Bates v. Municipal Property Assessment Corporation, 2018 CanLII 43336

Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE:

May 11, 2018

FILE NO.:

WR 151848

Assessed Person(s):

Jill Bates

Appellant(s):

Jill Bates

Respondent(s):

Municipal Property Assessment Corporation (“MPAC”) Region 17

Respondent(s):

Township of Georgian Bay

Property Location(s):

2 IS 3090 Georgian Bay

Municipality(ies):

Township of Georgian Bay

Roll Number(s):

4465-020-004-01000-0000

Appeal Number(s):

3234997 and 3308977 (deemed 2018 appeal)

Taxation Year(s):

2017 and 2018 (deemed appeal)

Hearing Event No.:

697068

Legislative Authority:

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

Heard:

March 19, 2018 by telephone conference call

APPEARANCES:

Parties

Counsel⁺/Representative

Jill Bates

Dana Stewart

MPAC

Sue Hummel

Township of Georgian Bay

No one appeared

DECISION OF THE BOARD DELIVERED BY MARCELLE BOURASSA AND JENNIFER GRIFFITH

INTRODUCTION

1Jill Bates is the owner of a beautiful island property known as 2 IS 3090 Georgian Bay (the ”subject property”), located in the Go Home Bay area of Georgian Bay. It has a main cottage and three sleeping cabins. There is also a dryland boathouse/shed and an outdoor sauna/hot tub. The island site area is 1.74 acres and is water access only.

2For the 2017 taxation year under appeal, MPAC returned the assessment for the property at $612,000. MPAC’s representative, Susan Hummel, inspected the property on June 15, 2017, as part of the Request for Reconsideration (“RFR”) process. The assessment was reduced by $19,000, from $612,000 to $593,000, as some factual information was corrected.

3Ms. Bates appealed the assessment for the 2017 taxation year to the Assessment Review Board (“Board”). It is the Appellant’s position that MPAC’s assessment is too high. She was represented at the hearing by her daughter, Dana Stewart. Ms. Stewart relies on an appraisal report prepared in June 2016 that appraises the value of property at $390,000. She highlighted the property as a legal non-conforming lot and structures. Its marketability is affected by restrictions on what can be built due to its Go Home Bay location. It is her position that the property should be assessed at about $450,000.

4Under the Assessment Act, R.S.O. 1990, c. A.31 (the “Act”), the onus of proof as to the correctness of the current value of the property rests with MPAC. For the period consisting of the four taxation years from 2017 - 2020, a property is valued as of the legislated valuation date of January 1, 2016. Ms. Hummel estimates the current value of the property to be $593,000, based on the direct comparison approach. Ms. Hummel also conducted an equity study. It is her position that an equitable reduction is not required. She concludes that the assessment should be reduced from $612,000 to $593,000 for the 2017 taxation year.

5The Municipality is a party to this proceeding. However, no one from the Municipality appeared at the hearing. Ms. Hummel advised that the Municipality agrees with the revised assessed value of $593,000.

ISSUES

6The issues to be determined are:

a) What is the correct current value of the property as of the January 1, 2016 valuation date?

b) Whether there should be an equitable reduction of the current value as determined by the Board and, if so, what should the amount of this reduction be?

DECISION

7For the reasons that follow, the Board finds that the current value of the subject property, as of the January 1, 2016 valuation date, is $576,000, under s. 44.(3)(a) of the Act. Furthermore, the Board finds that the evidence before it does not support the conclusion that an equity adjustment is required under s. 44.(3)(b) of the Act.

8The assessment of the subject property located at 2 IS 3090 Georgian Bay is reduced from $612,000 to $576,000 for the 2017 taxation year and reduced from $593,000 to $576,000 for the deemed 2018 taxation year.

RELEVANT LEGISLATION

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(1) of the Act states:

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

11Section 19.2(1) of the Act states:

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.

12Section 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.

13Section 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.

Analysis and Findings

What is the correct current value of the property as of the January 1, 2016 valuation date?

MPAC’S Evidence

14Ms. Hummel inspected the property that is the subject of this appeal (“the subject property”) on June 15, 2017 as part of the RFR process. The assessment was reduced by $19,000, from $612,000 to $593,000, as some factual information was corrected. The boathouse was incorrectly assessed as a wet boathouse. It is now assessed as a shed (a dry land boathouse) at the rear of cabin number 3. The main cottage’s effective year built was updated to 1947 to reflect an addition in 1952.

15Ms. Hummel relies on a Valuation Report. The Report provides information on the property and the sales of five properties all located in homogeneous neighbourhood B60 - Central Georgian Bay Mainland and Islands. She states that all of the properties in this area are a mix of mainland water access, subdivided islands and single owner islands. She expressed the opinion that single owner islands are considered a premium among these property types and fetch higher prices in comparison to similar size properties on mainland or subdivided islands. Ms. Hummel added that she used the actual sales values as she observed there was little upward or downward movement in the market.

16Key points of comparison of the subject property and the five sales comparables are set out below:

Property

Site Area (acres)

Effective Frontage (ft.)

Year Built (effective)

Quality

Building Area (sq. ft.)

Secondary Structure(s)

Type

Sale

2 Is 3090 Georgian Bay (subject property)

1.74

N/A

1947

4

978

cabin (326 sq.ft.) cabin (375 sq.ft.) cabin (306 sq.ft.) shed (416 sq.ft.) dryland boathouse sauna/hot tub

single owner island

N/A

2 Is 1830 Georgian Bay (Sale 1)

1.08

N/A

1967

5.5

1,300

cabin (108 sq.ft.) cabin (108 sq.ft.) cabin (131 sq.ft.)

single owner island

$662,500 (May 2016)

2 Is 2410 Georgian Bay (Sale 2)

4.9

N/A

1957

4

828

cabin (384 sq.ft.)

single owner island

$1,025,000 (October 2014)

7398 Is 2210 Georgian Bay (Sale 3)

1.73

239

1981

5

841

N/A

subdivided island

$400,000 (June 2013)

726 Is 2210 Georgian Bay (Sale 4)

2.5

360

1961

4

824

N/A

subdivided island

$388,000 (November 2013)

25732 Georgian Bay Shore (Sale 5)

2.41

869

1941

4

939

cabin (127 sq. ft.) in-water boathouse

mainland

$630,000 (August 2016)

17Ms. Hummel considers Sale 1 as a comparable property. It is a single owner island with a main cottage that is 322 square feet (“sq. ft.”) larger and 20 years newer. However, the site area of 1.08 acres is 38% smaller. It also has three cabins but they are much smaller at about 100 sq. ft. each. Both properties have less than average quality of construction ratings. There is no boathouse.

18Ms. Hummel considers Sale 2 as a superior property due to its island size. It is a single owner island with a site area of 4.9 acres. The main cottage is 137 sq. ft. smaller but it has an effective age that makes it 20 years newer. There are no secondary structures or a boathouse.

19Ms. Hummel considers Sale 3 as an inferior property. This property is located on a subdivided island with a similar site area of 1.73 acres. The cottage is 137 sq. ft. smaller but it has an effective age that makes it 34 years newer. There are no secondary structures or a boathouse. Ms. Hummel stated that most of the value on a subdivided island lot is derived by the amount of frontage. While the site areas are almost identical, this property has just 239 feet (“ft.”) of water frontage whereas the subject property has 360 degrees views and no immediate neighbours.

20Ms. Hummel considers Sale 4 as an inferior property. This property is located on a subdivided island with a larger site area of 2.5 acres. The cottage is 154 sq. ft. smaller and has no secondary structures to provide additional living space. Both cottages are similar in effective age and have the same quality of construction. As this a subdivided island, most of the value is derived by the amount of frontage and this property has 360 ft. of effective frontage. The subject property has 360 degrees views and no immediate neighbours.

21Ms. Hummel considers Sale 5 as somewhat comparable, although the overall property is still inferior because it is not a single owner island. It has a similar site area of 2.41 acres with mainland water access. The cottage is also similar in building size, in effective age and in the quality of construction. This property has one cabin, an in-water boathouse and 869 ft. of effective frontage.

22Based on her analysis, Ms. Hummel estimates the correct current value of the subject property as $593,000.

Appellant’s Evidence

23Ms. Stewart said that MPAC‘s proposed comparable properties are located in the Cognashene Community, a different community from the Go Home Bay area where the subject property is located.

24Ms. Stewart said the Township of Georgian Bay has adopted Amendment No. 14 to the Official Plan of the Township of Georgian Bay (referred to as the “Go Home Bay Community Plan Area”), noting that it can stipulate build form guidelines that are stricter than those set out in the Township of Georgian Bay Zoning By-law 2014-75. She said that her mother’s property has a legal non-conforming lot and structures. She expressed the opinion that the marketability of the property is affected by restrictions on what can be built due to its Go Home Bay location. For instance, she asserts that the property is restricted to rebuilding the main cottage on the original foot print of 978 sq. ft. She noted that, in the event that the sleeping cabins burn down, they cannot be rebuilt. Ms. Stewart expressed the opinion that properties further south in the Cognashene Community are more valuable as there are less restrictions on what can be built and, as a result, there are more sales. She asserts that their locations are also more desirable given their closer proximity to a marina.

25Ms. Stewart said that Sale 1, like the subject property, is a legal non-conforming property. However, its main cottage has 1,300 sq. ft. whereas the subject property’s main cottage is smaller at 978 sq. ft. She does not consider Sale 2 as a comparable property due to its much larger site area of 4.9 acres. Sale 5 is also non-conforming property and its main cottage with 939 sq. ft. is similar in size to that of subject property.

26She relies on an appraisal report prepared for her mother’s estate in June 2016 that appraises the property at $390,000. She asserts that the report considered three comparators that have none of the restrictions that the subject property does as a legal non-conforming property.

Board’s Analysis and Findings

27Under s. 44.(3)(a) of the Act, the Board must first determine “the current value of the land.” The best evidence the Board can receive of current value is an arm’s length and market-tested sale of the property on the valuation date or close to it. If, as in this case, no such transaction took place, the next best measure of current value is arm’s length and market-tested sales of comparable properties located nearby, as close as possible to the legislated valuation date of January 1, 2016.

28The Board has considered the five properties with sales and Ms. Stewart’s Appraisal Report. To enable an estimate of value for the property to be derived from suggested comparable properties, there must be sufficient elements of similarity, in terms of physical factors such as building area, land area, land frontage, age of construction, physical condition, etc. so as to enable a direct comparison to be made.

29The Board has not considered Sale 2 as it finds that it is a superior property primarily due to its site area of 4.9 acres.

30The Board has not considered Sale 3 and Sale 4. The Board finds them to be inferior properties given their location on subdivided islands. They have sales of $400,000 and $388,000, respectively, at the lower end of the sales range. These sales support Ms. Hummel’s opinion that most of the value on a subdivided island lot is derived by the amount of frontage whereas the subject property has 360 degree views and no immediate neighbours.

31Sale 1 is a single owner island. Like the subject property, it is a legal non-conforming property, has a main cottage and three cabins and a less than average quality of construction. However, its main cottage is 322 sq. ft. larger, 20 years newer and has a higher quality of construction rating of 5.5 than the subject property. Its site area of 1.08 acres is 38% smaller than the subject property. Also, the three cabins are much smaller at about 100 sq. ft. each. There is no boathouse. It sold for $662,500 in May 2016. The Board finds it to be slightly superior to the subject property given its larger, newer and better main cottage.

32Sale 5 is a mainland water access property. Like the subject property, it is a legal non-conforming property and has main cottage that is similar in building size at 939 sq. ft., in effective age at 1941 and in the quality of construction with a rating of 4. It has a similar site area of 2.41 acres with 869 ft. of effective frontage. Unlike the subject property, it has one 127 sq. ft. cabin and an in-water boathouse. It sold for $630,000 in August 2016. The Board finds this property to be inferior to the subject property due to it being a mainland water access property and having fewer cabins.

33The Board finds that Sales 1 and 5 are the sales closest to the January 1, 2016 valuation date and that, on average, provide the best indicator of current value. Applying the average sales value per square foot of $589 to the subject property’s square footage of 978 results is a value of $576,000.

34The Board prefers the above sales evidence to the Appraisal Report submitted by Ms. Stewart for the following reasons:

• the report was prepared for the purpose of valuing the property for Ms. Bates’ estate and not an assessment of the subject property for the purposes of the Act;

• although Ms. Stewart asserts that none of the comparators referred to in the Appraisal Report have the same restrictions as the subject property, the Report does not state so;

• the author of Ms. Stewart’s Appraisal Report was not present for cross-examination;

• the Appraisal Report appears to consider a mainland water access property (26512 Georgian Bay Shore), whereas, the subject property is only accessible by water;

• it is not clear whether the other two properties cited in the Appraisal Report (412 Island 2650 and 1540 Island 2220) are single owner islands or are located on subdivided islands.

35The Board also finds that there is insufficient evidence to quantify the impact on current value of the subject property’s status as a legal non-forming property located in in the Go Home Bay Community area.

36For all of these reasons, the Board sets the current value at $576,000.

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.

MPAC’s Evidence

37Ms. Hummel also relies on an Equity Analysis Report that considered the sales of 30 Single Family Detached on Water and Seasonal Recreational Dwelling – First Tier on Water that occurred between January 1, 2013 and December 31, 2016 and that are located within 10.25 kilometres of the subject property.

38In her Report, she states that the level of appraisal is established by determining the median Assessment to Sale Ratio (“ASR”) in the sales sample. She highlighted that, in this instance, the sales sample produced a median ASR of 0.986. For purposes of the equity test, MPAC takes the position that equity is achieved if the median ASR falls between 0.95 and 1.05. The median ASR of 0.986 indicates that similar properties in the vicinity have been assessed at or near their current values. Therefore, an equity adjustment is not required.

39Ms. Hummel concludes that the assessment should be reduced from $612,000 to $593,000 for the 2017 taxation year.

Appellant’s Evidence

40As noted above, Ms. Stewart’s focus was on the impact of the property’s legal non-conforming status on its marketability due to restrictions on what can be built due to its Go Home Bay location. The Board asked her if she had an opinion as to what the property should be assessed at. She asserts that the assessment as returned should be reduced to approximately $450,000. This represents the approximate midpoint between the current value assessments of $396,000 and $553,000 for Sales 3 and 5, respectively, of MPAC’s comparable properties. Both are legal non-conforming properties with similar sized main cottages.

Board’s Analysis and Findings

41Section 44.(3)(b) of the Act 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.”

42The purpose of equitable adjustment has been described as the equitable distribution of the tax burden according to the assessed value of property owned by taxpayers as follows 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 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.

43In 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].”

44The term “vicinity” is not defined in the Act, but refers to the appropriate geographical area that will yield a meaningful number of comparables (see Ontario Regional Assessment Commissioner, Region No. 3 v. Graham, 1993 CanLII 8621 (ON CA) at page 6).

45The test set out in s. 44.(3)(b) of the Act, requires that the Board refer to similar lands in the vicinity. Similar property relates to the same general nature and character. Use as a point of similarity, may be, but is not necessarily determinative of similarity. In determining whether other lands are similar, the Ontario Divisional Court, in Municipal Property Assessment Corp. v. Loblaw Properties Ltd., [2017] O.J. No. 1010 ONSC 1299, 276 A.C.W.S. (3d) 220, 2017 ONSC 1299, 62 M.P.L.R. (5th) 253, 2017 CarswellOnt 2861, applied the decision of the Ontario Divisional Court in Trizec Equities Ltd. v. Ontario (Regional Assessment Commissioner, Region No. 27), [1988] O.J. No. 182, 27 O.A.C. 203, 37 M.P.L.R. 175, 8 A.C.W.S. (3d) 399. The Court stated at paragraph 23:

…All points of comparison must be considered. The Board must make a factual finding based on such a consideration. One point of similarity such as use may be, but is not necessarily, determinative. Some similarities may be overridden by other characteristics and some differences may be subordinated.

46The ASR analysis of a reasonable sample of sold properties is one method used to determine if properties in the vicinity are assessed below their current value. If other properties are assessed substantially below their current value then a reduction is required to make the assessment of the subject property equitable with the assessments of similar lands in the vicinity. The ASR is determined by dividing the assessment as returned by the sale price.

47Ms. Hummel relies on an Equity Analysis Report that considered the sales of 30 Single Family Detached on Water and Seasonal Recreational Dwelling – First Tier on Water properties that occurred between January 1, 2013 and December 31, 2016. All are located within 10.25 kilometres of the subject property. She said that all properties in the sample are water access properties and include a mix of single owner islands, mainland properties and properties located on subdivided islands. In this instance, the sales sample produced a median ASR of 0.986.

48The Board finds that the median ASR of 0.986 falls within MPAC’s generally acceptable standard of 0.95 and 1.05 required to establish that that the level of current values assessments of similar properties is in line with the level of sales prices in the vicinity.

49On the other hand, Ms. Stewart proposes an assessment of $450,000. This value represents the approximate midpoint between the current value assessments of $396,000 and $553,000 for Sale 3 and Sale 5, respectively, both legal non-conforming properties with similar sized main cottages. The Board notes that the ASR for these two properties is 0.94.

50The Board prefers MPAC’s ASR study of 30 properties over Ms. Stewart’s sample of two properties. Ms. Stewart’s sample is not statistically significant. MPAC’s ASR study of the sales of 30 properties produced a median ASR of 0.986. As noted above, all properties in the sample are water access properties and include a mix of single owner islands, mainland properties and properties located on subdivided islands. The Board notes that the sales sample includes the three properties used as sales comparators in the Appraisal Report.

51For these reasons, the Board finds that the evidence before it does not support the conclusion that an equity adjustment is required under s. 44.(3)(b) of the Act.

CONCLUSION

52The Board finds that the current value of the subject property, as of the January 1, 2016 valuation date, is $576,000, under s. 44.(3)(a) of the Act. Furthermore, the Board finds that the evidence does not support the conclusion that the current value requires an equity adjustment under s. 44.(3)(b )of the Act.

53The assessment of the subject property located at 2 IS 3090 Georgian Bay is reduced from $612,000 to $576,000 for the 2017 taxation year

54Therefore, the assessment of the subject property located at 2 IS 3090 Georgian Bay is reduced from $593,000 to $576,000 for the deemed 2018 taxation year.

2018 DEEMED APPEAL

55An 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.

56Section 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.