Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE: December 19, 2019

FILE NO.: WR 162942

Assessed Person(s): Vitali Melkuev, Tamara Davitnidze

Appellant(s): Vitali Melkuev

Respondent(s): Municipal Property Assessment Corporation ("MPAC") Region 09

Respondent(s): City of Toronto

Property Location(s): 89 Rockford Road

Municipality(ies): City of Toronto

Roll Number(s): 1908-053-660-02600-0000

Appeal Number(s): 3380879

Taxation Year(s): 2019

Hearing Event No.: 726884

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

Heard: November 25, 2019 in Toronto, Ontario

APPEARANCES:

Parties	Representative
Vitali Melkuev	Self-represented
MPAC	Hassen Fereg
City of Toronto	No one appeared

DECISION OF THE BOARD DELIVERED BY ANTHONY LaREGINA

BACKGROUND

1Vitali Melkuev (the "Appellant") is the owner of 89 Rockford Road (the "subject property"), which is a single-family detached two-storey home located in the City of Toronto. The property has a total effective frontage of 50 feet and a total effective depth of 120 feet for a total effective site area of .14 acres.

2The two-storey structure was built in 2018 and has a current quality of construction of 8.0. The total building area is 4,246 square feet with 2,147 square feet on the main level and 2,099 square feet on the second floor. The basement has a building area of 2,090 square feet with 476 square feet of finished space and a basement height of 10 feet. The two-storey home has four bedrooms, four and a half bathrooms and one fireplace.

3Pursuant 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").

4MPAC has assessed the current value of the subject property at $2,088,000.

5The Appellant filed an appeal for the 2019 taxation year with the Assessment Review Board (the "Board"). It is the Appellant's position that MPAC's assessment of current value is too high and that the correct current value should be no more than $1,500,000. At this hearing, MPAC takes the position that its correct current value is $2,087,000.

6Pursuant to s. 40.(11) of the Act, the City of Toronto 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 behalf of the City of Toronto.

7Section 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.

8MPAC takes the position that an equitable reduction of 5% is required. The Appellant has taken no position with respect to s. 44(3)(b).

9At the completion of the hearing, the Board reserved its decision. The Board finds that the current value for the 2019 taxation years is $1,906,464. Pursuant to s. 44(3)(b) of the Act, an equitable reduction of this value of 5% is justified resulting in an assessed value of $1,811,000.

Relevant Legislation

10The Act states:

"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.

Current value

11The first issue to be determined on this appeal is the correct current value of the subject property for the 2019 taxation year.

MPAC's Evidence

12Hassen Fereg, representing MPAC, prepared both a Valuation Report and an Equity Report respecting the subject property which he submitted into evidence.

13Mr. Fereg identified six suggested comparable property sales which sold between 2015 and 2016 in the vicinity of the subject property. These properties are illustrated in the following table.

	Subject Property	Property 1	Property 2	Property 3	Property 4	Property 5	Property 6
Address	89 Rockford Road	255 Connaught Ave	252 Patricia Avenue	410 Connaught Avenue	7 Lister Drive	255 Homewood Avenue	235 Homewood Avenue
Distance from Subject Property km	0	1.8951	1.8897	1.4451	1.4922	1.7628	1.8979
Current Value Assessment	$2,088,000	$1,846,000	$1,838,000	$1,833,000	$1,814,000	$1,747,000	$1,833,000
Sale Date		January 2015	March 2015	Dec 2015	April 2016	Aug 2016	Nov 2016
Sale Value $		1,700,000	1,850,000	1,995,000	1,976,000	2,112,000	$2,626,263
TAS Value $		2,228,294	2,300,573	2,015,778	1,843,014	1,829,172	$2,158,923
Effective Site Area Acres	0.14	0.15	0.15	0.15	0.17	0.15	0.15
Effective Frontage/Depth in Feet	50x120	50x132	50x132	50x132	58x131	50x133	50x134
Actual/Effective Yr. Built	2018	2014	2014	2014	2011	2011	2014
Quality	8.0	8.0	8.0	8.0	8.0	8.0	8.0
Total Building Area Square Feet	4,246	3,638	3,569	3,572	3,655	3,501	3,667
Basement Square Feet	2,090	1,625	1,684	1,673	1,715	1,668	1,908
Finished Basement Square Feet	476	1,381	1,431	1,422	1,457	1,417	1,188
TAS $/square foot		612.50	644.60	564.32	504.24	522.47	588.74
Similar/Superior/Inferior		Inferior	Inferior	Inferior	Inferior	Inferior	Inferior but almost similar

Mr. Fereg points out in his Valuation Report that while all six properties are similar to the subject property for the purposes of establishing current value, he claims that the subject property is somewhat superior to each of them because the subject property is 579 to 745 square feet larger than the building areas of the suggested comparable properties.

14Mr. Fereg demonstrated that the time adjusted sale range of the six suggested comparable properties is between $1,829,172 and $2,300,573. He, therefore, estimates that the correct current value of the subject property should be within this time adjusted sale range.

15Relying on its evidence, MPAC submits that the correct current value for the 2019 taxation year is $2,087,000, which is the median time adjusted sale value of the six comparable properties submitted into evidence.

Appellant's Evidence

16The Appellant, Mr. Vitali Melkuev, agrees with MPAC that establishing current value based on comparable properties in the vicinity is the correct approach. He submits that the properties which Mr. Fereg submitted into evidence are not comparable to the subject property because they are all located east of Bathurst Street, between Bathurst Street and Yonge Street, while the subject property is located west of Bathurst Street. Mr. Melkuev maintains that the properties located west of Bathurst Street are less valuable because the area is less desirable. In cross-examination Mr. Fereg also admitted that the area east of Bathurst Street is more desirable but claimed he could not find similar comparable sales in the area of the subject.

17Mr. Melkuev entered some thirty Toronto Real Estate Board ("TREB") listings of properties that sold west of Bathurst Street. However, Mr. Fereg pointed out in cross examination that most of these properties were substantially older than the subject property and therefore, not similar to the subject property which was built in 2018. Furthermore, all the listings presented by Mr. Melkuev lacked detail with regards to building areas, quality of construction, etc. and therefore, the Board did not have the information to conduct a complete comparison of these properties to the subject property.

18Mr. Melkuev selected two sales, 266 Searle Avenue and 177 Waterloo Avenue located west of Bathurst Street and South of Finch Avenue, which he considered the best comparables to the subject property. The listing information again was not sufficient to conduct a full comparison however Mr. Fereg was kind enough to supply the property detail information for these two sales to allow for a comparison of these properties with the subject property.

	Subject Property	Property 1	Property 2
Address	89 Rockford Road	177 Waterloo Avenue	266 Searle Avenue
Distance from Subject Property km	0	3.2	3.3
Current Value Assessment	$2,088,000	$1,984,000	$1,626,000
Sale Date		October 2015	August 2016
Sale Value $		1,818,000	1,705,000
TAS Value $		1,896,378	1,500,694
Effective Site Area Acres	0.14	0.15	0.14
Effective Frontage/Depth in Feet	50x120	50x128.34	50x117
Actual/Effective Yr. Built	2018	2015	2006
Quality	8.0	8.5	8.0
Total Building Area Square Feet	4,246	3,659	3,938
Basement Square Feet	2,090	1,623	1,780
Finished Basement Square Feet	476	1,350	1,424
TAS $/square foot		518.28	381.08

19Mr. Melkuev concluded his evidence by pointing out that his home should be assessed at no more than $1,500,000. To demonstrate this point, he referred to the average sale price of the many older properties with similar lot sizes selling for approximately $1,000,000. He considers this value to be the lot value of his property. He further concludes that to build his home would require no more than $500,000 and therefore the total of $1,500,000 is a reasonable value for the subject property.

20Mr. Melkuev requests that the Board find the correct current value of his home to be $1,500,000.

Board's Findings

21The Board has reviewed and analysed the six suggested comparable property sales submitted by MPAC as well as the two suggested property sales submitted by the Appellant and makes the following observations.

22The Board has difficulty reconciling that MPAC submits six suggested comparable properties, all located east of Bathurst Street claiming they are all inferior to the subject property while simultaneously admitting that the location east of Bathurst Street is more desirable. Furthermore, Mr. Fereg also claims he has had difficulty finding comparable property sales west of Bathurst Street while the Appellant has proposed two comparable property sales west of Bathurst Street that the Board finds are reasonably comparable to the subject property.

23The Board prefers the two property sales introduced by the Appellant in support of his position on correct current value, being 177 Waterloo Avenue and 266 Searle Avenue. Both properties are located west of Bathurst Street, have identical lot sizes, similar quality of construction and slightly smaller building areas. Both properties sold within 12 months of the valuation day and have been time adjusted using MPAC's time adjustment factors. The average time adjusted sale value per square foot for these two properties is $449. In comparison, the properties submitted by MPAC located on the east side of Bathurst Street have an average time adjusted sale value per square foot of $572. This analysis suggests that the properties east of Bathurst Street are more desirable and command higher market values.

24Based on the above analysis, the Board will apply the time adjusted sale value per square foot of $449 to the subject property's building area of 4,246 square feet to establish the correct current value of the subject property at $1,906,454 which coincidentally, also falls at the lower end of the acceptable time adjusted sale range presented by Mr. Fereg for properties east of Bathurst Street.

25The Board recognizes that the subject property is a newer build than the two comparable properties but that is balanced by the fact that: (i) the two comparable properties have 1,350 and 1,424 square feet of finished space in the basement while the subject property only has 476 square feet of finished space; and (ii) both comparable properties are located further south closer to the downtown core of North York which is a more desirable location.

26Regarding Mr. Melkuev's request to set the current value at $1,500,000 representing the cost of land and building, which is normally referred to as the "cost approach" to value. The Board prefers to use market driven evidence which in this case is the sale of similar properties in the vicinity, as it provides a better prediction of market value of the subject property. The cost approach to value is the approach of last resort used to determine current value in the absence of sales of similar properties in the vicinity of the subject property.

Whether there should be an equitable reduction of the current value pursuant to s. 44.(3)(b) of the Act, and, if so, what should the amount of this reduction be?

MPAC's Evidence

27Mr. Fereg relies on his Equity Study showing a median Assessment to Sale Ratio ("ASR") of 0.95 based on the arm's length sales of 30 properties within 0.5 kilometres of the subject property. His position is that while the ASR is within the reasonable range of 0.95 to 1.05, MPAC is prepared to give a 5% downward adjustment to compensate for the assessment of similar properties in the vicinity.

28Mr. Fereg concludes that with an adjustment for equity MPAC is recommending an assessed value of $1,960,000 for the 2019 taxation year.

29The Appellant has submitted no evidence in support of an equity argument.

Board's Analysis and Findings

30Section 44.(3)(b) of the Act directs that after determining current value, the Board "shall 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."

31The purpose of equitable adjustment has been described as the equitable distribution of the tax burden according to the assessed value of property owned by taxpayers as follows by the Ontario Court of Appeal in Empire Realty Co. Ltd. and Assessment Commissioner for Metropolitan Toronto et al., 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 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.

32In addressing equity in assessment, the Court, at page 6, also noted that "an assessment made at the actual value of lands and buildings…would be an unequitable assessment if all similar lands in the vicinity were assessed at some percentage of actual value substantially less than one hundred." [emphasis added]

33The term "vicinity" is not defined in the Act but refers to the appropriate geographical area that will yield a meaningful number of comparables. See (Ontario Regional Assessment Commissioner, Region No. 3 v. Graham, 1993 CanLII 8621 (ON CA) at page 6).

34The test set out in s. 44(3)(b) of the Act, requires that the Board refer to similar lands in the vicinity. Used as a point of similarity, perhaps, but it is not necessarily determinative of similarity. In determining whether other lands are similar, the Ontario Divisional Court, in Municipal Property Assessment Corporation v Loblaw Properties Limited, 2017 ONSC 1299, applied the decision of the Ontario Divisional Court in Trizec Equities Ltd v Ontario (Regional Assessment Commissioner, Region No. 27), [1988] OJ No 182, 27 OAC 203, 37 MPLR 175, 8 ACWS (3d) 399. The Court stated at paragraph 23:

…All points of comparison must be considered. The Board must make a factual finding based on such a consideration. One point of similarity such as use may be, but is not necessarily, determinative. Some similarities may be overridden by other characteristics and some differences may be subordinated.

35The ASR analysis of a reasonable sample of sold properties is one method used to determine if properties in the vicinity are assessed below their current value. If other properties are assessed substantially below their current value, then a reduction is required to make the assessment of the subject property equitable with the assessments of similar lands in the vicinity. The ASR is determined by dividing the assessment as returned by the time adjusted sale price.

36Mr. Fereg relies on a median ASR of 0.95 based on the sample of 30 arm's length sales of properties in the vicinity of the subject property.

37The Board finds that the median ASR of 0.95 falls within MPAC's generally acceptable standard of 0.95 and 1.05 required to establish that the level of current value assessments of similar properties is in line with the level of sales. Because the median ASR is at the lowest limit the Board will accept Mr. Fereg's conclusion that the current value should be adjusted by 5% to compensate for the assessment of similar lands in the vicinity.

CONCLUSION

38The Board finds that the correct current value of the subject property, as of the January 1, 2016 valuation date, is $1,906,464. Furthermore, the Board finds that a 5% equitable reduction is required under s. 44.(3)(b) of the Act bringing the assessed value to $1,811,131 for the 2019 taxation year.

39Based upon the evidence, the Board reduces the assessment of the subject property from $2,088,000 to $1,811,000 (rounded) for the 2019 taxation year.