James Russell and Young-Eun Russell v. Municipal Property Assessment Corporation, 2018 CanLII 84477

Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE: September 05, 2018

FILE NO.: WR 152492

Assessed Person(s): James Russell and Young-Eun Russell

Appellant(s): James Russell and Young-Eun Russell

Respondent(s): Municipal Property Assessment Corporation (“MPAC”) Region 09

Respondent(s): City of Toronto

Property Location(s): 1818A Gerrard Street East

Municipality(ies): City of Toronto

Roll Number(s): 1904-094-200-05800-0000

Appeal Number(s): 3256777 and 3293092 (deemed 2018 appeal)

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

Hearing Event No.: 696187

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

Heard: April 13, 2018 by telephone conference call

APPEARANCES:

Parties

Representative

James Russell and Young-Eun Russell

James Russell

MPAC

Chris Vallier

City of Toronto

No one appeared

DECISION OF THE BOARD DELIVERED BY LESLIE FLEMMING

Background

1James Russell and Young-Eun Russell are the owners of 1818A Gerrard Street East (“subject property”), a single family detached residential building of 1,237 square feet (“sq. ft.”), located just east of an area of Toronto known as “the Beaches”. This home, built in 1932, was assessed at $778,000 for the 2017 taxation year and $768,000 for the 2018 taxation year. It is these assessments which are under appeal.

2Pursuant to the provisions of the Assessment Act, R.S.O. 1990, c. A.31 (the “Act”), the assessment of land shall be based on its current value. The Act also provides that, for the 2017 to 2020 taxation years, MPAC is required to assess this value as of the valuation day, January 1, 2016.

3Mr. Russell filed an appeal of the assessed value on the ground that the value is too high. Mr. Russell submits that a more accurate current value for his property is between $658,000 and $699,000.

4Pursuant to s. 40.(11) of the Act, the City of Toronto is a party to this proceeding. However, it did not advise the Assessment Review Board (“Board”) of its position on the issues raised in these appeals, and no one appeared at the hearing on the its behalf.

5Section 44.(3)(b) of the Act, directs the Board to reduce the current value of the subject property if similar lands in the vicinity have been assessed at a lower value (“equitable reduction”). The purpose of this provision is to fairly distribute the municipal tax burden according to the value of the property possessed by each ratepayer. In this appeal, MPAC provided an Equitable Analysis Report prepared by Chris Vallier, which concludes, based on 30 sales of similar properties in the vicinity, that the assessments in this area are accurate to an acceptable level, which means no reduction on the ground of equity is required. Mr. Russell did not give any evidence per se about equitable levels of assessment. He referred to the values of other properties assessed in the neighbourhood, but gave no evidence of assessment to sale ratios. Therefore, in this proceeding, this ground of appeal is not in issue.

6At the completion of the hearing, the Board reserved its decision. For the reasons that follow, the Board finds that the current value of the subject property for the 2017 to 2018 tax years is $768,000. Pursuant to s. 44.(3)(b) of the Act, an equitable reduction of this value is not required.

Relevant Legislation and Rules

The Act

7Section 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.

8Section 19.(1) of the Act states:

19.(1) Assessment based on current value. – The assessment of land shall be based on its current value.

9Section 19.2(1) of the Act states:

19.2(1) Valuation days. – Subject to subsections (2) and (5), the day as of which land is valued for a taxation year is determined as follows:

1. For the 1998, 1999 and 2000 taxation years, land is valued as of June 30, 1996.

2. For the 2001 and 2002 taxation years, land is valued as of June 30, 1999.

3. For the 2003 taxation year, land is valued as of June 30, 2001.

4. For the 2004 and 2005 taxation years, land is valued as of June 30, 2003.

5. For the 2006, 2007 and 2008 taxation years, land is valued as of January 1, 2005.

6. For the 2009 and subsequent taxation years, land is valued as of January 1 of the year preceding the taxation years.

10Section 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.

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.

12Rules of Practice and Procedure

Special Notices

40. A party to a summary proceeding must give notice to the Board, and all other parties to a summary proceeding, within 30 days of the day set in Rule 33 as the start of a proceeding, that the party intends to raise with the Board:

(a) a change in property classification that would result in higher taxation;

(b) a higher assessment than that returned by the MPAC;

(c) an application to invoke section 40(18) of the Assessment Act; or

(d) the doctrine of issue estoppel.

ISSUE

13The issue to be determined on this appeal is: what is the correct current value of the subject property for the taxation years 2017 and 2018?

EVIDENCE

MPAC’s Evidence

14Mr. Vallier, a Property Valuation Analyst with MPAC, represented MPAC, and gave evidence based on the Valuation Report and Equity Analysis Report, both of which he authored.

15MPAC gave a discount of 19% for the fact that the home is located on a busy arterial street with regular streetcar service. This is an older home, built in 1932, which was renovated extensively in 2006. The exterior was finished with stucco. MPAC has added value for the basement renovation as well.

16Mr. Vallier chose 12 comparable sales in the neighbourhood, these properties sold between January 2014 and August 2017. He used the direct comparison method of determining the value of the subject property. By choosing to use the selling prices of a variety of properties that were similar to, inferior to, or superior to the subject property, Mr. Vallier is able to come up with an estimate of value for a residential property. He testified that a study of the sales trends in the vicinity showed an overall change in the market of plus 62.69 per cent during the period January 2014, through August 2017. Mr. Vallier provided both the sales prices of the proposed comparable homes, a description of their main features, and the time-adjusted sale price derived from a study of 416 sales in the area of residential properties. The Appellant did not object to the use of time-adjusted sales figures.

17Mr. Vallier testified that the majority of sales taken from Gerrard Street were inferior to the subject property because they were older and had not been completely renovated as had the subject property. He highlighted the “better sales”, including Property 3 – 1672 Gerrard Street East – another property that had been extensively renovated. Property 3 has a slightly larger site area, larger home, and a finished basement which is larger than the subject property’s finished basement. This is an example of a superior home, with a sale price of $1,140,000 in 2017, which was time-adjusted to $944,716 to adjust the value to the amount it would have been worth on the valuation day.

18At the lower end of value were homes such as 1829 Gerrard Street East, with an assessed value of $658,000 and a sale price of $630,000 in March, 2015. MPAC time-adjusted that sale price to $693,858. MPAC uses this method of quantifying the value of residential properties by “bracketing” or by comparing the subject property to similar properties of both higher and lower values than the subject property. As long as the selected homes are reasonably similar to the subject property, it is a generally accepted method for assessing the value of residential properties.

19Also at the lower end of the comparable properties was 85 Wildwood Crescent, backing onto a railway, with a time-adjusted value of $677,465. MPAC notes that none of the less expensive properties had undergone major renovations such as the subject property had.

20Mr. Vallier testified that MPAC had reduced the initial assessment of the subject property from $788,000 to $768,000 for the reason that the square footage of the basement detracted from value, even though the owners had completed renovations to that space.

21On cross-examination, the Appellant asked Mr. Vallier how their measurements of the basement height could differ so significantly. Mr. Vallier was referring to a room that was over six feet in height, while Mr. Russell took the position that it was closer to five feet in height. Mr. Vallier explained that MPAC measures a room at the basement level from the bottom of the excavation as opposed to measuring from the floor of a finished basement.

Appellant’s Evidence

22Mr. Russell noted that a major point of disagreement was the value of the basement area in the home. He noted that he had some of the same comparable sales on his list as did Mr. Vallier, and pointed out some of the differences between those homes and the subject property.

23Mr. Russell produced photographs taken of the finished basement area of his home, using a measuring tape to show the existence of low ceilings. He stated that MPAC shows the ceiling height as being 7.5 feet, while a measurement taken from floor to ceiling and displayed in a photograph shows the height to be 77 inches or 6 feet 5 inches. Mr. Russell also testified that a large bulkhead, running horizontally along the width of the room, took up a great deal of what might have been usable space. Because the width of the bulkhead is shown to be 42 inches, and its height only 68 inches or 5 feet, 8 inches, it makes the space under the bulkhead difficult to use except for storage. Mr. Russell disputed MPAC’s assumption that the finished room in the basement was used as a bedroom – the photographic evidence would appear to show its use for storage. He noted that, if the area taken up underneath the bulkhead is subtracted from the floor area, the remaining area, and the part that is truly usable, is only 280 sq. ft. in total.

24The Appellant referred to comparable sales contained in an excerpt he produced of “My Neighbourhood – Favourites” from the MPAC website. Among the examples he referred to was 1818 Gerrard Street, a slightly smaller home on a smaller lot which sold for $572,000 in 2012. Another comparable sale produced by the Appellants was Property 6, 1829 Gerrard Street East, sold in 2015 for $630,000. This property has approximately 200 sq. ft. less in site area but has a slightly larger building total area and 31 sq. ft. more area in the finished basement. It is slightly older than the subject property and a quality 6 in construction quality, as compared to the subject property’s quality 7.

Analysis and Findings

25The subject property, with an effective year built of 2006, has indeed been modernized and upgraded as a result of major renovations. The Appellants believe that the upgraded appearance has been unfairly saddled with a value in excess of its worth.

26MPAC selected 12 comparable sales occurring in the shoulder years of 2015 and 2016. Some of those sales are selected for the purpose of bracketing, although, as the Appellant pointed out, there are some qualities in the more expensive homes not shared by the subject property. Some of MPAC’s comparable homes included garages; some others were substantially larger than the subject property, with, for example, a third floor. The Board prefers the two-storey homes without garages, and those with basements. The better comparable sales include MPAC’s Properties 3 (1672 Gerrard Street East); 4 (1706 Gerrard Street East); 6 (1783 Gerrard Street East); 8 – 1829 Gerrard Street East); and 11 (1706 Gerrard Street East). These comparable homes are single family detached homes of two-storeys in height with basements (not necessarily finished basements) and no garages.

27In the following chart, the respective lot sizes, effective building sizes, purchase prices and time-adjusted prices are set out. These properties do not include any semi-detached or duplexed homes; they are strictly single family detached homes without garages.

TABLE OF COMPARABLE SALES PROPERTIES:

Single Family Detached 2-Storey Homes without Garages*

Address on Gerrard St. East unless specified

Lot Size (sq. ft.)

Effective Building Size (sq. ft.)

Basement Size (sq. ft.)

Sale Date

Purchase Price

Time-adjusted price $

1818A

2,575

1,237

543

N/A

N/A

N/A

100 Kingsmount

2,250

1,551

1,551

2015, July

789,000

(X 1.065) 840,285

1672 (#3)

3,000

1,232

566

2017, July

1,140,000

944,716

1706 (#4)

3,750

1,232

672

2017, July

875,000

731,888

1783 (#6)

2,689

1,277

640

2015, July

765,700

808,794

1829 (#8)

2,340

1,301

581

2015, March

630,000

639,858

1706 (#11)

3,750

1,232

672

2014, July

667,000

803,165

Average Time-adjusted Price: $794,784

Median Time-adjusted Price: $803,165

28The chart above shows that there is one comparable property listed, the value of which on January 1, 2016, (the time-adjusted sale price) was lower than the others: 1829 Gerrard Street East or MPAC’s Property 8. Photographic evidence provided by MPAC in the Valuation Report shows 1829 Gerrard Street East to be a similar-sized home but with noticeable distinctions: (a) the basement does not appear from this photograph to have a large window as shows on MPAC’s photograph of the subject property; (b) the home does not have exterior renovations such as the subject property does, other than newer entry stairs; (c) the exterior finishes include siding on the upper floor, and not stucco throughout as in the case of the subject property; and (d) this property received a deduction for “abuts church”, although the report fails to mention the amount of that deduction.

29By isolating the most similar homes among all the comparators provided by both parties, the evidence provided by both parties shows that the current value of the subject property as proposed by MPAC is supportable.

30However, having determined that the value of $768,000 is supportable and that MPAC has indeed met the onus of proof, it is necessary to consider the evidence provided by the Appellant in order to determine whether or not there are any considerations which MPAC may have overlooked or, in the Board’s opinion, failed to adjust for appropriately.

31The Appellants have provided very detailed and compelling evidence that the finished area of the basement is not used as a bedroom, and that the use of the finished area of the basement is diminished by the low ceiling caused by the presence of the large bulkhead. The Appellant submitted that the actual normally usable space with a ceiling height of 6 feet 5 inches is only 280 sq. ft. in total. Photographs show the finished basement area used for storage and not for sleeping or recreation.

32Despite the evidence of the low ceiling in portions of the basement, the overall value of this home is lower than that of comparable properties, especially those with the same or similar quality of construction. In the chart above, without the evidence of duplexed homes or homes with garages, the subject property has been assessed at a value lower than the average value (using time-adjusted values) and lower than the median. The quality of the home is not reflected in this value. If anything, the current value of the subject property - the amount it would have sold for as of January 1, 2016 – would be higher than the assessed value in the amount of $800,000. However, where MPAC has not served a Special Notice under s. 40 for an increase in the assessed value, the Board has no jurisdiction to increase the value. (See Rule 40 above). For this reason, a reduction in value is also not required.

DECISION

33The current value of the subject property is hereby reduced from $778,000 to $768,000 for the 2017 and 2018 taxation years.

2018 DEEMED APPEAL

34An 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.

35Section 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.