Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE:

July 13, 2018

FILE NO.:

WR 151145

Assessed Person(s):

Jia Yan Yu, Bao Zhong Li

Appellant(s):

Bao Zhong Li, Jia Yan Yu

Respondent(s):

Municipal Property Assessment Corporation (“MPAC”) Region 09

Respondent(s):

City of Toronto

Property Location(s):

100 Whitehorn Crescent

Municipality(ies):

City of Toronto

Roll Number(s):

1908-112-340-10400-0000

Appeal Number(s):

3210146 and 3294407 (deemed 2018 appeal)

Taxation Year(s):

2017 and 2018 (deemed appeal)

Hearing Event No.

693064

Legislative Authority:

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

Heard:

February 14, 2018 in Toronto, Ontario

APPEARANCES:

Parties

Representative

Bao Zhong Li

Self-represented

MPAC

Tyler Nastich

City of Toronto

No one appeared

DECISION OF THE BOARD DELIVERED BY DAN WEAGANT

INTRODUCTION

1The subject property located at 100 Whitehorn Crescent has a current value assessment of $1,122,000 for the 2017 taxation year. The owner, Bao Zhong Li (“Appellant”) believed the value to be too high when compared to other properties in the same neighbourhood. After participating in a unsuccessful Request for Reconsideration process with MPAC, the Appellant appealed this assessment to the Assessment Review Board (“Board”). He believes the correct assessment of the subject property is in the range of $805,000.

2MPAC prepared a valuation report and an equity analysis in support of the returned assessment, with an opinion of value of $1,251,000. While this value exceeds the returned value, MPAC is not seeking an increase in the assessment of the subject property, but submitted their findings to support the value returned.

1The Board must decide two things in this appeal. Firstly, the current value of the subject property must be determined for the 2017 taxation year, based on the evidence at the hearing. Section 40.(26) of the Assessment Act (“Act”) 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.

2Having reference to the assessments of similar properties in the vicinity, the Board must also determine if the current value found for the 2017 and 2018 taxation years needs to be reduced for the purpose of equitable assessment.

DECISION

3The Board finds the current value of the subject property is $1,122,000. There is no evidence to support a reduction in this amount for the purposes of equitable assessment.

4Accordingly, the assessment of 100 Whitehorn Crescent is confirmed for the 2017 and deemed 2018 taxation years at $1,122,000, in the Residential property class.

LEGISLATION

5In making its determination of these appeals, the Board must consider the relevant sections of the Assessment Act (“Act”).

6Section 1 of the Assessment 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.

7Section 19.(1) of the Assessment Act states:

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

8Section 44.(3) of the Assessment 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.

What is the Current Value of the Subject Property?

MPAC’S Evidence and Position

9Because market conditions and sale prices change over time, and because the comparable properties were not sold on the valuation day of January 1, 2016, Time Adjustment Factors (“TAF”) are applied to adjust the sale value of each of the comparable properties to show their likely sale value as if they were sold on January 1, 2016. The TAFs in this case are derived from 126 sales of residential properties in the market area, between February 2014 and September 2017. By plotting these 126 sales, MPAC is able to assign a TAF that represents the adjustment in value necessary to reflect the change in a specific sale price so that it can be compared with the subject property and other sales as though they all sold on the statutory valuation day of January 1, 2016.

10Mr. Nastich used the sales of four properties in his analysis that he found to be comparable to the subject property. The range of the Time Adjusted Sale (“TAS”) values of these three comparables is $992,750 to $1,431,352. He submitted that when the subject property is compared to the TAS values of these four properties, its current value assessment (“CVA”) falls within a reasonable range, noting that the subject assessment is higher than the TAS values of the three smaller properties and is lower than the one larger property in the sample. The details of the characteristics of comparable properties and the subject property are summarized in Table A.

11Mr. Nastich submitted that the current value returned, as demonstrated by MPAC’s valuation analysis, is reasonable and correct.

TABLE A

Subject Property

100 Whitehorn Crescent

Sale 1 -

45 Whitehorn Crescent

Sale 2 -

44 Axsmith Crescent

Sale 3 -

15 Deerford Road

Sale 4 -

26 Lisburn Crescent

Lot Area (Acres)

0.15

0.14

0.15

0.14

0.21

Lot frontage (Feet)

50.01

50

61

50

71

Living Area square feet (“sq. ft.”)

2359

2723

2058

1902

1972

Year Built

1970

1971

1964

1964

1963

Sale Price ($mil)/Date

N/A

1.265 / March 2015

0.983 / Dec 2015

0.950 / March 2015

0.955 / May 2015

TAS Price ($)

1,431,352

992,750

1,074,928

1,055,249

TAS / Sq. Ft. ($)

525.65

482.39

565.16

535.12

Med 530.39/ Avg 527.08

2016 CVA ($)

1,122,000

1,250,000

1,079,000

993,000

1,043,000

2016 CVA / Sq. Ft.($)

475.63

459.05

524.29

522.08

528.90

Med 490.56/ Avg 508.58

Appellant’s Evidence and Position

12The Appellant disagreed with the methods used by MPAC to determine the current value of the subject property. He had concerns with the way MPAC uses their data, as follows:

• MPAC’s comparables include a number of two-storey dwellings, while the subject property is a split level dwelling;

• MPAC used a Sales Ratio Trend Analysis (SRTA) by plotting sale to assessment ratios (SARs). This is a subjective approach to determining value trends because one of the variables (assessment) is used in the formula to determine assessment. As a result it cannot be relied upon to determine sale value changes over time, rendering the TAFs used by MPAC to be unreliable.

• Three of MPAC’s comparables sold in early 2015 so the vagaries of MPAC’s TAFs are more pronounced and therefore are less reliable.

13To address the unreliability of MPAC’s statistical case, the Appellant submitted an alternative direct comparison approach, using sales that are as close as possible to the valuation day. These sales were then adjusted for their differences from the subject property using specific values for each characteristic. These values are summarized in Table B.

Table B

Element

Value Adjustment

Bedroom

$100,000

• Bedroom (basement Bedroom)

$15,000

Family Room

$50,000

Washroom

$30,000

Exterior Finish

$20,000

Outside Parking Space (each)

$5,000

Finished basement

$80,000

Separate Entrance

$10,000

Garage

$30,000

Time Adjustment

$5,000 per month

14The Appellant testified that the values attributed to each of the elements in Table B were drawn from discussions and consultations he had with area real estate agents. These values were applied to seven properties chosen by the Appellant because of the proximity of their sale date to the valuation day and their similarity to the subject property. Table C summarizes the comparisons between the Appellant’s comparables and the subject property and the amount of the adjustments he applied in accordance with Table B.

Table C

Property

Building Area – 1^st and 2^nd level / basement level

Lot Area

Bedrooms

Washrooms

Sale Price ($) / date

Adjusted Price ($)

Subject Property

2359 / 787

50 x 130 = 6500 sq. ft.

4 + 1

3

NA

N/A

17 Baroness Crescent

Unknown

50 x 154 = 7700 sq. ft.

3 + 3

4

892,000 / Dec. 2015

1,027,000

23 Baroness Crescent

2088 / 658

50 x 154 = 7700 sq. ft.

4 + 2

3

860,000 / Dec. 2015

805,000

10 Seneca Hill Drive

3000-5000 / unknown

50 x 113 = 5650 sq. ft.

4

3

1,016,000 / Dec. 2015

1,113,500

4 Ashstead Place

Unknown

40.66 x 115 = 4676 sq. ft.

4

3

973,000 / Dec. 2015

1,068,000

60 Kempsell Crescent

Unknown

50 x 120 = 6000 sq. ft.

5 + 3

3

973,000 / Jan. 2016

893,000

57 Goodview Road

unknown

65.7 x 127.08 = 8349 sq. ft.

5 + 1

3

1,098,000 / Jan. 2016

801,000

46 Cobblestone Drive

2500-3000 / unknown

52 x 110 = 5720 sq. ft.

4 + 1

4

1,370,000 / Feb. 2016

1,302,000

15The Appellant submitted that the most comparable property in his sample is 23 Baroness Crescent. This comparable is a detached side-split house with eight rooms, four bathrooms and a lot of similar size to the subject property. He further submitted that 23 Baroness Crescent differs from the subject property as follows:

• ‘4 + 2’ bedrooms, whereas the subject property has ‘4 + 1’ bedrooms;

• a separate basement entrance whereas the subject does not;

• exterior brick finish, whereas the subject property has siding; and

• four parking spaces whereas the subject property has only two.

16The sale of 23 Baroness Crescent occurred on November 26, 2015 in the amount of $860,000. The Appellant submits that this value doesn’t need to be time-adjusted because the sale occurred so close to the valuation day.

17Using the table of adjustment values in Table B, the Appellant reduced the sale price of 23 Baroness Crescent by:

• $15,000 for an additional basement bedroom;

• $10,000 for a separate basement entrance;

• $20,000 for brick exterior; and

• $10,000 for two additional parking spaces,

resulting in a net value adjustment of -$55,000 from the 23 Baroness Crescent sale for a comparable value of $805,000 for the subject property.

Board’s Analysis

18MPAC and the Appellant took two different approaches to determining the current value of the subject property. MPAC’s approach was based on its standard of determining comparable properties that have sold and using that sales information to derive a reasonable current value of the subject property.

19MPAC’s valuation analysis indicates that the median TAS per sq. ft. value of the comparables is approximately $530, while the CVA of the subject property is $475. Without further detail, this would suggest that the subject property is under-assessed when compared to the sale value of four properties in the area. This finding was not refuted by the Appellant, except to point out the flaws in MPAC statistical approach to the exercise. Mr. Nastich submitted that while the subject property is a split-level dwelling, it can be compared to two-storey buildings because sales data shows the per sq. ft. value of two-storey and split-level dwellings are in the same range.

20It is not unusual for the Board to be presented with submissions by the Appellant that seek to impugn the reliability of MPAC’s statistically-based sales comparison methods. What is unusual in this case is the Appellant’s efforts in developing an alternative means of comparison of other properties to determine the current value of the subject property.

21The difference in the two approaches before the Board is essentially one of selection criteria. Where MPAC sought to include comparables with similar square footage, age, quality of construction, location, size and time of sale, the Appellant focused on sales that occurred at or near the valuation day and then made specific dollar value adjustments to those sale values based on the differences between the properties sold and the subject property.

22The Assessment Act stipulates that the assessment of land shall be based on its current value. Current value is defined in the Act 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, meaning that, in order to accept evidence of data in determining current value, it is best to use evidence that is based on sales (Emphasis added).

23It is widely held by the Board that the best evidence of current value is a sale of the subject property on the valuation day. Where no such sale occurs, sales of comparable properties with proximity to the valuation day is the next best evidence.

24The Board views the Appellant’s alternative approach to have some logical merit. It makes sense that, where there are enough comparable sales that occurred at or very near the valuation day, they should be considered the most accurate for their valuation and hence their comparison to the subject property. However, the Board finds that the Appellant’s approach fails on a number fronts. Firstly, the result of his analysis focusses on the sale value and characteristics of a single property, 23 Baroness Crescent. Comparison with a single property to determine current value is problematic because one sale does not equate to the broader market. It is reasonable that a finding of current value based on the sales of multiple comparable properties, when available, is superior to a finding based on the sale of a single property.

25Secondly, the Appellant’s value adjustments of the differences between the subject property and 23 Baroness Crescent are not based on any sales evidence. In order to use such adjustment values for the purposes of determining current value, they need to be tested in the market to meet the definition of current value in the Assessment Act. In addition, as was pointed out by Mr. Nastich in his closing statement, the source of the element value information in the Appellant’s evidence was a local real estate agent. The agent was neither identified nor was she/he available at the hearing to testify as to the source of the data relied upon by the Appellant. Accordingly, the element value data are given less weight in determining the value of the subject property.

26Thirdly, while seeking to impugn MPAC’s time adjustment approach, which he deems to be arbitrary because it is partially derived from assessment, the Appellant made time adjustments to his own comparables of $5,000 per month, which the Board finds to be equally arbitrary. This lump sum price difference has no relationship to the total sale price, meaning a property that sold for $500,000 in October 1, 2015 is assumed to sell for $515,000 on the January 1, 2016 valuation day, whereas a property that sold for $2,000,000 on October 1, 2015 is assumed to sell for $2,015,000; creating very different percentage changes in price that are not demonstrated by the documentary evidence at the hearing.

27Lastly, the Appellant’s comparisons of value between the subject property and the seven comparable properties selected lacks important data. For instance, there is no consistent building area information which is a common market based means of comparison. While lot size is identified, there is no direct connection in the Appellant’s analysis between differing lot sizes and the impact on current value.

28The Board finds that the best evidence of current value is a combination of the Parties’ evidence and submissions. The Appellant made a compelling case with respect to the time adjustment factors used by MPAC. MPAC had no response to the criticism. When the sales in evidence that took place earlier than December 2015 and later than January 2017 are removed, the Board has two comparable properties to consider; 46 Cobblestone Drive and 44 Axsmith Crescent. The Board finds these to be the best comparables as they are demonstrably similar to the subject property and they sold within 28 days of the valuation day.

29The Board finds that the current value of the subject property is the median value of these two sales, or $1,176,500 ($1,177,000, rounded). MPAC is not seeking an increase in assessment for the subject property. Accordingly, the Board finds that the assessment of the subject property for the 2017 is confirmed at $1,122,000.

Is a reduction in the current value necessary to achieve equitable assessment when reference is made to the assessments of similar properties in the vicinity?

30The Appellant did not make a submission on the question of equity of assessment.

31MPAC’s equity analysis included the TAS values and the 2016 CVA of 50 similar properties in the vicinity of the subject property. The comparison of these assessments to sale values is called the Assessment to Sale Ratio (“ASR”). The range of ASRs in the sample was from 0.691 to 1.156, with a median of 0.956. He explained that this is a statistical exercise to make a determination of equity of assessment. As a result, two parameters are used to confirm that the findings are not erroneous. The first is the co-efficient of dispersion (“CoD”), which is the average difference between any one ASR and the resultant, median ASR in the study. The lower the CoD, the more accurate the findings of the study are considered. In this case the CoD is 9.2 which is considered to conform to the International Association of Assessing Officers’ (“IAAO”) suggested maximum of 15.

32The second parameter used to test the reliability of the equity analysis according to Mr. Nastich, is the proximity of the median ASR to 1.00. The subject study indicates that the median ASR of the 50 properties in the study is 0.956, meaning that generally speaking, properties that are similar to the subject property, in the same vicinity are assessed at approximately 95.6% of their current value as determined through sales. Mr. Nastich testified that a median ASR that is anywhere between 0.95 and 1.05 (as indicated by the IAAO and MPAC) suggests that properties are generally assessed at their current value, and that there is no requirement to reduce the current value determined to make the assessment equitable.

Board’s Analysis

33The concept of reducing the current value determined to make the subject property’s assessment equitable with that of similar properties in the vicinity requires the Board to change a correct assessment finding to one that is incorrect to make it fair and equitable. Adjustments for this purpose cannot therefore be made without compelling evidence to do so (Emphasis added).

34MPAC’s equity analysis indicates that, in accordance with standards set by the IAAO and MPAC, similar properties in the vicinity to the subject property are being assessed at a level close to their sale values and that no downward adjustment to the current value determined is necessary for the purposes of equity or fairness.

CONCLUSION

35The Board finds the current value of the subject property is $1,122,000. There is no evidence to support a reduction in this amount for the purposes of equitable assessment.

36Accordingly, the assessment of 100 Whitehorn Crescent is confirmed for the 2017 and deemed 2018 taxation years at $1,122,000, in the Residential property class.

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 Assessment 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.