Brent James Franklin v. Municipal Property Assessment Corporation, 2018 CanLII 55803

Assessment Review Board

Issue Date: June 15, 2018 File No.: WR 150343 Roll Number(s): 0911-914-020-55000-0000 Appeal Number(s): 3143683 Taxation Year(s): 2016 Hearing Event No.: 635464

Assessed Person(s): Brent James Franklin, Sherrell Jeanette Franklin Appellant(s): Brent James Franklin, Sherrell Jeanette Franklin Respondent(s): Municipal Property Assessment Corporation ("MPAC") Region 02, Township of Tay Valley

Property Location(s): 115 Christie Lake Lane Municipality(ies): Township of Tay Valley

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

Heard: September 08, 2016 in Smith Falls, Ontario

Appearances

Parties	Representative
Brent James Franklin, Sherrell Jeanette Franklin	Andrew Haydon
MPAC	Lincoln Pierce
Township of Tay Valley	No one appeared

Decision of the Board Delivered by Terry Denison

Introduction

1The subject property is a residence on Christie Lake Lane in Tay Valley Township. It was acquired by Brent James and Sherrell Franklin ("Appellants") from an estate in a transaction that was completed on June 14, 2013 for $174,000.

2MPAC assessed the subject property for the taxation years with a January 1, 2012 valuation day with a current value of $344,000.

3The Appellants appealed the assessment for the 2015 taxation year and the Assessment Review Board ("Board"), after a hearing, determined that the correct current value of the subject property was $267,000 in Franklin v Municipal Property Assessment Corporation, 2016 CanLII 33706, a written decision by Member Whitehurst, issued June 1, 2016.

4Since the subject property underwent some renovations starting in 2015, and evidence of the renovations was not reflected in the Board's determination of the current value, the Board declined to deal with the deemed appeal for the 2016 taxation year. Consequently, this decision follows a second hearing in September 8, 2016 dealing with the deemed appeal for the 2016 taxation year.

Issues

5What is the correct current value of the subject property for the 2016 taxation year?

6To achieve equity with the assessment of similar properties in the vicinity is it necessary to adjust the assessment?

Decision

7The correct current value of the subject property is $220,000 and there is no evidence to support a further adjustment of the assessment to make it equitable with the assessment of similar properties in the vicinity. Consequently the assessment of the subject property should be reduced from $344,000 to $220,000 for the 2016 taxation year.

The Legislation

8The initial task for the Board is to determine the current value of the subject property as required by s. 44.(3)(a) of the Assessment Act ("Act").

9Section 19.(1) of the Act states: that the assessment of the land shall be based on its current value. Current value is defined in s. 1 to mean, 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 19.2(1)(3) of the Act provides that for the period consisting of the four taxation years from 2013 to 2016, land is valued as of January 1, 2012, the valuation day.

11In determining the value at which the land shall be assessed, s. 44.(3) of the Act requires that the Board: (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.

12Section 40.(17) of the Act provides that, where value is the ground of appeal, the burden of proof as to the correctness of the current value of the land rests with the assessment corporation.

13After hearing the evidence and the submissions of the parties, the Board shall determine the matter pursuant to s. 40.(19) of the Act.

The Board's Decision for the 2015 Taxation Year and Issue Estoppel

14The Board dealt with an appeal of the assessment for the subject property, 115 Christie Lake Lane 42, for the 2015 taxation year and issued its decision in Franklin v Municipal Property Assessment Corporation, 2016 CanLii 33706. Based on the evidence presented to it in that hearing the Board found that the correct current value of the subject property was $267,000 and that it was not necessary to adjust that assessment to make it equitable with the assessment of similar lands in the vicinity. In making this decision the Board noted that renovations to the property had commenced in later 2015 which were not reflected in the Board's 2015 current value finding and consequently the Board did not deal with the deemed appeal for 2016. This hearing was to determine the appeal for the 2016 taxation year.

15The Board endeavors to avoid making inconsistent findings of the current value for a property for different taxation years that have the same valuation day unless there are changed circumstances. Issue estoppel can be raised where the assessment of an appeal has been resolved for a prior year in the same assessment cycle. However, since the impact of the renovations were not considered for the 2015 taxation year different factual circumstances that could lead to a different finding of the current value of the property in 2016 exist. Consequently, MPAC did not serve a notice that it intended to raise issue estoppel as required in the Board's Rules of Practice and Procedure and issue estoppel was not argued for the 2016 appeal.

Evidence in this Hearing

16Lincoln Pierce, an experienced assessor with MPAC, presented a Valuation Report for the subject property at this hearing. The subject property has 43.6 feet ("ft.") of frontage on Christie Lake and a lot area of 4.4 acres. There is a winterized cottage of 974 square feet that was constructed in 1983 and renovated in 2015. It is used year round. It has three bedrooms and one bathroom. The basement is unfinished. Although the lot is large, it is irregularly configured. Essentially it appears that neighboring waterfront properties may have been created out of a larger parcel and that a large "back lot" was left with the subject property. The back lot runs behind the neighboring properties as well as behind the subject property, it slopes towards the lake, is wooded, and not capable of separate development under the municipal by-laws.

17In his report Mr. Pierce considered the renovations made to the subject property and updated the information presented in the hearing for the 2015 appeal of the subject property. He relied on the sales of the same comparable properties that were used for the 2015 appeal. Sale A and Sale B were on nearby Lakes and three of the comparables were on Christie Lake: Sale C (518 Sleepy Hollow Road D), Sale D (102 Christie Lake Lane 42), and Sale E (115 Christie Lake Lane). Mr. Pierce concluded that Sale E was a reasonable comparable because it had a similar lot area to the subject property, notwithstanding that it had a water frontage of 175 ft. compared to the subject property's 43 ft. In the report Mr. Pierce used the September 2009 sale of this property at $285,000 that he time adjusted to $310,000. He forthrightly told the Board than he became aware of a 2016 sale of this property at $258,000, suggesting that there may have been some doubt as to whether the earlier sale was a valid comparable.

18The determination of the effect on value of the renovations is not a simple addition of the cost of the renovation to the current value determined for 2015. Consideration should be made whether the costs related simply the carrying out of necessary and prudent maintenance or if they were additions to increase the size and utility of the structure. To be consistent with the Board's legislated task of making a determination of the correct current value of the subject property the Board must consider if the renovations would affect the value in money, of the fee simple, if unencumbered, in a transaction between a willing seller and a willing buyer. There may be some renovations that make a property more saleable without necessarily changing its value. The renovations may be such that the property has changed to the extent that the comparables used to derive a value before are no longer applicable and different sales comparables are required.

19At the hearing the Board was advised by Mr. Pierce and Mr. Haydon that renovations were commenced in December of 2015 and were completed during the 2016 taxation year. The renovations consisted of repairing the roof, modernizing the windows, and the external siding of the house. These were illustrated in the photographs included in MPAC's Valuation Report. The renovations did not change the size or utility of the subject property and were clearly necessary and prudent maintenance when compared with the pre-renovation photographs also provided by MPAC.

20Mr. Haydon informed the Board that when the subject property was purchased from the estate that owned it previously the condition of the exterior of the subject property was poor and that may have been a factor on why it remained unsold for a considerable time before the Appellants purchased it, although it had been listed and exposed to the market. Mr. Haydon also expressed the view that although the subject property appeared to have a large lot area it only had a small frontage near the shoreline. The back-lot portion of the subject property was not very usable as it was sloped, uneven and treed, and not developable by itself, and therefore should not have been a significant factor in the value of the property. Mr. Pierce acknowledged to the Board that there were other properties on Christie Lake that had large back-lots which had resulted from waterfront lot creations out of larger parcels and that the back-lots probably did not contribute significantly to the value of a property. The back-lot in this case runs behind the subject property and adjacent waterfront properties. Although the subject property has an area of approximately four acres, its effective size is much less and is similar to the other water front lots with frontages of approximately 50 ft. The water frontage of the subject property is 43 ft.

21In presenting evidence to support the assessment MPAC used the same five comparables that were presented in the hearing of the appeal for the 2015 taxation year. It had concluded that the correct current value of the subject property was $325,000 for the 2016 taxation year. At the hearing Mr. Pierce told the Board that Comparable E in his report, 115 Christie Lake Lane, which he categorized as relatively similar to the subject property, had sold in 2016 for $258,000 that was significantly less than the time adjusted sale price of $310,000 used in the market analysis. Although this sale is somewhat removed from the statutory valuation day of January 1, 2012, Mr. Pierce indicated that it would cause him to question how much reliance could be placed on the earlier sale in valuing the subject property, and might lead to a conclusion that the value for the subject property should have been lower. Sale E has a water frontage of 175 ft. compared to 43 ft. for the subject property and, unlike the subject property, also has a boathouse.

22Mr. Haydon, representing the Appellants, offered no different sales information but commented on the validity of the 2013 estate sale of the subject property at $174,000 being a market transaction and not a distress sale. Mr. Haydon said that the improvements to the subject property would have added about $32,000 to the value of the property, and therefore he believed the current value for the subject property should be $210,000. He also reviewed the relative dimensions of the waterfronts for the comparable properties and suggested that MPAC's valuation overestimated the value of the subject property, conflating the importance of the lot area versus the lot's water frontage.

Equity

23MPAC provided an equity analysis demonstrating that the assessment to sales ratio of sales in the vicinity of the subject property was 1. The analysis was not challenged by the Appellants.

Findings

24The Board finds based on the new information in this hearing that the renovations completed in 2016 would not add significantly to the value of the property, although they might shorten the market exposure time to conclude a sale of the property.

25The Board finds that the most important factor to be considered when comparing waterfront properties is the amount of waterfront. Thus a property with 175 ft. of waterfront will have a greater value than a property with 43 ft. of waterfront, notwithstanding that the lot with the shorter water frontage has a greater area.

26The Board also finds, based on the additional information about Sale E in this hearing, that the correct current value of the subject property would be most probably be less than $267,000, which was determined by the Board for the 2015 taxation year. It is reasonable to conclude that had the additional information been available to the Board in 2015 it would have arrived at a different value than it did. Taken together the Board finds that the renovations do not have an impact on the valuation of the property and that having regard to the sales in 2009 and 2016 for Sale E the correct current value of the subject property for the 2016 taxation year is greater than its estate sale price $174,000, but less that the $267,000 value the Board determined previously. It is reasonable to conclude from the foregoing that $220,000, which is the midpoint between $174,000 and $267,000 would represent the current value of the subject property for the 2016 taxation year.

Conclusion

27The correct current value of the subject property for the 2016 taxation year is $220,000. There is no evidence to support any adjustment of the assessment to achieve equity with the assessment of similar properties in the vicinity.