Axion Development Corporation Limited v. Municipal Property Assessment Corporation, 2018 CanLII 89424

Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE:

September 20, 2018

FILE NO.:

WR 155195

Assessed Person(s):

Axion Development Corporation Limited

Appellant(s):

Axion Development Corporation Limited

Respondent(s):

Municipal Property Assessment Corporation (“MPAC”) Region 5

Respondent(s):

City of Kingston

Property Location(s):

73 Rideau Street

Municipality(ies):

City of Kingston

Roll Number(s):

1011-030-110-08600-0000

Appeal Number(s):

3260435 and 3292546

Taxation Year(s):

2017 and 2018

Hearing Event No.

701176

Legislative Authority:

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

Heard:

By written submission

Parties

Representative

Axion Development Corporation Limited

Lisa MacPhee

MPAC

Paul McIntyre

City of Kingston

No one appeared

DECISION OF THE BOARD DELIVERED BY JENNIFER GRIFFITH

Background

1Axion Development Corporation Limited (“Appellant”) is the owner of 73 Rideau Street (the “Subject Property”), which is located in the City of Kingston.

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 $354,000 for the 2017 and 2018 taxation years.

4The Appellant has filed an appeal for taxation year 2017 and was deemed to have filed a 2018 appeal with the Assessment Review Board (the “Board”), pursuant to s. 40 of the Act. It is the Appellant’s position that MPAC’s assessment of current value is too high and that the correct current value is $246,000. MPAC takes the position that its assessed value should be at $470,000.

5Pursuant to s. 40(11) of the Act, the City of Kingston is a party to this proceeding. However, 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 of the property possessed by each ratepayer. MPAC takes the position that an equitable reduction is required. The Appellant also asserts that an equity reduction is required.

7For the reasons that follow, the Board finds that the current value of the Subject Property for 2017 to 2018 tax years is $349,000. Pursuant to s. 44.(3)(b) of the Act, an equitable reduction of 0.844 of this value is required. The Board therefore finds that an equitable assessment for the 2017 and 2018 taxation years is $294,000. The assessment of the Subject Property is reduced from $354,000 to $294,000 for the 2017 and 2018 taxation years.

RELEVANT LEGISLATION

8Relevant sections of the Act are as follows:

1. “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.

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

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.

40.(17) Burden of proof - 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.

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.

ISSUES

9The issue(s) to be determined on 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 s. 44(3) (b) of the Act, and, if so, what the amount of this reduction should be.

Description of the Subject Property

10The Subject Property is described as a residential property, with three self-contained units, located at 73 Rideau Street, in the City of Kingston. The Subject Property was built in 1850, with a total building area of 2,256 square feet (“sq. ft.”), and a total lot size of 0.05 acres.

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

11Paul McIntyre represents MPAC. Mr. McIntyre prepared and filed a Valuation Report (“Valuation Report”) dated March 2, 2018 with the Board, as evidence in support of current value for the Subject Property.

12In support of current value, Mr. McIntyre submits a sales analysis of five suggested comparable properties sold in 2016 and 2017 in the same homogeneous area as the Subject Property. The analysis contains both actual sale and time-adjusted sale prices. Contained in the Valuation Report is the time-adjustment factor relied on, and the 543 sales of vacant or improved land used on to determine the time-adjustment factor. These sales occurred over the period January 3, 2014 to December 29, 2017 in the Subject Property’s neighbourhood and adjacent areas.

13The five suggested comparable properties are located at 491 Bagot Street, sold in 2016; 14 Plum Street, sold in 2017; 172 Montreal Street, sold in 2017; 17 Rideau Street, sold in 2016; and 109 Charles Street, sold in 2016.

14The analysis shows that the actual sale prices of these suggested comparable properties range from $295,000 to $636,000; and the time adjusted sale prices range from $293,336 to $608,496. Mr. McIntyre states in the Valuation Report that he relies on the Direct Comparison Approach to value which estimates the current value of the Subject Property, by adjusting the sale price of other sold properties for differences in property characteristics between the Subject Property and other sold properties.

15The analysis shows that these five sales have a median time-adjusted sale price of $208.61 per sq. ft. Based on this analysis, Mr. McIntyre determines the current value to be $470,624.

MPAC’s Submissions

16Relying on its evidence, MPAC submits that the correct current value for the Subject Property for taxation years 2017 to 2018 is $470,000 (rounded).

Appellant’s Evidence

17Lisa MacPhee represents the Appellant. Ms. MacPhee files two submission packages with the Board (one package dated May 14, 2018 (“Package 1”) and the second a supplemental addendum, dated May 17, 2018 (“Package 2”) in support of current value for the Subject Property.

18Ms. MacPhee presents an email dated May 25, 2018 to show that MPAC objected to Package 2, and an email dated June 15 to show that MPAC withdrew the objection.

19Ms. MacPhee submits an email (contained in Package 1, Schedule A) dated Thursday, April 27, 2018 from Kalin Doucet, of MPAC, in which he indicated that after the inspection and review, “additional corrections to the size of the deck and carport resulted in a reduction to $342,000”. Ms. MacPhee confirmed in her submission that the inspection of the Subject Property was done on April 24, 2018.

20In support of current value, Ms. MacPhee submits the following seven analyses, identified as Analysis 1 to Analysis 7:

• Analysis 1:

− Ms. MacPhee submits an analysis of six suggested comparable properties, located at 75 Rideau Street; 405 Barrie Street; 141 York Street; 77 Rideau Street; 172 Montreal Street; and 209 Sydenham Street, with three, four and five self-contained units, built over the period 1800 to 1900.

− The analysis shows that these suggested comparable properties are assessed at a median value of $177 per sq. ft., an average of $180 per sq. ft. and a weighted average of $179, based on total building area, compared to the Subject Property with a value of $157 per sq. ft., based on total building area. These six suggested comparable properties have a median unit value of $104,125; an average unit value of $112,447; and a weighted unit value of $109,217, lower than the Subject Property with a unit value of $118,000.

• Analysis 2:

− Ms. MacPhee submits an analysis of four suggested comparable properties, located at 65 Markland Street; 65 John Street; 122 York Street; and 14 Plum Street. These four suggested comparable properties are equipped with three, four and five self-contained units, built over the period 1910 to 1980.

− The analysis shows that these suggested comparable properties are assessed at a median value based on total building area of $176 per sq. ft., an average of $173 per sq. ft. and a weighted average of $173, higher than the Subject Property with a value of $157 per sq. ft., based on total building area. The analysis also shows that these four suggested comparable properties have a median unit value of $105,625; and average unit value of $104,496; and a weighted unit value of $100,625, lower than the Subject Property with a unit value of $118,000.

• Analysis 3:

− Ms. MacPhee submits an analysis which shows the Subject Property’s monthly rent for a one bedroom with courtyard and parking space is $925; a one bedroom with deck and parking space is $816; a two bedroom with parking is $975; and the total annual rent is $32,592.

− The analysis shows that the annual rent value of $32,592, is adjusted by a negative 3.30 per cent for Vacancy and Collections; a negative 16 per cent for Expenses; and adjusted by a Capitalization Rate of 5.50 per cent to arrive at an estimated value of $275,000 rounded, which is lower than the returned assessment of $354,000 for the Subject Property. In her submissions, Ms. MacPhee states that the adjustment values are based on MPAC’s Vacancy and Collections, Expense and Capitalization Rate variables, for walk-up Multi-residential properties in Kingston (copy contained in Package 1).

• Analysis 4:

− Ms. MacPhee submits an analysis of MPAC’s five sales of suggested comparable properties with basements, to address the fact that the Subject Property has no basement. In this analysis the total building areas for these suggested comparable properties were increased to include the basement area, and that results in a lower median time-adjusted sale price of $144 per sq. ft. When the median time-adjusted sale price was applied to the Subject Property it results in a value of $324,000 ($144 x 2,256 of total building area for the Subject Property). Ms. MacPhee’s finding was stated in error as $323,000 which the Board believes was due to a calculation error.

• Analysis 5:

− Ms. MacPhee is of the view that the most comparable multi-residential suggested comparable property to the Subject Property is 122 York Street (included in Analysis 2) with a returned assessment of $362,000 based on the valuation date of January 1, 2016. In order to account for the fact that the Subject Property has no basement, the total building was revised to 3,123 sq. ft. which includes the basement area (2,324 sq. ft. total building area plus the basement area of 799 sq. ft.) and it results in a value of $116 per sq. ft. Based on the revised rate of $116 per sq. ft. Ms. MacPhee calculates the value to be $261,000 ($116 x 2,256 sq. ft. of total building area for the Subject Property). This comparable also had a unit value of $72,400 based on total building area (excluding the basement area), and when this value is applied to the Subject Property it results in a value of $217,000 ($72,400 x 3 units for the Subject Property).

• Analysis 6:

− Ms. MacPhee is of the view that the most comparable property is 71 Rideau Street with a returned assessment of $274,000, based on the valuation date of January 1, 2016. This suggested comparable property is a single family row-house that shares a common wall with the Subject Property, with a smaller total building area of 1,784 sq. ft. a basement area of 892 sq. ft. and is said to have a larger site area than the Subject Property.

− Ms. MacPhee states that in order to account for the fact that Subject Property has no basement; the total building area for this suggested comparable property was revised to 2,676 sq. ft. (total area of 1,784 sq. ft. plus the basement area of 892 sq. ft.). Based on this revised total building area, Ms. MacPhee calculates that the value of this suggested comparable property is $102 per sq. ft. based on total building area. When this value is applied to the Subject Property it results in a value of $230,000 ($102 x 2,256 sq. ft. of total building area).

• Analysis 7:

− Ms. MacPhee presented four sales contained in Package 2, located at 238 Sydenham Street, sold in 2013; 152-154 Charles Street, sold in 2017; 177 Clergy Street East, sold in 2015; and at 102-104 James Street, sold in 2016. Ms. MacPhee states in her submissions that these four suggested comparable properties are “more similar to the Subject Property than the comparables originally listed in MPAC’s disclosure package”. However, she did not rely on the sale at 238 Sydenham Street, because it was sold in 2013, which she deemed too far removed from the valuation date of January 1, 2016 to be an adequate estimate of market value. The three remaining sales were analyzed for market value.

− The analysis shows that these three sales had a median sale price of $145 per sq. ft. based on total building area and a median sale price of $140 per sq. ft. based on time-adjusted sale price. When the median time-adjusted sale price was applied to the Subject Property it results in a value of $316,570.

21Based on the above evidence, Ms. McPhee states that the proposed value should be $246,000. This proposed value is based on the values of $274,000, $217,000, $261,000, and $230,000, determined in Analysis 5 and Analysis 6.

Appellant’s Submissions

22Ms. MacPhee submits that the market value determined by MPAC is overstated due to the utilization of properties that are superior to the Subject Property. She also submits that the inferior aspects of the Subject Property are not accounted for by MPAC.

23Ms. MacPhee submits that the site inspection of the Subject Property on April 24, 2018, reveals that the assessment data was incorrect.

24Ms. MacPhee submits that the Subject Property is inherently inferior to the suggested comparable properties presented by MPAC, because it was built on concrete slab and has no basement.

25Relying on her evidence, Ms. MacPhee submits that the correct current value for taxation years 2017 to 2018 is $246,000.

Findings on Current Value

26Under 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 property on the valuation date or close to it.

27In regard to MPAC’s evidence, the Board did not rely on sales at 14 Plum Street and 172 Montreal Street, because these two sales occurred in 2017, which the Board finds is too far removed from the valuation date of January 1, 2016 to provide any meaningful tests of current value. The remaining three sales at 491 Bagot Street, sold in 2016; 17 Rideau Street, sold in 2016; and 109 Charles Street, sold in 2016 are analyzed below in the final determination of current value.

28In regard to the Appellant’s evidence the Board accepts the revised assessment of $342,000 for the Subject Property, because the changes to the assessment data as stated by MPAC in their email to the Appellant are based on an inspection on April 24. No objections to the changes in assessment data was raised by the Appellant.

29In regard to Analysis 1, 2, 4, 5 and 6 in support of current value, the Board rejects the findings of these six analyses, because the suggested comparable properties used in the analyses are not sold. Therefore, the findings are not a true test of current value.

30In regard to Analysis 3, in support of current value, the Board rejects the finding of $275,000, because the adjustments to the annual rent of the Subject Property are based on the adjustment variables for walk-up for Multi-residential properties which is different than the Subject Property which is Residential Property. Also, the Board finds that the Appellant presents no sales of open market evidence to assist it in its determination of current value.

31In regard to the four sales presented in Analysis 7, the Board rejects the sales at 152-154 Charles Street, sold in 2017; and 238 Sydenham Street, sold in 2013 because the sales are too far removed from the valuation date of January 1, 2016, to provide any meaningful test of current value. The sales at 177 Clergy Street East, sold in 2015 was not relied on, because it is a Duplex, whereas, the Subject Property is a Triplex. The remaining sale at 102-104 James Street, sold in 2016 is a Triplex and is included in the Board’s determination as stated below.

32In support of current value the Board finds the best evidence to be the three sales presented by MPAC at 491 Bagot Street, sold in 2016; 17 Rideau Street, sold in 2016; and 109 Charles Street, sold in 2016; and the sale at 102-104 James Street, sold in 2016, presented by the Appellant. These four sales have on average a total building of 2,316 sq. ft.; a lot size of 0.08 acres; year built 1887; a quality rating of 5.87; a basement area of 536 and sold at $154.85 per sq. ft. based on total building area. Applying that value of $154.85 to the Subject Property results in a value of $349,000 rounded.

33Based on all of the evidence the Board finds the current value to be $349,000.

Issue No. 2: Whether there should be an equitable reduction of the current value pursuant to [s. 44(3)](https://www.canlii.org/en/on/laws/stat/rso-1990-c-a31/latest/rso-1990-c-a31.html) (b) of the [Act](https://www.canlii.org/en/on/laws/stat/rso-1990-c-a31/latest/rso-1990-c-a31.html), and, if so, what the amount of this reduction should be

MPAC’S Evidence

34MPAC presents an Equity Analysis Report in which the assessments of 30 comparable properties are compared to their respective sale prices to determine the Assessment to Sales ratio (“ASR”). The ASR is computed by dividing the assessed values of a property sold, by its sale price.

35MPAC submits that these 30 comparable properties are single family detached dwellings, duplexes, residential properties with three self-contained units, residential properties with four self-contained units, residential properties with five self-contained units; and residential properties with six self-contained units, which sold over the period January 1, 2014 to December 31, 2017, within 1.7 kilometres of the Subject Property.

36The analysis of these 30 comparable properties shows a Level of Appraisal (“LOA”) of 0.844 and a Coefficient of Dispersion (“COD”) of 15.4. Based on this finding, MPAC is of the opinion that an equity reduction is required, because the finding falls outside of MPAC’s standards of 0.95 to 1.05 for the LOA.

MPAC’s Submissions

37Relying on its evidence, MPAC’s submits that an equitable reduction of the current value for the 2017 to 2018 taxation years is required. Applying the LOA of 0.844 to the value of $470,624 results in a value of $397,000 ($470,624 x 0.844) rounded. The Equity Report states that MPAC is not seeking an increase in assessment and is therefore recommending the assessment value of $354,000 is confirmed.

Appellants’ Evidence

38Ms. MacPhee relies on MPAC’s Equity Analysis as demonstrated above and concurs with its finding that an equity adjustment of 0.844 is required.

Appellant’s Submissions

39Ms. MacPhee submits that the 543 sales used to determine the time-adjustment factor is an indication that the returned assessment for Subject Property is incorrect, because eight-two per cent of the ASRs are outside of the range (0.95 to 1.05) of MPAC’s acceptable standards.

40Finally, Ms. MacPhee cited the following case to assist the Board in its determination of Equity: Fleet v. Municipal Property Assessment Corp. Region No. 28, [2011] O.A.R.B.D. No. 208 (“Fleet”).

Findings on an Equitable Reduction

41The purpose of an equitable reduction has been described 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 paragraph 6:

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.

In addressing equity in assessment, the Court, at paragraph 35, also noted that “an assessment made at the actual value of lands and buildings … would be an inequitable assessment if all similar lands in the vicinity were assessed at some percentage of actual value substantially less than one hundred”.

42However, 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 that such a reduction is warranted. In this regard, the burden of proof rests with the Appellant to establish, on a balance of probabilities, that an equitable reduction is required.

43The term “vicinity” is not defined in the Act, but refers to the appropriate geographical area that will yield meaningful comparable properties (see Ontario Regional Assessment Commissioner, Region No. 3 v. Graham, 1993 CanLII 8621 (Ont. C.A.) at page 6).

44The Board rejects the Appellant’s assertion that the sales used by MPAC for time adjustment is outside MPAC’s acceptable standards, because these sales are not presented in support of equity. In fact, these sales are used to determine the time-adjusted factor; and the factor is used to adjust the sale dates of the suggested comparable properties to the valuation date of January 1, 2016. As these 543 sales are not presented in support of equity, the Board is not relying on the Fleet case in support of the ASR as submitted by the Appellant. In the Fleet case the Member was considering the ASR findings of two equity studies involving 40 and 57 sales within the vicinity of the Municipality of Temagami that were presented by MPAC in support of equity. It is clear in the Fleet case that the number of sales is much fewer; the vicinity was limited to the Municipality of Temagami; and the findings compared to MPAC’s acceptable range of 0.95 to 1.05 for an equitable assessment.

45Based on the evidence in support of equity, the Board accepts MPAC’s study that an adjustment of 0.844 is required. This finding is also supported and used by the Appellant in some of the above analyses. Applying the equity adjustment to the current value determined above results in a value of $294,000 (349,000 x 0.844).

46Based on all of the evidence the Board finds the current value is $294,000.

DECISION

47The Board reduces the returned assessment of $354,000 to $294,000 for the Subject Property for the 2017 and 2018 taxation years.