Assessment Review Board

Commission de révision de l'évaluation foncière

ISSUE DATE: August 30, 2018 FILE NO.: WR 154645

Assessed Person(s): Alicia Markson Appellant(s): Alicia Markson Respondent(s): Municipal Property Assessment Corporation ("MPAC") Region 09 Respondent(s): City of Toronto Property Location(s): 2627 Lakeshore Boulevard West Municipality(ies): City of Toronto Roll Number(s): 1919-051-740-02000-0000 Appeal Number(s): 3265679 and 3295522 Taxation Year(s): 2017 and 2018 Hearing Event No.: 701878 Legislative Authority: Section 40 of the Assessment Act, R.S.O. 1990, c. A.31, as amended Heard: August 2, 2018 on Toronto, Ontario

APPEARANCES:

Parties	Representative
Alicia Markson	Surin Toor
MPAC	Edward Mui
City of Toronto	No one appeared

DECISION OF THE BOARD DELIVERED BY MARCELLE BOURASSA

BACKGROUND

1Alicia Markson (the "Appellant") is the owner of a single family detached property located at 2627 Lake Shore Boulevard West (the "Subject Property") in the City of Toronto. It is a two-storey home located on a 0.27 acre (11,715 sq. ft.) lot with 55 feet of effective frontage that abuts and has direct access to Lake Ontario. It has 2,861 square feet ("sq. ft.") of total building area, an attached garage, and a basement with 262 sq. ft. of finished area. The property was built in 1968 and has not been renovated. MPAC has assigned it a quality of construction rating of 7. It receives a negative 10% variable adjustment for heavy traffic.

2For the 2017 and 2018 taxation years under appeal, MPAC returned the assessment for the Subject Property at $2,064,000.

3The Appellant has appealed the assessment for the 2017 and 2018 taxation years to the Assessment Review Board (the "Board"), pursuant to s. 40 of the Assessment Act ("Act"). Surin Toor represents the owner at this hearing. It is his position that the Subject Property is assessed too high. Based on his analysis, it his position that the Subject Property should have a current value of $1,825,000.

4Pursuant to the Assessment Act, R.S.O. 1990, c. A.31 ("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, Edward Mui, estimates the current value of the Subject Property to be $2,186,000 based on the direct comparison approach.

5Mr. Mui also conducted an equity study and determined that equity adjustment is not required. MPAC is not seeking a higher assessment. It is his position that the assessment as returned of $2,064,000 should be confirmed for the 2017 and 2018 taxation years.

6Mr. Toor does not take issue with MPAC's median ASR of 0.955 as determined in MPAC's Equity Analysis Report. However, he takes the position that an equitable adjustment to the current value is required. Applying the assessment to sales ratio ("ASR") of 0.955 to his opinion of current value results in an equitable assessed value of $1,742,875.

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 $1,825,000. Furthermore, the Board finds that the evidence before it supports the conclusion that an equitable adjustment is required under s. 44.(3)(b) of the Act. The current value of $1,825,000 is reduced to $1,709,000.

9Therefore, the assessment of the Subject Property located at 2627 Lake Shore Boulevard West is reduced from $2,064,000 to $1,709,000 for the 2017 and the 2018 taxation years.

RELEVANT LEGISLATION

10Section 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.

11Section 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.

12Section 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.

13Section 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.

14Section 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

15Mr. Mui relies on a Valuation Report. He states that abutting the lake and direct access to it is a significant locational factor in this instance. He relies on three comparable sales that also abut the lake and have direct access to it. He states that sales of such properties are scarce.

16Key property details for the proposed comparable properties presented by MPAC are set out below in Table A. Sale 1 is located in the same homogenous neighbourhood, A99, as the Subject Property. Sales 2 and 3 are located in a different homogenous neighbourhood, A97. He also states that MPAC's standard adjustment for abutting lakefront is $14,894 per sq. ft.

Table A

Property	Effective Site Area (sq. ft.)	Effective Frontage (ft.)	Year Built (effective)	Quality	Blg Area (sq. ft.)	Other	Sale (Time Adjusted Sale "TAS")	TAS Adjusted for Frontage	TAS Adjusted for Location
2627 Lake Shore Boulevard West (subject property)	11,715	55	1968	7.0	2,861	-10% for heavy traffic Attached garage	N/A
2677 Lake Shore Boulevard West (Sale 1)	7,332	39	1923 (1962)	6.5	2,091	-10% for heavy traffic Attached garage	$1,600,000 ($1,775,618) (05/01/2015)	$2,186,818
9 Lake Shore Drive (Sale 2)	4,350	29	1924 (1986)	7.5	2,304	D reno (1989) 819 sq. ft. added in 1989 Basement garage	$2,225,000 ($1,954,381) (11/302016)	$2,622,581	$2,360,323
1 Lake Shore Drive (Sale 3)	5,700	38	1943 (1997)	7.0	2,871	-4% for prox. to multi-res B reno (2006) 1,720 sq. ft. added in 1984 137 sq. ft. added in 2004 C reno 1984 Finished basement area (630 sq. ft.)	$1,785,000 ($1,845,854) (10/16/2015)	$2,282,754	$2,145,789

17Mr. Mui asserts that frontage plays an important role for this type of property. More frontage equates to a greater value. The three proposed comparable properties all have smaller frontages than the Subject Property. He asserts that there is no vacant residential lake front land on water remaining in Toronto and so he extended his search west to Mississauga and Oakville in order to find sales of vacant land.

18The key property details of the sales of vacant residential /recreational land on water that occurred in either 2015 or 2016 are summarized below in Table B. The average sale price per foot of frontage is $25,778 and the median sale price per foot of frontage is $26,304.

Table B

Property	Sale ($)	Effective Frontage (ft.)	Effective Depth (ft.)	Sale price per foot of frontage ($)
928 Lynnrod Court, Mississauga	4,950,000	293	121,12	21,245
9 Carlis Place, Mississauga	1,610,000	52	72.37	30,962
1128 Westdale Road, Oakville	2,800,000	93	341	30,108
3156 Lakeshore Road, Oakville	2,250,000	100	270	22,500
4034 Lakeshore Road, Oakville	3,500,000	90	369	38,889
115 Appleby Place, Oakville	2,400,000	218.88	240.69	10,965

19The average sale price per foot of frontage is $25,778 and the median sale price per foot of frontage is $26,304. Mr. Mui states that he applied the value of $25,700 (rounded) per foot of frontage to the difference in frontage between the subject property and each comparable property to reflect a time adjusted sale ("TAS") value adjustment for differences in frontage. For instance, for Sale 1, the adjustment is $411,000 (16 ft. X $25,770 per ft.). This value was added to the TAS for a TAS adjusted frontage value of $2,186,818. The adjustments are summarized in Table A above.

20Mr. Mui states that he also made adjustments for locational factors to Sales 2 and 3. For Sale 2, he subtracted 10% or $262,258 (as Sale 2 is not subject to a negative 10% heavy traffic adjustment) from the TAS adjusted value for frontage for a new adjusted TAS value adjusted for location of $2,360,323. Similarly, for Sale 3, he subtracted 6% or $136,965 (as Sale 2 is not subject to a negative 10% heavy traffic adjustment but is subject to a negative 4% adjustment for proximity to multi-res) from the TAS adjusted value for frontage for a new adjusted TAS value adjusted for location of $2,145,789. The adjustments are summarized in Table A above. The average adjusted TAS is $2,230,977 and the median TAS is $2,186,818.

21Mr. Mui states that he adopted the lower median TAS of $2,186,818 as his opinion of the Subject Property's current value.

22Under cross-examination, Mr. Mui states:

• He chose to adjust for differences in frontage and locational factors as, in his opinion, they most impact on value. He did not adjust for differences in quality, level of renovation or building size.
• He agrees that in connection with the vacant land sales, he adjusted for frontage only irrespective of depth as, in his opinion frontage is valued more than depth. He made no adjustment for differences in rates between the cities of Toronto, Mississauga and Burlington.
• He agrees that Sale 1 and Sales 2 and 3 are located in different homogeneous neighborhoods. However, they are all lake front properties and are not that far apart.

Appellant's Evidence and Submissions

23Mr. Toor states that valuing lake front property is challenging. He proposes a different approach that considers the primary factors of building size and site area.

24Mr. Toor selected nine properties. He states that he expanded his search north from the lake to find a meaningful number of comparables. He asserts that the properties are located in a superior and more prestigious neighbourhood in North Etobicoke and that they are more similar to the Subject Property in terms of lot size and building size. All have a quality of construction rating of 7 or higher. He considers these properties as slightly superior to the Subject Property in terms of effective age/renovated condition. He states that some properties have been renovated and have a higher effective year of build than the subject property but all are within 20 years of the subject property's 1968 year of build. Mr. Toor states that the average time adjusted sale value per square foot is $574.14. Applying this value to the Subject Property's building area of 2,861 sq. ft. results in a value of $1,642,614.

25Mr. Toor states that he derived his opinion of current value of $1,825,000 by making an allowance for a lake front premium offset by heavy traffic. He asserts that in his experience, appraisers apply a premium for abutting the lake that ranges from 14-18%. Many factors are taken into account including erosion, buildable area, and so on. In this instance, he allowed about 21% which was offset by the adjustment for heavy traffic of 10%.

26Mr. Toor asserts that Mr. Mui adjusted for differences in lake frontage as between the Subject Property and the three proposed comparables by using an average sale price per square foot for land sales in different cities. He also asserts that Mr. Mui did not consider differences in depth. As a result, the opportunity for error is huge.

27Mr. Toor also asserts that MPAC's proposed comparables vary greatly in building size from the Subject Property. Mr. Mui did not adjust for differences in building size and condition as between the Subject Property and the three proposed comparables. Mr. Toor asserts that the level of confidence goes down based on the number of adjustments made.

28Mr. Toor asserts that in following MPACs approach that multiplies the effective frontage by the adjustment for abutting lakefront of $14,894 per sq. ft. results in a huge value being added to the time adjusted sale price of a property. For instance, he referred to his proposed sale comparable number 4 located at 219 Edenbridge Drive (with similar building and site areas and year of build as the Subject Property). He asserts that MPAC's lake front adjustment of $983,004 (66 ft. X $14,894) results in a huge value being added to the TAS of $1,304,030.

Board's Analysis and Findings

29Under 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.

30The 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.

31To 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.

32The Board has several proposed comparable sales and two suggested approaches before it for purposes of determining the Subject Property's current value.

33Mr. Mui proposes three comparable sales located within 0.3595 and 0.6676 kilometres from the Subject Property. Like the Subject Property, they abut Lake Ontario and have direct access to it.

34The Board finds that the three comparables proposed by MPAC share some similarities with the Subject Property in addition to their location on Lake Ontario. However, they also differ from the Subject Property to varying extents in terms of site area, building area, effective age and condition. This is in addition to differences in effective frontage and locational factors. However, Mr. Mui opted to adjust for differences in effective frontage and locational factors only.

35Mr. Mui explained that it was necessary to expand his search to Mississauga and Oakville to find sales of vacant land. However, the Board finds that the site areas of the selected vacant land sales are not comparable to the subject property either in terms of site area with an average of 29,966 sq. ft. (as compared to the Subject Property at 11,715 sq. ft.) or in terms of effective frontage with frontages ranging from 52 to 233 ft. for an average of 96.5 ft. (as compared to the subject property at 55 ft.). Furthermore, the vicinities in the neighbouring cities vary from the Subject Property's location along busy Lake Shore Boulevard West in Toronto.

36Mr. Mui did adjust for locational factors. However, he did not adjust for differences in building size and condition and site area that should have been considered. Overall, the differences between the Subject Property and MPAC's suggested properties lead to the conclusion that they are not very comparable. The Board, therefore, rejects Mr. Mui's approach in determining current value.

37Still, the Board finds three properties located at 2677 Lake Shore Boulevard West and 1 and 9 Lake Shore Drive to be helpful in arriving at a determination of current value.

38Sale 1, the property located at 2677 Lake Shore Boulevard West, is most comparable to the Subject Property in terms of effective year of build (1962) as it underwent a "B" renovation in 1983 and is subject to the same negative 10% adjustment for heavy traffic. It has a smaller effective frontage at 39 ft. (versus the Subject Property at 55 ft.) and a much smaller lot size at 7,332 sq. ft. (versus the Subject Property at 11,715). It also has 770 less square feet of total building area than the Subject Property and a slightly lower quality of construction rating of 6.5. It has a TAS of $1,775,618. The Board finds this property to be inferior to the Subject Property. Accordingly, the Subject Property's current value should be higher.

39Sale 3, located at 1 Lake Shore Drive, is most comparable to the Subject Property in terms of building size at 2,871 sq. ft. and its quality of construction rating of 7.0. However, it has a much newer condition than the Subject Property having undergone several renovations and has an effective year of build of 1997. It also has a larger finished basement area. However, it has a smaller effective frontage at 38 ft. (versus the Subject Property at 55 ft.) and a smaller lot size at 5,700 sq. ft. (versus the Subject Property at 11,715 sq. ft.). It is located in a quieter neighbourhood but is subject to a negative 4% adjustment for proximity to multi-residential. It has a TAS of $1,845,854. The Board finds this property to be superior to the Subject Property. Accordingly, the Subject Property's current value should be lower.

40Sale 2, located at 9 Lake Shore Drive has a smaller building area at 2,304 sq. ft. (versus the Subject Property at 2,861 sq. ft.), a smaller effective frontage at 29 ft. sq. (versus the Subject Property at 55 ft.) and a smaller lot size at 5,700 sq. ft. (versus the Subject Property at 11,715 sq. ft.). However, it is newer than the Subject Property having undergone a substantial "D" renovation in 1989 and has an effective year of build of 1986 and has a higher quality of construction rating of 7.5. It is located in a quieter neighbourhood and is not subject to any locational variables. It has a TAS of $1,954,381. The Board finds this property to be superior to the Subject Property. Accordingly, the Subject Property's current value should be lower.

41Based on the sales of these three properties, the Board finds that the Subject Property's current value likely lies within the range of $1,775,618 and $1,845,954.

42Mr. Toor proposes an approach where he considered the sales of nine properties that he asserts are located further away from the Subject Property but in a more prestigious neighbourhood in North Etobicoke but are more comparable to the Subject Property in terms of lot size (average of 12, 345 sq. ft. versus the Subject Property at 11,715 sq. ft.) and building size (average 2,963 sq. ft. versus the Subject Property at 2,861 sq. ft.). All have a quality of construction rating of 7 or higher. He considers these properties as slightly superior to the Subject Property in terms of effective age/renovated condition. The Board finds these properties to be reasonably comparable to the Subject Property in terms of site area, building area and effective age/condition.

43Mr. Toor applied an average time adjusted sale value per square foot of $574.14 to the Subject Property's building area of 2,861 sq. ft. for a value of $1,642,614. He derived an opinion of current value of $1,825,000 by making an allowance of 21% for a lake front premium offset by an adjustment for heavy traffic of 10%.

44The Board finds that Mr. Toor's opinion of value falls within the range of $1,775,618 and $1,845,954 as established from the time adjusted sales for the three properties located at 2677 Lake Shore Boulevard West and 1 and 9 Lake Shore Drive. Accordingly, the Board finds that the most likely current value of the Subject Property is $1,825,000.

Whether there should be an equitable reduction of the current value pursuant to s. 44.(3)(b) of the Act, and, if so, what should the amount of this reduction be?

MPAC's Evidence and Submissions

45Mr. Mui relies on an Equity Analysis Report that considers the time adjusted sales of 30 single-family detached properties that occurred between January 1, 2015 and December 31, 2016 within 0.6 kilometres of the Subject Property.

46In his Report, Mr. Mui states that the level of appraisal is established by determining the median ASR in the sales sample. The International Association of Assessing Officers standards state that level of appraisal (in this case the median ASR is MPAC's preferred measure) for all property types should fall between 0.90 -1.10. 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 is 0.955 falls within the acceptable range.

47Mr. Mui asserts that the median ASR of 0.955 falls within the range and that no equity adjustment is required. His opinion of current value of $2,186,000 is higher than the assessment as returned of $2,064,000. He asserts that MPAC is not seeking a higher assessment. Mr. Mui concludes that the assessment for the Subject Property should be confirmed at $2,064,000 for the 2017 and 2018 taxation years.

Appellant's Evidence and Submissions

48Mr. Toor does not take issue with MPAC's median ASR of 0.955 as determined in MPAC's Equity Analysis Report. However, based on his experience, both in settling matters with assessors at MPAC and in appearing before the Board, he requests that the Board apply the ASR of 0.955 to this opinion of current value of $1,825,000. Applying the ASR of 0.955 to his opinion of current value results in an equitable assessed value of $1,742,875. He asserts that the Board has the discretion to apply the median ASR of 0.955 and he requests that it exercise its discretion in affording the Appellant the benefit of the doubt.

Board's Analysis and Findings

49Section 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."

50The 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.

51In 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].

52The 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).

53The test set out in s. 44.(3)(b) of the Act, requires that the Board refer to similar lands in the vicinity. 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.

54The 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.

55Mr. Mui relies on an Equity Analysis Report that considered the sales of 30 single family detached properties. All are located within 0.60 kilometres of the Subject Property. The sales sample produced a median ASR of 0.955.

56Mr. Toor does not take issue with MPAC's median ASR of 0.955 as determined in MPAC's Equity Analysis Report but requests that the Board applies its discretion and makes an equitable adjustment.

57The Board has reviewed MPAC's study and notes that the ASRs for 20 properties fall outside of the range of 0.95 and 1.05 used by MPAC to determine whether equity is achieved. Of these, 15 properties (or 50% of the properties) have ASRs less than 0.95. The Board notes that the ASRs of 0.92 and 0.79 for MPAC's sales comparables located at 1 and 9 Lake Shore Drive also fall outside of the range. These properties were not included in the study although they are located 0.6292 and 0.6776 kilometres, respectively, away from the Subject Property. However, MPAC's sale comparable located at 2677 Lake Shore Boulevard West was included in the study and its ASR of 0.867 also falls outside of the range. The Board finds that the median ASR would have been lower at 0.9365 had the ASRs for the properties located at 1 and 9 Lake Shore Drive been included in the study.

58The study also includes six properties located along Lake Shore Boulevard West (2677, 2580, 2635, 2672, 2596 and 2600 Lake Shore Boulevard West) with ASRs that range from 0.867 to 0.983 for a median ASR of 0.906. While the Board finds this sample too small to be statistically significant, it provides some indication that the level of current value assessments of properties located along Lake Shore Boulevard West that share similar locational factors with the Subject Property is substantially below the level of sales prices.

59In the circumstances of this case, the Board finds that the evidence before it supports the conclusion that an equitable adjustment is required. Applying the median ASR of 0.9365 using the larger sample of 32 properties to the current value as determined of $1,825,000 results in an equitable value of $1,709,112 or $1,709,000 (rounded).

CONCLUSION

60The Board finds that the current value of the Subject Property, as of the January 1, 2016 valuation date, is $1,825,000. Furthermore, the Board finds that the evidence before it supports the conclusion that an equitable adjustment is required under s. 44.(3)(b) of the Act. Therefore, the current value of $1,825,000 is reduced to $1,709,000.

61The assessment of the Subject Property located at 2627 Lake Shore Boulevard West is reduced from $2,064,000 to $1,709,000 for the 2017 and the 2018 taxation years.