Shea v. Municipal Property Assessment Corporation, 2018 CanLII 82040

Assessment Review Board

Issue Date: August 31, 2018 File No.: WR 151994

Assessed Person(s): Edward Shea, Debbie-Jane Prada-Shea Appellant(s): Edward Shea, Debbie-Jane Prada-Shea Respondent(s): Municipal Property Assessment Corporation ("MPAC") Region 26 Respondent(s): Municipality of Chatham-Kent

Property Location(s): 22850 Eastlawn Road Municipality(ies): Municipality of Chatham-Kent Roll Number(s): 3650-140-001-22603-0000 Appeal Number(s): 3256734 and 3313665 (deemed 2018 appeal) Taxation Year(s): 2017 and 2018 (deemed appeal) Hearing Event No.: 692473

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

Heard: March 23, 2018 in Chatham, Ontario

APPEARANCES:

Parties	Representative
Edward Shea, Debbie-Jane Prada-Shea	Self-represented
MPAC	Lillian Postma
Municipality of Chatham-Kent	No one appeared

DECISION OF THE BOARD DELIVERED BY DAN WEAGANT

INTRODUCTION

1Edward Shea and Debbie-Jane Prada-Shea (the "Appellants") appealed the 2017 assessment of the Subject Property at 22850 Eastlawn Road ("Subject Property") because they believed the value returned by MPAC was too high. The Appellants also believe the assessment of the Subject Property should be in the range of $288,000 to $307,000 when compared to the assessments of similar properties in the vicinity.

2MPAC returned a value of $390,000 for the Subject Property. In preparation for the hearing, MPAC determined an estimate of current value, based on the sales of comparable properties. This adjusted amount, expressed as an opinion of value, was $408,000. MPAC was not seeking a higher assessment. It submitted the higher value to support the assessment returned.

3The Assessment Review Board (the "Board") must decide two things in this appeal. Firstly, the Board must determine, based on the evidence at the hearing, the current value of the Subject Property for the 2017 taxation year. Having reference to the assessments of similar properties in the vicinity, the Board must also decide if the current value determined needs to be reduced for the purpose of equitable assessment.

4Section 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.

DECISION

5The Board finds that the current value of the Subject Property is $402,000. The Board also finds that a reduction in the current value is not required for this assessment to be equitable with the assessments of similar properties in the vicinity.

6As MPAC failed to give notice to the Board and the other Parties, under Rule 40 of the Board's Rules of Practice and Procedure ("Rules"), of their intention to raise a change in assessment that would result in higher taxation, the Board finds that the assessment of the Subject Property, at 22850 Eastlawn Road is confirmed at $390,000 in the Residential property class, for the 2017 and deemed 2018 taxation years.

LEGISLATION

7In making its determination of these appeals, the Board must consider the relevant sections of the Assessment Act R.S.O. 1990, c. A.31 ("Act").

8Section 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.

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 40.(1) of the Act states:

40.(1) Appeal to Assessment Review Board. Any person, including a municipality, a school board or, in the case of land in non-municipal territory, the Minister, may appeal in writing to the Assessment Review Board,

(a) on the basis that,

(i) the current value of the person's land or another person's land is incorrect,

(ii) he person or another person was wrongly placed on or omitted from the assessment roll,

(iii) the person or another person was wrongly placed on or omitted from the roll in respect of school support,

(iv) the classification of the person's land or another person's land is incorrect, or

(v) or land, portions of which are in different classes of real property, the determination of the share of the value of the land that is attributable to each class is incorrect; or

(b) on such other basis as the Minister may prescribe.

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.

What is the current value of the Subject Property?

MPAC's Evidence

12MPAC described the Subject Property as a single family dwelling, with 2,058 square feet of living area on one floor, with two full baths, one ½ bath, a gas fireplace and 344 square feet of finished basement area. It includes an attached garage of 812 square feet and a 684 square foot outdoor swimming pool. The Subject Property was constructed in 1999. The Appellants agreed with this description.

13MPAC provided a valuation report to show how it arrived at the Subject Property's current value for 2017. The report took the direct comparison approach to value, which is the most common approach used by MPAC for single family dwellings. This approach compares the Subject Property to other properties that have sold in proximity to the valuation day of January 1, 2016.

14The valuation report compared the Subject Property with six proposed comparable properties that sold between June 2013 and October 2016. All six are located in the Municipality of Chatham–Kent. Lilian Postma, appearing for MPAC, testified that these six proposed comparable properties were selected based on their similarity in lot size, dwelling size, location, amenities and age when compared to the Subject Property.

15When using the direct comparison approach, MPAC applies a Time Adjustment Factor ("TAF") to the sale value of each proposed comparable property. The TAF is used to adjust the sale price so that it more closely reflects the value at which the properties would have sold on the valuation day of January 1, 2016. The TAFs used in this case were derived from a 'time changes over time' study that used 445 sales of residential properties in the area that took place in 2013, 2014, 2015 and 2016. A TAF for each month in that time period was applied to proposed comparable property sales in that month to arrive at a 'Time Adjusted Sale' ("TAS") value.

16TAS values for the six properties in MPAC's Valuation Report ranged from $330,427 to $468,318. MPAC considered proposed comparable properties 1, 2, 4, 5 and 6 to be similar to the Subject Property, while it considered proposed comparable property 3 to be inferior to the Subject Property in terms of value. MPAC considered its proposed comparable property 5 at 14 Frances Avenue to be the most comparable to the Subject Property. It had a TAS value of $381,309, was built in 1997 and had 1,855 square feet of living area on one floor. It had a lot size of 0.33 acres, 2 full baths, and an attached garage of 811 square feet. It sold in September of 2014 for $366,000.

17MPAC submitted that when the Subject Property is compared to proposed comparable property 5, the differences in dwelling and lot area, number of bathrooms and the presence of an in-ground pool at the Subject Property indicate that the value of the Subject Property should be higher than proposed comparable property 5.

18The findings of the report are that, given the various differences between the Subject Property and the six proposed comparable properties, the value of the Subject Property reasonably lies within the range of TAS values of the proposed comparable properties. The report finds that when the comparisons are made, the current value of the Subject Property is approximately $408,000, concluding that the returned value of $390,000 is reasonable.

Appellant's Evidence

19The Appellants submitted that MPAC's valuation report is flawed. They believe that five of the six proposed comparable properties cited by MPAC are not suitable for comparison because they are in what was referred to as the former City of Chatham. The Lynnwood subdivision, where the Subject Property lies, was combined with the City to form the single tier Municipality of Chatham-Kent. As a result, residential properties that lie outside of the former City have characteristics that are different from properties that are in the former Chatham City limits.

20The Appellant's testified to the following differences:

• The former City has full municipal services, including sanitary sewers, street lights, sidewalks and curb and gutter whereas the Subject Property does not;
• Properties in the former City have proximity to parks, open space and schools whereas the Subject Property does not;
• The Subject Property is served by Ontario Hydro, which is more expensive that the electrical service offered within the former City;
• The Subject Property is taxed higher than similar properties in the former City for emergency services and waste recycling.

21The Appellants' position is that these differences have a combined effect of reducing the current value of properties in the Lynnwood area when compared to properties within the former City limits. They submitted no documentary evidence as to specific value differences as a result of these differences.

22The Appellants submit that the only property in evidence that is similar enough to compare to the Subject Property is MPAC's proposed comparable property 3, at 22872 Eastlawn Road. It was the only proposed comparable property cited by MPAC in the same Lynnwood Estates subdivision as the Subject Property, and according to the Appellants the only one that is subject to the same differences present in Lynwood when compared to the former City of Chatham.

23The living area of proposed comparable 3 is smaller than the Subject Property by 308 square feet. It sold in October of 2013 for $325,000 and has a TAS value applied by MPAC of $330,427. The Appellants testified that proposed comparable 3 underwent significant upgrades prior to the 2013 sale and that 900 square feet of the basement was finished, including a 4 piece bathroom, a bedroom, workshop and family room. The Appellant's equate this living area in the basement with above ground living area and submitted that the actual living area should be increased from 1,750 square feet as reported by MPAC to 2,650 square feet as a result.

24In using this updated information, the Appellants derived an assessed value of proposed comparable 3 of $119.25 per square foot.

25The Appellants further submitted that when all of the assessed values from 12 properties on the west side of Eastlawn Road are considered, the average per square foot value is $139.91. They submitted that this value should be applied to arrive at a current value of the Subject Property of $287,934 ($288,000, rounded).

When reference is made to the assessments of similar properties in the vicinity, should the current value determined be reduced to make it equitable?

26The Appellants relied on the same comparison of assessments in the Lynnwood to the Subject Property that they relied on for the determination of current value. They submitted that the average per square foot assessment of the 12 properties on the west side of Eastlawn Road of $139.91 should indicate an equitable assessment of the Subject Property, resulting in an assessment of $288,000.

27MPAC submitted an Equity Analysis that compared the assessments of 30 single family dwellings in the Municipality of Chatham-Kent to their corresponding TAS values for the 2017 taxation year. This comparison is called an Assessment to Sale Ratio ("ASR"). The analysis then compared the ASR of each property to arrive at a median ASR for the 30 property sample, which MPAC submitted is an indication of equitability of assessment within the sample.

28The results of the analysis were then compared to two tests of reliability. The first was whether or not the median ASR falls within the standard set by the International Association of Assessing Officers ("IAAO"). The IAAO standard for a median ASR is between 0.90 and 1.10. The median ASR in MPAC's analysis was 0.966.

29The second test of reliability is whether or not the Coefficient of Dispersion ("CoD") falls within the standard set by the IAAO. The CoD is the average percentage deviation from the median ASR of the other 29 properties in the analysis. The IAAO standard for CoD in residential applications is 15%. The CoD in MPAC's analysis is 6.3%. MPAC submitted that the 30 properties in the analysis are both similar as they are single family dwellings, like the Subject Property, and in the vicinity as they are all in the same Municipality as the Subject Property. It further submitted that since the median ASR and the CoD in the analysis both fell within IAAO standards, the analysis indicated that assessments of similar properties in the vicinity of the Subject Property are near to their current values as expressed as TAS values, and that no reduction in the current value determined is necessary for it to be considered equitable.

The Board's Analysis

Current Value

30The best evidence of current value of any property is its sale on or near the valuation day stipulated in the Act. In the absence of such a sale, the comparison of that property to comparable properties and their sale values is the next best evidence. There is no sale of the Subject Property in evidence in this case. MPAC provided a comparison of the Subject Property with the sale values of six proposed comparable properties and submitted that one of these, proposed comparable property 5, was the best indicator of the value of the Subject Property.

31In order to use comparable properties as a means of determining the current value of the Subject Property, there must be suitable comparability. This does not mean the proposed comparable properties need to be identical to the Subject Property; only that reasonable adjustments between them can be made to arrive at a reasonable conclusion of current value.

32MPAC submitted six comparable properties for consideration by the Board. The Board disregards proposed comparable properties 1, 2, 4, 5 and 6. These properties all lie within the former limits of the City of Chatham. The Board finds that the evidence at hearing indicates these five properties enjoy a range of urban services that are not available to the Subject Property. These differences were enumerated by the Appellants and MPAC did not refute them.

33The Appellants compared the assessed values of a number of properties in the same neighborhood to the Subject Property and applied a per square foot value to arrive at a current value. This approach is fundamentally flawed. The Act defines current value as the amount of money that changes hands in a sale. Hence current value must be determined by the sale values of comparable properties. The Board disregards the Appellants approach as a result.

34The Board finds that the best evidence of current of the Subject Property is a comparison to the TAS value of MPAC's proposed comparable 3. This property is on the same street as the Subject Property and has the same characteristics of the neighborhood relating to municipal services and the lack thereof. Comparable property 3 had a TAS value of $330,427. It differs from the Subject property as follows:

• It is 13 years older;
• It has 308 square feet less of living area;
• It does not have a swimming pool, which carries a value of $14,000 to $16,000 according to MPAC.

35These differences would suggest that the subject property should have a higher value than proposed comparable 3, to account for age, size and the presence of the pool. When the TAS value of proposed comparable 3 of $330,427 is divided by its 1,750 square feet of living area, the result is $188.82 per square foot. When this figure is applied to the Subject Property's 2,058 square feet of living area, the result is $388,592, or $389,000 rounded. When the value of the pool is added to this amount the result is between $402,000 and $405,000. The Board finds that this result represents a reasonable current value for the Subject Property, when the differences in living area and the presence of the pool are compared to proposed comparable 3.

36There was no evidence at hearing to support any specific adjustment of value to account for the difference in age between proposed comparable 3 and the Subject Property. However, since the Subject Property is newer, it is most reasonable to assume a higher value as a result.

37Therefore, the Board finds that the current value of the subject property is $402,000, the lowest value indicated by the best evidence at the hearing.

Equity of Assessment with the Assessments of Similar Properties in the Vicinity

38In order to reduce the amount of the current value for the purposes of equity or fairness, the Board has to reduce a correct finding to one that is incorrect. In order to so, the Board must have sufficient evidence to suggest the current value determined should be reduced to be fair.

39To decide if the current value determined represents equitable assessment of the Subject Property when compared to the assessments of similar properties in the vicinity, the Board must compare the assessments of similar properties in the vicinity with their current value.

40Similarity, as it applies to the consideration of sales in determining equity is less burdensome than the same comparison for the purpose of determining current value. The concept of equitable assessment is intended to reflect that, on a balance of probabilities, it is reasonable to infer that properties in the same classification are generally sharing the assessment, and the resulting tax burden fairly.

41MPAC's equity analysis includes the assessments and TAS values of 30 single family dwellings in Chatham-Kent, with a median ASR and a CoD that fall within the standards set by the IAAO.

42The Appellant's submission included only assessment information and did not compare those assessments to current values. As a result, it was missing one half of the comparison needed to determine the equity of assessment.

43Accordingly, the Board finds that the best evidence of whether or not the current value determined represents equitable assessment is that of MPAC and no adjustment to the current value determined is required to achieve equitable assessment.

CONCLUSION

44The Board finds that the current value of the Subject Property is $402,000. The Board also finds that a reduction in the current value is not required for this assessment to be equitable with the assessments of similar properties in the vicinity.

45As MPAC failed to give notice to the Board and the other Parties, under Rule 40 of the Board's Rules of their intention to raise a change in assessment that would result in higher taxation, the Board finds that the assessment of the Subject Property, at 22850 Eastlawn Road is confirmed at $390,000 in the Residential property class, for the 2017 and deemed 2018 taxation years.