Scott Rose v. Municipal Property Assessment Corporation, 2018 CanLII 96149

Assessment Review Board / Commission de révision de l’évaluation foncière

ISSUE DATE: October 10, 2018

FILE NO.: WR 153844

Assessed Person(s): Judith Anne Truax; Scott Andrew Rose

Appellant(s): Scott Rose

Respondent(s): Municipal Property Assessment Corporation (“MPAC”) Region 07

Respondent(s): Township of North Kawartha

Property Location(s): 91 Butler Drive

Municipality(ies): Township of North Kawartha

Roll Number(s): 1536-020-001-52800-0000

Appeal Number(s): 3253665 and 3292986

Taxation Year(s): 2017 and 2018

Hearing Event No. 701175

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

Heard: June 11, 2018 in Apsley, Ontario

APPEARANCES:

Parties	Representative
Scott Rose	Self-represented
MPAC	Steve Gardiner
Township of North Kawartha	No one appeared

DECISION OF THE BOARD DELIVERED BY LESLIE FLEMMING

REASONS

Background

1Scott Rose and Judith Truax are the owners of 91 Butler Drive (“Subject Property”) in North Kawartha, a single family detached recreational residence located on Julian Lake. Scott Rose appealed the assessment returned for the taxation years 2017 and 2018 in the amount of $255,000, on the ground that this value is too high.

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”).

3Mr. Rose has filed appeals for taxation years 2017 and 2018 with the Assessment Review Board (the “Board”), pursuant to s. 40 of the Act. It is his position that MPAC’s assessment of current value is too high. While Mr. Rose set out a number of reasons that the assessment is too high, he did not propose a correct current value. At this hearing, MPAC asserts that the assessed value of $255,000 is low and that the current value is $325,000.

4Pursuant to s. 40(11) of the Act, the Township of North Kawartha (the “Township”) is a party to this proceeding. However, the Township did not advise the Board of its position on the issues raised in these appeals, and no one appeared at the hearing on the Township’s 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 of the municipal tax burden according to the value of the property possessed by each ratepayer. MPAC takes the position that an equitable reduction is not required. Mr. Rose did not assert that an equitable reduction is required. Therefore, in this proceeding, this ground for 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 is $307,000. However, as no one made an application to increase the assessment, the assessment for 2017 and 2018 tax years is confirmed at $255,000. An equitable reduction of this value is not required.

Relevant Legislation

7Relevant 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.

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.

ISSUE

8The issue to be determined on this appeal is the correct current value of the Subject Property for the taxation years 2017 and 2018.

Discussion, Analysis and Findings

MPAC’s Evidence

9Steve Gardiner, a Property Valuation Analyst for MPAC, represented the assessment corporation and presented evidence on its behalf. He filed his Property Valuation Report and an Equity Analysis Report, dated April 4, 2018. He inspected the property on July 19, 2017.

10Mr. Gardiner used the direct sales comparison method of determining current value. This technique uses property sales of comparable properties, and because the valuation day for the current assessment cycle is January 1, 2016, MPAC also uses a technique to estimate the sales values of their proposed comparable properties as of the valuation day. Mr. Gardiner outlined the process of canvassing 533 of residential property sales in the vicinity from January 6, 2012 through March 16, 2018 in order to track the trend in sales in the area. Based on this technique, Mr. Gardiner stated that the overall trend in the market was an increase of 33.55 per cent over these 74 months. He then broke down the changes each month in order to determine a time adjustment factor per month. This factor is multiplied by the actual selling price to arrive at an estimate of value for each of his selected comparable property sales as of the valuation day. While Mr. Rose disagreed with Mr. Gardiner’s choice of comparable residential properties, he did not object to the time adjustment method used.

11The main features of the Subject Property that were incorporated into the search for comparable sales were:

• seasonal/recreational dwelling, first tier on water;
• hydro available
• septic bed
• year round road access
• water from lake or river
• an effective site area of 9800 square feet (“sq. ft.”)
• effective frontage of 140 feet
• effective year built: 1955
• living area: 760 sq. ft.
• 1 storey
• 1 bathroom
• Construction quality rating of “5”

12Mr. Gardiner selected four properties in the area that he deemed comparable to the Subject Property. All were in the category of either seasonal/recreational first tier on water, or single family detached on water. They ranged in construction quality from 5 to 6.5. The time-adjusted sales amounts ranged from $350,665 for 46 Fire Route 37 to $693,382 for 6242 Highway 28. The Subject Property had the smallest structure of the five cottages being compared. Two of the proposed comparable properties had much larger waterfronts at 180 and 204 feet. Two had less waterfront, with one at 80 feet and one at 67. All of the properties except 61 Butler Drive had one or more outbuildings in the nature of a cabin (like the Subject Property’s 119 sq. ft. cabin) or a shed, carport, or boathouse. The most expensive of the proposed comparable homes was 6242 Highway 28, with two single-family detached homes on the 2.57 acre property and an attached garage, a boathouse and a cabin.

13The sales of MPAC’s four proposed comparable properties took place quite a long time away from the valuation day. Properties #2 and #3 sold in 2012, while properties #1 and #4 sold in 2017. Therefore there had to be more adjustments made in respect of the change in value to estimate the value of the four properties as of the valuation day. All four examples chosen by Mr. Gardiner sold for more than the Subject Property’s assessed value, with the least expensive being 46 Fire Route 37, an 880 sq. ft. single family detached home on a site of .88 acres with a small 135 sq. ft. cabin. This property sold for the time-adjusted price of $350,655 in June, 2017.

14201 Butler Drive (Property #2) sold in February, 2012, for the time-adjusted price of $398,477. It has 40 more feet of waterfront than the Subject Property and a residence of 70 more sq. ft. This cottage has a shed and a carport. It has a higher quality construction, rated a “6” as opposed to the “5” rating given to the Subject Property.

1561 Butler Drive (Property #3) sold in April, 2012, for the time-adjusted price of $376,425. It has a smaller site area than the Subject Property, and a waterfront of only 67 feet. This property lacks any outbuildings. However, it is a “higher end” property than the Subject Property and rated a construction quality “6”.

166242 Highway 28 is a much more valuable property with a construction quality of “6.5”, 2.57 acres, and two cottages on site of 2,308 sq. ft. and 2,291 sq. ft. This property sold in 2017 for $747,000, which is adjusted to $693,382 using the time adjustment method outlined by Mr. Gardiner.

17Based on these sales of other detached single family homes on water, Mr. Gardiner concluded that the current value of the Subject Property was $325,000 as of January 1, 2016.

MPAC’s Submissions

18Relying on its evidence, MPAC’s submits that the correct current value for the taxation years 2017 and 2018 is $325,000. However, no one has made an application to increase the assessment, which is $255,000 for both years.

19MPAC also submitted several decisions from the Board, of which he referred to three. He submitted the Board decision of July, 2010 in Auerbach v. Municipal Property Assessment Corp. Region No. 03, [2010] O.A.R.B.D. No. 449, a decision by Member A. Fenus, along with the decision Cogan v. Municipal Property Assessment Corporation, Region No. 3, DM 32084 by Member J. de P. Seaborn, dated July 22, 2004. Both decisions stand for the principle that the assessment tool used by MPAC is not on trial but rather the results of the analysis. The Act does not specify how assessment is to be carried out, and various methods have been used. MPAC uses a system of mass appraisal but that is not the only method of valuing land, and it is MPAC’s conclusions that are under scrutiny in a given appeal, not its methods and formulae.

20The third case referred to by MPAC is Kenney v. Municipal Property Assessment Corp. Region No. 05, [2012] O.A.D.R.B.D. No. 78 a decision of Members J. LaFlamme and S. Mather released on March 12, 2012. This case involved the nuisance effect of wind turbines in proximity to a Subject Property. Mr. Gardiner did not clearly explain its relevance to the facts of this case.

Appellant’s Evidence

21Mr. Rose represented himself, and provided all the evidence for this his appeal. He filed a one-page “Summary of Concerns”, a copy of the Property Profile prepared by MPAC, an excerpt from a survey of the property and the surrounding lots and cemetery, plus nine photographs showing the interior of the cabin.

22Mr. Rose testified that the comparable properties selected by MPAC were not comparable in most ways with the Subject Property. He used the photographs provided to illustrate that his cabin is constructed in a basic fashion with no insulation, no drywall (studs are showing on the interior); single-pane windows; no storm windows, a space heater as opposed to electric baseboard heating, and basic wiring that may not be up to building code requirements.

23Mr. Rose testified that the cabin is 65 years old, and there have been few improvements during that time with the exception of raising the home and installing a foundation, and upgrading to 100 amp electrical service as of three years ago.

24The property not only abuts a cemetery, stated Mr. Rose, but wraps around two sides of it, as shown on the survey he provided. MPAC had omitted to mention “abuts cemetery” in the property profile, and Mr. Rose thought that this was a significant omission given that his property abuts two sides of the cemetery and because the presence of the cemetery will prevent him from upgrading to a larger septic system or from building a larger cottage on the site.

25In addition, Mr. Rose testified that MPAC’s measurement of the property on which the cabin sits is incorrect. He states that the actual size is 0.1827 of an acre and not 0.31 acres as noted by MPAC. He stated further that MPAC used comparable properties which were much larger than his. He proposed that a better comparable property would have been 35 Butler Drive. However, he provided no details about this possible comparable property. He pointed out the inaccuracy of comparing his property (a quality “5” in MPAC’s records) to properties that were quality “6” or “6.5”, but did not provide details of the effect of this on the cabin’s value in comparison to the other properties.

Appellants’ Submissions

26While Mr. Rose was succinct in his objection to MPAC’s assessment of his property, and was able to indicate clearly where MPAC had made errors in its description of the lands, he did not present any argument in support of a reduction of the current assessment or the current value submitted by MPAC. He made no recommendations of value; nor did he submit property sales that he deemed to be suitable comparable sales for the purpose of establishing a value for the Subject Property.

Findings of the Board

27The direct sales comparison method is regarded as a very useful method of determining value in respect of residential properties. In the case of properties having a variety of different qualities, such as in the field of recreational properties on water, it is unlikely that sufficient sales of very comparable properties will be available to make the analysis simple or straightforward. This case is no different. Mr. Rose raises a good argument when he states his view that the comparable sales chosen by MPAC were generally better quality buildings, with larger site areas or waterfront. The sales also took place over a very large period of time, thereby undermining the accuracy of the adjusted sales values. The more adjustments have to made, the less confidence there is in the end result.

28Unless there is a complete absence of relevant evidence, the Board is required to use the best evidence presented, both verbally and in documents, to make a finding of current value. Evidence of value always requires evidence of the cost of something – in this case, the cost of similar properties when traded at arm’s length by willing sellers and buyers. While MPAC proposes four properties to serve as comparable property sales, even their representative acknowledges that none of the evidence presented was exactly or primarily similar to the Subject Property. In addition, because of the absence of sufficient sales within a few months of the valuation day, MPAC expanded its search and provided comparable property sales from 2012 to 2017 – rather a large window of time given the usual cycles and changes within the real estate market.

29While MPAC’s proposed comparable properties were generally quite different from the Subject Property in size, year built, size of waterfront, and sizes of structures, it is also the only evidence of value presented at the hearing. While the objective is usually to derive value from comparative property sales that are inferior, superior and relatively similar to the Subject Property, MPAC was not able to achieve this. Instead, using the four sales it selected, it was able to derive a current value by providing examples of superior properties, some of which were quite superior and others which were only mildly superior. MPAC concludes that the Subject Property would be less valuable than the four comparable sales proposed. However, MPAC did not make it clear how the value of $325,000 was derived from comparison to more valuable properties.

30Without access to evidence of lower-priced properties, the “bracketing” technique is not available. However, another means of checking the current value of the subject property is to compare the buildings, land values or waterfront values of the given comparable properties on a per square foot basis to find out whether the value ascribed to the Subject Property is indeed supportable. Because one of the proposed comparable properties provided by MPAC is quite superior to the subject property, it will not be useful in this way. This was property 4, 6242 Highway 28. However, the remaining three properties may provide some insight into the current value of the Subject Property, but primarily in respect of a comparison of building values. The waterfronts and lot dimensions are quite different, and even calculating an average will give an untenable result because the other properties primarily have longer frontages on water and larger site areas than the subject property.

31Therefore, the chart below looks at the calculation of the sq. ft. values for the three selected comparable residential structures of properties 1, 2, and 3. It then shows the average value and applies it to the Subject Property.

	Building Size Sq. ft.	Time-adjusted Selling Price	$ per sq. foot (building)
Subject Property	760
46 F.R. 37	880	$350,665	$398
201 Butler	830	$398,477	$480
61 Butler	1,127	$376,425	$334
Average			$404

32Multiplying the average sq. ft. value of the three most comparable property structures by the structure size of the Subject Property results in a value of $307,040. This would indicate that the Subject Property would have a lower value than the value assigned to it by MPAC. Because neither party presented proposed comparable sales that were fairly similar to the Subject Property in size, waterfront or building area, the Board will rely on this calculation to support a current value of $307,000 (rounded).

33Because the finding of current value exceeds the assessed value, and because no one applied to increase the Subject Property’s assessed value, the Board must confirm the assessment in the amount of $255,000.

DECISION

34The correct current value of the Subject Property is $307,000 as at the valuation day, January 1, 2016. An equitable reduction of the current value of the Subject Property, pursuant to s. 44.(3)(b) of the Act, is not required. No one applied to increase the assessment, so the Board hereby confirms the assessment in the amount of $255,000 for 2017 and 2018.