Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE: October 05, 2018

FILE NO.: WR 153146

Assessed Person(s): Marguerite Johnston and Wayne Johnston

Appellant(s): Marguerite Johnston and Wayne Johnston

Respondent(s): Municipal Property Assessment Corporation (“MPAC”) Region 30

Respondent(s): City of Greater Sudbury

Property Location(s): 651 Panache Shore Road

Municipality(ies): City of Greater Sudbury

Roll Number(s): 5307-120-013-34000-0000

Appeal Number(s): 3246256 and 3314562

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

Hearing Event No. 696272

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

Heard: May 4, 2018 by telephone conference call

APPEARANCES:

Parties

Representative

Marguerite Johnston and Wayne Johnston

Self-represented

MPAC

Andrew Rossanese

City of Greater Sudbury

No one appeared

DECISION OF THE BOARD DELIVERED BY LESLIE FLEMMING

Background

1Marguerite Johnston and Wayne Johnston (Appellants”) are the owners of 651 Panache Shore Road North (“Subject Property”) in the City of Greater Sudbury (“City”). This is a seasonal/recreational dwelling, first tier on water, located on the shore of Panache Lake, with 147 feet of frontage and comprising approximately 2.11 acres. It is served by a year-round road, and hydro is available. The dwelling itself was built in 1950, is 774 square feet (“sq. ft.”) in size, a single storey, with a boathouse and a shed also on the property.

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 $248,000.

4The Appellants have filed an appeal for taxation year 2017 with the Assessment Review Board (the “Board”), pursuant to s. 40 of the Act. It is their position that MPAC’s assessment of current value is too high and that the correct current value is $206,000. At this hearing, MPAC takes the position that its assessed value should be changed to $216,000. Because the appeal was not heard by March 31, 2018, the Appellant’s were deemed to appeal the assessment for the 2018 taxation year.

5Pursuant to s. 40(11) of the Act, the City is also a party to this appeal. However, the City did not advise the Board of its position on the issues raised in these appeals, and no one appeared at the hearing on the City’s 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 of the municipal tax burden according to the value of the property possessed by each ratepayer. In this case, Andrew Rossanese presented his Equity Analysis Report, addressing the issue. In that report he obtained 42 sales of residential properties in the vicinity within 28 kilometres of the Subject Property. Using time-adjusted sales prices, Mr. Rossanese calculated that median Assessment to Sales Ratio (“ASR”) was 0.871, or lower than the sales values. Equity requires that the Subject Property be assessed at a similar rate as similar properties in the vicinity, with the result that Mr. Rossanese recommended a reduction in the current value from $248,000 to $216,000 to make the assessed value of the subject property equitable with the sample.

7The Appellants provided no evidence on this issue.

8At the completion of the hearing, the Board reserved its decision. For the reasons that follow, the Board finds that the current value for the 2017 and 2018 tax years is $248,000. Pursuant to s. 44(3)(b) of the Act, this value should be reduced to $216,000.

Relevant Legislation and Rules

9The Act:

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.

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

3. For each subsequent period consisting of four consecutive taxation years, land is valued as of January 1 of the year preceding the first of those four taxation years.

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.

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

10The 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; and

11Whether 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.

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

12Mr. Rossanese represented MPAC, and presented the evidence. Mr. Rossanese is a Property Valuation Specialist for MPAC, and prepared the Valuation Report and Equity Analysis Report, dated November 15, 2017, which were filed at the hearing.

13Mr. Rossanese began with a description of the subject property, an unheated, seasonal-use dwelling on 2.11 acres, built in 1950, and given a construction quality ranking by MPAC of 4.0. The building itself is 774 sq. ft.

14Mr. Rossanese chose the direct sales comparison method of determining the current value. To that end he used six sales of comparable seasonal/recreational dwellings, first tier on water, all of which were one storey in size and lacked central heating. The properties have all sold between 2012 and December, 2017, and all but one are located on Panache Lake. Sale 1, at 1736 Regional Road 10, is located on Little Panache Lake. Sale 3, located at 83-5 LaFrance’s Point, also on Lake Panache, is a water access property while the subject property and the five other comparable sales have road access to their properties. All six properties fall within the “fair” (3 or 3.5) or “average” (4.0) construction quality ranking.

15In arriving at the current value of the subject property, MPAC set out the comparable details of the six selected properties, and highlighted where each one is either superior to, inferior to, or relatively comparable to the subject property. The following chart contains a summary of the properties selected by MPAC for comparison (note that Properties 1, 2 and 4 were also included in the Appellants’ evidence as comparable sales). Note the following abbreviations:

TA = “time adjusted”

Eff. = “Effective”

Subject Property

1736 Reg. Rd. 10

529 Panache Shore N.

83-5 Lafrances Pt.

225 Panache Shore N.

563 Panache Shore N.

51A Panache Shore N.

Sale Date

Aug/14

Nov/15

Oct/17

Dec/16

Oct/17

May/12

Sale Price

$211,900

$215,000

$212,000

$300,000

$180,000

$252,500

TA Sale Price

$225,800

$216,353

$197,197

$287,846

$167,432

$301,091

Eff. Year Built

1953

1976

1959

1953

1930

1955

1960

Eff. Frontage

147

528

202

235

217

450

157

Eff. Site Area (Acres)

2.11

2.15

1.32

1.75

2.18

2.61

0.92

Structure Area

774

735

559

470

501

369

658

Out-buildings

2 - Shed, Boathouse

1 – Shed

3 - Boathouse, 2 sheds

1 - Shed

2 - 1 Cabin, 1 Shed

1 -Boathouse

1 - Detached garage

Road Access?

Yes

Yes

Yes

Water access

Yes

Yes

Yes

16Mr. Rossanese used time adjustment factors calculated by analyzing 104 sales in the vicinity occurring between January, 2012 and October, 2017. By analyzing and applying the trend in sales on a monthly basis, Mr. Rossanese revised the sale prices of the comparable properties to bring them to the estimated value of the sale had it occurred on January 1, 2016, the valuation day. The Appellants did not challenge the use of time-adjusted sales figures, which are shown in the chart above.

17In his evidence of proposed comparable properties, Mr. Rossanese went over the differences between each property and the subject property in an effort to “bracket” the value of the Subject Property. Bracketing is a technique used in direct sales comparisons where the use of similar properties both likely to be more valuable, less valuable or reasonably similar to the Subject Property help identify the value at which the Subject Property would likely have sold around the valuation day.

MPAC’s Submissions

17In the properties proposed by MPAC, there are both superior and inferior properties which help to define a current value for the Subject Property. For example, Sale 3, 83-5 Lafrance’s Point, has a smaller residence by 304 sq. ft., a small shed almost identical in size to the subject property’s shed, 88 more feet of water frontage, but a site area which is .36 of an acre smaller. It has no boathouse. This property sold in October, 2017, for $197,197 (time-adjusted). MPAC deemed this property inferior to the subject, primarily for the reason that it is a water-access-only property.

18Sale 6 at 51A Panache Shore Road North sold for $252,000 in May, 2012, with a time-adjusted value on January 1, 2016, of $301,091. The property has 10 more feet of frontage, a smaller site area, but a slightly newer residence built in 1960. It is smaller than the subject property, but there is also a detached garage on site built in 1995 of 709 sq. ft. This would be a slightly superior property when compared to the subject property.

19Sale 5, 563 Panache Shore Road North, is an example of a lower value property. While it has more frontage and a larger site area, the structure is only half the size of the Subject Property’s. While it has a small boathouse, there are no other structures to offset the small residence on the site. This property sold for $180,000 in 2017, and MPAC’s time adjustment revised the value downward to $167,432. This property is inferior to the Subject Property.

20The proposed comparable sales support MPAC’s assessment of current value at $248,000. This property appears to be superior to four of the suggested comparable properties, and inferior to two, in Mr. Rossanese’s opinion.

21Relying on its evidence, MPAC submits that the current value of the subject property is $248,000 for the 2017 and 2018 taxation years.

22In respect of the Appellants’ submission that MPAC has ignored the inherent value of water frontage in seasonal/recreational properties, Mr. Rossanese responded that frontage is not the only determining factor to be considered in the assessment of seasonal/recreational property, even if it might be given greater weight in other communities. The Appellants also challenged some of the evidence provided by MPAC in connection with the comparable sales properties. In response to these assertions, primarily to do with structures in existence which were not accounted for by MPAC, Mr. Rossanese noted that the assessment of improvements on land are triggered by applications for building permits. Where the land owners failed to obtain building permits prior to construction, MPAC would have no records of the improvements.

Appellant’s Evidence

23The Appellants represented themselves, and both Marguerite Johnston and Wayne Johnston testified. They advised at the outset that they thought water frontage was not valued appropriately by MPAC and ought to be given more weight. They also commenced their presentation by advising the Board that during the prior assessment cycle, their property had received a -$42,000 adjustment. When the new cycle began, the adjustment had been removed.

24The Appellants gave examples of properties in the vicinity which were assessed close in value to their property and yet had larger site areas and/or longer frontages on the Lake. The Appellants provided properties A through D as examples of comparable properties, but none had been recently sold. This makes it impossible to compare their sales values when there have been no recent sales. Sales are required because current value is based on the amount a willing buyer would pay to a willing seller for the land, unencumbered, as of the valuation day. While the Appellants provided good photographs of these properties, they were not helpful in determining the correct current value of the subject property.

25The Appellants also provided information on four properties which had sold between 2014 and 2016, labelled F through I. Sale F is the same sale as provided in MPAC’s comparable sales as Property 1, although the information provided by both parties is different. This property, 1736 Regional Road 10, is described by MPAC as being on a busier road than the subject and on a smaller lake: Little Panache Lake. The Appellants note that the sale in 2014 was for $219,900 while MPAC records the 2014 sale as for $211,900, time-adjusted to $225,850.

26Also among the Appellants’ comparable sales was Sale G, 115 Panache Shore Road North, with a sales value in 2016 of $18,358. The property had been assessed at $235,000. No clarifying information was provided by the Appellants to explain the exceptionally low sale price, which they acknowledged in their materials. Because of the radically low price, the Appellants conceded that this was an outlier, and it is not helpful in establishing the value of the subject property.

27Sale H, described as 529 Panache Shore Road North, sold in 2016 for $215,000. The Appellants’ materials note that the property is similar to the subject property with significantly more frontage. This property was Sale 2 of MPAC’s selected comparable sales properties.

28Sale I, 225 Panache Shore Road North, sold for $300,000 in 2015. No additional information was provided. This was Sale 4 on MPAC’s list of proposed comparable sales.

29The Appellants also attached a Residential Appraisal Report dated 2001 for the purpose of showing that very few changes had been carried out on this property since its acquisition by them.

Appellants’ Submissions

30Relying on their evidence, the Appellants submit that the correct current value for taxation years 2017 and 2018 is $206,000.

31The Appellants made no submissions with respect to equity.

Findings on Current Value

32The Board finds that the comparable sales presented by both parties serve to support the assessment as returned in the amount of $248,000. As noted by MPAC, the sales prices in the immediate vicinity of the subject property have a range of $180,000 to $300,000, with a median price of $213,500 and an average price of $228,566. Many of the comparable residences are very old, built in the 1930’s to 1950’s. Values on Panache Lake are superior to values on Little Panache Lake because the lake is larger.

33When comparing the subject property to the comparable properties proposed by both parties, the Board finds that the assessed value of the subject property in the amount of $248,000 is supportable on the balance of the evidence.

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

MPAC’S Evidence

34The equity analysis carried out by MPAC confirmed that, based on the comparison of 42 residential properties in the vicinity, the median level of appraisal was 87 per cent. This means that homes in the random sample were being assessed at less than their sale prices. In order to make the assessment of the subject property equitable with the assessment of similar homes in the vicinity, MPAC reduced the current value to an assessed value of $216,000.

35Relying on its evidence, MPAC submits that an equitable reduction is required and the current value for the 2017 and 2018 taxation years should be reduced to $216,000.

Appellant’s Evidence

36The Appellants did not address the issue of equity in their evidence or submissions.

Findings on an Equitable Reduction

37The 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 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 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 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”.

38However, 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.

39The 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).

40In this case, even though the Appellants did not argue for the application of an equitable reduction, MPAC recommended a reduction in order to be fair as a result of their equity study. The Board agrees: where evidence shows that land values have been assessed inequitably, the Board has the jurisdiction to order a reduction in the current value which results in a value below current value. In this case, evidence provided by MPAC shows us that such a reduction is warranted.

DECISION

41The correct current value of the Subject Property is $248,000 for the 2017 and 2018 taxation years.

42An equitable reduction of the current value of the Subject Property, pursuant to s. 44.(3)(b) of the Act, is required. The current value of the Subject Property is reduced to $216,000.