Clarke v. Municipal Property Assessment Corporation, 2018 CanLII 62970

Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE: July 03, 2018

FILE NO.: WR 153594

Assessed Person(s): Neal Clarke, Brendan Clarke Iris Karen Clarke, Keith John Walter Clarke

Appellant(s): Iris Clarke

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

Respondent(s): City of Sudbury

Property Location(s): 289 Middle Lake Road

Municipality(ies): City of Sudbury

Roll Number(s): 5307-090-018-04800-0000

Appeal Number(s): 3239288 and 3314612 (deemed 2018 appeal)

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

Hearing Event No.: 699964

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

Heard: May 2 and 24, 2018 by telephone conference call

APPEARANCES:

Parties

Representative

Iris Clarke and Keith Clarke

Iris Clarke

MPAC

Andrew Rossanese

City of Sudbury

No one appeared

DECISION OF THE BOARD DELIVERED BY MARCELLE BOURASSA

INTRODUCTION

1Iris Clarke (the “Appellant”) is one of the owners of the property located at 289 Middle Lake Road (the “subject property”) on Middle Lake in the City of Sudbury. It is a two-storey single family detached home on water located on 2.48 acres. It has 3,066 square feet (“sq. ft.”) of total building area, a detached garage and a shed. The subject property was built in 1975 and has an effective year of build of 1981. MPAC has assigned it a quality of construction rating of 5.5. The Clarkes purchased the subject property in 1997 under Power of Sale for $100,000.

2For the 2017 taxation year under appeal, MPAC returned the assessment for the subject property at $393,000.

3Ms. Clarke has appealed the assessment for the 2017 taxation year to the Assessment Review Board (the “Board”), pursuant to s. 40 of the Assessment Act R.S.O. 1990, c. A.31 (“Act”). It is the Appellant’s position that the subject property is assessed too high given the impact of the Certificate of Prohibition registered on title that affects its marketable value in comparison to neighbouring properties. She expressed her opinion that a negative 20% adjustment is not enough. It is her position that the subject property’s current value at the January 1, 2016 valuation date could have been about $200,000 to $230,000. However, it should be more fairly assessed at $250,000.

4Pursuant to the Act, the burden of proof as to the correctness of the current value of the subject property rests with MPAC. For the period of 2017-2020, the subject property is valued as of January 1, 2016. MPAC’s representative, Andrew Rossanese estimates the current value of the subject property to be $393,000 based on the direct comparison approach. Mr. Rossanese acknowledges that there is some evidence that the subject property was used as a dump some decades ago. MPAC has carried through a negative 20% adjustment. He conducted an equity study and determined that an equity adjustment is not required. It is his position that the assessment as returned of $393,000 should be confirmed for the 2017 and deemed 2018 taxation years.

ISSUES

5The 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

6The Board finds that the current value of the subject property, as of the January 1, 2016 valuation date, is $293,000 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.

7The assessment of the subject property located at 289 Middle Lake Road is reduced from $393,000 to $293,000 for the 2017 and the deemed 2018 taxation years.

RELEVANT LEGISLATION

8Section 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.

9Section 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.

10Section 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 the period consisting of the four taxation years from 2013 to 2016, land is valued as of January 1, 2012.

4. For the period consisting of the four taxation years from 2017 to 2020, land is valued as of January 1, 2016.

5. After 2020, for each subsequent period consisting of four consecutive taxation years, land is valued as of January 1 of the year that precedes the period by two years.

11Section 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.

12Section 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

13Mr. Rossanese states that the subject property is located on Middle Lake that has 46 year round residents and 15 seasonal residents. There are no sewers or water.

14Mr. Rossanese states that there is some evidence that garbage that included old mattresses and car parts was dumped on the site several decades ago. There is no clear evidence such as an environmental engineering report or other assessment to assist in quantifying an adjustment. However, over the years, a 20% adjustment has been applied to the subject property’s overall assessed value whether warranted or not. Mr. Rossanese confirmed that the adjustment has been carried through to the current base year.

15Mr. Rossanese relies on a Valuation Report. He adds that he tried to find properties that are inferior or superior to the subject property in order to establish a reasonable range. Key property details are set out below.

Property

Site Area (acre)

Effective Frontage (feet)

Year Built (effective)

Quality

Building Area (sq. ft.)

Other

Secondary Structure(s)

Time Adjusted Sale (TAS) ($)

289 Middle Lake Road

(subject property)

2.48

371.52

1975

(1981)

5.5

3,066

Detached

Garage

(1,472 sq. ft.)

Shed

2259 Salo Road

(Sale 1)

0.54

80

2005

(2005)

6

1,256

Finished basement area

(575 sq. ft.)

445,000

(444,180)

(04/2017)

301 Middle Lake Road

(Sale 2)

1.77

225

1980

(1980)

6.0

1,288

Finished basement area

(1,102 sq. ft.)

Detached

garage

(624 sq. ft.)

Shed

365,000

(366,487)

(06/2013)

606 Ester Street

(Sale 3)

0.15

43

2008

(2008)

6.0

1,257

Finished basement area

(842 sq. ft.)

Detached garage

(595 sq. ft.)

545,000

(546,699)

(11/2013)

2193 Salo Road

(Sale 4)

0.93

180

1992

(1992)

7.0

1,453

Finished basement area

(1,000 sq. ft.).

650,000

(651,040)

(11/2014)

426 Ester Road

(Sale 5)

0.58

88.04

1975

(1975)

6.5

1,692

Finished basement area

(360 sq. ft.)

515,000

(513,768)

(08/2017)

Salo Road

(Sale 6)

0.58

88.04

1975

(1975)

6.0

1,652

Finished basement area

(935 sq. ft.)

Detached garage

(455 sq. ft.)

Cabin

525,000

(527,269)

(02/2013)

2891 Treeview Road

(Sale 7)

1.33

152

2001

(2001)

7.0

2,798

Finished basement area

(961 sq. ft.)

630,000

(633,270)

(06/2012)

16Mr. Rossanese states that 2259 Salo Road is on Hannah Lake, less than 1 kilometre away from the subject property. It is inferior to the subject property in terms of lot size and building area. It has an attached garage instead of a secondary structure.

17Mr. Rossanese states that 301 Middle Lake Road is a direct neighbour of the subject property. MPAC has no record of any renovations. It has a slightly higher quality class of construction rating of 6.0, a smaller lot and a much smaller dwelling than the subject property. Mr. Rossanese considers it to be an inferior property.

18Mr. Rossanese states that 606 Ester Street is also located on Middle Lake. He considers this property’s dwelling as superior to the subject property given that it was built in 2008 and has a quality of construction rating of 6.0. However, it is inferior in terms of its much smaller lot size and total building area.

19Mr. Rossanese states that 2193 Salo Road is located on Hannah Lake. It is inferior to the subject property in terms of lot size and building area. However, it is superior in terms of age and quality of construction.

20Mr. Rossanese states that 426 Ester Street is also located on Middle Lake. He considers this property’s dwelling as superior to the subject property given that it was built in 1987 and has a quality of construction rating of 6.5. However, it is inferior in terms of its much smaller lot size and total building area.

21Mr. Rossanese states that the property at Salo Road is located on Hannah Lake. It has a smaller building area and lot size than the subject property. It has a cabin and a 455 sq. ft. detached garage built in 2005. He considers this property to be inferior to the subject property.

22Mr. Rossanese states that he considers 2891 Treeview Road also located on Middle Lake as a superior property to the subject property. It has the highest time adjusted sale in the area.

23Mr. Rossanese states that his opinion of the subject property’s current value is $393,000. This value is at the lower end of the range of actual sales of $365,000 to $650,000. It is $52,000 lower than the average of $445,000 of the actual sales of for the most comparables properties, 301 Middle Lake Road and Salo Road.

Appellant’s Evidence

24Ms. Clarke states that a Certificate of Prohibition under the Environmental Protection Act (“EPA”) that was registered on title in February 1995 is still in effect. Reference was made to clause 3.5 that prohibits any use of the land for a period of 25 years. Clause 3.5 references s. 46 of the EPA that provides that “no use shall be made of land …. which has been used for the disposal of waste within a period of twenty-five (25) years from the year in which such land ceased to be so used unless the approval of the Minister of the Environment and Climate Change for the proposed use has been given”.

25Ms. Clarke states the subject property was purchased in 1997 under Power of Sale for $100,000 in cash. The previous owners had put it up for sale in 1996 and were asking $150,000. Ms. Clarke states that they did a title search and discovered the Certificate of Prohibition registered on title. They made an offer for $100,000 in cash knowing that it would be impossible to get mortgage financing through a financial institution. The offer was rejected.

26In late summer 1997, the realtor contacted them to advise that the Toronto-Dominium Bank wanted to sell the subject property under Power of Sale and would accept their earlier offer of $100,000. Ms. Clarke adds that the bank had a mortgage registered in its favour securing $127,000 and that it took a loss of $27,000. She asserts that the mortgage was registered prior to the Certificate of Prohibition being registered on title.

27Ms. Clarke states that when they purchased the subject property they were told that it had not been “cleaned up”. However, there were no mattresses sticking out, etc. They did remove the rubble. Over the years, they put in new flooring and a new kitchen. They also removed an old kitchen from an apartment that was converted back for their personal use.

28Ms. Clarke works in a legal office and she expressed her opinion that it would have cost thousands of dollars to get an environmental assessment report and that they never felt they had the money to obtain one. In any event, they did not want to sell the subject property.

29It is Ms. Clarke’s position that the subject property is assessed too high given the impact of the Certificate of Prohibition registered on title that affects the marketable value of the subject property in comparison to neighbouring properties. Ms. Clarke asserts that a potential buyer would require funding to purchase the property from a source other than a bank in order to purchase the subject property. A buyer would have to be willing to risk buying the subject property with this Certificate of Prohibition registered against title. She adds that as the owners, they would never be able to affirm to a potential buyer that the subject property has never been used as a waste disposal site.

30Ms. Clarke referenced the neighbouring property at 267 Middle Lake Road that sold shortly after the purchase of the subject property in July 1998 for $263,000. She asserts that the properties were comparable at the time and that the value of the two properties would have been similar but for the impact of the Certificate of Prohibition on the value of the subject property. She estimates the reduction on the value of the subject property as 38% ($100,000 divided by $263,000 x 100%) of what it should have been. She asserts that it is a nicer property now and has a 2016 CVA of $614,000.

31Ms. Clarke proposes applying the 38% formula to the 2016 CVA for 267 Middle Lake Road of $614,000. She asserts that the subject property would have a value of $233,320 if the properties were still similar. However, she acknowledges that the residence at 267 Middle Lake Road has been enlarged and a garage has been added, so she asserts that this property is worth a great deal more than it was in 1998.

32The Board asked Mr. Rossanese to provide property details for 267 Middle Lake Road. He confirmed that it last sold in 2006 for $467,000. It has a 1.46 acres lot, a total building area of 2,637 sq. ft., an effective year of build of 1987 (it was originally built in 1964 and underwent interior and exterior renovations in 1992) and a higher quality of construction rating of 6.5. It has a 672 sq. ft. detached garage and a shed. It has a 2016 CVA of $614,000

33The property at 301 Middle Lake Road has a 2016 CVA of $454,000. Applying the 38% formula to this property results in a value of $172,520.

34It is Ms. Clarke’s position that the subject property’s current value at the January 1, 2016 valuation date could have been about $200,000 to $230,000 given that it is not known how much it would cost to clean the site and get a clear title. She adds that the Toronto-Dominium Bank had a mortgage on the subject property for $127,000 and they could not get financing through the bank at the time of purchase through the Power of Sale because of the Certificate of Prohibition registered on tittle. She expressed the view that the subject property should be more fairly assessed at $250,000 as, in her opinion, a 20% adjustment is not sufficient.

35Ms. Clarke acknowledges that they swim in the lake. Their well water was tested about five years ago and the water is potable.

Board’s Analysis and Findings

36Under 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.

37To enable an estimate of value for the subject 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.

38The Board has not considered Ms. Clarke suggested approach of using the 38% formula as it finds that there is sufficient sales evidence to arrive at a determination of current value.

39Based on the evidence before it, the Board finds that the subject property is the only property that has a Certificate of Prohibition registered on title and a history of use as a waste disposal site.

40The Board finds the sales on Middle Lake Road to be the most helpful evidence in determining the subject property’s current value.

41The Board finds sale 2, the neighbouring property located at 301 Middle Lake Road, to be a reasonably comparable property to the subject property apart from the subject property’s history of use as waste disposal site and the whole issue of the Certificate of Prohibition registered on title. It has the largest site area of all of the sales comparables in evidence located on Middle Lake Road even though at 1.77 acres, it is still smaller than the subject property. It has a smaller dwelling at 1,299 sq. ft. However, unlike the subject property, it has a finished basement area that adds 1,102 sq. ft. of living space. It is fairly similar in age but slightly newer than the subject property and has a slightly higher quality of construction rating of 6.0. It also has a detached garage and a shed. It has a TAS value of $366,487. This is the lowest time adjusted sale of all of the sales in evidence.

42The Board finds sale 3, the property located at 606 Ester Street, to be superior to the subject property. It is much newer having been built in 2008 and has a higher quality of construction rating of 6.0. It also has 842 sq. ft. of finished basement area that adds additional living space. It also has a detached garage. It has a TAS of $546,699.

43The Board finds sale 5, the property located at 426 Ester Street, to be slightly superior to the subject property given it is somewhat newer having been built in 1987 and has a higher quality of construction rating of 6.5. It also has 360 sq. ft. of finished basement area that adds additional living space. It has an attached garage. It has a TAS of $513,768.

44The Board finds sale 7, the property located at 2891 Treeview Road, to be much superior to the subject property. It is much newer having been built in 2001 and has a much higher quality of construction rating of 7.0. It also has 961 sq. ft. of finished basement area that adds additional living space to the building area of 2,795 sq. ft. It has an attached garage instead of a detached garage. It is located on a large lot of 1.33 acres. It had a TAS of $633,270.

45The Board has considered the sales located on neighbouring Hannah Lake.

46The Board finds sale 1, the property located at 2259 Salo Road on Hannah Lake, to be superior to the subject property given it is newer having been built in 2005 and has a higher quality of construction rating of 6.0. It also has 575 sq. ft. of finished basement area that adds additional living space.

47The Board finds sale 4, the property located at 2193 Salo Road on Hannah Lake, to be superior to the subject property given it is newer having been built in 1992 and has a higher quality of construction rating of 7.0. It also has 1,000 sq. ft. of finished basement area that adds additional living space.

48The Board finds sale 6, the property located at Salo Road on Hannah Lake, to be slightly superior to the subject property as it has a higher quality of construction rating of 6.0. It also has 935 sq. ft. of finished basement area that adds additional living space. It also has a newer detached garage and a cabin.

49Again, the Board finds the property at 301 Middle Lake Road to be reasonably comparable apart from the subject property’s history of use as waste disposal site and the whole issue of the Certificate of Prohibition registered on title. Given the differences in total building areas, the Board will not apply a TAS value per sq. ft. to the subject property. Rather, the Board finds that subject property’s current value should not exceed $366,487.

50Based on the evidence before it, the Board finds that the subject property is the only property that has a Certificate of Prohibition registered on title and a history of use as a waste disposal site and that it affects its marketability. The Board found Ms. Clarke’s evidence as to the impact of the Certificate of Prohibition registered on title mortgage financing through a financial institution to be persuasive. The issue remains on how to quantify the impact of the Certificate of Prohibition registered on title and a history of use as a waste disposal site.

51The best evidence before the Board is the historical 20% adjustment applied by MPAC. There is insufficient evidence before the Board to support a larger reduction. Therefore, the Board will apply a 20% reduction to the value of $366,487. This result in the value of $293,487 or $293,000 (rounded).

52Therefore, the Board sets the current value of the subject property at $293,000 (rounded).

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

53Mr. Rossanese relies on an Equity Analysis Report that considered the sales of 30 single-family detached on water properties that occurred between January 1, 2012 and November 8, 2017 and that are located within 5 kilometres of the subject property.

54In his Report, he states that the level of appraisal is established by determining the median Assessment to Sale Ratio (“ASR”) in the sales sample. He highlighted that, in this instance, the sales sample produced a median ASR of 1.032. 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 1.032 indicates that similar properties in the vicinity have been assessed at or near their current values. Therefore, an equity adjustment is not required.

55Mr. Rossanese concludes that the assessment for the subject property should be confirmed at $393,000 for the 2017 and deemed 2018 taxation years.

Appellant’s Evidence

56Ms. Clarke expressed the view that the subject property should be more fairly assessed at $250,000. In her opinion, a 20% adjustment is not sufficient.

Board’s Analysis and Findings

57Section 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.”

58The 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.

59In 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].

60The 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.

61The 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.

62The 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.

63Mr. Rossanese relies on an Equity Analysis Report that considered the sales of 30 single-family detached on water properties that occurred between January 1, 2012 and November 8, 2017 and that are located within 5 kilometres of the subject property. In this instance, the sales sample produced a median ASR of 1.032.

64The Board finds that the median ASR of 1.032 falls within MPAC’s generally acceptable standard of 0.95 and 1.05 required to establish that the level of current values assessments of similar properties is in line with the level of sales prices in the vicinity.

65On the other hand, Ms. Clarke expressed the view that the subject property should be more fairly assessed at $250,000. In her opinion, a 20% adjustment is not sufficient. The Board has already considered an adjustment under its current value analysis.

66For 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

67The Board finds that the current value of the subject property, as of the January 1, 2016 valuation date, is $293,000 (rounded). Furthermore, the Board finds that the evidence before it does not support the conclusion that an equitable adjustment is required under s. 44.(3)(b )of the Act.

68Accordingly, the assessment of the subject property is reduced from $393,000 to $293,000 for the 2017 and deemed 2018 taxation years.

2018 DEEMED APPEAL

69An appeal for the 2017 taxation year is presently before the Board. Section 40.(26) of the 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.

70Section 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.