Sang v. Municipal Property Assessment Corporation, 2018 CanLII 80817

Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE: August 22, 2018

FILE NO.: WR 153842

Assessed Person(s): Claude Jacqueline Sang, Jean Victor Sang

Appellant(s): Claude Jacqueline Sang, Jean Victor Sang

Respondent(s): Municipal Property Assessment Corporation (“MPAC”) Region 02

Respondent(s): Township of Leeds and the Thousand Islands

Property Location(s): 240 Ellisville Road

Municipality(ies): Township of Leeds and the Thousand Islands

Roll Number(s): 0812-816-015-04503-0000

Appeal Number(s): 3267970 and 3289032

Taxation Year(s): 2017 and 2018

Hearing Event No.: 700064

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

Heard: June 19, 2018 in Landsdowne, Ontario

APPEARANCES:

Parties

Representative

Claude Jacqueline Sang, Jean Victor Sang

Self-represented

MPAC

Laura Kelleher

Township of Leeds and the Thousand Islands

No one appeared

DECISION OF THE BOARD DELIVERED BY SCOTT McANSH

1Claude Sang appealed the 2017 and 2018 assessments of her property located at 240 Ellisville Road in the Township of Leeds and the Thousand Islands because she felt it was too high. The property is a 45 acre farmland parcel and is required to be valued as farmland. She believes that MPAC has improperly valued the land.

2MPAC assessed the property at $234,000 for the 2017 and 2018 taxation years. At the hearing MPAC suggested that the value ought to be $231,000 for both taxation years. Ms. Sang argues that the assessment should be $188,000 for both taxation years.

3For the reasons that follow, I find that the property must be valued as farmland and likely would have sold for $200,000 on January 1, 2016. There is no indication that it would be unfair or inequitable to assess the property at that value. I therefore reduce the assessment for the 2017 and 2018 taxation year from $234,000 to $200,000.

Farmland

4The property is a 45 acre site, of which approximately two acres are farmland. There is a 1,490 square foot bungalow on the property that was built in 1997. The property was farmed by the owner until the owner retired. Subsection 19(5.1) of the Assessment Act, R.S.O. 1990, c. A.31 (the “Act”) requires that land continue be assessed as farmland if the farmer that owns the land retires, for as long as that person continues to occupy the land. There is no dispute that subsection 19(5.1) applies here, which means that the property must be valued as farmland.

5The procedure for valuing farmland is set out subsection 19(5). There are two main requirements. Clause (a) states that “consideration shall be given to the current value of the lands and buildings for farm purposes only.” Clause (b) states that “consideration shall not be given to the sales of lands and buildings to persons whose principal occupation is other than farming.” These provisions mean that farmland that is sold for its recreational value or development potential cannot be considered in determining the value of farmland. Only the sales of farmland to farmers intent on farming the land can be considered.

6Ms. Sang argues that valuing farmland requires that the cost approach to value be used. The cost approach looks at what it would cost to construct buildings of similar utility, and then deducts various forms of deprecation. The depreciated building value is then added to the land value to arrive at a total value. Ms. Sang relies on the decision of Member Mitchell in Sang v. Municipal Property Assessment Corp., Region No 2, [2006] O.A.R.B.D. No 34. In that case the Assessment Review Board (the “Board”) held that the land should continue be assessed as farmland, even though it was no longer farmed, due to the retirement of the owner. The Board went on to hold that assessing farmland required the use of the cost approach to value.

7I do not agree with Member Mitchell that the assessment of farmland requires the use of the cost approach to value. Subsection 19(5) sets out the requirements of farmland assessment and it limits the properties that can be compared to the farmland, but does not dictate a method of valuation.

8MPAC has a practice of valuing different quality of farm soil on a different per acre rate and this leads to a value for the land. It is then logical to add the value of buildings to that land value, which would require the cost approach to value. But there is no legal requirement that farmland be valued in that way. A direct comparison to the sale values of similar farms would also be permissible, provided that they sold as farms to farmers. MPAC presented both comparable sales and a cost approach valuation. Both should come close to the true value of the property. I will first consider the sales evidence, then review the costing mythologies proposed by the parties.

Sales

9MPAC presented the sales of five farms as evidence of what this property likely would have sold for on January 1, 2016. Those sales are summarized in the following table:

Address

Lot Size (acres)

House Size (sq. ft.)

House Age

Sale Date

Sale Price

240 Ellisville Road

45

1,490

1997

1

238 Ellisville Road

75

1,500

2002

Jan 2017

$485,000

2

262 Sweets Corners Road

14.79

2,145

1937

Sept 2015

$200,000

3

195 Briar Hill Road

62.6

770

1987

Oct 2015

$240,000

4

632 Lyndhurst Road

40

1,452

1927

Sept 2014

$188,000

5

218 Sweets Corners Road

12.76

2,538

1954

Oct 2015

$270,000

10MPAC argues that these sales show that the property likely would have sold for $300,000 on January 1, 2016. Ms. Sang argues that none of these properties are especially comparable to her property because they have more farmland and have very different homes. I find that some of these homes are comparable to Ms. Sang’s and indicate that her property likely would have sold for between $200,000 and $240,000 on January 1, 2016.

11Property 1 cannot properly be used to value this property. That property was previously owned by Ms. Sang, who indicated that they listed it as a waterfront lot when they sold it in 2001 in order to increase the sale value. She provided a more recent real estate listing for Property 1, which lists the property as a waterfront farm. That is not a property was strictly sold as a farm and its sale value likely reflects more than the farm and buildings. Clause 19(5)(a) is clear that consideration is only to be given to the value of the farm and buildings. Property 1 is not, therefore, a permissible comparison in determining the value of this farmland.

12The remaining properties vary a great deal in lot size, house size, and the age of construction. Those sales do, however, suggest a range of potential sales values for Ms. Sang’s property.

13I find that Property 2 is likely inferior to Ms. Sang’s property because it has a smaller lot and an older house. It does have more land that can be farmed than Ms. Sang’s property, but far less land overall. The newer, higher quality, house on Ms. Sang’s property offsets both the farmable land and the fact that the house is larger. The sale of Property 2 indicates that Ms. Sang’s property likely would have sold for more than $200,000 on January 1, 2016.

14I find that Property 3 is likely superior to Ms. Sang’s property because it has a significantly larger farmable area. There are 55.6 acres of farmable soil on Property 3, compared to only 2 acres on Ms. Sang’s property. While the home is smaller and older, the farmland value is likely a strong driver of value of a property such as this. The sale of Property 3 indicates that Ms. Sang’s property likely would have sold for less than $240,000 on January 1, 2016.

15I find that Property 4 is likely inferior to Ms. Sang’s property because it has an older home. There are 14 acres of farmable land on Property 4, which is 12 acres more than on Ms. Sang’s property, which is not significantly more. The house is comparable in size, but is significantly older than Ms. Sang’s. The sale of Property 4 indicates that Ms. Sang’s property likely would have sold for more than $188,000 on January 1, 2016.

16Finally, I find that Property 5 is likely superior to Ms. Sang’s property because it has higher quality farmland and a larger home. There are 10.76 acres of class 1 farmland on Property 5, while all of the other properties, including Ms. Sang’s, have class 3 soil. That higher quality soil will attract a higher price. The sale of Property 5 indicates that Ms. Sang’s property likely would have sold for less than $270,000 on January 1, 2016.

17The overall conclusion that can be drawn from these sales is that Ms. Sang’s property would likely have sold for more than $200,000, but less than $240,000, on January 1, 2016.

Cost Approach

18Both parties provided a cost approach analysis, in line with MPAC’s usual approach to farmland. MPAC used its residential cost analysis, the Ontario Valuation Manual. That document uses 1980 residential construction costs in Ontario and applies a modifier to bring those costs in line with current construction costs in each geographic area. They then apply depreciation to those values to account for the age and condition of each particular property. The only depreciation applied here was physical depreciation. Ms. Sang relied on both an adjustment of the 2012 costing of her home and a modification of the cost estimate of the buildings on Property 1 to arrive at a value for her property.

19MPAC calculated the depreciated value of Ms. Sang’s house at $194,485 and the value of the attached garage on the property to be $10,602. It calculated the value of the land to be $29,346. That is a total value of $234,433, however MPAC is recommending an assessment of $231,000. MPAC did not provide any detailed breakdown of how that costing was prepared. It did not indicate the reproduction cost new or the rate of depreciation applied. It is effectively impossible to assess the accuracy of MPAC’s costing numbers due to that lack of transparency.

20Ms. Sang accepts the MPAC valuation of the land at $29,346. She suggests two ways to arrive at a fair value for the house on her property.

21First, Ms. Sang argues that an adjustment to the 2012 valuation of the home is reasonable. She accepts that the buildings on the property were assessed at $148,900 for the January 1, 2012 valuation day. She then looked at the increases in Canadian construction costs from Statistics Canada for 2013, 2014, 2015 and 2016, which total 7.26% over than four year period. Finally, she took the rate of depreciation MPAC applied to her property, which she calculated at 0.75% per year, or 3.03% over the four year period. The cost increase less the deprecation meant a net increase of 4.26% should be made to the 2012 value. That resulted in a structure value of $155,750. When that value is added to the agreed land value the result is a total value of $185,096.

22The other method proposed by Ms. Sang is to adjust the buildings of Property 1 to arrive at a value for the buildings on her property. That house is nearly identical in size and was built only five years after Ms. Sang’s. MPAC calculated the value of the buildings on Property 1 to be $174,950. Ms. Sang would reduce that value by $1,380 for the 10 square feet larger that house is. She would also reduce $7,500, or $1,500 per year, for the five years newer that house is. She would remove $18,000 for a barn on Property 1, which was the value attributed to that barn when Ms. Sang owned Property 1. Finally, she would remove $7,000 because the home on Property 1 has a metal roof. Those reductions lead to a building value of $146,100 for Ms. Sang’s property. Adding the agreed land value to that value leads to a total value of $175,446.

23MPAC argues that Ms. Sang has not included the ways in which her home is superior to the home on Property 1 in her second method. It says that Ms. Sang’s home has central air conditioning and an extra half-bathroom when compared to the house on Property 2. It also questions the value of some of Ms. Sang’s adjustments, including the construction costs and roof costs. I accept all of Ms. Sang’s proposed adjustments as reasonable, though acknowledge that there is a lack of precision in how some of the values are calculated. I find the second proposed method more compelling than her adjustment to MPAC’s previous costing.

24The second method, however, assumes that there is some accuracy in MAPC’s costing of the neighbouring property. That is difficult to determine, but there should, at a minimum, be fairness between the values calculated. MPAC did not explain why Ms. Sang’s slightly older home is valued higher than the home on Property 1. The total building value of Ms. Sang’s property is $30,137 more than Property 1, and Property 1 has a barn. The homes are nearly identical in size and the home on Property 1 is more recently constructed. MPAC has assigned a higher quality class to Ms. Sang’s property but acknowledges that it has not recently inspected either property. Even if Ms. Sang’s home is of a slightly superior quality, that alone cannot justify the differences in value. I do not accept MPAC’s contention that air conditioning and a half bathroom can significantly drive value.

25I find that there is no compelling reason for MPAC to have applied a higher building value to Ms. Sang’s property than to Property 1. If the building value of Property 1 was applied to Ms. Sang’s land, with no adjustments for the differences, the total value would be $204,296. It is likely that the building value of Ms. Sang’s property should be less than that, for the reasons she raised including the age of construction and extra buildings. I find that the value of the barn is likely less than $18,000, given that it has been 15 years since Ms. Sang sold that property and buildings depreciate over time. It is likely offset by the attached garage value applied to Ms. Sang’s property. I also do not find the value applied to the metal roof to be accurate enough, taking into account the age of the roof. I do, however, accept Ms. Sang’s adjustments for size and age, totaling $8,880. That adjustment would indicate a value of $195,416.

Value Reconciliation

26Valuation theory holds that all of the three major ways of valuing land, the direct comparison approach, the income approach, and the cost approach, should get to a value close to the true market value of the land. Two of those approaches were presented to me and they collectively point to a likely sale value of $200,000.

27The sales indicated a range of values from $200,000 to $240,000. The cost approach suggested by Ms. Sang, which I modified slightly, points to a value slightly below $200,000. Those calculations indicate to me that it is most likely that Ms. Sang’s property would have sold for approximately $200,000 on January 1, 2016. I find that to be the current value of the property for the 2017 and 2018 taxation years.

Equity

28Once I have determined the current value, s. 44.(3)(b) requires that I “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” but only if that adjustment would result in a reduction of the assessment. I was presented with the assessments of a number of properties in the vicinity and neither party argued that it would be unfair or inequitable to assess the property at its current value. I do not find that an adjustment for equity is required.

CONCLUSION

29This property must be assessed as farmland. Valuing it in that manner with both the direct sales comparison approach and the cost approach indicates a likely current value of $200,000 for the 2017 and 2018 taxation years. There is no evidence that it would be unfair or inequitable to assess the property at that value. I therefore reduce the assessment for the 2017 and 2018 taxation years from $234,000 to $200,000.