Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE: July 06, 2018

FILE NO.: WR 150743

Assessed Person(s): Lai Yee Tse, Wing Sing Chan

Appellant(s): Wing Sing Chan

Respondent(s): Municipal Property Assessment Corporation (“MPAC”) Region 09

Respondent(s): City of Toronto

Property Location(s): 259 Princess Avenue

Municipality(ies): City of Toronto

Roll Number(s): 1908-092-620-01600-0000

Appeal Number(s): 3236290 and 3297250 (deemed 2018 appeal)

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

Hearing Event No.: 693068

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

Heard: January 15, 2018 in Toronto, Ontario

APPEARANCES:

Parties	Representative
Wing Sing Chan	Self-represented
MPAC	Carlo Bassi
City of Toronto	No one appeared

DECISION OF THE BOARD DELIVERED BY WARREN MORRIS

REASONS

Background

1Wing Sing Chan (the “Appellant”) is the co-owner of 259 Princess Avenue (the “Subject Property”), a 1,629 square foot, one-story single-family residence on a 0.15 acre lot with a 50 foot frontage located in north central Toronto.

2For the four taxation years from 2017 to 2020, the Assessment Act R.S.O. 1990, c. A.31 (the “Act”) requires the Subject Property to be valued as of the legislated valuation date of January 1, 2016. MPAC determined that the current value assessment of the Subject Property on this valuation date as $1,679,000.

3The Appellant has appealed the assessment for the 2017 taxation year to the Assessment Review Board (the “Board”), pursuant to s. 40 of the Act. The Appellant did not dispute the current value of his property but believed it was inequitable relative to similar properties in the vicinity. At this hearing, MPAC took the position that the correct current value for this taxation year is $1,773,720.

4Pursuant to s. 40.(11) of the Act, the Municipality, (in this case, the City of Toronto) is a party to this proceeding. However, no one from the Municipality appeared at the hearing.

5Section 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 the municipal tax burden according to the value of the property possessed by each ratepayer. MPAC takes the position that the current value of $1,773,720 should be reduced to $1,679,000 in order to achieve equity. The Appellant did not contest the current value. However he takes the position that MPAC’s equitable adjustment is insufficient. The Appellant asserts that there are a number of similar properties in his neighbourhood with the same current values as the Subject Property that have been assessed at significantly lower than the Subject Property. It is the Appellant’s position that the current value should be reduced to $1,431,000 to achieve equity with similar properties in the vicinity.

6At the completion of the hearing, the Board reserved its decision.

7For the reasons that follow, the Board finds that the current value of the Subject Property is $1,773,720. Pursuant to s. 44.(3)(b) of the Act, the Board finds that an equitable adjustment should be applied to current value to reduce the assessment to $1,441,000.

Relevant Legislation

8Section 1 of the Act states:

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.

9Section 19.(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:

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.

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.

ISSUES

13The issue(s) to be determined on this appeal are:

1. What is the correct current value for the 2017 taxation year;
2. Whether there should be an equitable reduction of the current value pursuant to s. 44.(3)(b) of the Act, and, if so, what the amount of this reduction should be.

Discussion, Analysis and Findings

Issue No. 1: What is the correct current value of the Subject Property for the 2017 taxation year?

MPAC’S Evidence

14MPAC’s Property Valuation Analyst, Carlo Bassi, presented two exhibits relating to current value: i) Valuation Report (authored by Carlo Bassi), and ii) Property Sales Information.

15The Valuation Report concluded that the current value of the Subject Property is $1,773,720 based on a direct comparison approach. Although the Valuation Report makes reference to adjusting the sale prices of other sold properties for differences in property characteristics, Mr. Bassi’s conclusion appears to rely solely on the time adjusted sale of the Subject Property itself. The Subject Property sold in June 2016 for a price of $1,560,000. The Valuation Report includes an appendix titled “Sales Used in Price Changes over Time Analysis” which uses data from 267 property sales of homes in the Subject Property’s neighbourhood and adjacent areas from January 2015 through December 2016. Mr. Bassi used the data to conduct a sales ratio trend analysis, by plotting monthly sales relative to assessments, each month during the period, to determine the rate of change over the period. Using a trend line, Mr. Bassi determined time adjustment factors for each month. To adjust a sale occurring in June 2015 to the valuation date of January 1, 2016, Mr. Bassi determined a time adjustment factor (“TAF”) to be 1.137, indicating that this was an inflationary period, and that the sale price of the Subject Property should be adjusted upward by 13.7%. After the TAF is applied to the sale price, $1,773,720 is the time-adjusted sale price.

16The Property and Sales Information document supplied by Mr. Bassi consisted of detailed data in regards to 18 properties located within a kilometre of the Subject Property that sold in 2015 or 2016. The time adjusted sale prices of the 18 properties ranged between $1,458,000 and $1,911,000. The time adjusted sale price of the Subject Property falls within this range.

MPAC’s Submissions

17At the hearing, Mr. Bassi described the Subject Property and stated that there was a valid market sale approximately six month prior to the valuation date. Mr. Bassi testified that he used his Sales Ratio Trend Analysis to arrive at a TAF of 1.137, and simply applied the TAF to the sale price of the Subject Property to arrive at the current value. Mr. Bassi also reviewed some of the comparable property sales from the Property and Sales Information document. He particularly drew attention to Sale #6, which was a bungalow that was demolished shortly after being sold. Mr. Bassi testified that the assessment associated for Sale #6 pertained to the newly built home, and therefore was not relevant for valuing the Subject Property.

Appellant’s Evidence

18The Appellant, Mr. Chan, did not provide any documentary evidence relating to the current value of the Subject Property.

Appellant’s Submissions

19The Appellant testified in regards to the market conditions prevailing during the period between the sale of the Subject Property and the valuation date. He described potential purchasers as either being people looking for new built homes, or developers looking for bungalows to knock down and rebuild. The Appellant’s testimony did not focus on the current value of the Subject Property, but rather on MPAC’s assessment system.

Findings on Issue 1

20The best indicator of current value is an arm’s length and market tested sale of the Subject Property on the valuation day, January 1, 2016 or close to it. In this case, such a transaction took place very near the valuation date. Given the rapidly rising property values during the period between the June 2015 sale date and the January 1, 2106 valuation date, the Board finds it reasonable to apply a TAF to the sale price to arrive at current value.

21MPAC’s sales ratio trend analysis and “Sales Used in Price Changes over Time Analysis” was a reasonable method for adjusting for time. The Appellant did not dispute the TAF provided by MPAC, nor did the Appellant provide any alternative methodology for time adjustments. For this reason, the Board finds the current value of the Subject Property to be $1,773,720 ($1,560,000 x 1.137).

Issue No. 2: 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.

Introduction

22Section 44.(3)(b) of the Act requires that the Board address the issue of whether an equitable reduction of the current value is required.

MPAC’s Evidence

23MPAC presented a seven-paged Equity Analysis Report. The report consisted of an explanation of the methodology used to determine whether the Subject Property was equitably assessed. In summary, MPAC has compared the property assessments against sale prices. Dividing assessments by time-adjusted sale prices leads to an Assessment to Sale Ratio (“ASR”). This ratio will indicate, overall, whether the assessed value of a property is an accurate reflection of its market value. An ASR of less than 1.0 indicates that the property is under assessed, whereas and ASR of over 1.0 indicates the assessments are higher than the values. The Equity Analysis Report includes a map of the vicinity showing 30 properties used in the study, as well as a chart with Roll Numbers, Addresses, 2016 Assessments, Sale Dates, Sale Prices, Time Adjusted Sale Prices and Time Adjusted Sales Ratio for each of these 30 properties. The mean ASR in the Equity Study is 0.928, indicating that in general, properties in the vicinity are under assessed by approximately 7.2%. The report stated that the equitable assessment of the Subject Property to be $1,646,012, which was calculated by reducing the time adjusted sale price by the relevant factor (the mean ASR for the vicinity). Mr. Bassi’s report concluded that since the equitable assessment is only slightly below the current value assessment (CVA) originally returned by MPAC, that no equitable adjustment was required.

MPAC’s Submissions

24Mr. Bassi submitted that an equitable reduction is not appropriate since the equitable assessment of $1,646,012 is only slightly lower than $1,679,000, the assessment originally returned by MPAC. According to Mr. Bassi, an assessment within 5% of the equitable assessment is within the acceptable range. In his closing submission, Mr. Bassi stated that the 30 property sales is sufficient, but eight or nine property sales are too few to form an adequate a sample size to base an equity adjustment. He quoted an April 8, 2000 decision of past Board Member J. Wyger to support the proposition that for the purpose of determining equity, the property sales used need not be similar to the Subject Property as long as they are of the same character and in the vicinity of the Subject Property.

Appellant’s Evidence

25The Appellant relied on an 11-page document titled “Appellant’s Submission for Hearing” that contained bullet point narratives as well as a map of the area, a chart of property data and a graph.

26The Appellant makes use of eight properties—five selected from the 18 comparable property sales listed in MPAC’s Valuation Report, and an additional three properties selected from the 267 properties used in MPAC’s “Sales Used in Price Changes Over Time Analysis”. The eight property sales relied on by the Appellant were selected based on the following criteria: i) all sold for a price within +/-15% of the subject property; ii) all sold within 90 days of the Subject Property sale date; and iii) all located within close proximity of the Subject Property¹.

27The eight properties selected by the Appellant had time adjusted sale prices ranging from $1,523,584 to $1,859,599, yet the current value assessments for these same properties ranged from $1,315,000 to $1,431,000. The Appellant’s documentary evidences concludes by stating “Following the principle of market value assessment, properties with similar market value should be assessed similarly;” and consequently, the subject property should have an assessment of $1,431,000 or less.

Appellant’s Submissions

28At the hearing, the Appellant reiterated the information in his documentary evidence. The Appellant was critical of MPAC mass appraisal model as failing to capture the prevailing market conditions and as having an inherent bias by relying on irrelevant factors. Potential buyers of residential properties in the neighbourhood were either people looking for larger new built homes, or were developers looking for bungalows to knock down and rebuild. The Appellant stated that most sales in the neighbourhood are for land value only. The Appellant testified that he selected the most comparable sales from the sale information that MPAC submitted at the hearing. The Appellant suggested that the eight property sales that he selected should be preferred over the 30 sale used in MPAC’s Equity Analysis Report since his selected sales are more comparable, similar in price, and sold in a narrower time frame.

29In his final submissions, the Appellant states that statistically speaking, a large sample size is not required to establish equity in this case since in order to expand the sample to use all 30 of MPAC’s properties, there must be dissimilar properties included which distorts the accuracy and creates a bias of what is being estimated.

Findings on Issue 2

30The purpose of an equitable reduction has been described by the Ontario Court of Appeal in Re 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 application of 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.

31In 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]. The under assessment of one or two similar properties in the vicinity is not sufficient. There must be a general trend in order to warrant an adjustment downward.

32However, the goal of the Act is to determine the correct current value. Any equitable reduction in the current value results in an incorrect current value. Consequently, an equitable reduction should only be made where there is clear evidence to support that such a reduction is warranted. In this regard, the burden of proof rests with the Appellant to establish, on a balance of probabilities, that an equitable reduction is required.

33After considering the Appellant’s evidence and submissions, the Board is satisfied that an equitable adjustment may be required. However, in order to be satisfied of a general trend of under assessment of similar properties in the vicinity, it is preferable to use as much data as possible. In this case, to rely upon just eight properties to determine equity may be insufficient, particularly when there are numerous other similar properties that have been entered into evidence.

34In terms of similarity, the Board notes that, for the purposes of determining equity, properties only need be of the same general nature, character or function in relation to the Subject Property. For statistical purposes, the more properties used in an equity analysis produces stronger evidence of a general trend in the vicinity. MPAC’s Equity Analysis Report uses 30 properties, all which are single-family homes in the near vicinity of the Subject Property. What the Board finds disconcerting is that of the 18 properties that MPAC itself identified as the most similar sales in the vicinity, not one could be found in MPAC’s Equity Analysis Report. The Board questions how could MPAC identify property sales as comparable for the purpose of current value but not consider these same properties to be similar and in the vicinity for the purposes of Equity? The Board will rely on 17 of the 18 comparable property sales identified in MPAC’s Valuation Report. Sale #6 will not be used since its assessment was based on a new rebuilt home on the property and will therefore skew the ASR calculation. The Board calculated the assessment to time-adjusted sale ratio for each of the 17 properties and discovered that all but one property had an ASR of less than 1. The median ASR for this group of similar properties in the vicinity of the Subject Property is 0.813, which is significantly less than the 0.928 figure determined by the MPAC Equity Analysis Report. The 17 properties used are more reliable than the 30 properties in the MPAC Equity Analysis Report due to evidence of similarity and proximity to the Subject Property. The Board finds that a factor of 0.813 applied to the current value is warranted. Once applied to the current value of $1,773,720, the Board finds the equitable current value to be $1,442,000 (rounded).

DECISION

35The current value of the Subject Property is $1,773,720 for the 2017 and deemed 2018 taxation years.

36An equitable reduction of the current value of the Subject Property, pursuant to s. 44.(3)(b) of the Act, is required. The current value of the Subject Property for the 2017 and deemed 2018 taxation years is therefore reduced to $1,441,000.

2018 DEEMED APPEAL

37An 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.

38Section 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.

Footnotes

1. 1There was a 9th property sale that the Appellant noted met the criteria. Although MPAC’s comparable sale #6 met all three of the criteria, it was not selected since the assessment was based on a brand new rebuilt home on the property.