Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE: June 27, 2018

FILE NO.: WR 148242

Assessed Person(s): Mohawk Motel Inc.

Appellant(s): Mohawk Motel Inc., Anil Mehta

Respondent(s): Municipal Property Assessment Corporation (“MPAC”) Region 30

Respondent(s): Township of Sables-Spanish Rivers

Property Location(s): 305 Sable Street East

Municipality(ies): Township of Sables Spanish Rivers

Roll Number(s): 5218-000-007-19200-0000

Appeal Number(s): 3113040 and 3160464

Taxation Year(s): 2015 and 2016 (Deemed)

Hearing Event No. 677479

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

Heard: May 1, 2017 in Massey, Ontario

APPEARANCES:

Parties	Counsel/Representative
Mohawk Motel Inc., Anil Mehta	Self-Represented
MPAC	Marc Serre
Township of Sables-Spanish Rivers	Patricia Deline

DECISION OF THE BOARD DELIVERED BY MARK SPRAGGETT

REASONS

Background

1Mohawk Motel Inc. is the owner of 305 Sable Street East (the “Subject Property”), located in Massey, Ontario, the Municipality of Sables-Spanish Rivers. Designated with a property type - Motel, it is a split use between commercial (Motel) within the CT property class and residential (owner's dwelling) within the RT property Class. The subject property is 1.24 acres of land with a sixteen (16) room Motel and a Single Family Attached Dwelling. The current owners purchased the subject property on February 28th, 2011 for $463,000.

2Pursuant to the Assessment Act (“the Act”), MPAC is required to determine the value of the Subject Property on the valuation date, which, in this case, is January 1, 2012, the “Current Value Assessment” (“CVA”). For the 2013 through 2016 taxation years, MPAC has concluded as being correct, a CVA of $446,000.

3The Appellants, Mohawk Motel Inc. and Anil Mehta, have appealed the assessments for these taxation years to the Assessment Review Board (the “Board”), pursuant to s. 40 of the Act. It is their position that MPAC’s CVA is too high and that the correct value for the 2015 to 2016 taxation years is $421,000.

4Section 44.(3)(b) of the Act, directs the Board to reduce the CVA 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 the municipal tax burden according to the value of the property possessed by each rate payer. Neither the Appellants nor MPAC assert that an equitable reduction is required. Therefore, in this proceeding, this ground for appeal is not in issue.

5Pursuant to s. 40(11) of the Act, the Municipality of Sables-Spanish Rivers is a party to this proceeding. However, the Municipality took no position on the issue raised in this proceeding.

6At the completion of the hearing, the Board reserved its decision. For the reasons that follow, the Board finds that the correct CVA of the Subject Property is $446,000.

Relevant Statutory Legislation

7Section 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.

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:

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:

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.

Issue

12The issue in this appeal is the determination of the correct 2012 CVA of the Subject Property.

Discussion, Analysis and Findings

MPAC’s Evidence

13Marc Serre represented MPAC as Property Valuation Analyst and testified as witness.

14Mr. Serre provided a Property Valuation Report (“MPAC's Report”), of the subject property.

MPAC’s Submissions

15Mr. Serre provided a property valuation report which states that the 2012 CVA for the subject property was determined using the Income Approach to value as the primary method for the motel component, and the Cost Approach for the residential dwelling component. A total of five (5) suggested comparable properties were provided in MPAC's analysis to support its assessment of current value. Of the five suggested comparable properties, only one property, Alta Vista Motel on Highway 17 West, was the subject of a sale, selling in November, 2012 in the amount of $481,000. The remaining four suggested comparables have no sales history provided. MPAC compared their respective CVA’s and the subject’s purchase price to support its assessment. MPAC concluded as reasonable and correct, a CVA of $446,000 as returned for the January 1, 2012 valuation date.

16Mr. Serre testified that Motels are typically valued using the Income Approach and cross referenced with the Direct Comparison Approach if comparable properties do exist. In this instance, the Income Approach was tailored to the motel model by deriving the current value based on the Sale Price per Room for each motel. An income modifier was applied to the estimated gross income generated by the motel, to arrive at a CV.

17Mr. Serre explained that a current value for the property may be determined by estimating a gross income from the motel operations at market rates and applying the income modifier, known as the Gross Income Modifier ("GIM"). Determining a GIM, relies on information obtained from sales of similar motels, annual operating statements and rent rolls reported by motel owners. In this instance, Mr. Serre indicated that he was unable to obtain revenue statements for the 2010 or 2011 fiscal years, as the subject property was in a state of transition when being sold. Therefore, he relied on a GIM of 3, which was also used in the 2008 assessment cycle.

18By applying the GIM of 3 to the estimated room revenues as provided and adjusting for chattels, Mr. Serre calculated that the 2012 CVA is $446,250 rounded to $446,000.

19Mr. Serre also applied the Direct Sales Comparison method to cross check the reasonableness of the value derived using the Income Approach. The Direct Sales Comparison method compares similar type properties recently sold, to that of the subject property. There was only one property sale among the five suggested comparable properties, namely the Alta Vista Motel, selling in November of 2012 for $481,000. Its sale price per room is higher than the subject property and the sale occurred eleven months after the valuation date. Mr. Serre asserted that the subject property's value is considered to be less than this sale amount. Mr. Serre did not provide any quantitative analysis in his Direct Sales Comparison method to determine a current value based on sales. Rather, MPAC compares the assessment values of the comparable properties to draw similarities to that of the subject property and conclude that its proposed current value for the subject property is reasonable, particularly in light of the income approach result.

Appellant’s Evidence

20Anil Mehta represented both himself and Mohawk Motel Inc., and testified as a witness. He did not assert that he has any qualifications as property valuation specialist.

21Mr. Mehta stated that he has been in the motel business over twenty-five years.

22Mr. Mehta submitted a copy of MPAC's Property Assessment Notice of the subject property dated October 18, 2016, indicating an updated value for the property as $421,000.

23Mr. Mehta stated that he overpaid for the property when he purchased it in 2011, admitting it was his mistake.

24The Appellant provided no further evidence from which the Board may refer in its determination of current value and Mr. Mehta's recommended current value of $421,000.

Appellants’ Submissions

25Mr. Mehta opined that the Queensway Motel is located in a much bigger town and therefore not comparable from this point of view.

26Mr. Mehta expressed his view that only the Massey Motel is comparable to the subject property and all the remaining properties proposed by MPAC are not comparable.

27Mr. Mehta opined that economic activity varies among towns and influences how well motels perform, depending in which town they are located, suggesting that some motels will do better than others depending on the economic infrastructure of the town.

Findings on Issue

28The Board finds that the Appellant has not persuaded the Board to reduce the CVA as returned from $446,000 to $421,000. The Board notes that Mr. Mehta provided no oral testimony or documentary analysis to support his proposed valuation. More specifically, Mr. Mehta did not provide any evidence to support his assertion regarding the economic impact on motels in towns of varying scale and degree of infrastructure. For this reason, the Board does not accept this evidence.

29The Board accepts Mr. Mehta’s submission that the suggested comparable property, namely the Massey Motel, is the most comparable to the subject property. Although Mr. Mehta did not elaborate further, the Board notes that the Massey Motel and the subject property have the same 2012 CVA of $446,000 as well as the same number and Value Per Room based on assessed values, as indicated in MPAC's Report.

30The Board finds that MPAC's evidence in support of the Income Approach, both, in terms of available income information from the suggested comparables as well as the subject property's sale, is sparse and for this reason accepts the use of the 2008 GIM in its calculations of current value using this approach.

31In the use of the Direct Sales Approach, the Board finds that four of MPAC's suggested comparable properties do not have any sales history as evidence, which limits the scope of MPAC’s analysis in determining current value based on existing property sales. However, given the recent sale of the subject property, as well as the comparable property sale of Alta Vista Motel, both selling more or less eleven months on either side of the valuation date of January 1, 2012, the Board is satisfied that a comparison demonstrates a consistent outcome in terms of sales value per room, as well as in terms of assessed value per room. As a cross check for the Income Approach, the Board finds the Direct Sales Approach, although limiting in property sales, confirming the Income Approach result. On review of the evidence provided by the Appellant and MPAC, the Board finds the current value as returned by MPAC to be reasonable.

CONCLUSION

32The Board confirms the assessed current value for the 2015 and 2016 taxation years in question, based on a January 1, 2012 valuation date of $446,000 as being reasonable.