Alison Rae Lean and Elizabeth Carol Clarke v. Municipal Property Assessment Corporation, 2018 CanLII 99120

Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE:

September 10, 2018

FILE NO.:

WR 153147A

AMENDED DECISION ISSUED ON: October 19, 2018

Assessed Person(s):

Alison Rae Lean, Elizabeth Carol Clarke

Appellant(s):

Alison Rae Lean, Elizabeth Carol Clarke

Respondent(s):

Municipal Property Assessment Corporation (“MPAC”) Region 28

Respondent(s):

Municipality of Temagami

Property Location(s):

24 Lake Temagami Island Unit 464

Municipality(ies):

Municipality of Temagami

Roll Number(s):

4869-860-001-41000-0000

Appeal Number(s):

3225658 and 3314206

Taxation Year(s):

2017 and 2018

Hearing Event No.

696881

Legislative Authority:

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

Heard:

May 1, 2018 in Temagami, Ontario

APPEARANCES:

Parties

Counsel⁺/Representative

Alison Rae Lean and Elizabeth Carol Clarke

Marc A. Lean⁺

MPAC

Brittany Kee

Municipality of Temagami

No one appeared

DECISION OF THE BOARD DELIVERED BY LESLIE FLEMMING

Amended pursuant to Rule 114 of the Assessment Review Board’s Rules of Practice and Procedure, effective April 1, 2017

Background

1Alison Rae Lean and Elizabeth Carol Clarke are the owners of 24 Lake Temagami Island Unit 464, (the “subject property”), which is a seasonal/recreational dwelling first tier on water. This is a single-owner island of almost an acre in size located on the southwest arm of Lake Temagami. The dwelling is 1,037 square feet (“sq. ft.”) in area, and is described as having two bedrooms, a small kitchen which uses propane for cooking and powering lights. There is a woodstove for heat. It is a water-access property; the owners indicate that it takes 45 minutes by boat from the access point to the island. The cottage is not winterized.

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”). MPAC has assessed the current value of the subject property at $ 316,000 for 2017 and 2018.

3Ms. Lean and Ms. Clarke (the “Appellants”) filed an appeal for taxation year 2017 (and were deemed to appeal for taxation year 2018) 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 $235,000. At this hearing, MPAC takes the position that its assessed value, based on current value, is $316,000.

4Pursuant to s. 40(11) of the Act, the Municipality of Temagami is a party to this 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.

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.

6MPAC takes the position that an equitable reduction is not required. The Appellant did not assert that an equitable reduction is required. Therefore, in this proceeding, equity is not in issue.

7The correct current value of the Subject Property is $300,000 for the 2017 and 2018 taxation years. The assessment for the 2017 and 2018 taxation years is therefore reduced from $316,000 to $300,000.

Relevant Legislation

8The relevant 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:

4. For the period consisting of the four taxation years from 2017 to 2020, land is valued as of January 1, 2016.

Amended pursuant to Rule 114 of the Assessment Review Board’s Rules of Practice and Procedure, effective April 1, 2017

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

9The 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

10Brittany Kee represented MPAC. Blair Adams, a Property Valuation Analyst with MPAC, testified on behalf of the assessment corporation. A Valuation Report and Equity Analysis Report authored by Mr. Adams were entered into evidence.

11Mr. Adams advised that he had personally inspected the subject property in late 2016, and that his colleagues Gary Cooper and Ellen Macedo had carried out an interior inspection in June 2017. Mr. Adams gave some background on the property which included these details:

• Single-owner island 0.94 acres in size;

• Located half-way down the southwest arm of Lake Temagami;

• Island is rocky and tree-covered;

• The 1037 sq. ft. cottage on the island is construction quality 4.5 out of 10, . and is built on piers;

• It features a second level loft of 203 sq. ft. while the main floor is 834 sq. ft.;

• There are two bedrooms;

• There is no hydro to the island;

• Plumbing exists only for the sink and taps in the kitchen; the toilet is a composting toilet; there is an on-demand hot water system.

• Heating consists of a woodstove;

• Floors are softwood; the exterior is clapboard siding; the interior walls are mostly unfinished;

• There is a wrap-around porch including a section enclosed in screening;

• There are three small cabins on the island: one for sleeping, a second for a bathhouse and the third for storage of the solar batteries (not presently used).

• The cottage is water-access only. It is not insulated for winter use.

12Mr. Adams noted that there are 1,250 islands on Lake Temagami and approximately 746 cottage properties. The cottages are very different, as are the islands; this makes valuation a challenge.

13Given the rustic features of this cottage, and the unfinished items such as interior walls, lack of insulation, plus the existence of rough-ins for solar power in the future, the cottage was given approximately 20% reductions in the form of an “unfinished allowance”.

14Mr. Adams testified to the concept of valuing lands as of the valuation day, January 1, 2016, and the fact that MPAC uses time adjustment factors to bring the comparable properties to the value they would likely have had on that day. In this case, MPAC based its time adjustment figures on the price changes over time occurring in 586 sales from January 4, 2012 through December 19, 2016. In the 59 months of this analysis, MPAC determined that the overall market increase was 2 per cent.

15In residential property assessment, a common technique is to ascertain value by using direct sale comparisons. Properties similar to the subject property, sold at or near the valuation day, are analyzed with a view to determining the value at which the subject property would have been sold during this period. Mr. Adams selected five property sales in the vicinity, which he compared to the subject property and ranked “inferior”, “superior”, or “relatively comparable”. One of his comparable sales had a superior island, but an inferior structure. In addition to the information set out in his materials, Mr. Adams supplied photographs of the subject property and the five comparable cottages.

16The following chart (Table 1) sets out the most relevant information about the five comparable sales.

Note: all are single-owner islands, water-access only, seasonal-recreational properties. The addresses are (where “LT” stands for Lake Temagami):

• Sale 1 – 2 LT Island 375

• Sale 2 – 4 LT, Suite 496

• Sale 3 – 6 LT, Island 902

• Sale 4 – 40 LT, Island 855

• Sale 5 – 12 LT, Island 585

TABLE 1: COMPARABLE SALES PROVIDED BY MPAC

Features	Subject Property	Sale 1	Sale 2	Sale 3	Sale 4	Sale 5
Sale Date		06/15/2012	09/17/2014	08/19/2013	11/13/2015	11/22/2016
Sale Amount		$223,000	$510,000	$340,000	$300,000	$387,500
Time-Adjusted Amt.		$226,327	$512,749	$343,385	$300,155	$386,097
Storeys	1.25	1	1	1	1	1
Building Size (sq. ft.)	1,037	327	1,518	734	899	1,101
Property Area (acres)	0.94	0.6	4.5	1	3.56	2
Effective Year Built	2009	1966	1940	1982	1971	1930
Outbuildings	3 (incl. 1 sleeping cabin)	1 cabin	2 cabins, shed, boathouse	1 cabin	Shed	2 Boathouses; Shed, 2 cabins
Hydro available?	No	No	No	No	Yes	Yes
Quality of Construction	4.5	3.5	5	5.5	3	4
Similarity to Subject		Inferior	Superior	Relatively comparable	Sup. (Island) Inf. (Struct.)	Superior

17Mr. Adams gave an explanation of the MPAC quality of construction ranking, giving examples of where the subject property had inferior construction and where it was superior. While the overall building was given a quality rating of 4.5, parts of the construction were higher or lower quality than this. Examples included the post and pier foundation (a lower quality 4) and the cathedral or vaulted ceiling (higher quality 7). The bedrooms of the subject property are generally small (quality 5); and the absence of a bathroom would also be ranked quality 5 in MPAC’s categories. The exterior wood siding would be quality 6, in Mr. Adam’s opinion, as would the interior pine walls and ceilings. While he did not give them a numeric rating, Mr. Adams described the plumbing and electrical systems as below average.

18On cross examination, Mr. Adams confirmed other features of the structure that were lower class features or for which an unfinished reduction has been given. They included:

• The absence of electrical service;

• No vinyl or linoleum flooring;

• No closets;

• Average kitchen cabinetry; no higher quality features.

19Using a technique called “bracketing”, where value is determined by finding a point between higher-valued properties and lower-valued properties, MPAC assessed the current value of the subject property to be $316,000, reducing the earlier assessment of $334,000.

MPAC’s Submissions

20Relying on its evidence, MPAC submits that the correct current value for the taxation years 2017 and 2018 is $316,000.

Appellants’ Evidence and Submissions

21Marc A. Lean represented the Appellants. Mr. Lean is personally familiar with the subject property. He prepared the materials filed in support of the appeal and gave evidence for the Appellants.

22Mr. Lean emphasized how the current cottage is not the same cottage the Appellants purchased in 2006. The cottage was sold to them for $285,000 in November 2006, and consisted of a fully winterized cottage with an indoor bathroom and three bedrooms. After having stayed at the cottage for only one night, it was destroyed when a tree fell on it. The Appellants rebuilt the cottage, but the newer version was not winterized and used basic construction. The Appellants have challenged the assessments ever since for the reason that the cottage’s assessment has increased substantially with no further improvements. Mr. Lean noted that the value of the subject property has increased well in excess of the trend for that area. MPAC’s evidence showed that the overall increase on Lake Temagami has been a modest two per cent.

23Mr. Lean described the current cottage as having been built using “stick construction” or “2 by 4 construction”—which he defined as simple construction, finished softwood floors, interior walls finished on only one side, no bathroom, no hallways, no cupboards and closets, and modest finishes.

24Mr. Lean introduced his own comparable property sales. His first comments referred to MPAC’s Property 5—12 Lake Temagami Island 585. He testified that the actual site area is closer to three acres than the two referenced in MPAC’s materials. This comparable, he notes, is three times the size of the subject property, with half the distance to the access point. He states that the indoor plumbing and hydro service which are features of this cottage are worth more than the $60,000 difference in their values.

25Mr. Lean also spoke to the sale described as Property 2 in the MPAC materials—4 Lake Temagami Island, Suite 496. This cottage is four times the size of the subject property, and “exquisitely finished”. It has a septic tank, a fully furnished main cabin, a generator with an invertor, a magnificent stone fireplace, a two-room sleep cabin, a work shop and an art studio. In Mr. Lean’s opinion, the properties are not comparable. Mr. Lean pointed out that both Property 2 and Property 3 are fully winterized cottages – which, in his opinion, are not really comparable to a summer cottage of basic construction.

26Mr. Lean provided some comparable property sales that are described below.

(a) 196 Island 25 Lake Temagami: This parcel of land was 100.58 feet x 400 feet or 0.92 acres. It featured a one-storey cottage of 768 sq. ft. and a total of three bedrooms, with hydro, a septic system, a storage shed near the water’s edge, and the building was winterized. A copy of the notice from the realtor indicating that the property was no longer for sale indicated that it was a “part-island”. Mr. Lean advised that the listing was for $224,900 but that the property had sold for $165,000. He had not realized it was not a single-owner island.

(b) Smoothrock Island 582 Lake Temagami: This property was listed in November 2017 for $450,000. Mr. Lean reports that it sold for $340,000. It is a single-owner island property, one acre in size. The cottage has three bedrooms, a 4-piece bathroom, a floor-to-ceiling stone fireplace with wood insert; a guest cottage, a breakwater and docks, a boathouse and a covered boat-port. This property is located on the same arm of the Lake as the subject property, but nearer the top of the arm and therefore half the distance from the landing.

(c) Part Island 150: This property includes a lot of 1.15 acres, a main cottage, a bunkie and two sheds. It has propane appliances, but there is also hydro so there is a second fridge which is electric. The island is located 10 minutes from the town access point. Mr. Lean noted that it was sold in September 2016, for $200,000. The listing he provided was for a subsequent sale in 2017, where it was listed for $225,000. No information was given as what it sold for or if it sold at that time.

27Mr. Lean then called Barry Graham, a realtor familiar with Lake Temagami real estate. He testified that he had seen the subject property and that his estimate of value in 2016 would be $240,000. He offered the opinion that the amount of water that has to be crossed to access a recreational property on Lake Temagami adversely affects the value. While single owner islands generally are more valuable than properties on part islands, larger islands in the neighbourhood of 3 or 4 acres have more value because of the potential for severance. Generally, an island over two acres in size will have the potential of severance.

Appellants’ Submissions

28Relying on his evidence, the Appellant submits that the correct current value for taxation years 2017 to 2018 is $235,000.

Board’s Analysis and Findings

29Seasonal/recreational property is always a challenge to assess because of the extensive difference in the quality and location of residences, especially on a lake as large as Lake Temagami. As was apparent during the introduction of evidence, some features—such as distance from the access point—are viewed as adding value by some, and as detracting from value by others.

30The Board’s initial finding has to do with the use of comparable sales. The evidence of all the witnesses, including the realtor, Mr. Graham, was that single-owner islands have an increase in value because of the privacy the ownership of the entire island can bring. For that reason, some of the comparable properties put forward by Mr. Lean will not be considered “comparable” because they are not single-owner islands.

31The evidence was clear that the subject property is located half-way down the southwest arm of the Lake, quite a long way from the Town of Temagami, and approximately 45 minutes by boat from the access point. It was clear from Mr. Graham’s and Mr. Lean’s evidence that the distance by boat negatively affects price. Mr. Adams countered this by indicating that the opposite could also be true: the closer you are located to the Municipality or to the access point ensures much more boat traffic and less tranquility. Closer to one of the access points you also have proximity to Finlayson Point Provincial Park and to the place on the lake where the planes land. Mr. Adams described it as “getting more for less” and “getting less for more”: more boat traffic and congestion is to be had for less money; less noise and activity is available for more money. Neither the Appellants’ witnesses nor Mr. Adams was able to give a corresponding dollar value, either positive or negative, for the idea of being located far away from the landing.

32The Board finds that the three comparable properties which are the most similar to the subject property, and which will assist in finding its current value are Sales 3 and 4 proposed by MPAC, and Smoothrock Island 582 as proposed by the Appellants. None of these properties is completely comparable, because each has very different main structures, is located in a different part of the lake, and has different amenities. However, the subject property and two of the comparable sales are each approximately one acre in size, each has a guest cabin, permanent docking, and water access only. The subject property and 6 Lake Temagami Island 902 (Sale 3) both have no septic system and no hydro. The Smoothrock Island property and Sale 4 would appear to have both, along with indoor plumbing. Sale 4 provided by MPAC, is a larger island (3.56 acres). It is much older than the subject property and, assessed as a quality 3 in construction; however, this property does have hydro. Because of the existence of hydro and septic on Sale 4, it would not be less valuable than the subject property

33Unfortunately, the sales of two of these comparable properties occurred well outside the valuation day of January 1, 2016. Only MPAC’s Sale 4 occurred close to the valuation day, while Sale 3 occurred in 2013 and Smoothrock Island 582 transacted in 2017.

34The time adjustment information provided by MPAC, while accepted by the Appellants does not extend to 2017 sales. In that case, I will use the actual sales figures for all three sales. 6 Lake Temagami Island 902 (Sale 3) sold in mid-August, 2013 for $340,000. 40 Lake Temagami Island 855 (Sale 4) sold in November 2015, for $300,000; Smoothrock Island 582 sold in 2017 for $340,000.

35While these properties are comparable to the subject property, they have amenities that the subject property does not. 6 Lake Temagami Island 902 has a Pan Abode cottage, which Mr. Lean describes as a higher quality construction than the “stick construction” used in the subject property. Mr. Lean also testified that this property is winterized. Mr. Adams provided the Board with a one-page information page on Pan Abode construction. The raw material for Pan Abode buildings is western red cedar logs, and this style of construction employs a building technique where the purchasers assemble the pre-cut components of their home. This is a higher quality building material than regular soft wood lumber.

36The Smoothrock Island 582 property has a large living room and a floor-to-ceiling fireplace, plus a number of kitchen cupboards, a guest cabin with a sauna and shower, and large docking space. The quality of construction is not available; however, with the description of kitchen, bathroom and living room, this cottage is clearly superior to the subject property.

37Sale 4 or 40 Lake Temagami Island 855 has an inferior, smaller structure but a site area three times the size of the subject property, plus the amenity of hydro. The subject property would not have a higher value than this property, especially given the size of this island.

38The Board therefore finds that the subject property would have a current value equivalent to the lowest value of the three selected comparable properties or $300,000. The value is not as low as suggested by the Appellants (a current value of $235,000 to $240,000) due to the relatively new construction, the outbuildings for guest accommodation and for showering, and the rough-ins for future solar power. However, the absence of hydro, the significant distance from the access point, and the simple construction without insulation make the subject property less valuable than the comparable properties that sold for $340,000 or more.

39The Board finds that the current value as of January 1, 2016, $300,000.

DECISION

40The correct current value of the Subject Property is $300,000 for the 2017 and 2018 taxation years. The assessment for the 2017 and 2018 taxation years is therefore reduced from $316,000 to $300,000.

Amended pursuant to Rule 114 of the Assessment Review Board’s Rules of Practice and Procedure, effective April 1, 2017