Stronach v. Municipal Property Assessment Corporation, 2018 CanLII 84488

Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE:

September 05, 2018

FILE NO.:

WR 154843

Assessed Person(s):

Joel Alexander Stronach

Appellant(s):

Joel Stronach

Respondent(s):

Municipal Property Assessment Corporation (“MPAC”), Region 15

Respondent(s):

Township of Chatsworth

Property Location(s):

Concession 3 NETSR, Part Lots 26, 27 and 28

Municipality(ies):

Township of Chatsworth

Roll Number(s):

4204-360-005-20000-0000

Appeal Number(s):

3270844 and 3313380

Taxation Year(s):

2017 and 2018

Hearing Event No.:

701900

Legislative Authority:

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

Heard:

August 10, 2018 by telephone conference call

APPEARANCES:

Parties

Counsel⁺/Representative

Joel Stronach

Danielle Dunn

MPAC

Jeff Bauman

Township of Chatsworth

No one appeared

MEMORANDUM OF ORAL DECISION DELIVERED BY JEAN-PAUL PILON ON AUGUST 10, 2018

Background

1Joel Stronach is the owner of Concession 3 NETSR, Part Lots 26, 27 and 28 (the “Subject Property”) which is land in the managed forests property class, located in the Township of Chatsworth.

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 date, January 1, 2016 (“current value”).

3MPAC has assessed the current value of the Subject Property at $217,000 for the 2017 and 2018 taxation years.

4The Appellant filed an appeal for the 2017 taxation year with the Assessment Review Board (the “Board”), and has been deemed to have brought the same appeal with respect to the Subject Property for the 2018 taxation year pursuant to section 40 of the Act.

5Pursuant to subsection 40(11) of the Act, the Township of Chatsworth was a party to the proceeding. However, it did not advise the Board of its position on the issues raised in these appeals, and no one appeared at the hearing on its behalf.

6Section 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 possessed by each ratepayer. MPAC takes the position that an equitable reduction is not required. The Appellant asserts an equitable reduction is required.

7At the completion of the hearing, the Board rendered its decision orally. For the reasons given at the hearing, and which follow in writing below at the request of the Appellant, the Board finds that for the 2017 and 2018 taxation years, the current value of the Subject Property as of the valuation date, January 1, 2016 is $217,000.

Relevant Legislation and Rules

The 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 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.

11Section 19(5.2) of the Act states:

19(5.2) Conservation land, managed forests.—The current value of the land as defined in the regulations or land in the managed forests property class shall be based only on the current use of the land and no other uses to which the land could be put.

12Section 19(5.2.1) of the Act states:

19(5.2.1) current value of managed forests. – Despite subsection (5.2) and any other provision of this Act, the Minister may, by regulation, provide that the current value of land in the managed forests property class shall be determined in accordance with the regulations.

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.

15Ontario Regulation 282/98 as amended (referred to as Ontario Regulation 397/16 in MPAC’s Valuation Report and referred to in this decision as the “Regulation”) states:

32.1 (1) The current value of land in the managed forests property class shall be determined as follows for the 2017 and subsequent taxation years:

1. Determine the value of the land in accordance with subsection 19 (5.2) of the Act.

2. Determine the value of the land in accordance with subsection (2).

3. If the value determined under paragraph 1 is less than the value determined under paragraph 2, the current value of the land is the value determined under paragraph 1.

4. If the value determined under paragraph 2 is less than 31 per cent of the value determined under paragraph 1, the current value of the land is the amount calculated by multiplying the value determined under paragraph 1 by 0.31.

5. In any other case, the current value of the land is the value determined under paragraph 2.

(2) For the purposes of paragraph 2 of subsection (1), the value of the land is determined as follows:

1. Determine whether the geographic area in which the land is located is listed in Column 2 of Table 1 to Part IX.1 of this Regulation. If it is, take the step described in paragraph 2. If it is not, take the steps described in paragraphs 4 and 5.

2. If the geographic area is listed in Column 2 of Table 1, determine whether the land band for the land, as assigned by the assessment corporation, is listed in Column 3 of Table 1 for the applicable geographic area. If it is, take the steps described in paragraphs 3 and 5. If it is not, take the steps described in paragraphs 4 and 5.

3. For land located in a geographic area listed in Column 2 of Table 1 and assigned to a land band listed in Column 3 of Table 1, identify the applicable value per acre of the land as set out in Column 4 of Table 1.

4. For any other land, identify the applicable value per acre of the land as set out in Column 2 of Table 2 to Part IX.1 of this Regulation using the land band assigned to the land by the assessment corporation.

5. The value of the land is calculated by multiplying the applicable value per acre of the land by the acreage.

(3) In this section,

“land band” means a geographic area in which similar farm properties sell for similar prices, as determined by the assessment corporation under subsection 19 (5) of the Act.

ISSUES

16The issues to be determined in this appeal are:

1. What is the correct current value of the Subject Property for the taxation years 2017 and 2018?

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

Discussion, Analysis and Findings

Issue No. 1: What is the correct current value of the Subject Property for the taxation years 2017 to 2018?

MPAC’s Evidence

17Jeff Bauman testified for MPAC and relied on MPAC’s Valuation Report prepared in anticipation of the hearing.

18MPAC’s description of the Subject Property was not disputed in that the entirety of the Subject Property is in the managed forests property class and that the lot area is 133.35 acres.

19MPAC referred to four proposed comparable properties that were in the managed forests property class at the time that each was sold. Without any adjustment to sale prices arising from the passage of time, the sale price of each ranged between $2,874 per acre and $2,205 per acre.

20MPAC’s representative testified that larger lot areas have lower per acre values in land sales, as illustrated in its chart of proposed comparable properties, partially reproduced below.

Subject Property

Property 1

Property 2

Property 3

Property 4

Address

Concession 3 NETSR, Part Lots 26, 27 and 28

Con 9, Pt Lot 5

Con 9, EGR Lot 15

Con 1 N, Pt Lot 7

Sullivan Con 1, Pt Div 1, among others

Sale Date

N/A

12/18/2015

08/29/2014

02/15/2017

07/30/2017

Sale Amount

N/A

$220,000

$175,000

$115,000

$137,000

Acreage

133.35

100

79

50

48.71

Sale Amount Per Acre

N/A

$2,205

$2,215

$2,300

$2,874

21The most similar of the proposed comparable properties to the Subject Property in size is the first proposed comparable property, which had the lowest per acre price of $2,205 in a transaction completed on December 18, 2015, very close to the valuation date of January 1, 2016. None of the other proposed comparable properties were the subject of sales transactions occurring within a one year period before or after January 1, 2016.

22MPAC’s representative testified that because the Subject Property is larger than the other proposed comparable properties, MPAC’s current value assessment of $217,000 or $1,627 per acre was correct. He further testified that the assessment was produced by MPAC’s computer model.

23MPAC’s representative pointed out that the valuation of land in the managed forests property class is specially regulated.

24The assessment of lands in the managed forests property class is governed by section 21.1 of the Regulation. That provision requires that two separate valuations be conducted. First, the value of the land must be determined in accordance with subsection 19(5.2) of the Act, that is “based only on the current use of the land and no other uses to which the land could be put.” Secondly, subsection 32.1(2) of the Act sets out a regulated rate. The Regulation sets a value per acre for different parts of the province. The applicable rate here is $1,758 per acre. The Regulation requires that the lower value be used, and has a provision to apply in the event that the regulated rate is less than 31% of the value at the land’s current use. That provision is not applicable here.

25As a result, MPAC’s representative testified that the current value of the land was the upper limit value, $217,000, or $1,627 per acre, pursuant to the Regulation.

26All of this was summarized in a chart set out in MPAC’s Valuation Report reproduced below. It is noted that the first line incorrectly shows the Upper Limit (market value) at $1,630 per acre, not $1,627 per acre:

Valuation

Rate Per Acre

Value

Upper Limit (market value)

$1,630

$217,366

Regulated Rate

$1,758

$234,429

Lower Limit

$505.30

$67,381

MPAC’s Submission

27Relying on its evidence, MPAC submits that the correct current value for the taxation years 2017 and 2018 is the value returned of $217,000.

Appellant’s Evidence

28Danielle Dunn represented the Appellant and testified on the Appellant’s behalf. Her testimony was that the Subject Property has little in the way of road access, which devalues the property and limits its potential usefulness.

29The Appellant’s representative further testified that two similar and neighbouring properties have the same zoning as the Subject Property but that they are not in the managed forests property class. These, she testified, were assessed much lower at $940 per acre and $1,415 per acre, and that the Subject Property should be assessed at the average of these two, to arrive at a current value assessment at $156,701.

Appellant’s Submission

30Relying on his representative’s evidence, the Appellant submits MPAC’s assessment of current value is too high and that the correct current value is $156,701.

Findings on Issue 1

31The burden of proof as to the correctness of the current value of the land rests with MPAC and, in this case, MPAC did not prove its current value assessment was correct. This is because the Board was not satisfied on a balance of probabilities that there was any evidence to support a valuation of the land at $1,627 per acre, where the most comparable of MPAC’s proposed comparable properties, the first, supported a significantly higher valuation of $2,205 per acre.

32It may be the case, as submitted by MPAC’s representative, that the larger Subject Property would have a lower per acre value that the four, smaller, proposed comparable properties, by virtue of its size. However, the difference in value per acre between the Subject Property and the first proposed comparable property is $578 per acre, or a premium of 35%. In contrast, the differences in per acre costs between the first proposed comparable property and the second and third proposed comparable properties are minimal, even though those properties are significantly smaller at 100, 79 and 50 acres respectively. This is more than the “slight” difference MPAC’s representative testified should be present, and there was no evidence before the Board to explain the disproportionate discrepancy between MPAC’s opinion of value and the proposed comparable properties. The fourth proposed comparable property is similarly unhelpful for comparison purposes, where its sale price was $2,874 per acre, nearly 77% more than the current value of the Subject Property advanced by MPAC.

33The Board therefore finds that MPAC did not meet its burden of proving its opinion of current value on a balance of probabilities.

34In a recent decision of the Board, Jay Patry Enterprises Inc. v. Municipal Property Assessment Corporation Region 5, 2019 CanLII 39629 (ON ARB), 2018 CanLII 70338 (“Patry”), it was determined in paragraph 40 that “if MPAC has not met its burden, the taxpayer’s evidence must be analyzed to see if it is capable of proving that a particularly current value is more likely than not.”

35In this case, the Board finds that the Appellant did not provide evidence to support his opinion of value because his was not evidence of sales, but of assessments. It was not suggested at the hearing that any method other than the direct comparison approach, requiring evidence of sales not assessments, should be applied.

36The Patry decision then says that “if there is insufficient evidence in the record that is capable of proving current value, the Board should fix the assessment at the last uncontested value. This framework provides meaning to both subsection 40(17) and clause 44(3)(a).”

37It is not the case here, however, that there is insufficient evidence of current value. There is evidence before the Board of current value because the Regulation sets out a regulated rate of $1,758 per acre. Returning to the Regulation’s methodology, the first step is to determine the likely sale value of the land, which cannot be determined by the evidence before the Board. Then, the regulated rate is to be determined. Paragraph 5 of subsection 32.1(1) of the Regulation is clear that “in any other case” the current value of the land is the regulated rate, which is $1,758 per acre or $234,429.

38It is therefore determined that the current value of the land is $1,758 per acre or $234,429. However, that value is higher than the assessment that was returned to the assessment roll of $217,000 and MPAC has not filed a notice of intention to seek a higher assessment.

Issue No. 2: Whether there should be an equitable reduction of the current value pursuant to section 44(3)(b) of the Act, and, if so, what the amount of this reduction should be.

MPAC’s Evidence

39MPAC chose fourteen proposed comparable properties in its equity analysis that were all in the managed forests property class within 20 kilometers of the Subject Property. They had all been transferred in arm’s length real estate transactions over approximately six years.

40MPAC’s representative testified all of these proposed comparable properties were in the managed forests property class at the time of sale. MPAC’s representative testified that its level of appraisal and coefficient of dispersion measures indicated that similar properties in the vicinity of the Subject Property have been assessed at or near their current values.

MPAC’s Submission

41Relying on its opinion of value of $217,000, MPAC determined that no equity adjustment was required.

Appellant’s Evidence

42The Appellant’s representative testified that only the fourteenth of MPAC’s fourteen proposed comparable properties was comparable because it was the only one not to have road access like the Subject Property.

43The Appellant’s representative further testified that the thirteenth of MPAC’s proposed comparable properties was not in the managed forests property class at the time of sale.

Appellant’s Submission

44The Appellant and his representative made no specific submission as to what equitable adjustment was required, and it was assumed they sought an equity adjustment to reduce the current value of the Subject Property to the same $156,701.

Findings on Issue 2

45The purpose of an equitable reduction has been described by the Ontario Court of Appeal in Empire Realty Co. Ltd. and Assessment Commission for Metropolitan Toronto et al., [1968] 2 O.R. 388, 1968 CanLII 183:

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 application of 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.

46In addressing equity in assessment, the court 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.”

47However, the goal of the Act is to determine the correct current value. Any equitable reduction in the current value results in an incorrect current value. Consequently, an equitable reduction should only be made where there is clear evidence to support such a reduction. The burden of proof rests with the Appellant to establish on a balance of probabilities it is required.

48The Board rejects the Appellant’s argument that thirteen of MPAC’s fourteen proposed similar properties should not be considered in determining whether an equitable reduction is required. The Board makes this determination for three reasons.

49First, the Board finds that the thirteenth of MPAC’s proposed comparable properties was a managed forests class property as was asserted by MPAC. MPAC’s equity report was served well in advance of the hearing and indicated MPAC’s position that all of its proposed comparable properties were managed forests class properties. The Appellant researched other details of each of these properties, yet he failed to produce any evidence to prove that it was not in the managed forests property class.

50Second, the Board finds that MPAC’s proposed comparable properties are substantially similar to the Subject Property because they all belonged to the managed forests property class at the time of sale. Managed forests class properties are assessed in accordance with section 19(5.2) of the Act, where “the current value of the land that is….land in the managed forests property class shall be based only on the current use of the land and no other uses to which the land could be put”. Road access might have been more important had the land belonged to a different class of property. The Board was not convinced that the value of land in the managed forests property class should be significantly affected by the absence of road access.

51Third, a determination as to whether the Subject Property is equitably assessed with respect to similar lands in the vicinity cannot be made with evidence of the assessment of only one property beyond the Subject Property. This is what the Board would have been left with if only the fourteenth proposed comparable property was determined to be similar to the Subject Property as submitted by the Appellant where the Appellant proposed no other comparable properties. The question in an equity analysis is set out in subsection 44(3)(b) of the Act, having “reference to the value at which similar lands (emphasis added) in the vicinity are assessed”, not similar land singular.

52The Board therefore finds that no equity adjustment is required in these circumstances, where the Board’s conclusion is that equity has been achieved.

DECISION

53The correct current value of the Subject Property is $234,429, as set by the Regulation. However, MPAC did not serve notice of its intention to seek a higher assessment, as required by Rule 40 of the Board’s Rules of Practice and Procedure. The Board does not generally increase assessments when that notice has not been provided. The Board therefore confirms the assessment of $217,000 for the 2017 to 2018 taxation years.

54An equitable reduction of the current value of the Subject Property pursuant to section 44(3)(b) of the Act, is not required.