Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE: June 28, 2018

FILE NO.: WR 152943

Assessed Person(s): Sarah Helen Freedhoff

Appellant(s): Sarah Helen Freedhoff

Respondent(s): Municipal Property Assessment Corporation (“MPAC”), Region 17

Respondent(s): Muskoka Lakes Township

Property Location(s): 1018 Berry Point Drive

Municipality(ies): Muskoka Lakes Township

Roll Number(s): 4453-080-004-01400-0000

Appeal Number(s): 3228638 and 3308988 (deemed 2018 appeal)

Taxation Year(s): 2017 and 2018 (deemed appeal)

Hearing Event No.: 696764

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

Heard: April 10, 2018 by telephone conference call

APPEARANCES:

Parties	Counsel+/Representative
Sarah Helen Freedhoff	Stephen Freedhoff
MPAC	Pam Mulligan
Muskoka Lakes Township	No one appeared

DECISION OF THE BOARD DELIVERED BY JOANNE LAWS

INTRODUCTION

1This is an appeal of a seasonal property on Lake Muskoka (“the subject property”). It is improved with a two-storey 1,850 square foot cottage built in 2006, replacing the original cottage which was destroyed by a tornado. The position of the Appellant’s representative, Stephen Freedhoff, is that MPAC lacks transparency and that MPAC either could not or would not explain how his assessment was calculated and why his assessment increased greater than a neighbouring property.

2Pam Mulligan, representing MPAC, takes the position that the assessment as returned of $1,093,000 is correct.

3Section 44.(3)(a) of the Assessment Act (“Act”) requires the Assessment Review Board (“Board”) to “determine the current value of the land”. Current value is defined in s.1 as “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”. That is, I must determine what the property would have sold for in an arm’s length transaction on the valuation day, which, in this case is January 1, 2016 for the 2017 and the deemed 2018 taxation years.

4Once I have determined the current value, s. 44.(3)(b) requires that I “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” but only if that adjustment would result in a reduction of the current value.

5Section 40.(26) states 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 did not dispose of the 2017 appeal before March 31, 2018. For that reason, this decision also applies to the 2018 taxation year.

DECISION

6For the reasons stated below and pursuant to s. 44.(3)(a) of the Act, the Board sets the current value of the property, as of the January 1, 2016 valuation day and for the 2017 and 2018 taxation years, at $1,093,000. The evidence demonstrates that, pursuant to s. 44.(3)(b), a reduction is not required to make the assessment equitable with that of similar properties in the vicinity.

7Accordingly, the assessments as returned for the 2017 and the deemed 2018 taxation years are confirmed at $1,093,000 in the Residential property class.

CURRENT VALUE

8Mr. Freedhoff’s main issue was MPAC’s lack of transparency. He stated he received full co-operation from Ms. Mulligan but believes MPAC’s assessment methodology is flawed. He argues that if the methodology is flawed then the market analysis is flawed.

9Mr. Freedhoff stated that Ms. Mulligan could not explain to him how the assessment as returned was calculated. He was told that the data MPAC provided him on previous assessment years, separating the land value from the building value, is no longer available. He was told that there are some 200 factors used to assess his property but, despite his requests, he wasn’t provided with that information either. Mr. Freedhoff stated that the building portions of his property and a neighbouring property were assessed at a similar value on the previous valuation day of January 1, 2012 ($430,000 and $426,000, respectively). Mr. Freedhoff submits that there have been no changes or improvements to either property between the 2012 and 2016 valuation days yet his property’s assessment (land and buildings) increased by 16.51% while that same neighbour’s increased by only 12.83%. His position is that if he had been given a reasonable explanation as to why his property was assessed as it was, he would not have filed an appeal.

10In support of the valuation days being independent of each other, Ms. Mulligan submitted Cooney v. Municipal Property Assessment Corp., Region No. 14, [2006] O.A.R.B.D. No. 140 in which the Board member indicated that the percentage increases between valuation days is not a basis for determining current value.

11I appreciate Mr. Freedhoff’s frustration. However, the assessments on a valuation day reflect the market at it existed at that point in time. Each valuation day stands alone and is not related to other valuation days. I was not provided with a sale or the physical details of this neighbouring property and the assessment of that property does not assist me in determining whether the subject property is correctly assessed.

12The best evidence of the current value of a residential property is the sale of that property on or near the valuation day. When that evidence is not available, the sales of similar properties on or near the valuation day are the next best evidence.

13In order to determine the current value of the subject property using the sales of comparable properties, there must be sufficient elements of similarity. In seasonal/recreational properties on water, factors that contribute to value include not only the lot, the structure, and secondary buildings but also topography, the amount of water front and, of course, location. Seasonal/recreational properties are seldom directly comparable because no two properties are alike.

14The subject property is a 0.48 acre lot with a northern exposure on Muskoka Lake. Although there is 330 feet of actual lakefront, MPAC has valued the property as having an effective lakefront of 200 feet. The subject property is improved with a two-storey 1,850 square foot cottage with a partially finished basement and walk-out, built in 2006. It replaces the original cottage which was destroyed by a tornado. The replacement cottage was built on the same footprint as the original cottage. A seasonal road accesses the property. There is hydro, heating, and air conditioning, water is taken from the lake, and there is a septic bed.

15In addition to the main cottage, there is a small bunky on the property. MPAC’s data shows a second building of 233 square feet built in 1960. Mr. Freedhoff clarified that it is a former icehouse, now used as a bunky, and predates the original cottage that was built in 1960. The term ‘bunky’ used by Mr. Freedhoff indicates it is occupied and, therefore, has been improved since it was used as an icehouse.

16Ms. Mulligan describes the lot as having a slight slope. Mr. Freedhoff disagrees stating the lot is too steep to be of use. Both agree that the lot is heavily treed. The photographic evidence shows the cottage on a slightly sloping topography with a steeper slope between the cottage and the waterfront. Ms. Mulligan submits there is a -20% adjustment off the land component.

17Ms. Mulligan presented six sales in support of the assessment as returned. All of her sales are waterfront properties, located on Lake Muskoka and accessed by seasonal roads. Although Ms. Mulligan included Time Adjustment Factors and a Sales Used in Price Change over Time Analysis, she did not time-adjust the sale values. Mr. Freedhoff submitted no sales evidence.

18I find that Sale 1, 1036 Road 3600, is superior to the subject property due to the topography. It is located south of the subject property, has 225 effective feet of lakefront, a similar lot size (0.51 acre) and faces northwest. Unlike the subject property, there is no basement or secondary structure. It sold in August 2015 for $1,249,000. Mr. Freedhoff stated he is familiar with this property because a friend owned it and he has visited it on a number of occasions. MPAC has assessed both this property and the subject property as having a slight slope. The photographs of Sale 1 show a very slight slope and it appears flat enough for outdoor activities which is not possible at the subject property due to its steeper slope and trees.

19I find that Sale 2, 1068 Broadley Road, Unit 27, is similar to the subject property. It has 200 effective feet of lakefront, a much larger lot (1.19 acres) but is negatively impacted by steep topography. Like the subject property, it faces north and has a partially finished basement with a walk-out. The cottage is 400 square feet larger than the subject property but is nine years older. It sold in July 2015 for $1,235,000.

20I find that Sale 3, 1211 Foreman Road, Unit 32, is, on balance, inferior to the subject property because of a smaller waterfront of 81 feet. It has a similar lot size (0.43 acre), a steep topography and a basement walk-out. The cottage is larger (2,192 square feet) and is newer, built in 2014. However, I accept Ms. Mulligan’s evidence that the waterfront is a driving force of value in Muskoka Lakes Township. It sold in May 2015 for $965,000.

21I find that Sale 4, 1519 Muskoka Road 118 W, Unit 7, is, on balance, inferior to the subject property based on the smaller waterfront of 125 effective feet and that the main structure, while similar in size (1,988 square feet), is 14 years older than the subject property. It has a larger lot (0.96 acre), the topography is a slight slope, there is a basement walk-out. but no air conditioning and the basement is unfinished. It sold in September 2015 for $939,000.

22I find that Sale 5, 1034 Ramsden Road, is inferior to the subject property. Despite the level topography and slightly larger lot size (1.57 acres) it has a much smaller waterfront of 71 feet and a smaller main structure (1,333 square feet). It is similar in that it has air conditioning and a finished basement with a walk-out and a small shed. It sold in September 2016 for $1,064,000.

23I find that Sale 6, 1153 Bradley Road 7, is superior to the subject property. It has 340 effective feet of lakefront, a much larger lot (1.55 acres), a larger main structure (2,202 square feet), a workshop (667 square feet) and a cabin (836 square feet). It sold in June 2015 for $1,250,000.

24These sales show that the subject property likely would have sold for more than $1,064,000 and less than $1,235,000. MPAC has assessed the property at $1,093,000, which falls within that range.

25Mr. Freedhoff challenged MPAC’s choice of comparables citing distances from the subject property, arguing that those which are 30-40 kilometres away from the subject property by road are in a different market than the subject property or that someone travelling north to a cottage would prefer the subject property’s location as it is shorter and more direct. Ms. Mulligan argued that her comparables are in the same municipality, Muskoka Lakes Township, and on the same lake as the subject property and, therefore, have the same market factors. She further argued that the distance by road between the comparables and the subject property is not relevant. I agree with Ms. Mulligan and find that, for the purpose of determining the current value of the subject property, they are comparable because they are located on the same lake and in the same municipality. I received no evidence that the market differs based on proximity to urban areas, which may be an advantage to some and a drawback to others.

26Mr. Freedhoff further challenged Ms. Mulligan’s six sales, noting that she used 580 sales to calculate her time adjustment factors and, therefore had a large sample of sales to choose from. Ms. Mulligan submitted that these were the best sales in terms of location, age, construction quality class, lacking a significant second structure, type of access and waterfront.

27On four occasions in her Valuation Report, Ms. Mulligan references Larry Dybvig’s The Appraisal of Real Estate, 3rd Canadian Edition: Highest and Best Use, Direct Comparison Approach to Value, bracketing of sale comparable to establish a probable range of value and Real Property Interest Appraised. Ms. Mulligan did not time adjust the sale prices or make adjustments for the physical differences between the subject property and her comparables. However, she provided a detailed analysis as to how each property differed from the subject property, identifying which properties she believed were inferior, similar and superior, thereby creating a probable range of sale prices. This is called bracketing. In determining the value of a property, Mr. Freedhoff, who had read Mr. Dybvig’s book, argued that the author recommends making adjustments for differences such as lot and building sizes, amenities, finishes, etc. before bracketing. He argued that Ms. Mulligan should have made such adjustments if she is relying on Mr. Dybvig’s book and that the other properties are not comparable to the subject property without such adjustments. While such adjustments may be helpful, I do not find that they are necessary in determining current value.

28In examining the evidence in total, I find that Ms. Mulligan provided six property sales in reasonable geographical proximity to the subject property that sold within nine months of the valuation day. While none of the properties are exactly the same as the subject property, they are similar and provide a range of values. On average, the inferior properties sold for less and the similar and superior properties sold for more than MPAC”s valuation of the subject property. When taken together, the six sales show that MPAC’s assessment of the subject property at $1,093,000 is reasonable and supportable.

EQUITY

29I must also consider the assessments of similar properties in the vicinity and determine whether the current value, as established, is inequitable relative to those assessments. If so, the current value should be adjusted to make it equitable, as required by s. 44.(3)(b) of the Act.

30Ms. Mulligan submitted an Equity Analysis Report containing 30 time-adjusted sales of lake front properties which sold between January 1, 2014 and December 31, 2016 and within 4.7 kilometres of the subject property. In her assessment to sale ratio (“ASR”) analysis, the sales sample produced a median ASR of 0.994, indicating that similar properties in the vicinity are assessed close to their sale values.

31Mr. Freedhoff argues that MPAC is not assessing properties accurately in his vicinity. Of the 580 sales in MPAC’s Sales Used In Price Change Over Time Analysis he states that only 34% of the assessments fell within 3% of the sale prices, concluding that MPAC’s assessments are not accurate. I note that this study uses sales of improved lands, not just waterfront, and the proximity to the subject property is not given.

32I prefer MPAC’s analysis which is restricted to waterfront properties only and within 4.7 kilometres of the subject property. For the purpose of establishing equity, properties do not need to be comparable however they need to be of a similar nature and within a reasonable proximity to the subject property. That smaller sample shows that there is no systematic error in how MPAC is assessing properties in the vicinity.

33I therefore find that no adjustment is required pursuant to s. 44.(3)(b) of the Act.

CONCLUSION

34I find that the current value of the subject property, as of the January 1, 2016 valuation day, is $1,093,000 for the 2017 and the deemed 2018 taxation years and there is no evidence indicating that it would be unfair or inequitable to assess the property at that current value. I therefore confirm the assessment at $1,093,000 for the 2017 and the deemed 2018 taxation years.