1698318 Ontario Inc. v. Municipal Property Assessment Corporation, 2019 CanLII 103798

Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE:

October 30, 2019

FILE NO.:

WR 162193

Assessed Person(s):

1698318 Ontario Inc.

Appellant(s):

1698318 Ontario Inc.

Respondent(s):

Municipal Property Assessment Corporation (“MPAC”)

Region 32

Respondent(s):

Township of Shuniah

Property Location(s):

2253 Amethyst Avenue

Municipality(ies):

Township of Shuniah

Roll Number(s):

5828-010-005-40500-0000

Appeal Number(s):

3334578, 3334579, 3334561 and 3368279

Taxation Year(s):

2016, 2017, 2018 and 2019

Hearing Event No.:

722570

Legislative Authority:

Sections 33 and 40 of the Assessment Act, R.S.O. 1990, c. A.31, as amended

Heard:

September 17, 2019 in Thunder Bay, Ontario

APPEARANCES:

Parties

Counsel⁺/Representative

1698318 Ontario Inc.

Roderick W. Johansen⁺

MPAC

Edward Molcan

Township of Shuniah

No one appeared

DECISION OF THE BOARD DELIVERED BY JEAN-PAUL PILON

BACKGROUND

11698313 Ontario Inc. is the owner of 2253 Amethyst Avenue in Shuniah Township (the “Subject Property”). Roderick W. Johansen, a lawyer, is the principal of the numbered company and resides at the Subject Property.

2Pursuant to the Assessment Act, R.S.O. 1990, c. A. 31 (the “Act”), the assessment of land shall be based on its current value. 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 returned a current value of the Subject Property of $1,079,000 in 2018 and $936,000 for 2019. MPAC took the position at the hearing that the correct current value of the Subject Property for these taxation years is $936,000.

4The Appellant filed an appeal for the 2018 taxation year with the Assessment Review Board (the “Board”) and was deemed to have brought the same appeal with respect to the Subject Property for the 2019 taxation year pursuant to subsection 40(26) of the Act. The Appellant’s position was that MPAC’s assessment of current value was too high and that the correct current value was between $700,000 and $750,000.

5The Board also created two other deemed appeals for the 2016 and 2017 taxation years where MPAC had returned additional assessments for omissions in those taxation years. Those two appeals were dismissed at the hearing.

6Pursuant to subsection 40(11) of the Act, Shuniah Township was a party to the 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.

7Subsection 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 possessed by each ratepayer.

8Neither party at the hearing took the position that an equitable reduction was required.

9At the completion of the hearing, the Board reserved its decision.

10For the reasons that follow, the Board finds that current value of the Subject Property for the 2018 and 2019 taxation years is $731,000.

Relevant Legislation and Rules

11Section 1 of the Act states:

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.

12Section 19.(1) of the Act states:

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

13Section 39.1 (3) of the Act states:

39.1(3) Despite subsections (1.1), (1.2) and (2), for 2017 and subsequent taxation years, a person who has received a notice of assessment under subsection 35 (1) may request the assessment corporation to reconsider the assessment no later than 120 days after the issuance date printed on the notice of assessment.

14Section 40(3) of the Act states:

40(3) If a property is in the residential, farm or managed forests property class, or in such other circumstances as the Minister may prescribe, no appeal may be brought to the Assessment Review Board under subsection (1) by a person who is entitled to make a request for reconsideration under section 39.1 in respect of the property, if the person has not made the request within the time required under that section.

15Section 40.(17) of the Act states:

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.

16Section 40(26) of the Act states:

40(26) For 2009 and subsequent taxation years, an appellant shall be deemed to have brought the same appeal in respect of a property,

(a) in relation to the assessments under sections 32, 33 and 34 for the year; and

(b) in relation to the assessment, including assessments under sections 32, 33 and 34, for a subsequent taxation year to which the same general reassessment applies, if the appeal is not finally disposed of before March 31 of the subsequent taxation year or, if an assessment has been made under section 32, 33 or 34, before the 90th day after the notice of assessment was mailed.

17Section 44.(3) of the Act states:

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

18The first issue, which was addressed at the hearing, was raised by MPAC’s representative who argued that the two omitted appeals for the 2016 and 2017 taxation years pursuant to section 33 of the Act should be dismissed. The Board concurred at the hearing for the oral reasons given at the hearing and the further reasons set out below.

19The second issue to be determined was the correct current value of the Subject Property for the 2018 and 2019 taxation years.

Discussion, Analysis and Findings

Deemed Appeals for 2016 and 2017

20There were four appeals before the Board. The only appeal filed by Mr. Johansen was his appeal pursuant to section 40 of the Act for 2018 and, pursuant to section 40(26) of the Act, there was a deemed appeal for 2019 because the 2018 appeal was not resolved prior to March 31, 2019.

21The other two appeals that were before the Board were deemed appeals for the omitted assessments in the 2016 and 2017 taxation years for which notices of assessments were sent to Mr. Johansen or his company at the time. At the hearing, Mr. Molcan argued that those two appeals should be dismissed because Mr. Johansen had not filed Requests for Reconsideration (“RfR”) within the time allowed after those notices of assessment were sent, where the filing of RfRs is a prerequisite to appeals in the residential tax class. Mr. Johansen opposed the motion but gave no reasons for opposing it other than he wanted to pursue those appeals at the hearing.

22The Board concurred at the hearing that two section 33 appeals for the 2016 and 2017 taxation years should be dismissed because section 39.1(3) of the Act provides that no appeal in the residential tax class may be brought without an RfR having been filed first. This was not done. The Board also found at the hearing that it would be illogical for a party to have a second opportunity to pursue appeals several years later if there was no interest in those appeals to start with, when the Act contains deadlines for the filing of RfRs and appeals. Those appeals were therefore dismissed at the hearing.

23In any event, the Board finds that those two appeals must have been created in error because there is no provision in the Act that would have allowed for them.

24Deemed appeals from 2009 onward are created by Board staff pursuant to section 40(26) of the Act. This section provides two situations in which deemed appeals can be created: first, if there are assessments in the same taxation year for corrections of errors (section 32), omissions (section 33) and to supplement assessments (section 34), and second, for subsequent years, as was the case for the 2019 deemed appeal here. The Board therefore finds that the creation of these appeals was most likely the result of an administrative error and that it is without jurisdiction to decide them.

Section 40 Appeals for 2018 and 2019

Evidence

25Mr. Molcan testified that MPAC returned a current value assessment of $1,079,000 in the 2018 taxation year which was reduced to $936,000 in the RfR process.

26MPAC chose the five proposed comparable properties summarized below for comparison:

Subject Property

1

951 Blind Creek Drive

2

2465 Scott Drive

3

1941 Crystal Beach Avenue

4

2619 Birch Beach Road

5

2519 Scott Drive

Sale Date

2016/06/30

2014/09/14

2016/08/23

2016/02/29

2016/07/28

Adjusted Sale Amt

$497,818

$585,001

$821,438

$640,288

$466,191

Effective Site Area (acres)

0.33

0.91

0.61

0.96

1.74

0.46

Frontage (ft.)

51.51

110

102

146.76

147.6

75

Building Area (sq. ft.)

3,023

2,256

1,761

3,267

2,180

1,466

Effective Year Built

2016

1987

1999

1990

1999

1987

Quality

7

5.5

6

6

7

6.5

Storeys

2

2

2

2

1

1 ¾

Secondary Structure

Single family detached

Single family detached

Year Built

1978

1979

Total Area (sq. ft.)

703

783

Secondary Structure

Detached garage

Attached garage

Detached garage

Shed

Detached garage

Detached garage

Year Built

1978

1982

2003

1988

1999

2004

Additional Structure

Detached garage

Attached garage

Year Built

1986

1999

27Mr. Molcan testified that other change to occur in the RfR process was a reduction in the quality class of the Subject Property from 7.5 to 7, after the Subject Property was inspected. He further testified that as a result of the RfR, MPAC had applied a 7% decrease in assessed value that is customarily applied to properties with more than 3,000 sq. ft. of building area because the Subject Property has a building area of 3,023 sq. ft.

28MPAC’s position was that the third and fourth proposed comparable properties were relatively comparable to the Subject Property, and that the other three were inferior to the Subject Property. Mr. Molcan noted that the Subject Property was newer than the others, and that its secondary structures improved the property by more than $100,000.

29Mr. Molcan further testified that MPAC adjusted the sale prices of the proposed comparable properties to account for the passage of time before and after the valuation date of January 1, 2016. For all but the second proposed comparable property, these adjustments were minimal because those sales occurred in 2016, and they were beneficial to Mr. Johansen in seeking a lower value. In addition, Mr. Molcan testified that MPAC’s equity study had shown no need for any equitable adjustment. Neither the time adjustments, nor equity were live issues requiring adjudication at the hearing.

30On cross-examination, Mr. Molcan testified that he chose the most similar properties of the 47 he was told had sold in the area of the Subject Property in 2016. When asked why he did not choose sales of properties with frontage similar to that of the Subject Property of approximately 50 ft., Mr. Molcan testified there were no such sales.

31Mr. Molcan testified that quality of construction ratings in MPAC’s report would have been personally confirmed by inspection; that effective, as opposed to actual, site area numbers are used to account for irregularly shaped lots; and that there are economies of scale with larger lots. None of these questions arose later in argument.

32Mr. Molcan also testified that the secondary structures on the Subject Property were worth $77,000 and $16,894 respectively, and that MPAC made adjustments of $35 per foot of frontage and $17 per foot of depth to its assessment of the Subject Property.

33Mr. Johansen wanted to rely on evidence of his own but did not serve it in accordance with the Schedule of Events on or before July 8, 2019, providing it instead a day prior to the hearing. MPAC’s motion to exclude that evidence at the hearing was granted because MPAC did not have a reasonable opportunity to review Mr. Johansen’s documentation in advance and prior to the hearing.

Appellant’s Argument

34In closing, however, Mr. Johansen highlighted the differences between the Subject Property and MPAC’s proposed comparable properties, particularly in frontage and lot size.

35Mr. Johansen proposed an approach that would, in his submission, take into account the differences in frontage using MPAC’s evidence on the third and fourth proposed comparable properties. It was, in essence, in an attempt to decouple land and building values from sale prices.

36For the third proposed comparable property, Mr. Johansen’s approach was to multiply the frontage of 146.76 ft. by $2,000 to arrive at $293,520. He then subtracted that amount from the unadjusted sale amount of $850,000 (where MPAC relied on the adjusted sale price of $821,438) to obtain a difference of $556,480. Then, he divided that amount by the square footage of building space of 3,267 sq. ft. to arrive at $170.33 per square foot of building space.

37Mr. Johansen used the same approach for MPAC’s fourth proposed comparable property with 147.6 ft. of frontage which, multiplied by $2,000, equaled $295,200. Subtracted from the actual sale amount of $644,000 (where the adjusted amount was $640,288), he arrived at $348,000. Divided by the square footage of the building at 2,180 sq. ft., he arrived at $160.00 per sq. ft. of building space.

38Applying this approach to the Subject Property, Mr. Johansen concluded that the land value was $103,200, which is the frontage of 51.51 ft. multiplied by $2,000. He then multiplied the two values per sq. ft. of building space from the third and fourth proposed comparable properties, $170.33 and $160.00, to arrive at two totals, $617,927 using the per square foot value from the third proposed comparable property and $585,700 from the fourth proposed comparable property. Using the latter amount, he added MPAC’s valuation for the secondary structures of $17,000 and $77,000 rounded to arrive at a value of $679,700. Using the higher number, he arrived at a total value of $711,928. He argued that this approach provided the best indications of the correct current value of the Subject Property.

Analysis

39The Board first notes that all of MPAC’s proposed comparable properties have significantly more land than the Subject Property. Similarly, there were substantial differences in the frontage of the proposed comparable properties.

40In other respects, however, the Subject Property is superior to the proposed comparable properties. The most notable difference is in the age of the proposed comparable properties, where the Subject Property is between 17 and 39 years newer. The Subject Property is of better quality than all but the fourth proposed comparable property with which it is equal at 7. It also has more building area than the others except the third, and has more substantial secondary structures than all but the second.

41While the third proposed comparable property has nearly three times the land and frontage, it is substantially older, and its construction is of lower quality. In addition, it has only a shed as a secondary structure, while the Subject Property has a second single family detached house as well as a detached garage.

42The fourth proposed comparable property has more land than the Subject Property and is of similar quality. However, it too is older, it has only one storey instead of two, it has nearly one-third less floorspace and has two garages, one attached, compared to a second single family dwelling and a garage.

43Despite these differences, the Board concurs with MPAC’s position that the third and fourth proposed comparable properties are relatively comparable to the Subject Property in that their differences balance out. These two properties are the best indications of the value of the Subject Property in the evidence before the Board.

44Mr. Molcan was asked how he arrived at a current value of $936,000 when the third and fourth proposed comparable properties had lower adjusted sale amounts of $821,438 and $640,288 respectively. His answer was that he added values for frontage, depth, secondary structures and economies of scale, but there was no corroborating evidence to support any of those values at the hearing. Similarly, Mr. Johansen’s analysis used a frontage value of $2,000 which was also unsupported by any evidence before the Board. None of these adjustments can be considered by the Board in the absence of any evidence to justify them.

45Having concluded that the Subject Property is relatively comparable to the third and fourth proposed comparable properties that have adjusted purchase prices of $821,438 and $640,288 respectively, the logical approach is to take the median of the two as the best indication of correct current value in the evidence. As a result, the Board finds the correct current value of the Subject Property to be $730,863.

CONCLUSION

46The deemed appeals for the 2016 and 2017 taxation years are dismissed.

47The Board finds the current value of the Subject Property is $731,000 rounded.

48Accordingly, the assessment of 2253 Amethyst Avenue for the 2018 and 2019 taxation years is reduced from $936,000 to $731,000.