that any superiority of the four comparable properties due to a walkout basement is offset by the fact that all four comparable properties have smaller lot frontage, smaller floor area and fewer bathrooms. Thus, the Board finds MPAC Sales 1, 3, 4 and 6 to be the most comparable and of equivalent value to the Subject Property.

30The Board does not accept the Appellants evidence that a custom built home is necessarily superior in quality to a home built for sale to the public. While the Board accepts that the Appellant had roof leakage issues that may have detracted from the value of the Subject Property, the evidence presented is that the repairs were made well in advance of the valuation date. Therefore, the impact of a leaky roof in 2012 would have had little if any impact on value in 2016.

31The Board finds that the median sale price of MPAC Sales 1, 3, 4 and 6, of $660,000, is a reasonable indicator of the current value of the Subject Property. For this reason, the Board finds that the current value of the Subject Property is $660,000.

Issue No. 2: Whether there should be an equitable reduction of the current value pursuant to s. 44.(3)(b) of the Act, and, if so, what should the amount of this reduction be.

Introduction

32Section 44.(3)(b) of the Act requires that the Board address the issue of whether an equitable reduction of the current value is required.

MPAC’s Evidence

33MPAC presented a 7-paged Equity Analysis Report. The report consisted of an explanation of the methodology used to determine whether the Subject Property was equitably assessed. In summary, MPAC has compared their assessments against sale price. By dividing assessments by sale prices (Assessment to Sale Ratio, or “ASR”), this ratio will indicate, overall, whether the assessed value of a property is accurately approximates its market value. The Equity Analysis Report includes a map of the vicinity showing 30 properties used in the study, as well as a chart with Roll Numbers, Address, 2016 Assessment, Sale Date, Sale Price, Time Adjusted Sale Price and Time Adjusted Sales Ratio for each of these 30 properties. Mr. Benner noted that the mean ASR in the Equity Study is 0.918. He stated that this indicates that, generally, similar properties in the vicinity are assessed at less than their market value by approximately 8.2%.

MPAC’s Submissions

34MPAC submitted that an equitable reduction is required and the current value should be reduced to $593,000.

35As MPAC’s equity study indicates that similar properties in the vicinity are assessed at less than their market value by approximately 8.2%, MPAC submits that it is appropriate to reduce the current value to $593,000, which is derived by multiplying the 0.918 factor to the $647,000 current value.

Appellant’s Evidence

36The Appellant relies on the same evidence he presented respecting the current value of the Subject Property.

Appellant’s Submissions

37The Appellant submitted that if his submissions on current value are accepted that being a current value of $532,626.04, then no equitable reduction is necessary.

38In the alternative, if current value is determined to be higher, an equitable reduction is required and the current value should be reduced to $570,000.

39The Appellant submitted that equity dictates that he should receive the same current value on a square foot basis as his neighbours. The Appellant identified Property 1 and 4 from his comparable properties, introduced into evidence in Chart B above, and described them as examples of inequitable current values. On a square foot basis, Property 1 and 4 were assessed at $262 and $271 psf, whereas the Subject Property has a current value of $296.92 psf, (prior to equitable adjustment). When applying neighbours’ current value psf to the Subject Property, the Appellant submits that his property should be assessed at $570,000.

40The Appellant also takes issue with MPAC’s Equity Analysis Report. The Appellant identified a footnote in the report indicating that the standards applied for the ASR Study were from the International Association of Assessing Officer (IAAO) in Kansas City. He asserts that there is no reason why the Board should consider standards that he claims were developed and applied in the Kansas City area. The Appellant contends that Ontario, or at very least Canadian standards, should be applied.

Findings on Issue 2

41The 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 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.

42In 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].” The under assessment of one or two similar properties in the vicinity is not sufficient. There must be a general trend in order to warrant an adjustment downward.

43However, 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 Appellant to establish, on a balance of probabilities, that an equitable reduction is required.

44After considering the Appellant’s evidence and submissions, the Board rejects the Appellant’s proposition that only two of his seven comparable properties should be used for the purposes of equity. Firstly, two under-assessed properties is not sufficient to indicate that similar lands in the vicinity have been assessed lower than the Subject Property. There must be a general under-assessment in the vicinity. Secondly, the Appellant’s methodology can best be described as selective or “cherry picking.” The two properties the Appellant uses as comparators have current values of $261 and $272 psf respectively. The remaining five properties in his own evidence have current values of between $275 and $304 psf. The median current value psf of all the Appellant’s similar properties results in a reduced current value of $637,183 for the Subject Property, which is significantly higher than the reduced current value recommended by MPAC.

45In terms of similarity, the Board notes that, 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. MPACs Equity Analysis Report uses 30 properties, all which are single family homes in the near vicinity of the Subject Property. For this reason, the Board finds the Equity Analysis Report submitted by MPAC to be reasonable. As such, the Board finds that a factor of 0.918 applied to the current value is warranted. Therefore, the current value of $660,000 should be reduced by a factor of 0.918 resulting in an equitable current value is $605,000 (rounded).

DECISION

46The current value of the Subject Property is $660,000 for the 2017 taxation year.

47An equitable reduction of the current value of the Subject Property, pursuant to s. 44.(3)(b) of the Act, is required. The current value of the Subject Property for the 2017 and deemed 2018 taxation years is reduced from $647,000 to $605,000.

2018 DEEMED APPEAL

48An 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.

49Section 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.