Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE: August 19, 2019

FILE NO.: WR 161243A

AMENDED DECISION ISSUED ON: May 06, 2020

Assessed Person(s): Michalakos Panagiotis

Appellant(s): Michalakos Panagiotis

Respondent(s): Municipal Property Assessment Corporation (“MPAC”), Region 15

Respondent(s): City of Mississauga

Property Location(s): 180 Queen Street South

Municipality(ies): City of Mississauga

Roll Number(s): 2105-120-004-17500-0000

Appeal Number(s): 3271996

Taxation Year(s): 2016

Hearing Event No.: 718370

Legislative Authority: Section 357(7) of the Municipal Act, 2001, S.O. 2001, c. 25 as amended

Heard: June 17, 2019 in Mississauga, Ontario

APPEARANCES:

Parties	Counsel+/Representative
Michalakos Panagiotis	Robert Baranowski
City of Mississauga	John O’Kane*

DECISION OF THE BOARD DELIVERED BY ANTHONY LaREGINA

AMENDED DECISION

In accordance with Rule 114 of the Assessment Review Board’s Rules of Practice and Procedure, as amended May 2019, related to the correction of minor errors and in accordance with Rule 21.1 of the Statutory Powers and Procedure Act regarding the correction of errors, this Amended Decision is issued to correct error(s) in the Amended Decision regarding calculations in paragraphs [9], [34] and [35]. The amendments have been underlined for ease of reference. There are no other changes in this Amended Decision.

INTRODUCTION

1This is an appeal to the Assessment Review Board (the “Board”) from a City of Mississauga (the “City”) decision to grant a partial refund of taxes paid for the 2016 tax year due to a fire.

2The subject property is an end unit of a five-unit mixed use property at the intersection of Queen Street South and Tannery Street in the City of Mississauga (the “City”). The subject property was occupied by a shawarma restaurant on the main floor and a two-bedroom residential unit on the second floor. Both parties agree that on November 5^th, 2015 the subject property was substantially damaged by fire rendering both the main floor restaurant and the second-floor residential unit totally unusable for the entire 2016 calendar year.

3Mr. Michalakos, (the “Owner”) filed an application under section 357(1) (d) of the Municipal Act, 2001, S. O. 2001, c. 25 (“Act”) requesting a cancellation, reduction or refund of the taxes paid on the property for the 2016 tax year based on the damage caused by the fire.

4City Council reviewed the facts of the application and refunded $552.10 of the $14,148.05 total taxes paid.

5The owner has now lodged this appeal under s. 357(7) of the Act with the Assessment Review Board (“Board”) appealing Council’s decision.

6The owner has taken the position that based on the damage to the building he should be paying $3,364.18 in taxes for the 2016 tax year. Based on the amount paid of $14,148.05 and the already refunded amount of $552.10 the owner says he is entitled to an additional $10,231.77.

7The City has taken the position that the owner should pay $11,012.15 for the 2016 tax year. Based on the amount paid of $14,148.05, the revised tax obligation of $13,038.44 resulting from the revised assessment of $707,000 and the already refunded amount of $552.10, the City says the owner is entitled to an additional $1,474.19.

ISSUES

8The only issue is the quantum of tax relief that the owner should receive from the municipality for the 2016 tax year.

DECISION

9I find that the most reliable evidence supports that the taxes owed in 2016 should be $8,296.83 and therefore order an additional refund of $4,189.51 be made to the owner.

LEGISLATION

10The Act states:

Cancellation, reduction, refund of taxes

357.(1) Upon application to the treasurer of a local municipality made in accordance with this section, the local municipality may cancel, reduce or refund all or part of the taxes levied on land in the year in respect of which the application is made if,

(d) During the year or during the preceding year after the return of the assessment roll, a building on the land,

(ii) was damaged by fire, demolition or otherwise so as to render it substantially unusable for the purposes for which it was used immediately prior to the damage.

Appeal

357.(1)(7) Within 35 days after council makes its decision, an applicant may appeal the decision of council to the Assessment Review Board by filing a notice of appeal with the registrar of the board.

Decision

357.(1)(10) The Assessment Review Board shall hear the appeal and may make any decision that council could have made.

Decision Final

357.(1)(17) A decision of the Assessment Review Board is final.

REASONS FOR DECISION

Applicant’s Submissions

11The owner has taken the position that the returned value of the property is not at issue and therefore the cost approach to value should not be considered by the Board as the Act makes no reference to the assessed value in order to establish quantum. The owner asserts that the property was totally unusable for the entire 2016 tax year and therefore the Board should consider the amount of damage and cost to cure the damage in determining the appropriate refund.

12The owner entered into evidence a report from Rosehill Design Limited setting out scope of work and the cost to completely renovate the property to its original state. He also entered an estimate from Bachly Construction of which had the same scope of work and a competing cost estimate.

13The owner testified that he hired Rosehill Design who’s estimate of cost was $248,808 which was identical to the second quote of $248,812 from Bachly Construction.

14The owner also entered the Fire Proof of Loss report showing that the insurance company paid a total claim of $433,296.36 with the following breakdown:

Building $256,831.77 Building - Emergency Services $82,171.77 Rental Income $52,423.56 Ontario Building Code Coverage $37,369.75 Mechanical Engineering $4,500.00 Total $433,296.36

The owner confirmed that he received $433,296.36 from the insurance company but claims he spent more than that amount to rebuild the damaged property. He testified that the Rosehill estimate did not include the cost of his kitchen, appliances or ventilation hood but provided no receipts for the work done and could not remember the total amount he spent to rebuild the property.

15Notwithstanding, the owner argues that he spent over $500,000 to rebuild both the restaurant and the residential unit above and that this amount should be removed from the 2016 returned assessment of $767,000 leaving a residual value of $267,000. Based on the 71% commercial portion and the 29% residential portion, the owner submits that the total taxes payable for 2016 should be $3,364.18. Based on the taxes paid of $14,148.05 and the refund of $552.10 the City should refund an additional $10,231.77.

The City’s Submissions

16The City submits that s. 357 of the Act has no mechanism for determining the refund value and that the City’s process is to establish the value of the damaged property utilizing the expertise provided by MPAC. The City submits that the underlying land has not been contaminated and that it was only the building structure that was substantially damaged and there is, therefore, value remaining in the property even in its damaged state.

17The City called Pavel Kurnat, a property valuation specialist with MPAC with a focus on commercial and industrial properties. Mr. Kurnat appeared for Rosemary Aranha, the valuation specialist who was assigned to the file and did the valuation but for personal reasons could not attend. Mr. Kurnat assured the Board that he had reviewed the file and felt comfortable in presenting the information accurately.

18Mr. Kurnat indicated that the subject property was an end unit of a five-unit complex. The total building area was 1,822 square feet with 911 square feet on the first and second floor. The structure was built from concrete blocks with stone on the first floor and stucco on the second floor of the front and side elevations. The back elevation had brick veneer. The original 2016 assessed value was $767,000. On March 18, 2016, the Board issued a decision based on minutes of settlement changing the assessment to $707,000 with $504,000 in the commercial class and $203,000 in the residential class. In this case, MPAC established the property value using the cost approach which adds both the land value and building value. The breakdown of the $767,000 returned value is $657,963 for land and $109,562 for the building. The breakdown of the $707,000 is $597,439 for land and $109,562 for building. After the fire Mr. Kurnat testified that, on May 3, 2016, Rosemary Aranha revised the value of the property to $677,000 representing a reduction of $30,000 to account for interior finishes, plumbing and electrical work to be completed in both commercial and residential units. This value was derived using the Automated Cost System. The reduction of $30,000 was all related to cost of repairing the structure therefore bringing the value of the structure down from $109,562 to $89,562 apportioned $21,300 for commercial and $8,700 residential.

19Mr. Kurnat also pointed out that the 2017 and 2018 returned value of $756,000 has not been appealed by the property owner.

20In cross examination Mr. Kurnat essentially agreed with the owner that MPAC has recommended a reduction of $30,000 to rebuild 1,822 square feet of building area which equates to $16.47 per square foot to install plumbing, electrical, drywall, and interior finishes.

21Ms. Sandi Turnbull, Municipal Supervisor of Assessment Review Board Analysis has responsibility for tax rebates and appeals, was also sworn in as a witness for the City. Ms. Turnbull essentially provided the same evidence as MPAC:

2016 Returned CVA $767,000 Taxes Paid $14,148.05 June 2016 PRAN CVA $707,000 Taxes $13,038.44 Credit $1,109.61 Value based on 357 app $677,000 Taxes $12,486.34 Credit $552.10

22However, in the City’s Statement of Response, Ms. Turnbull also provided evidence to show that MPAC inspected the property on May 16^th, 2016 with the owner in attendance and concluded that the property should be valued at $596,000 translating into a tax rate of $11,012.15, which represented a total refund of $2,026.20 or an additional refund of $1,474.19 over and above the $552.10 already credited to the property owner. In cross examination, Ms. Turnbull admitted that the property owner was not notified of this additional refund. The City confirmed that it was prepared to stand behind the value in the Statement of Response.

23Ms. Turnbull stated that the City’s process is to work with MPAC to determine the value of the damaged property and establish the new tax rate based on the differential between the original and revised value.

Owner’s Closing Remarks

24The owner submits that s. 357 of the Act has no relationship with s. 40 of the Assessment Act and that there is no need to determine the Current Value of the subject property to establish a tax refund for a property damaged by fire. MPAC brought evidence of property value using the cost approach which has no relationship to market value and furthermore no relationship to s. 357 of the Act. The owner submits that the indicated tax refund proposed by the City of $2,026.29 is far too low considering the owner had a loss of over $500,000. The owner argues that the refund should be determined based on the cost to cure and not the assessed value of the property. In support of his case he enters Canadian Property Holdings (Ontario) Inc. v Municipal Property Assessment Corporation, Region 15, 2017 CanLII 78332 (ON ARB) where the panel concluded that the best approach to calculating the quantum of relief while undergoing renovations was based on the cost to cure.

City’s Closing Remarks

25The City submits that there is a connection between the Assessment Act and the Act and that it is the assessed value of property which assists in determining the level of taxation. The City points out that the assessment as returned for the 2016 and 2017 is correct and binding as it has not been challenged. The City submits that it’s only logical and reasonable that the refund should be based on the assessed value of land and building as provided by MPAC. The City submits further that there is no other quality evidence supporting the valuation of this property in relation to the loss. The City states that the owner has no evidence to support the $500,000 loss although he has supplied evidence to show he received a refund of $433,000 from his insurance company. The City points out that the proof of loss is an unreliable document although it does show that the loss on the building is $256,000 which is very much in line with the estimate’s provided by both Rose Hill and Bachly Construction both at approximately $248,000 to rebuild the interior.

26The City concludes that while there is no clear legislative direction requirement, using MPAC’s values to establish the value for tax purposes is the most common approach. This approach was also used in 151516 Canada Inc. v. Belleville(City) (Re), [2014] O.A.R.B.D. No.489 (“151516 Canada Inc.”) where the City of Belleville adopted the suggestion of MPAC to adjust the Current Value of the entire property to take into account the loss of rental income from vacant space resulting from a major renovation and therefore a complete loss of use. The Board held, at paragraph 23, that a loss of use “does not result in a total negation of the taxes – it reduces the taxes”. The City requests the Board utilize the same approach to establish the tax relief in respect to the subject property.

Board’s Analysis

27In accordance to s. 357(1)(d)(ii) of the Act, the parties are in agreement that the fire damage to the subject property has rendered the property totally unusable for the entire 2016 taxation year. The parties are also in agreement that the Act does not set out how the calculation of tax savings is to be made.

28The City has taken the approach that MPAC is the best authority to determine the impact of the fire damage on the assessed value of the property. The Board agrees that there is a connection between the assessment of the property and the level of taxation and therefore there is a role for MPAC in this process. Even the owner has indirectly agreed by using the assessed value and reducing the $500,000 of claimed damages to establish his tax rate.

29Both parties also agree that regardless of the fire damage there is value in the remaining property and therefore some level of taxation is justified. On this I agree with the parties and is further supported by 151516 Canada Inc. which clearly states, at paragraphs 22 and 23 that “this does not result in a total negation of the taxes - it reduces the taxes” to reflect the damage to the subject property.

30The owner has taken the position that the tax savings should be based on the loss of value based on the cost to cure and not the assessed value although the owner also uses the assessed value as a starting point and reduces the value of the loss to establish a taxation rate of $3,364.18.

31In analysing the evidence of the owner, the Board agrees with the City that the owner has not provided evidence or receipts of any kind to support the $500,000 worth of damages. On the other hand, the Board is satisfied that the damages are at least $256,000 as documented on the Fire Proof of Loss document and corroborated by the $248,000 estimate by both Bachly Construction and Rose Hill Design Limited. Reducing the agreed to assessed value before the fire of $707,000 by $256,000 leads to an assessed value of $451,000. Based on a 71% commercial and 29% residential split the apportionment would be $320,000 for commercial and $131,000 for residential. Based on the mill rates for both the tax obligation would be $7,625.46.

32While the Board clearly understands the cost approach to value and its application it’s not credible that MPAC and the City, using the ACS system, have put forward a reduced value of $30,000 to re-built 1,822 square feet of space between the first and second floor. The difficulty may be that the building is older and therefore has been substantially depreciated and for this reason the cost approach may be somewhat limited when dealing with a fire loss of this magnitude in an older building. Regardless of the reason, the Board does not accept that the building value only be reduced by $30,000 to compensate for damage relating to the fire.

33Regarding the land value, the Board is in agreement with the City’s position that the land has not been contaminated from the fire and therefore there is value in the land. It is difficult to establish a land value for a property which is part of a five-unit complex that has been damaged to the extent of the subject property. There are no comparable sales that can be brought forward that would be similar in nature to accurately establish land value.

34Based on the best available evidence before me I am satisfied that the subject property was substantially damaged by fire and totally unusable during the 2016 taxation year. I am also satisfied that the owner spent a minimum of $256,000 to repair the damage in the 2016 taxation year. The Board will therefore apply the City’s mill rates to the assessment of $451,000, as set out above, equating to $7,625.47 in taxes. Adding the BIA levy of $671.36 results in a total tax obligation of $8,296.83. The difference between the taxes levied of $13,038.44 and the revised valuation after the fire damage of $8,296.83 is $4,741.61. The City has already refunded $552.10 to the owner. The owner is therefore entitled to a further tax refund of $4,189.51.

35The Board orders the City to refund $4,189.51 to the owner for relief from the fire damage to the property in the 2016 taxation year.