Ehsanul Habib v. Municipal Property Assessment Corporation, 2018 CanLII 78267

Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE:

August 14, 2018

FILE NO.:

WR 154096

Assessed Person(s):

Ehsanul Habib

Appellant(s):

Ehsanul Habib

Respondent(s):

Municipal Property Assessment Corporation (“MPAC”)

Region 14

Respondent(s):

City of Vaughan

Property Location(s):

123 Thornridge Drive

Municipality(ies):

City of Vaughan

Roll Number(s):

1928-000-030-52800-0000

Appeal Number(s):

3269277 and 3303241

Taxation Year(s):

2017 and 2018

Hearing Event No.:

700275

Legislative Authority:

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

Heard:

June 25, 2018 by telephone conference call

APPEARANCES:

Parties

Representative

Ehsanul Habib

Andrew Attard

MPAC

Leo Verduci

City of Vaughan

No one appeared

DECISION OF THE BOARD DELIVERED BY MARCELLE BOURASSA

1Ehsanul Habib is the owner of a two-storey residential dwelling located at 123 Thornridge Drive (the “subject property”) in the City of Vaughan. The dwelling has 6,669 square feet (sq. ft.) of building area and 2,160 sq. ft. of finished basement area. It was built in 1995 and has been assigned a quality of construction rating of 8.0. It is located on a site area of 0.36 acres. The subject property was purchased on January 29, 2014 for $1,900,000.

2For the 2017 and 2018 taxation years under appeal, MPAC returned the assessment for the property at $2,963,000.

3Ehsanul Habib (the “Appellant”) appealed the assessment for the 2017 taxation year to the Assessment Review Board (“Board”). Andrew Attard, the Appellant’s representative, states that the subject property‘s assessment has increased by 56% above its 2014 sale price. It is his position that the best evidence of the subject property’s current value is its sale that occurred in January 2014, as time adjusted to the January 1, 2016 valuation date. The issue is the appropriate time adjustment factor and Mr. Attard proposes several approaches. His revised opinion of current value as stated in his final oral submission is $2,422,000.

4Pursuant to Section 40 of the Assessment Act, R.S.O. 1990, c. A.31 (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, Leo Verduci, estimates the current value of the subject property to be $3,336,000 based on the direct comparison approach.

5Mr. Verduci conducted an equity study and determined that an equitable reduction is required. However, the equitable value of $3,095,000 is higher than the assessment as returned of $2,963,000. MPAC is not seeking a higher assessment. He concludes that the assessment should be confirmed at $2,963,000 for the 2017 and 2018 taxation years.

6Mr. Attard asserts that the subject property is inequitably assessed in relation to similar properties. In his final oral submission, Mr. Attard states that he relies on a revised equitable value of $2,243,000 based on a revised opinion of current value of $2,422,000 multiplied by MPAC’s median Assessment to Sale Ratio (“ASR”) of 0.926.

ISSUES

7The issues to be determined are:

a) What is the correct current value of the subject 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

8The Board finds that the current value of the subject property, as of the January 1, 2016 valuation date, is $3,336,000, under s. 44.(3)(a) of the Act. Furthermore, the Board finds that the evidence supports the conclusion that the current value requires an equity adjustment under s. 44.(3)(b) of the Act. The Board finds that the current value should be reduced from $3,336,000 to the equitable value of $3,096,000.

9The equitable value of $3,096,000 is higher than the assessment as returned of $2,963,000. MPAC has not complied with Rule 40(b) and is not seeking to increase the returned assessment. Rule 40(b) prohibits MPAC from seeking a higher assessment than the assessment as returned without proper notice.

10Therefore, the assessment of the property located at 123 Thornridge Drive is confirmed at $2,963,000 for the 2017 and the 2018 taxation years.

RELEVANT LEGISLATION

11Section 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.

12Section 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.

13Section 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.

14Section 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.

15Section 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 subject property as of the January 1, 2016 valuation date?

MPAC’S Evidence and Submissions

16Mr. Verduci states that he did not consider the subject property’s January 2014 sale in determining current value as he considers the sale as too far removed from the shoulder years on either side of the January 1, 2016 valuation date.

17Mr. Verduci relies on a Valuation Report. He conducted a Sales Ratio Trend Analysis (“SRTA”) study based on 248 sales of residential single-family detached properties from January 5, 2015 to December 28, 2016, a period of 23 months. The overall change in the market was 37.04%. He used the SRTA study to determine time adjustment factors (TAFs) used to adjust sale values to the valuation date.

18Key property details for his proposed comparable properties are set out below.

Property

Site

Area (ac.)

Year

Built

(effective)

Quality

Blg

Area

(sq. ft.)

Other

Sale

(Time Adjusted Sale “TAS”)

123 Thornridge

Drive

(subject property)

0.36

1995

8.0

6,669

Finished basement

area

(2,160 sq. ft.)

Corner lot

68 Clarkehaven Street

(Sale 1)

0.45

1998

8.5

5,910

Finished basement area

(2,614 sq. ft.)

2,930,000

(3,166,674)

(07/2015)

131 Thornridge Drive

(Sale 2)

0.76

2001

8.5

6,912

Finished basement area

(3,230 sq. ft.)

4,180,500

(3,889,780)

(06/2016)

108 Brooke Street

(Sale 3)

0.36

2010

8.5

6,377

Finished basement area

(1,543 sq. ft.)

3,150,000

(3,507,471)

(05/2015)

19Mr. Verduci considers the properties located at 68 Clarkehaven Street and 108 Brooke Street as similar to the subject property with respect to site area, building size and location in the same neighbourhood.

20Mr. Verduci considers the property located at 131 Thornridge Drive to be superior to the subject property on account of a much larger lot size and a newer and larger dwelling.

21Mr. Verduci estimates the current value of the subject property as $3,336,000. This is the midpoint of the time adjusted sales for the properties located at 68 Clarkehaven Street and 108 Brooke Street.

22Mr. Verduci states that he considers the proposed sales comparables as similar enough in quality of construction. He is of the opinion that it was not necessary to make an adjustment for that factor.

23Mr. Verduci asserts that Mr. Attard’s sales evidence included under the “first approach” in determining a time adjusted sale value for the subject property includes the sales of condominiums that do not have a land component and so are not considered comparable to the subject property. Accordingly, he asserts that the summary median rate per square foot used to determine the subject property’s time adjusted sale value is flawed.

24Mr. Verduci asserts that Mr. Attard’s “paired sales approach” is also flawed. The study includes some sales that occurred in 2013 and that are too far removed from the January 1, 2016 valuation date. Also, the study includes a sale of vacant land (338 Woodland Acres Crescent) and several builders’ sales that are not considered arm’s length sales (279 and 293 Torrey Pines Road, 69 Torgan Trail, 18 Winterlude Court and 147 Crestwood Road). Also, the properties located at 279 and 293 Torrey Pines Road, 69 Torgan Trail, 18 Winterlude Court, 22 Knudson Lane and 32 Daleview Court are located far away from the subject property on the west side of Highway 400 and subject to different market conditions. He asserts that no real estate appraiser would use these sales for purposes of determining a market value for the subject property.

Appellant’s Evidence and Submissions

25Mr. Attard states that the subject property has not undergone any significant improvements since its purchase other than to install solar panels at a cost of approximately $26,000.

26Mr. Attard states that the best evidence of the current value is the subject property’s January 2014 sale. The sale falls between two valuation dates: January 1, 2012 and January 1, 2016. He states that the 2012 current value assessment (“CVA”) was reduced from $2,079,000 to $1,710,000 based on a time adjusted sale. The challenge is to determine a time adjustment factor in relation to the 2016 CVA and Mr. Attard proposes several approaches.

27The first approach is based on a 29% change in residential values in the City of Vaughan for all sales that occurred between 2014 and 2016. Using a 26% change in the median rate per square foot, the subject property’s time adjusted sale value is $2,394,000. Mr. Attard acknowledged under cross-examination that the sales could have included sales of condominiums and so this may not be the most reliable approach to determine a change in the market over the two year period.

28Another approach referred to by Mr. Attard as the “paired sales approach”, involves a study of 15 residential properties with paired sales above $1,400,000. The first sale occurred in either 2013 or 2014 and the second sale occurred in either 2016 or 2017. He determined an average change per month of 1.24% that applied to the subject property results in a time adjusted sale value of $2,441,000.

29Another approach involves an ASR analysis of eight nearby properties similar in value to the subject property. He concludes that these properties were assessed 19% higher than their 2014 sale prices versus the subject property that is assessed at 56% above its 2014 sale price.

30Under cross-examination, Mr. Attard states as follows:

• His first approach could include sales of condominiums with no land component;

• He agrees that it was not fair to consider the sales of condominiums with the sales of single detached properties for purposes of market value;

• In relation to the paired sales approach study, he was not aware that 338 Woodland Acres Crescent involved a vacant land parcel or that the first sales for 279 and 293 Torrey Pines Road, 69 Torgan Trail,18 Winterlude Court and 147 Crestwood Road were builders’ sales;

• He is not aware of the locations for the properties located at 22 Knudson Lane and 32 Daleview Court;

• In relation to the ASR study, Mr. Attard acknowledges that he did not have all the property details, including the quality of construction rating, for the eight properties.

31Mr. Attard initially relied on a current value of $2,441,000 as derived using the “paired sales approach”. However, in his final oral submission, he states a revised position. He now excludes the five properties that involved builders’ sales (279 and 293 Torrey Pines Road, 69 Torgan Trail, 18 Winterlude Court and 147 Crestwood Road) from his “paired sales approach” and recalculated the average change per month using the remaining 10 properties that he asserts are similar to the subject property. He states that the new average change per month is 1.96% per month. The resulting change is 27.5% over 23 months. His revised opinion of current value is $2,422,000.

Board’s Analysis and Findings

32Under 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 subject property on the valuation date or close to it.

33Mr. Verduci did not consider the subject property’s January 2014 sale in determining current value as he considers the sale as too far removed from the legislated January 1, 2016 valuation date.

34Mr. Attard states that the best evidence of the current value is the subject property’s January 2014 sale, time adjusted to the January 1, 2016 valuation date. He acknowledges that the challenge is to determine a time adjustment factor in relation to the 2016 CVA. He proposes several approaches. In his final oral submission he revised his opinion of current value to $2,422,000 based on a revised sample of sales included in his “paired sales approach” study after it was pointed out, inter alia, that his sample includes builders’ sales.

35The Board finds that the subject property’s January 2014 sale date is too far removed from the legislated valuation date of January 1, 2016 for purposes of determining current value. Furthermore, the Board gives no weight to Mr. Attard’s study of the remaining 10 “paired sales” as relied on by him in support of his revised opinion of current value. Mr. Attard asserts in is closing oral submission that the remaining 10 properties in the paired sales study are similar to the subject property. However, there were no property details in evidence so as to enable a direct comparison to be made. The Board notes that the “first” sales occurred in either 2013 or 2014 and had sale prices that ranged from $1,425,000 to $5,550,000 which also suggests that they are not comparable to the subject property. Also, the properties located at 22 Knudson Lane and 32 Daleview Court are located far away from the subject property on the west side of Highway 400 and subject to different market conditions.

36The next best measure of current value, after the sale of the subject property itself, 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 considered the three proposed comparable properties with sales in evidence.

39The Board finds the property located at 131 Thornridge Drive to be superior to the subject property. It is located a few doors away from the subject property on Thornridge Drive. It has a much larger lot size of 0.72 acres (versus 0.36 acres for the subject property) and a larger building size of 6,912 sq. ft. (versus 6,669 sq. ft. for the subject property). It also has a much larger finished basement area of 3,230 sq. ft. (versus 2,160 sq. ft. for the subject property). It is slightly newer having been built in 2001 and has a slightly higher quality of construction rating of 8.5. It has the highest TAS price of $3,889,780. The subject property’s current value should be lower than that amount.

40The Board finds the properties located at 68 Clarkehaven Street and 108 Brooke Street to be reasonably comparable to the subject property. Both properties are located close by and in the same homogeneous neighbourhood as the subject property. Both had sales in the 2015 shoulder year to the January 1, 2016 valuation date.

41The property located at 68 Clarkehaven Street is similar in age having been built in 1998 and has a slightly larger lot at 0.45 acres and a slightly higher quality of construction rating of 8.5. It has 760 less square feet of building area but 454 more square feet of finished basement area than the subject property. It had a TAS price of $3,166,674.

42The property located at 108 Brooke Street has the same site area of 0.36 acres as the subject property. However, it has 292 less square feet of building area and 617 less square feet of finished basement area than the subject property. On the other hand, it is much newer than the subject property having been built in 2010. It also has a slightly higher quality of construction rating of 8.5. It had a TAS price of $3,507,471.

43The Board finds that the best evidence of current value is the midpoint of the time adjusted sales for the properties located at 68 Clarkehaven Street and 108 Brooke Street.

44Therefore, the Board finds that the subject property’s current value is $3,336,000 (rounded).

Whether there should be an equitable reduction of the current value pursuant to s. 44.(3)(b) of the [Act](https://www.canlii.org/en/on/laws/stat/rso-1990-c-a31/latest/rso-1990-c-a31.html), and, if so, what should the amount of this reduction be?

MPAC’s Evidence and Submissions

45Mr. Verduci relies on an Equity Analysis Report that considered the time adjusted sales of 30 single-family detached properties that occurred between January 1, 2015 and December 31, 2016 within 1 kilometre of the subject property.

46In his Report, Mr. Verduci states that the level of appraisal is established by determining the median ASR in the sales sample. 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. In this case, the median ASR of 0.928 indicates that similar properties in the vicinity have not been assessed at or near their current values.

47Mr. Verduci applied the ASR of 0.928 to his opinion of current value of $3,336,000 for a resulting equitable value of $3,095,000. This value is higher than the assessment as returned of $2,963,000.

48Mr. Verduci concludes that the assessment for the subject property should be confirmed at $2,963,000 for the 2017 and 2018 taxation years.

49Mr. Verduci asserts that while Mr. Attard is of the opinion that MPAC’s 2016 CVAs are not correct, Mr. Attard still used MPAC’s assessed values in his ASR study. Mr. Verduci also asserts that the original sale prices are not stated in Mr. Attard’s ASR study or how the stated adjusted sale prices were derived.

Appellant’s Evidence and Submissions

50Mr. Attard asserts that the subject property is inequitably assessed in relation to similar properties and requires an equity adjustment.

51Mr. Attard initially relied on a time adjusted equity study that considered the time adjusted sales of 30 residential properties with sales between $1,500,000 and $4,400,000 that occurred between 2015 and 2016 and located within 0.48 kilometres of the subject property. The original sale prices are not indicated in his study. However, Mr. Attard states that the sale prices were adjusted by 16% or 1.37% per month. He asserts that this is very similar to the average change per month of 1.24% rate using the paired sales approach. He derived a median ASR of 0.90 that he applied to the subject property’s current value as determined using the paired sales approach that results in an equitable value of $2,196,900 (0.90 X $2,441,000).

52In his final oral submission, Mr. Attard states that he now relies on a revised equitable value of $2,243,000 (rounded) based on a revised opinion of current value of $2,422,000 multiplied by MPAC’s median ASR of 0.926.

Board’s Analysis and Findings

53Section 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.”

54The 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.

55In 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].

56The 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).

57The 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, character or function. 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.

58The 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.

59Mr. Verduci relies on an Equity Analysis Report that considered the TAS of 30 single-family detached properties that occurred between January 1, 2015 and December 31, 2016 within 1 kilometre of the subject property.

60In this this instance, the sales sample produced a median ASR of 0.928 that indicates that similar properties in the vicinity have not been assessed at or near their current values.

61In his final oral submission, Mr. Attard revised his proposed equitable value based on MPAC’s median ASR of 0.928. So, there is no disagreement that an equitable adjustment to the current value is required.

62Applying the median ASR of 0.928 to the current value of $3,336,000 results in an equitable value of $3,095,800 or $3,096,000 (rounded).

CONCLUSION

63The Board finds that the current value of the subject property, as of the January 1, 2016 valuation date, is $3,336,000, under s. 44.(3)(a) of the Act. Furthermore, the Board finds that the evidence supports the conclusion that the current value requires an equity adjustment under s. 44.(3)(b) of the Act. The Board finds that the current value should be reduced from $3,336,000 to the equitable value of $3,096,000.

64The equitable value of $3,096,000 is higher than the assessment as returned of $2,963,000. MPAC has not complied with Rule 40(b) and is not seeking to increase the returned assessment. Rule 40(b) prohibits MPAC from seeking a higher assessment than the assessment as returned without proper notice.

65Therefore, the assessment of the property located at 123 Thornridge Drive is confirmed at $2,963,000 for the 2017 and the 2018 taxation years.