Helena Kerr and Sheldon Herbert James McLaren v. Municipal Property Assessment Corporation (“MPAC”) Region 18, 2019 CanLII 1221

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

ISSUE DATE: January 10, 2019

FILE NO.: WR 157693

Assessed Person(s): Helena Kerr and Sheldon Herbert James McLaren

Appellant(s): Helena Kerr

Respondent(s): Municipal Property Assessment Corporation (“MPAC”) Region 18

Respondent(s): Town of Pelham

Property Location(s): 9 Blackwood Crescent

Municipality(ies): Town of Pelham

Roll Number(s): 2732-020-010-07311-0000

Appeal Number(s): 3268073 and 3309680

Taxation Year(s): 2017 and 2018

Hearing Event No.: 707764

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

Heard: December 3, 2018 in Pelham, Ontario.

APPEARANCES:

Parties	Representative
Helena Kerr and Sheldon McLaren	Self-represented
MPAC	Sheryl McRoberts
Town of Pelham	No one appeared

DECISION OF THE BOARD DELIVERED BY JOANNE LAWS

Background

1Helena Kerr and Sheldon Herbert James McLaren (the “Appellants”) are the owners of 9 Blackwood Crescent (the “Subject Property”). It is a single-family detached residential building located in the community of Fonthill in the Town of Pelham.

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”).

3Section 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.

4MPAC has returned an assessment of $312,000 for the 2017 taxation year and $315,000 for the 2018 taxation year.

5The Appellants filed an appeal for the 2017 taxation year with the Assessment Review Board (the “Board”), and have been deemed to have brought the same appeal with respect to the Subject Property for the 2018 taxation year pursuant to s. 40 of the Act. It was the Appellants’ position that MPAC’s assessment of current value is too high and that the equitable value is between $260,000 and $270,000. MPAC took the position at the hearing that its assessed value should be changed to $295,000.

6Pursuant to s. 40(11) of the Act, the Town of Pelham 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.

7At the completion of the hearing, I reserved my decision. For the reasons that follow, I find that for the 2017 and 2018 taxation years, the current value of the Subject Property as of the January 1, 2016 valuation day is $295,000. Pursuant to section 44(3)(b) of the Act, this value should be reduced to $267,000.

Relevant Legislation

8The Act states that:

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

9The issues to be determined on this appeal are:

1. The correct current value of the Subject Property for the 2017 and 2018 taxation years; and

2. Whether 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 2017 and 2018 taxation years?

MPAC’s Evidence

10Sheryl McRoberts represented MPAC at the hearing and gave evidence in support of MPAC. She entered into evidence a Valuation Report dated April 10, 2018.

11The parties agree that the Appellants purchased the Subject Property in an arm’s length sale for $295,000 on September 19, 2014. Ms. McRoberts submits that the time adjusted sale value as of the valuation day of January 1, 2016 would be $323,985. The time adjustment factor to estimate a September 2014 sale to the valuation day was not provided by either party.

12MPAC described the Subject Property as a residential single family detached home with 1,272 square feet (“sq. ft.”) of above-ground living space, built in 1977. There is an attached garage of 294 sq. ft. MPAC inspected the Subject Property and, as a result, the following corrections were made to MPAC’s data on this property:

a. The house was amended from ‘back-split’ to single storey;

b. The lot size was amended from 10,795 sq. ft. to 7,589 sq. ft.;

c. The basement area was amended from 1,272 sq. ft. to 1,077 sq. ft. and a crawl space was acknowledged;

d. The number of bathrooms was amended from 2.5 to 3 full bathrooms; and

e. A newer kitchen (circa 2010) and 718 sq. ft. of finished basement were added.

13Based on the renovations, MPAC amended the year built from 1977 to an effective year built of 1988. The quality of the construction of the home, as ranked by MPAC, is 6.0.

14Based on the above changes, Ms. McRoberts recommends a current value of $295,000.

15However, Ms. McRoberts also used the direct sales comparison method in order to support the Subject Property’s returned assessed values of $312,000 and $315,000. She selected four-single family residential homes located between 0.02 and 4.4 kilometres from the Subject Property. All are back-split residences. These properties were selected before MPAC amended the Subject Property’s description from back-split to single storey. The following chart sets out the sales information for the four properties.

MPAC’S PROPOSED COMPARABLE PROPERTIES

Feature	Subject Property	11 Blackwood Crescent	1319 Haist Street	1152 Balfour Street	30 Deerpark Crescent
Date of Sale	September 2014	September 2015	April 2015	July 2016	September 2016
Sale Price	295,000	343,000	309,900	294,500	400,000
Time Adjusted Price	323,985	350,040	327,845	269,677	352,490
Year Built	1977	1977	1978	1960	1989
Effective Year Built	1988	Unknown	Unknown	Unknown	Unknown
Build. Area (sq. ft.)	1,272	1,450	1,276	910	1,887
Lot Size (Acres)	7,589	Unknown	Unknown	Unknown	Unknown
Quality of Construction	6	Unknown	Unknown	Unknown	Unknown
Garage (sq. ft.)	294	333	508	466	453
Basement Area (sq. ft.)	1,077	Unknown	Unknown	Unknown	Unknown
Finished Basement (sq. ft.)	718	Unknown	Unknown	Unknown	Unknown
Variables	Medium Traffic	Light Traffic
Pool	No	No	Yes	No	No

16Ms. McRoberts omitted lot size, basement size, finished basement area and quality of construction for her suggested comparable properties.

MPAC’s Submissions

17Although MPAC’s position is that the correct current value is $295,000, she concluded that the returned values of $312,000 and $315,000 are supported by her sale properties because the time adjusted sale values bracket the assessed values.

18In response to the Appellants’ evidence that similar single-storey properties with smaller garages and modest-sized lots are assessed less than the Subject Property, MPAC submits that the Appellants did not account for quality of construction and that the different quality classes are assessed at different rates, the higher the quality class, the higher the rate per square feet of building area. MPAC provided detailed descriptions of all but one of the properties, including the quality class, in its evidence. I have incorporated the relevant data submitted by the parties in the attached Schedule A2.

Appellant’s Evidence

19The Appellants represented themselves. Their evidence and arguments addressed an equitable assessment and are outlined under Issue 2, below. They presented no sales evidence of properties they considered to be comparable to the Subject Property.

Appellants’ Submissions

20The Appellants argued that MPAC’s four sale properties are not comparable to their property. They are back-splits which allow for full basements and, in some cases, walk-outs from the rear of the house, features which they consider to be superior to their property. They argue that the superiority of a back-split is reflected in the sale price for their next door neighbour, 11 Blackwood Crescent, which sold for $50,000 more than their property. In addition, they argue that 1152 Balfour Street is not comparable to their property because it is located almost five kilometres away in Fenwick and has a double-wide lot.

Findings on Current Value

21The very best way of determining the current value of a property is if it has been recently sold. That gives a market-tested value for the property which is essentially its current value at the time of the sale. Here we have an arm’s length sale of the Subject Property. It sold for $295,000 in the fall of 2014. I find that it is the best evidence of current value. While it is a bit farther from the valuation day than I would prefer, it is not too far to be relevant. While MPAC’s evidence is that the market was rising between the sale date and the valuation day, I reject MPAC’s time adjusted sale value because it was not supported by evidence.

22Only when there is no arm’s length sale of the Subject Property near the valuation day, would sales of other properties be considered. In addition, it appears MPAC’s suggested comparable properties were selected to support the property description being a back-split rather than a single storey; this is reflected in the Subject Property’s returned assessments and not MPAC’s recommended current value. It is unlikely that MPAC’s suggested comparable properties would provide a good indication of the Subject Property’s correct current value and, therefore, I am not considering them.

23Accordingly, the correct current value of the Subject Property as of the January 1, 2016 valuation day is $295,000.

Issue No. 2: Whether there should be an equitable reduction of the current value pursuant to [s. 44(3)](https://www.canlii.org/en/on/laws/stat/rso-1990-c-a31/latest/rso-1990-c-a31.html) (b) of the [Act](https://www.canlii.org/en/on/laws/stat/rso-1990-c-a31/latest/rso-1990-c-a31.html), and, if so, what the amount of this reduction should be.

Appellants’ Evidence

24The Appellants take the position that their property’s assessment should be reduced to reflect the assessed values of similar properties in their neighbourhood and that a similar property is a single-storey home with a small garage. They note their property has one of the smallest lot sizes among such comparable properties.

25The Appellants provided a detailed Equity Analysis of properties in their vicinity, including a number of calculations which are attached to this decision as Schedules A1, A2, B, C, D and E.

26The Appellants presented an analysis of property assessments for nine of their closest neighbours (Schedule A1). They identified all nine properties as superior to their property yet the average assessed value per square foot of building areas is very similar to their returned assessments.

27The Appellants presented 15 assessments of single-storey properties in their neighbourhood (Schedule A2). Their calculations show that the average assessed value per square foot of building area for these properties, $207.20, applied to the Subject Property’s building area of 1,272 sq. ft. results in a value of $263,558.

28In addition, they presented an analysis of seven sale properties that MPAC disclosed to them during the Request for Review process (Schedules B, C and D). They described each of these properties and argued that none of these sales is directly comparable to the Subject Property because they are raised single-storey or back or side-split homes, have larger garages, basement walk-outs and larger lots. The average sale price per square foot of building area is $259.70 and the average assessed value is $230.30. The average assessment to sale ratio was 0.899, indicating that MPAC assessed these properties below their market values. Applying 0.899 to the current value of $295,000 results in a value of $265,205.

29The Appellants presented an analysis of five properties, taken from MPAC’s evidence, which sold within a four block radius of the Subject Property (Schedule E) as well as photographs of these properties. They are a mixture of raised single-storey, single-storey, and side and back-split homes. The average assessment per square foot of building area is $201.90. Applying this to the Subject Property’s 1,272 sq. ft. results in a value of $256,817.

Appellants’ Submissions

30The Appellants argue that MPAC is assessing superior and similar homes at or below their assessed value. Based on their evidence, they submit that an equitable assessment should fall within the range of $260,000 to $270,000.

31They argue that the Subject Property should be assessed similarly to other single-storey homes in their neighbourhood (Schedule A2), the average of which is $207.20 per square foot of building area.

32They argued that MPAC’s sale properties in Schedules B, C and D are all superior to their property and, therefore, their property should be assessed less than $230.30 per square foot of building area. They also argued that MPAC is not assessing properties accurately as illustrated by the assessment to sale ratios of these seven sales.

MPAC’s Evidence

33MPAC presented an Equity Analysis Report of 25 single-family detached property sales which occurred from January 1, 2015 to April 10, 2018. All of the properties are located within one kilometre from the Subject Property. The median assessment to sale ratio of these 25 sales is 0.997 and the coefficient of dispersion is 8.7.

MPAC’s Submissions

34Relying on its evidence, MPAC’s submits that an equitable reduction of the current value for the 2017 and 2018 taxation years is not required.

35In response to the Appellants’ argument that neighbourhood single-storey homes are assessed less than the Subject Property on the basis of the square foot of building area, MPAC presented an analysis of 14 of the 15 properties presented in the Appellants’ Schedule A2. MPAC argued that properties with quality classes other than 6 should not be used because the building square foot assessments factors for the building area are different.

36MPAC argues that the equity value sought by the Appellants is lower than the Subject Property’s 2014 sale price and MPAC’s time adjusted sale price.

Findings on Equity

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] 2 O.R. 388, 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.

38The 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.

39The Appellants put forth an analysis which indicates that MPAC is assessing similar properties below their current value.

40In reviewing the Appellants’ 15 properties in Schedule A2 and MPAC’s property details for 14 of those 15 properties, I accept MPAC’s argument that only quality class 6 should be considered. Based on MPAC’s evidence, there are nine quality class 6 properties in Schedule A2: 18 Daleview Crescent, 32 Daleview Crescent, 4 Strathcona Drive, 36 Strathcona Drive, 38 Strathcona Drive, 40 Strathcona Drive, 3 Orchard Place, 14 Orchard Place and 16 Orchard Place. Their assessed values range from $230,000 to $325,000. I find that they are inferior to the Subject Property in age; six were built in the 1950s, two were built in the 1960s and one was built in 1974. However, they are superior to the Subject Property in lot size which range from 8,160 sq. ft. to 13,300 sq. ft. Their building sizes are relatively similar, ranging from 1,075 sq. ft. to 1,542 sq. ft. and most have a partially finished basement. The median assessed value of these nine properties is $270,000 and the average is $267,330.

41In addition to the above, the median assessed value per square foot of building area is $210.77 or $268,099 when applied to the Subject Property’s building area of 1,272 sq. ft. The average is $209.27 per sq. ft. or $266,191.

42I prefer the Appellants’ numerous equity analyses calculations over MPAC’s equity report. The Appellants’ results are consistent, resulting in an equitable assessment that falls within a general range $266,000 to $270,000. Of their two analyses, I prefer the first analysis, found in the Appellants’ Schedule A2, which is based on whole property values. Although the analysis of the square foot values results in a very similar result, it is less reliable because the sale properties are not identical to the Subject Property. In addition, I prefer the average over the median.

43Accordingly, I find that MPAC has assessed the Subject Property inequitably and an adjustment is required. I find that the equitable assessment of the Subject Property is $267,000, rounded.

DECISION

44The correct current value of the Subject Property is $295,000 for the 2017 and 2018 taxation years.

45An equitable reduction of the current value of the Subject Property, pursuant to s. 44.(3)(b) of the Act, is required. The assessment of the Subject Property is reduced to $267,000.

46Accordingly, the assessments are reduced from $312,000 for the 2017 taxation year and $315,000 for the 2018 taxation year to $267,000 for the 2017 and 2018 taxation years.

“Joanne Laws”

JOANNE LAWS

MEMBER

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