Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE: October 24, 2019

FILE NO.: WR 161196

Assessed Person(s): James Edward Crane, Judy Karen Crane

Appellant(s): James Edward Crane, Judy Karen Crane

Respondent(s): Municipal Property Assessment Corporation (“MPAC”) Region 23

Respondent(s): Township of Malahide

Property Location(s): 15175 Helder Road

Municipality(ies): Township of Malahide

Roll Number(s): 3408-014-010-04500-0000

Appeal Number(s): 3273459, 3312707 and 3365893

Taxation Year(s): 2017, 2018 and 2019

Hearing Event No.: 716564

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

Heard: June 17, 2019 in London, Ontario

APPEARANCES:

Parties	Counsel+/Representative
James Edward Crane, Judy Karen Crane	James Edward Crane
MPAC	Ian Johnstone+, Wayne Williams and Corinne Van Raay
Township of Malahide	No one appeared

DECISION OF THE BOARD DELIVERED BY DAN WEAGANT

INTRODUCTION

1James Edward Crane (the “Appellant”) and Judy Karen Crane (collectively the “Appellants”) own the subject 52.1 acre farmland property located within the Township of Malahide. They have appealed their 2017, 2018, and 2019 property tax assessment as they take the position that the farm land class 2 rate per acre applied by MPAC is too high and therefore their property tax assessment is too high.

2MPAC returned an assessment of $610,000 for the 2017 taxation year. Prior to the roll return for 2018 and 2019 that assessment was reduced to $547,000 for both taxation years.

3MPAC considered there to be 36.1 acres of ‘land class 2’ farmland and 16 acres of ‘land class 5’ farmland. The original property assessment details provided by MPAC applied a value of $2,917.54 per acre to the ‘land class 5’ portion of the property, and $6,952 for the existing barn.

4The value per acre returned for the ‘land class 2’ farmland for the 2017 taxation year was $15,422. The value per acre returned for the ‘land class 2’ for the 2018 and 2019 taxation years was $13,677.

5The Appellant submitted that the assessment of the property was too high because the rate per acre applied by MPAC to the Class 2 lands was too high.

6The Assessment Review Board (“Board”) needs to make three decisions in these appeals. Firstly, the Board must determine the current value of the subject properties. To do so, the Board must also determine the correct land class applicable to the subject property.

7Once the current value is determined, the Board must then decide, when reference is made to the assessments of similar properties in the vicinity, if the value should be reduced to be equitable.

DECISION

8The Board finds the current value of the subject property is $520,000 for the 2017, 2018 and 2019 taxation years. The Board also finds that there is no evidence to indicate a reduction in these values is necessary for the purposes of equitable assessment.

9The Board finds that the assessment of the subject lands at 15175 Helder Road, for the 2017 taxation year is reduced from $610,000 to $520,000 in the Farm property class.

10The Board finds that the assessment of the subject lands at 15175 Helder Road, for the 2018 and 2019 taxation years is reduced from $547,000 to $520,000, in the Farm property class.

THE LEGISLATION

11The relevant sections of the Assessment Act, R.S.O. 1990. c. A.31 (“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.

2. (1) Assessment of Easements – Where an easement is appurtenant to any land, it shall be assessed in connection with and as part of the land at the added value it gives to the land as the dominant tenement, and the assessment of the land that, as the servient tenement, is subject to the easement shall be reduced accordingly

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

19. (5) Farm lands and buildings For the purposes of determining the current value of farm lands used only for farm purposes by the owner or used only for farm purposes by a tenant of the owner and buildings thereon used solely for farm purposes, including the residence of the owner or tenant and of the owner’s or tenant’s employees and their families on the farm lands,

(a) consideration shall be given to the current value of the lands and buildings for farm purposes only;

(b) consideration shall not be given to sales of lands and buildings to persons whose principal occupation is other than farming;

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.

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.

What is the Current Value of the Subject Property?

MPAC’s Evidence

12The majority of the land (36.1 acres) was considered by MPAC to be Class 2 farmland. MPAC explained that farm land carries classes ranging from Class 1 through Class 6, with Class 1 generally being the most valuable owing to its production capabilities. The remaining 16 acres was assigned a Class 5 by MPAC, and was described as being a wooded area and not suitable for agricultural production in that state.

13MPAC’s assessors testified that they had walked the subject property and were present twice to review the site conditions in June and September of 2017. Based on these site reviews, they were confident that the subject property has 36.1 acres of Class 2 land.

14To arrive at an assessed value, MPAC applied a value of $14,359 per acre of the land it considered to be Class 2 farmland. This value per acre was derived from an analysis of six sales of properties in the area it deemed to be comparable. The summary of sale data for these six farms is summarized in Table A.

Table A

MPAC Sale Number	Sale Price / date	Sale Price / acre	Time adjusted sale (TAS) Price / acre	Farm Land Class / Acreage	Adj rate per acre*
1	$750,000 / November 2013	$15,225	$17,282	Class 1 / 49.26 acres	$13,998
2	$900,100 / February 2014	$17,813	$19,803	Class 1 / 50.53 acres	$15,240
3	$1,235,000 / April 2013	$19,489	$23,557	Class 1 / 63.37 acres	$15,034
4	$520,000 / December 2015	$13,337	$13,367	Class 2 / 37.99 acres; and Class 6 / 1 acre	$12,650
5	$450,000 / April 2016	$15,000	$14,743	Class 2 / 30 acres	$14,166
6	$950,000 / April 2013	$19,149	$27,179	Class 1 / 49.61 acres; and Class 4 / 1 acre	$15,065

*Adjusted rate per acre includes time adjustment, size adjustment and market adjustment.

15MPAC submissions indicate that some irregularities applied to these sales that affected their eventual assessment levels. An 8% across-the-board reduction was applied to all sales for the January 1, 2016 current value assessment. MPAC submitted that this reduction reflected overall market conditions in Malahide Township and Elgin County.

16In addition, where there were different farms sizes that had sold, MPAC adjusted land values to account for the effects of economy of scale to these values.

Farm Size

17According to MPAC, sale values were adjusted by following to MPAC’s “Farm Size Adjustment 2016” Table. This table applies an adjustment percentage according to a farm’s size. Farm properties that are less than 100 acres in size have a slight upward adjustment to value per acre, while farms over 100 acres in size have a slight downward adjustment. These adjustments are intended to apply the generally accepted concept of economy of scale, whereby a larger volume of land purchased together would sell for somewhat less than a smaller volume of the same quality.

18MPAC has published a ‘Farm Size Adjustment’ table for the 2016 current value assessment that applies to the three years under appeal. When comparing the value of the subject property to properties that are smaller requires an adjustment to the 100-acre standard to allow direct comparison of sale prices per acre.

19Each of the sales in MPAC’s sample was adjusted for three things:

• Time adjustment, whereby the sale value was adjusted to account for changing values between the sale date and the January 1, 2016 valuation day applicable to these appeals;
• Size adjustment to account for changing values due to variable farm sizes; and
• A market reduction of 8% for Malahide Township.

20When the appropriate adjustments were applied to each of the five sales in MPAC’s sample, the per acre average was $14,359. In the original assessment for the 2016 current value assessment, MPAC assigned a value per acre for the Class 5 land of $2,917.54.

21When these two, per acre values are applied to the acreage of the subject property, MPAC’s valuation results in the following:

• 36.1 acres Class 2 x $14,359 = 518,360
• 16 acres Class 5 x $2,917.54 = 46,681
• Barn structure = $6,952

Total: $571,993 x 1.039% (size adj) $594,300 / 1.08 (market adj) = $550,277

22MPAC submitted this as support of its position to reduce the current value of the subject property for the three years under appeal to $547,000.

Appellant’s Evidence

23The Appellant submitted two sales to support his case for lower assessment. The first, with a roll # ending 07401 in the Township of Malahide, sold in December 2016 for $576,000 and included a residence, a barn, a shed and 50 acres of Class 2 land. The Appellant submitted this is an indication of a value for Class 2 lands in the range of $11,500 per acre, including buildings.

24Secondly, the Appellant submitted property with roll # ending 07400 in the Township of Malahide. He testified this property sold for $660,000 in 2011 and included 90.62 acres of Class 2 land and 7.5 acres of Class 5 land. This property included several buildings that were demolished after the sale. Subsequent to the sale, a house, barn and 1.18 acres of land were severed from the property and sold separately. The Appellant submitted that this indicates a value per acre of approximately $7,333, including buildings.

25The Appellant concluded that these two properties indicate an average value for workable land in the Township of $9,400 and submitted that the Class 2 lands at the subject property would be properly assessed at approximately $339,340. When added to the Class 5 land value of $46,682 the total is $386,022 or $386,000, rounded.

Board’s Analysis

What is the Appropriate farm land class?

26According to MPAC, the subject property has a total of 36.1 acres of Class 2 land and 16 acres of Class 5 land. There was no dispute as to the areas considered by MPAC to be in these classes. There was also no dispute with regard to the value attributed to the Class 5 lands. The original assessment for the 2016 current value assessment applied a per acre value for Class 5 of $2,917. When applied to the 16 acres of Class 5 land, the sub-total is $46,682.

27The dispute lies between MPAC’s opinion of the value of the Class 2 land. MPAC applied a value over $13,000 and the Appellants derived a value slightly above $9,400 per acre.

28At the outset of the hearing, Mr. Johnstone sought to have both Mr. Williams and Ms. Van Raay recognized as expert witnesses. Upon reviewing their respective qualifications, the Board sought submissions from the Appellant who had no issue with their qualifications as such. The Board found that both assessors met the qualification requirements to be considered expert witnesses. This is important because, on the subject of farm land class, the Board is faced with comparing the opinions and respective qualifications of the witnesses at the hearing.

29While the Board places value on the Appellant’s knowledge and farming expertise, the Board finds that MPAC’s experts’ opinions, with combined experience of over 40 years in the valuation of farm properties and which were supported by reliable corroborating data, provide the more compelling evidence.

30Determining the land class for valuation purposes requires more than the ‘ins and outs’ of modern farming. It also requires an ability to identify and compare the characteristics of farm properties and make consistent and fair judgements as to their respective value. The Board heard from MPAC that drainage, soil type, slopes and production capability were the kinds of characteristics that were considered in determining the land class for the subject lands. In contrast, the Appellant based his opinion on a document (the small-scale map) of questionable use in determining land class within the consistently applied class system employed by MPAC. The Board finds therefore that the best evidence of land class is that of MPAC. The Board finds that the Class 2 farmland designation is most appropriate for the 36.1 acres of productive farmland at the subject property.

What is the Current Value of the Subject property?

31MPAC refuted the Appellant’s first sale comparison, with roll # ending 07401. This sale was investigated by MPAC but was discounted as a reliable indicator of land values because:

• The vendors were in financial difficulty and over the course of five years the property had been for sale at a price of $650,000. The vendor was forced to sell at a reduced price of $576,000 for quick sale. In this type of circumstance, MPAC considers the sale suspect as it indicates there were other considerations, other than land value, at play in the negotiated price.

32MPAC submits that the Appellant’s first sales comparison does not meet the legal requirement of an open market sale between a willing vendor and willing purchaser, unencumbered.

33MPAC refuted the Appellant’s second sale comparison, with roll # ending 07400. This sale was investigated by MPAC but was discounted as a reliable indicator of land values because:

• The sale included a house, a garage, two barns and a silo. These additional components make it difficult to extract land value from building values.

34To determine the value of the Class 2 lands at the subject property, the Board finds that the best evidence of current value of the subject property are the sales of MPAC’s proposed comparable properties #4 and #5, for the following reasons:

• These sales occurred very near to the valuation day applicable to these appeals of January 1, 2016;
• Sale #4 included only one acre of Class 6 land, which the Board heard in testimony from MPAC, carries little or no value for assessment purposes, so the total value of Sale #4 is not skewed by other land classes;
• Sale #5 included only lands considered to be in Class 2, representing only a Class 2 sale value;

35By contrast, the Board considers the Appellant’s sales to be less persuasive with respect to what was actually purchased, and for how much. Both transactions have elements to suggest that these sales were not straight forward land sales. The sale of roll # 07401 took place in 2011 and clearly does not reflect the value of land at the valuation day of January 1, 2016 as it occurred nearly five years earlier.

36The Board heard and is satisfied that there was evidence that sale price per acre did not necessarily indicate property values if the comparison used properties of varying size. For this reason, MPAC applied its ‘’Farm Size Adjustment 2016” table. Sale #4 has 37.99 acres of Class 2 land. Sale #5 has 30 acres of Class 2 land.

37By using the “Farm Size Adjustment 2016” table, the Board is able to arrive at a per acre value attributable to the subject property of 93.96 acres in size, as follows:

• Sale #4 price per acre (38 acres rounded): $13,688 / 100 acres, 106% adjustment factor = $12,913 ($775 reduction).
• Sale #5 price per acre (30 acres): $15,000 / 100 acres, 107.5% adjustment factor = $13,953 ($1,047 reduction).

38This results in an average of $13,433 per acre, as these two sales would compare to a 100 acres farm in Elgin County. The Board finds that the last step of the process is to adjust this value to the 36.1 acres of Class 2 farmland at the subject property. The adjustment factor in this case is 103.9%, resulting in an average, adjusted value per acre of $13,957.

39MPAC testified that, in addition to the size adjustments applied to sale values, it applied an across the Board 8% market reduction to all sales in Malahide Township for the 2016 current value assessment cycle. This reduction was not in dispute. When it is applied to the size-adjusted value per acre the result is:

• $13,957 / 1.08 = $12,923 per acre of Class 2 farmland.

40When applied to the subject property’s 36.1 acres of Class 2 farmland, the result is $466,520. When this Class 2 value is added to the undisputed value of the Class 5 lands of $46,682, the total is $513,202. When the undisputed value of the existing barn is added to this sub-total ($6,592), the total value of the property is $519,794 or $520,000, rounded.

41Accordingly, the Board finds the current value of the subject property is $520,000.

Should the Current Value Determined be Reduced for the Purpose of Equitable Assessment, when the Assessments of Similar Properties in the Vicinity are Considered?

42The Appellant made no submissions with respect to whether or not a reduction in the current value determined was necessary for it to be considered equitable when the assessments of similar properties in the vicinity are considered. The only documentary evidence at hearing was the Assessment to Sale Ratio (“ASR”) study submitted by MPAC.

43The Appellant did refer to several sales in the area, that occurred at different time, of varying farm sizes with differing farmland classes. However, he was not able to articulate any resulting adjustment that could be applied to the subject’s current value to create further equity.

44MPAC’s ASR study is a common method of determining whether an equity adjustment to current value is necessary to reflect equitable assessment, or not. The ASR approach uses the median ASR of a number of sales that occurred in the vicinity. MPAC chose 24 sales that occurred in Malahide Township, from 2012 through 2016. Each sale value was adjusted to account for changes in value over time. Those adjusted values were then compared to those assessments for the 2016 current value assessment.

45MPAC testified that’s the International Association of Assessing Officers considers that a median ASR that falls within the range of 0.9 to 1.0, the result should be considered to reflect that properties in the vicinity are being assessed at or very near their current value.

46MPAC indicated that its standard is more restrictive, and it uses a range of 0.95 to 1.05. The ASR study indicated a median ASR of 0.98, suggesting, according to MPAC, that equitable assessment is being achieved among similar properties in the vicinity and therefore an adjustment to the current value determined in not required.

47The Board prefers the evidence of MPAC on the question of equitable assessment. It undertook a common method of making its determination. The input data was clearly laid out and the conclusion was clearly presented and supported by the data. By contrast, the Appellant’s submission on the issue lacked a cohesive purpose was not supported by any reliable corroborating evidence and did not answer the fundamental question of whether the current value determined would be equitable or not.

48The Board finds that no adjustment to the current value determined is required for it to be considered equitable when compared to the assessments of similar properties in the vicinity.

DECISION

49The Board finds the current value of the subject property is $520,000 for the 2017, 2018 and 2019 taxation years. The Board also finds that there is no evidence to indicate a reduction in these values is necessary for the purposes of equitable assessment.

50The Board finds that the assessment of the subject lands at 15175 Helder Road, for the 2017 taxation year is reduced from $610,000 to $520,000 in the Farm property class.

51The Board finds that the assessment of the subject lands at 15175 Helder Road, for the 2018 and 2019 taxation years is reduced from $547,000 to $520,000 in the Farm property class.