Smith v. Municipal Property Assessment Corporation, 2018 CanLII 60437

Assessment Review Board

Commission de révision de l’évaluation foncièreAppellant

ISSUE DATE: June 27, 2018

FILE NO.: WR 152494

Assessed Person(s): Michael Smith, Margaret Smith

Appellant(s): Michael Smith, Margaret Smith

Respondent(s): Municipal Property Assessment Corporation (“MPAC”) Region 07

Respondent(s): Municipality of Highlands East

Property Location(s): 1333 Upper Paudash Road

Municipality(ies): Municipality of Highlands East

Roll Number(s): 4601-101-000-37300-0000

Appeal Number(s): 3259829 and 3293036 (deemed 2018 appeal)

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

Hearing Event No. 696883

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

Heard: April 11, 2018 in Wilberforce, Ontario

APPEARANCES:

Parties

Representative

Margaret Smith

Self-represented

MPAC

Matthew Sauder

Municipality of Highlands East

No one appeared

DECISION OF THE BOARD DELIVERED BY JENNIFER GRIFFITH

REASONS

Background

1Michael Smith and Margaret Smith are the owners of 1333 Upper Paudash Road in the Municipality of East Highlands (the “Subject Property”). Located on Paudash Lake in Joe Bay, the MPAC has classified the Subject Property as a 391, Seasonal/Recreational dwelling – First Tier on water. The Subject Property was built in 2009, with a total site area of 0.82 acres, a total building area 1,621 square feet (“sq. ft.”), and MPAC has assigned it a quality class of 5.5. There is a secondary structure built in 1949 and with a total building area of 636 sq. ft.

2Pursuant to the provisions of the Assessment Act, R.S.O. 1990, c. A.31 (the “Act”), the assessment of land shall be based on its current value. The Act also provides that, for the 2017 to 2020 taxation years, MPAC is required to assess this value as of the valuation date, January 1, 2016. (“current value”).

3MPAC has assessed the current value of the Subject Property at $474,000 for the 2017 taxation year and at $454,000 for the 2018 taxation year.

4MPAC takes the position that the current value should be $454,000 for both taxation years.

5Michael Smith and Margaret Smith (the “Appellants”) have filed appeals for taxation years 2017 and 2018 taxation years with the Assessment Review Board (the “Board”), pursuant to s. 40 of the Act. It is their position that MPAC’s assessment of current value is too high and that the correct current value is $400,000.

6Pursuant to s. 40(11) of the Act, the Municipality of Highlands East is a party to this proceeding. However, no one appeared at the hearing on the Municipality’s behalf.

7Section 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.

8MPAC takes the position that an equitable reduction is not required.

9The Appellant did not assert that an equitable reduction is required. Therefore, in this proceeding, this ground for appeal is not in issue.

10At the completion of the hearing, the Board reserved its decision. For the reasons that follow, the Board finds that the current value for the 2017 and 2018 tax years is $454,000.

Relevant Legislation

11The Act:

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.

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

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.

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.

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.

Issue

12The issue to be determined on this appeal is what is the correct current value of the Subject Property for the taxation years 2017 and 2018?

Discussion, Analysis and Findings

MPAC’S Evidence

13Matthew Sauder represented MPAC. Mr. Sauder prepared a Valuation Report respecting the subject property, dated December 18, 2017 (“Valuation Report”) which he presented into evidence.

14Mr. Sauder stated that Paudash Lake is made up of four main bays. Joe Bay is located to the southwest, Lower Paudash (Outlet Bay) to the east, North Bay to the north and Inlet Bay to the northeast. He noted that Paudash Lake is the largest lake, and that homes in this area are a mix of Seasonal/Recreational dwellings on water and single family detached year round dwellings on water. That there is a mix of old and new cottages and homes built in 1900s to 2000s. That access on Paudash Lake is a mixture of year round private and seasonal roads, and some properties only have water access.

15In support of current value, Mr. Sauder presented an analysis of six properties, three of which are located in the same homogeneous area as the Subject Property. The remaining three are from homogeneous areas (O15, O17 and 18). These suggested comparable properties are all Seasonal/Recreational dwellings, First Tier - property with no basement on water as the Subject Property. He states that these comparable properties have been inspected after the sale.

16These suggested comparable properties are located at 1478 Lewis Road, which sold in 2016 (“Comp #1”); at 1255 Upper Paudash Road, which sold in 2015 (“Comp #2”); at 1259 Thunderbird Drive, which sold in 2015 (“Comp #3”); at 1027 Squirrel Lane, which sold in 2016 (“Comp #4”); at 1100 Karl’s Lane, which sold in 2015 (“Comp #5”); and at 1032 Paul’s Lane, which sold in 2016 (“Comp #6”).

17Mr. Sauder testified that, on average, these six suggested comparable properties have: a total building area of 1,216 sq. ft.; a total frontage of 138.5 feet, a total site of 0.86 acre; a quality class of 5.5; and a 1973 building date. The average time-adjusted sale price of these properties is $339,556 ($279.24 per sq. ft.) based on average total building area. In comparison, the Subject Property has: a total building area of 1,621 sq. ft.; a frontage of 121 feet; a site area of 0.82 acres; a quality class of 5.5; and a 2009 building date. MPAC has assessed the Subject Property a value of $292.41 per sq. ft. based on total building area.

18Based on the above sales, the Mr. Sauder states that the most similar comparable property is Comp #5, which has: a total building area of 1,634 sq. ft.; frontage of 100 ft; a site area of 0.46 acres; a quality class rating of 6, a building date of 2012, sold in 2015, with a time-adjusted sale price of $523,281 and a cost per sq. ft. of $320.24. When this value is applied to the Subject Property it results in a value of $519,000 ($320.24 x 1,621 sq. ft.). In comparison, the Subject Property has: a total building area of 1,621 sq. ft., a frontage of 121 feet; and a site area of 0.82 acres; a quality class rating of 5.5; and a 2009 building date. Mr. Sauder assessed the Subject Property using a value of $292.41 per sq. ft. Based on total building area; MPAC calculates that the value is $473,996. However, Mr. Sauder made adjustments to this value including a reduction of $33,690 for the dwellings, $9,000 for the boathouse, and an increase by $20,000 for renovation to the second cottage. He concludes, therefore, that the current value of the Subject Property is $454,000.

19MPAC states that the Subject Property was inspected on March 31, 2017, and that the Subject Property’s measurements, classification and data were reviewed and confirmed as current and complete.

20On cross-examination, Mr. Sauder disagreed with the Appellant’s assertion that MPAC’s methodology is flawed, because MPAC is not obligated to use the same suggested comparable properties as the Appellant.

21Mr. Sauder states that the suggested comparable properties used in MPAC’s Valuation Report are all assessed as Seasonal/Recreational properties, further stating that none of these properties or the Subject Property are winterized. In regard to the impact of the number of bedrooms on the assessed value of a property, Mr. Sauder stated that the value of the structure is calculated based on the total square footage and not by the number of bedrooms.

22Mr. Sauder maintains that the current value assessment of MPAC’s suggested comparable properties are current. In response to how quality rating is determined, he stated that factors such as layout, bathrooms, flooring, kitchen, exterior finishes (siding, wood, and brick) and quality of construction are taken into consideration when assigning a quality rating.

MPAC’s Submissions

23Relying on Mr. Sauder’s evidence, MPAC’s submits that the correct current value for the taxation years 2017 to 2018 is $454,000.

Appellant’s Evidence

24Margaret Smith represented herself and Michael Smith.

25In support of their position on current value, Ms. Smith presented two lists of sales of waterfront residential properties (cottage) on Paudash Lake to show that sale prices in 2015 ranged from $232,000 to $645,000; and sale prices in 2016 ranged from $230,000 to $638,000. Based on the ranges of these sales, Ms. Smith feels that the current value should be $400,000 for the Subject Property.

26On cross-examination, the Appellant stated that the Subject Property is built to code and was designed by the owner to maintain the beauty of the Subject Property. She also stated that the bedrooms and bathrooms are the only insulated areas, and that the other areas of the structure are cedar, with exposed studs and no drywall.

Appellants’ Submissions

27Relying on her evidence, the Appellant submits that the correct current value for taxation years 2017 to 2018 is $400,000.

28The Appellant emphasizes that the Subject Property is not winterized and has no privacy. The Appellant argues that a number of the comparable properties presented by MPAC are not similar to the Subject Property, because they are winterized, have wells, more bedrooms, different design and renovation. The Appellant cited these comparable properties as: Comp #2 is winterized; Comp #3 has four bedroom and designed with an open concept; Comp #4, is winterized and has well water; and Comp #5 is winterized, has well water and five bedrooms; and Comp #6 is winterized, with three cottages and renovated.

29The Appellant quotes an article by Kim Pittaway, in Cottage Life, Spring 2015 issue, stating that it indicates that one of the factors influencing the cottage real estate market in 2015 is year is year round access.

30The Appellant also relies on information obtained from John Jarvis, a broker/owner with Re/Remax North Country Realty in Huntsville. She indicates that he states that nearly 100 per cent of his buyers are looking for four season places, because buyers want a property that they can enjoy year round and with flexible financing options, than would otherwise have with a three season cottage.

31The Appellant quotes an article by Philip Preville, in Cottage Life, Spring 2017 issue, stating that it indicates that one of the trends influencing the cottage real estate market is four-season cottages and that another likely trend is soon to be retirees, who are downsizing their city property and buying their future countryside retirement home.

32The Appellant also relies on new data from Ontario Real Estate Association, stating that it shows that 78 per cent of realtors are seeing an increasing trend in demand for four season properties and two-thirds of realtors say more buyers are actively looking in the fall.

33The Appellant quotes a statement by Royal LePage in its 2015 Recreational Property Report, that the average price of properties found in the Halliburton Highlands has remained unchanged since 2014. That waterfront property with land access is $350,000; and that the 2016 Canadian Recreational Housing Report stated that the average price of a lakefront property and a non-waterfront wood property are $400,000 and $200,000 respectively.

34The Appellant concedes that she has no market evidence to quantify the impact of privacy, winterization and market trends and predictions of the real estate market as described above.

Findings on Issue 1

35The Board must first address the question of whether any of MPAC’s proposed comparable properties are winterized. MPAC states, that according to their records, these are not shown to be winterized and are not assessed as winterized properties, whereas the subject property is winterized. The Appellant asserts that MPAC’s comparable are winterized. The Board does not find it necessary to determine this factual issue, because the Appellant presented no evidence to quantify the impact of winterization on current value, in particular no sales evidence. Therefore, the Board finds that MPAC’s evidence is the best evidence in terms of sales.

36The Board finds that MPAC presents the best sales evidence in support of current value with Comp #5, with a total building area of 1,634 sq. ft., frontage of 100 ft., a site area of 0.46 acres, quality class 6, built in 2012, sold in 2015, with a time-adjusted sale price of $523,281 and a cost per sq. ft. of $320.24. This comparable property is similar to the Subject Property with a total building area of 1,621 sq. ft., a frontage of 121 feet, and a site area of 0.82 acres, a quality class of 5.5, built in 2009 and assessed at a value of $292.41 per sq. ft. based to total building area. When the comparable cost per square foot is applied to the Subject Property it results in a value of $519,000 ($320.24 x 1,621 sq. ft.). However, MPAC has indicated that it is not seeking a current value higher than $454,000. Therefore, the Board finds the current value is $454,000.

37The Appellant asserts that MPAC’s methodology is flawed, because MPAC used different comparables than the comparables she had requested from MPAC. Each party is entitled to propose the properties they consider to be comparable. The fact that MPAC has chosen to propose different properties than the Appellant, is not an indication of whether a property is comparable to the subject property.

38The Board finds that the Appellant presented no quantifiable evidence to demonstrate the impact of privacy; well water; and winterization. That Kim Pittaway, Cottage Life; John Jarvis, broker/owner Re/Remax North Country Realty; Philip Preville, Cottage Life; Ontario Real Estate Association; and Royal LePage, Recreational Property Report are not in attendance at the hearing to be cross-examined. Their predictions and trends provide no quantitative evidence to assist this Board in its determination of current value.

39The Board did not rely on the Appellant’s list of sales which occurred on Paudash Lake in 2015 and 2016, because the Appellant failed to present crucial information (e.g. age, quality, property type, the addresses of these properties, and other secondary structures information) that is necessary to determine if these suggested properties are comparable to the Subject Property.

40Based on the above evidence, analysis, and findings, the Board finds the current is $454,000. Therefore, the Board reduces the returned assessment value from $474,000 to $454,000 for the 2017 taxation year and confirms the assessment value of $454,000 for the deemed 2018 taxation year.

2018 DEEMED APPEAL

41An 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.

42Section 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.