Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE: July 27, 2018

FILE NO.: WR 150393

Assessed Person(s): Donald William DeJong

Appellant(s): Donald DeJong c/o Tridon Group Ltd.

Respondent(s): Municipal Property Assessment Corporation (“MPAC”) Region 23

Respondent(s): City of London

Property Location(s): 510 Central Avenue

Municipality(ies): City of London

Roll Number(s): 3936-020-130-03650-0000

Appeal Number(s): 3259708 and 3312369 (deemed 2018 appeal)

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

Hearing Event No. 690366

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

Heard: January 17, 2018 in London, Ontario

APPEARANCES:

Parties

Counsel⁺/Representative

Donald William DeJong

Self-represented

MPAC

Toban Edmunds

Donald G. Mitchell⁺

City of London

No one appeared

DECISION OF THE BOARD DELIVERED BY TYRONE D. SKANES AND LESLIE FLEMMING

ISSUE

1The appeal before the Assessment Review Board ("Board") was filed by Donald William DeJong (the “Appellant”) in respect of the assessment of a single, detached family home located at 510 Central Avenue, the subject property (“SP”), for the 2017 and 2018 taxation years.

2The single storey 700 square foot ("sq. ft.") home was built in 1940 and is situated on a lot size of 3,926.49 sq. ft. It has an unfinished basement of 682 sq. ft. MPAC has the Quality Class ("QC") rated as 5.0. The dwelling is uninhabitable. There are no municipal services supplied to the property. The Fire Department has attached warning signs to the access door and on the building that it is uninhabited.

3Toban Edmunds, representing MPAC, entered seven comparable properties that he said were good comparators to the SP. He said that the current value assessment (“CVA”) of the SP as returned on the roll was $190,000. A Request for Reconsideration (“RfR”) was filed by the Appellant and the CVA was reduced to $171,000. He inspected the SP and as a result of that inspection the CVA was further reduced to $162,000. He said that he believed that this reduced value was fair and reasonable and recommended the Board find the CVA to be $162,000.

4Donald William DeJong, representing himself, advised that he purchased the SP as part of a larger property transaction in 2014 and the house was in the condition that is it now. It has never been lived in since the purchase and there are no municipal services provided. The inside of the house is in a demolished condition and would require extensive renovations before anyone could live there. He advised that he is hopeful of tearing down the structure sometime this year and building a new house. He said that he cannot understand how MPAC has assessed the SP even at the reduced CVA of $162,000. He said that he believes that the SP ought to be assessed in a range of $110,000 to $120,000, as a land only assessment.

5The issue before the Board for determination is whether the assessment of the SP for the 2017 and 2018 taxation years is at current value and whether the assessment is equitable with the assessment of similar lands in the vicinity.

DECISION

6The Board is required by s. 44. (3) of the Assessment Act (“Act”) to determine the current value of the land and have reference to the value at which similar lands in 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.

7The Board finds that MPAC has not met its statutory burden of proving the correctness of the current value of the land, under s. 40. (17) of the Act.

8However, the Board must still determine the current value of the land. The Board finds that the current value of the SP as of January 1, 2016, is $115,000 and that an adjustment for equity is not required.

REASONS FOR DECISION

Relevant Legislation

9Section 1 of the Act states:

1. (1) Definitions

“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;” 1997, c. 5, s. 1(3).

10Section 19 states:

19. (1) Assessment based on current value. – The assessment of land shall be based on its current value. 2007, c. 7, Sch. 1, s. 3.

11Section 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.

12Section 40.(17) of the Act states:

40.(17) Burden of proof. – 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.

MPAC's Position and Evidence

13Mr. Edmunds’ valuation report was entered into evidence as Exhibit 1 and his Equity Analysis as Exhibit 2. He testified that the direct sales comparison approach to value was used in determining the current value of the SP.

14Mr. Edmunds entered the sales of seven comparable properties that he opined were good comparators to the SP, despite the fact that none were in the same decrepit condition as the SP and all were lived-in properties. He recommended that the Board accept those sales as comparable properties.

15Mr. Edmunds entered an Equity Analysis Report in which he examined the sales of 30 similar lands located within one kilometer of the SP. He testified that his analysis determined that the equitable assessment of the SP was $187,000, a value higher than the CVA and an equity adjustment was not required.

16Mr. Edmunds summed up his presentation by saying that he believed the evidence proved that the recommended CVA value of $162,000 was fair and reasonable and recommended the Board reduce it to that value.

17On cross-examination by the Appellant, Mr. Edmunds admitted that the SP was rated as the same QC, at 5.0 as three of the comparable properties and the other four comparable properties were rated at 5.5. The Appellant asked Mr. Edmunds how he could justify having a similar or very close QC rating when all of the comparable properties were lived-in and the SP was uninhabitable. Mr. Edmunds could not provide a credible response to this question. He provided a rambling response but did not directly answer the question.

18Mr. DeJong noted that in Appendix E – Market Analysis Grid of Exhibit 1, the Structure Condition Code rated the SP as being in fair condition while the comparable properties were rated as average condition. He asked Mr. Edmunds to clarify the definitions of those terms and Mr. Edmunds said that average meant some work might need to be done, fair meant that a considerable amount of work needed to be done and poor condition meant that a property was uninhabitable and major renovations had to be completed before it could be lived in. The Appellant asked why the SP was not rated as poor condition as it was uninhabitable but again, Mr. Edmunds could not provide a credible answer.

19Mr. DeJong asked Mr. Edmunds how he assessed the structure as the interior was gutted and he answered that there had been a 90% negative adjustment to the structure to account for the uninhabitable condition. When pressed by the Appellant to clarify what 90% meant by way of costing he was unable to do so. He asked Mr. Edmunds why the CVA had been reduced to $172,000 at the RfR stage and was told it was to account for the condition of the interior. The Appellant then asked Mr. Edmunds to clarify if that meant that the land value for the SP was around $170,000 and was told yes. Mr. Edmunds could not articulate how he came to that conclusion.

20The Board asked Mr. Edmunds to clarify what a 90% negative structure adjustment would amount to in a dollar figure and he was unable to do so.

Appellant’s Position and Evidence

21Donald William DeJong represented himself and entered a documentary package into evidence as Exhibit 3. Included in this evidence were four pictures of the SP, three of the exterior and one of the interior.

22Mr. DeJong testified that he had some experience in land valuation and renovation costing as he had been a real estate agent in the past and had studied extensively for a brokerage license, although he never wrote the examinations for certification as a broker. He said that he purchased the SP as part of a larger property sale and his intention was to improve the property, either by renovation or new build and sell it. His intention now was to, sometime this year, tear down the existing structure and build new. He referred to the pictures of the structure and pointed out what appeared to be a significant depression on the roof. He said that there was a large hole in the roof and the elements had open access into the interior of the house. He said that it was his belief that there was mould throughout the interior, although he had not yet had it tested. He referred to another picture of the interior that clearly demonstrated the gutted condition rendering it uninhabitable. He highlighted stickers on the access door and on the structure and advised they had been placed there by the Fire Department advising that the place was uninhabited. He also advised that there were no municipal services provided to the SP.

23Mr. DeJong said that it was his opinion that to renovate the SP so that it could be lived in would cost $60,000 at the low end and more than $100,000 at the high end. He said that if there was extensive mould as he suspected it would most likely be too expensive to renovate, due to the cost of remediating the mould. He believed the most cost effective option would be demolition and build new.

24Mr. DeJong said that he disagreed with MPAC’s comparable properties because none of them were in the same uninhabitable condition as the SP, therefore they were not similar. He said that he could not understand how MPAC could rate the QC of the SP and three of the comparable properties at 5.0 and the remaining four comparable properties at 5.5 when none were in a gutted condition. He pointed out that all of the comparable properties were currently being lived in.

25Mr. Dejong ended his presentation by saying that he believed that the SP ought to be valued for land only and he believed that value, based on his experience, was in a range between $100,000 and $120,000 and asked the Board to reduce the CVA to a value within that range.

26On cross-examination Mr. Edmunds asked the Appellant if he agreed MPAC had placed a nominal value to the structure by applying a 90% negative adjustment. The Appellant replied that he disagreed with that because Mr. Edmunds had not been able to show how that adjustment applied to the assessment. The Appellant agreed with Mr. Edmunds when asked if he thought that the assessment should only apply to the land value.

Board's Deliberations - Current Value

27The best evidence of current value is the sale of the subject property if the sale meets the definition of current value on or near the valuation day. When no such sale occurs, as in this instance, the Board looks to the sale of similar properties in the vicinity to determine current value.

28The Board has carefully considered the testimony of the parties and the documentary evidence tendered as exhibits.

29The Board, when comparing properties, does not expect exactness or sameness. Therefore, the Board looks at similarity of characteristics, amenities and location to determine comparability.

30The Board usually considers the sales of comparable properties that have occurred within one year on either side of the valuation date as the ideal time period for consideration. The Board occasionally does extend the time period for considering comparable properties when the parties have demonstrated that there are an insufficient number of relevant sales during the ideal time period.

31Section 40.(17) of the Act places a burden on MPAC to prove the correct current value of the land they are assessing. The evidence must have a clearly defined pathway that the reader can follow to the destination of a correct current value. The evidence of similarity between the SP and the comparable properties must be a fair representation so that the conclusions reached can be believed.

32MPAC entered the sales of seven properties in close proximity to the SP that the assessor opined were good comparators to the SP.

33The Board disagrees and finds that MPAC has not met its’ statutory burden of proof of demonstrating the correctness of the current value.

34The SP is located on a relatively small lot with a structure that is decrepit and in an uninhabitable condition. It has not been lived in for many years and there are no municipal services connected to the property. The Fire Department has posted notices that the building is uninhabited. The Appellant provided photographic evidence that clearly illustrated the condition of the property.

35The assessor testified that he had applied a 90% negative adjustment to the assessment of the SP’s structure to account for its’ decrepit condition. Yet he could not provide a dollar value for that 90% when asked on cross-examination or when the Board asked for clarification.

36The assessor said that the final assessed value was $162,000, a reduction from the $172,000 offered to the Appellant during the RfR. However, the assessor could not or would not explain what the original assessed value was for the SP before he applied the 90% reduction for its’ decrepit condition. As 90% is a significant reduction, the assessor’s reluctance to fully explain the reduction contributed to the Board’s scepticism that it had been applied.

37None of the comparable properties entered into evidence by MPAC are in a similar condition as the SP and are not a fair representation of similarity. All are currently being lived in and cannot be described as being uninhabitable. The Board cannot grasp how the assessor can use the QC rating of 5.0 for the SP, as well as three of the comparables and a mere 0.5 rating higher for the remaining four comparable properties, while describing the SP’s condition as fair and the comparable properties as average. Yet in answer to the Appellant’s question on cross-examination he admitted that a rating of poor would describe a structure in uninhabitable condition.

38Similarly, in the Equity Analysis Report the assessor says that he arrived at his conclusion by examining the sales of 30 similar lands in the vicinity. Although the Board recognizes that similar lands, in an equity analysis, do not have to have the same rigid standards of similarity as for determining current value there has to be the same nature and function of the properties being analyzed as the SP. In this instance the same nature and function would have to include, in the Board’s opinion, the fact that the SP is uninhabitable and the Board is sceptical that the assessor was able to locate the sales of 30 uninhabited properties, from which to conduct an analysis.

39The Board would have been more accepting of MPAC using strictly land sales and articulating that they ascribed no value to the SP’s structure, instead of attempting to assess the structure as something that has value. In fact, the Appellant testified that he will likely incur significant costs if he chooses to demolish the structure and build new.

40The Board found the assessor’s evidence, at varying times, to be evasive and contradictory. Therefore, the Board has no confidence in the assessor’s evidence and will disregard it.

41For the above reasons the Board finds that MPAC has not met its’ burden of proving the correctness of the current value of the land.

42Mr. DeJong testified that he had prior experience in land valuation and construction/renovation costs owing to his past experience as a real estate agent, his training and education for a brokerage licence and his current experience as a land developer. This was not challenged by the assessor and the Board accepts that Mr. DeJong has some experience in these areas.

43Mr. DeJong did not come to the Board seeking a null value for the SP. He recognized that the land itself has value and made this point clearly. He simply wanted to know MPAC’s justification for assessing the SP at the value it had when the building was uninhabitable. He recommended that the Board disregard MPAC’s comparable properties as they are not suitable for comparison. He believed that only the land value should be assessed. He said that based on his experience he believed that a reasonable value for the land portion of the assessment ought to fall within a range of $110,000 to $120,000. He did not have any recent land sales to support his opinion.

CONSEQUENCES OF MPAC NOT HAVING MET ITS STATUTORY BURDEN

44The Board, in finding that MPAC has not met its statutory burden under s. 40(17), canvassed the parties for their opinions on whether MPAC had met the burden under the relevant section and if not, what consequences might be appropriate.

45The Board sent notice to the parties seeking their response to the following questions:

1. What does it mean for MPAC to have the burden of proof, as set out in section 40 (17)?

2. How does MPAC believe it has met the burden?

3. What are the possible consequences, if any, for MPAC failing to meet the burden?

4. What are the justifications including policy grounds for the possible consequences?

5. What consequences, if any, should be applied in this case?

46The parties were advised that their responses should only answer those questions and they were encouraged to support their positions with legal authorities. They were cautioned that the Board would not consider new evidence or further submissions on the questions of current value or equity.

47The Board received a brief submission from the Appellant, without any legal authorities, whereby he reiterated his hearing position that the poor condition of the SP was not properly assessed by MPAC. The Appellant offered no opinion on consequences other than to say that the SP should be re-assessed.

48MPAC provided a more fulsome response that was submitted by legal counsel and accompanied by 11 legal authorities.

49However, the Board did not find the submission particularly instructive or helpful. None of the prior decisions submitted for consideration offered the Board guidance in a situation such as this one, where MPAC has failed in its’ statutory burden of establishing a correct current value for the SP. Not surprisingly counsel opined that MPAC had indeed met the burden and the assessor’s evidence ought to be preferred over that of the appellant.

50Counsel advised that in most cases burden of proof is not a significant issue as MPAC always adduces evidence and in most cases meets the initial burden. He further stated that practically this means that the appellant will present some evidence with which to convince the Board to change the current value assessment. Typically, the Board will base its decision on the best evidence and the issue of burden of proof will not arise.

51However, the Board’s position is that this appeal is outside of “most cases” and that MPAC’s evidence is so poor and was so badly presented that it did not met its burden under s. 40(17). The assessor’s evidence that he applied a 90% structural discount n strains credulity. The assessor’s reluctance or refusal to explain from what value he applied the 90% reduction greatly contributed to the Board’s not having confidence in his evidence. It is impossible for the Board to accept counsel’s opinion that MPAC submitted the better evidence.

52Counsel provided three possible consequences, including accepting the appellant’s evidence; making its own determination; or asking for additional evidence and submissions.

53The Board will answer the submissions in the reverse order that they were provided. The Board will not re-convene to allow the parties to present new evidence and make further submissions. The Board expects the parties to prepare and present their evidence as it takes a great deal of time and expense to hold hearings. The Board will usually make its own determination, on the evidence, if neither party is able to convince it that their position is fair and reasonable. That is not the case in this appeal.

54The Board can accept the appellant’s evidence if it finds that the evidence is fair, reasonable and clear in establishing the current value of the SP.

55Counsel advised that it is MPAC’s position that it had met the burden and that no consequences should apply. However, he did admit that the amount of assessment in dispute was relatively small and that the Board should use its best effort and determine the current value based on the evidence submitted at the hearing.

BOARD DELIBERATIONS ON PARTIES SUBMISSIONS

56The Board appreciates the submissions provided by the parties and finds that it can make a decision based on the evidence. The Board finds that MPAC has not met its statutory burden under s. 40(17).

57Despite counsel’s submissions to the contrary the Board finds that MPAC’s evidence falls far below the standard required to prove that its opinion of current value of the SP is correct. MPAC’s evidence identified no clear path by which the Board could make a determination of the correct current value assessment.

58During the presentation of his evidence and on cross-examination by the Appellant and questioning by the Board the assessor lacked the necessary candour to have his evidence believed. He was evasive and at times confrontational. He was asked by both the appellant and Board members to explain how he discounted the structure on the SP by 90% to account for its structural condition but he was unable or unwilling to do so. When asked by the Board members how he could assess the SP in relation to the comparable properties despite its decrepit condition he provided a lengthy rambling response but did not answer the question. The Board was not made aware of the SP’s decrepit condition until the appellant cross-examined the assessor. The Board found this omission troubling in light of the fact that the assessor was using lived in dwellings as comparable properties to the SP.

59The Appellant did not come to the Board seeking a null value for the SP. He recognized that there was some value even thought the structure was in a decrepit condition. He testified that he had education, training and experience in land valuation, particularly in the London area. He was an experienced real estate agent who had studied extensively for his brokerage licence, although he did not write the certification exams. He was now a land developer and as such had experience in building and renovation costs. His qualifications were not questioned by the assessor.

60The Board accepts the Appellant’s prior experience as a real estate professional and land developer. The Board further accepts his opinion that the current value of the SP ought to fall within a range of $110,000 to $120,000.

61The Board finds that the current value of the SP falls at the mid-point of that range at $115,000.

Board's Deliberations – Equity

62There was no evidence placed before the Board that it would be inequitable to assess the SP at its current value.

63The Appellant did not present any equity evidence.

64There was no evidence put before the Board that would indicate that equity is an issue and the Board finds that an adjustment for equity is not required.

CONCLUSION

65The Board finds that the current value of the SP is $115,000 for the 2017 and 2018 taxation years.

2018 DEEMED APPEAL

66An 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.

67Section 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.