Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE: February 22, 2019 FILE NO.: WR 155643

Assessed Person(s): Eric Sillanpaa, Mary McDonald Appellant(s): Eric Sillanpaa Respondent(s): Municipal Property Assessment Corporation (“MPAC”) Region 31 Respondent(s): City of Sault Ste. Marie

Property Location(s): 134 Pleasant Drive Municipality(ies): City of Sault Ste. Marie Roll Number(s): 5761-030-026-04000-0000 Appeal Number(s): 3262387 and 3314858 Taxation Year(s): 2017 and 2018 Hearing Event No.: 700765

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

Heard: August 20, 2018 by telephone conference call

APPEARANCES:

Parties	Representative
Eric Sillanpaa	Self-represented
MPAC	Brett McGuire
City of Sault Ste. Marie	No one appeared

DECISION OF THE BOARD DELIVERED BY JOSEPH JEBREEN

OVERVIEW

1Eric Sillanpaa (the “Appellant”) appeals the assessment of his property located at 134 Pleasant Drive in Sault Ste. Marie, Ontario (the “Property”). MPAC returned an assessment of $252,000 but submits that the correct January 1, 2016 current value of the Property, based on the direct comparison approach, is $237,000. The Appellant takes the position that the correct current value of the Property is $200,000.

2For the reasons that follow, I find that the current value of the Property as of January 1, 2016 is $219,000 for the 2017 and 2018 taxation years and that no equitable adjustment is warranted. The assessment is therefore reduced from $252,000 to $219,000 for the 2017 and 2018 taxation years.

BACKGROUND

3The Property is in an urban area, has a frontage of 61 feet and a depth of 111 feet for a total site area of 0.16 acres. It is connected to municipal water and sewer.

4The dwelling is a 1,287 square foot bungalow with three bedrooms, two bathrooms, and a fireplace. It was built in 1978 but, due to some interior renovations, MPAC has assigned the Property an effective age of 1984. The basement measures 1,150 square feet, of which 345 square feet are finished as a recreational room. The dwelling is connected to a 435 square foot attached garage that was also built in 1978.

ISSUES

5The first issue to decide is the current value of the Property. In other words, I must determine what the Property would have sold for in an arm’s length transaction on January 1, 2016. Once the current value has been determined, clause 44(3)(b) of the Assessment Act, RSO 1990, c. A.31 (the “Act”) requires that I “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” but only if that adjustment would result in a reduction of the assessment.

6In addition to the 2017 taxation year appeal, the 2018 taxation year appeal is also before me because, pursuant to subsection 44(26) of the Act, a 2018 appeal is deemed to have been filed if the 2017 taxation year appeal was not finally disposed of before March 31, 2018.

LAW AND ANALYSIS

Current Value

7Subsection 40(17) of the Act states that MPAC has the burden of proving “the correctness of the current value of the land.” As this Assessment Review Board (this “Board”) found in Jay Patry Enterprises Inc. v Municipal Property Assessment Corporation, Region 05, 2019 CanLII 39629 (ON ARB), 2018 CanLII 70338 (ON ARB) WR 152892 (“Patry Enterprises”) at paragraph 21, the burden is around “current value” and not the assessment. That is, MPAC is not required to prove the correctness of their returned assessment. It is required to prove the correctness of “the amount of money the fee simple, if unencumbered, would realize if sold at arm’s length from a willing seller to a willing buyer.”

8Patry Enterprises summarizes the procedure to follow in an appeal where current value is at issue, at paragraph 40:

…first look at MPAC’s evidence on its own and make a determination as to whether it can prove its suggested current value on a balance of probabilities. If MPAC meets its burden, the Board should review all of the evidence before it and determine the current value of the property. However, if MPAC has not met its burden, the taxpayer’s evidence must be analyzed to see if it is capable of proving that a particular current value is more likely than not. If there is no evidence in the record that is capable of proving current value, the Board should fix the assessment at the last uncontested assessed value.

9I will follow that procedure here.

Can MPAC’s evidence prove its suggested current value?

10As stated in Patry Enterprises at paragraph 23, in order for MPAC to meet its burden, MPAC’s evidence “must show how the current value MPAC is proposing is arrived at and why that value is correct. Without this bare minimum, the Board cannot possibly determine if MPAC’s proposed current value is correct.”

11Brett McGuire for MPAC submitted a Valuation Report to establish an opinion of current value. As with most residential properties, MPAC relies on the direct comparison approach to prove its suggested current value of $237,000 for the Property.

12To satisfy its burden when using the direct comparison approach, MPAC cannot simply present any properties. It must review the market data and select properties that are in fact comparable. In his Valuation Report, Mr. McGuire relies on six comparable properties in his current value analysis as summarized in the table below:

Property	Subject	Sale 1	Sale 2	Sale 3	Sale 4	Sale 5	Sale 6
Date sold		01/10/2014	12/11/2015	04/10/2012	07/15/2015	12/09/2016	08/10/2012
Address	134 Pleasant	140 Pleasant	147 Pleasant	151 Pleasant	94 Pleasant	113 Pleasant	134 Pleasant
Lot area (Acres)	0.16	0.16	0.18	0.18	0.24	0.19	0.18
Frontage/Depth (feet)	61/111	61/111	62/125	62/125	66/159	64/127	62/125
Number of storeys	1	1	1	1	1	2	2
Building area (sq. ft.)	1,287	1,189	1,279	1,088	1,073	1,850	2,153
Year built	1978	1976	1975	1975	1960	1975	1976
Effective year built	1984	1976	1975	1977	1979	1975	1976
Quality of construction	6.5	6.5	6.5	6.5	6	6.5	7
Basement area (sq. ft.)	1,150	1,170	1,108	543	1,073	1,094	1,262
Finished Basement area (sq. ft.)	345	493	924	250	800	270	n/a
Secondary structure type	Attached garage	Detached garage	Attached garage	Detached garage	n/a	Attached garage	Attached garage
Secondary structure year built / area	1978/435	1977/528	1975/323	2005/593	n/a	1975/420	1976/281

13All of MPAC’s comparable sales are located on Pleasant Drive. However, I find that Sale 3 is not comparable to the Property. Sale 3 sold in April 2012, nearly four years before the January 1, 2016 valuation date. This property may have been an appropriate comparison for the January 1, 2012 valuation date but it is too far removed to be considered here. There is no reason to rely on Sale 3 especially when, as here, there are other comparable sales closer to the valuation date.

14I further find that Sales 5 and 6 are not comparable because the residences are two storey dwellings, as opposed to a bungalow. MPAC admitted that this is a significant difference and has stated in other hearings that two storey homes are not comparable to bungalows. Once again, this is especially the case when there are other comparable bungalows in evidence. Sales 5 and 6 are also on larger lots and have 44% and 67% larger dwellings, respectively.

15The remaining three properties presented by Mr. McGuire are appropriate comparable sales and can be used in his analysis. In his Valuation Report, Mr. McGuire stated that Sales 1 and 2 are similar, and Sale 4 is inferior. Mr. McGuire also explained why he believes that the comparable properties are inferior or similar. As detailed further below, I disagree with some of Mr. McGuire’s opinions regarding whether a particular comparable sale is inferior or similar. However, this is not considered in determining whether MPAC has met its burden.

16Using time adjustment factors that he calculated, and based on his analysis of the comparable properties, Mr. McGuire opined that the price of the Property must be between the time adjusted sale price of Sale 2 at $199,956 and the time adjusted sale price of Sale 1 at $240,516. Mr. McGuire further submitted that the value must be above $224,457, the time adjusted sale price of Sale 4, because of his opinion that Sale 4 is inferior to the Property. Mr. McGuire concluded that the correct current value of the Property is closer to Sale 1 at $237,000.

17With this evidence, I find that MPAC has met its burden. Mr. McGuire clearly showed his pathway to arriving at the proposed current value of $237,000 and why, in his opinion, that value is correct. That is what is required as a minimum.

18I note that I am not making a finding that the correct January 1, 2016 current value is $237,000. Rather, at this stage of the analysis, I am simply finding that MPAC’s evidence, if believed, can prove its proposed current value.

What is the correct current value of the property?

19Following the framework in Patry Enterprises, if MPAC has met its burden, I must then determine current value based on all of the evidence before me.

20In response to MPAC’s evidence, the Appellant relied heavily on the City of Sault Ste. Marie’s Transportation Master Plan dated January 2015. The Appellant detailed how road changes and other developments have resulted in higher traffic patterns along Pleasant Drive and that the traffic is predicted to increase significantly in the coming decades because of City restructuring. The evidence in the Transportation Master Plan supports the Appellant’s submission that traffic patterns have increased and will continue to increase significantly to 2042 and perhaps beyond. However, the effect of traffic patterns on sale prices would be reflected in the sale prices. No further reductions to sale prices are warranted to account for increased traffic.

21The Appellant also submitted a chart reorganizing MPAC’s six sales according to date sold in an effort to show that sale prices have been affected by traffic patterns. I do not agree that the chart demonstrates a decrease in sale price as a result of traffic patterns. However, even if it did, the Appellant’s submission is that the traffic patterns are reflected in the decreasing sale prices. A request for a further reduction due to traffic, when it is already reflected in the sales prices, is not justified.

22I will now turn to an analysis of the comparable sales in evidence. The details of MPAC’s six sales are summarized in the table at paragraph [12] above. I have already found that Sales 3, 5, and 6 are not comparable.

23Sale 1 is located at 140 Pleasant Drive. It sold for $243,000 on January 10, 2014. The features of Sale 1 are similar, if not identical, to the features of the Property in many respects. The lot dimensions, year built, building square footage, number of bathrooms, basement area, and finished basement area are all the same or similar enough that no adjustments are required. Sale 1 has a detached garage whereas the Property has an attached garage. This makes Sale 1 slightly superior. However, there were no renovations done on the dwelling at Sale 1 whereas the dwelling on the Property was somewhat renovated. Sale 1 is similar to the Property.

24The main issue with Sale 1 is that the sale is two years away from the valuation date. Sales are better indicators of current value when they have sold close to the valuation date. Nevertheless, due to its high degree of comparability, it is a useful sale.

25Sale 2 is located at 147 Pleasant Drive and sold for $200,000 on December 11, 2015. Like Sale 1, the features of Sale 2 are similar, if not identical, to the features of the Property in many respects. The lot dimensions, year built, building square footage, number of bathrooms, garage, and basement area are all the same or similar enough that no adjustments are required. Sale 2 has a slightly larger lot and a larger finished basement area which would make Sale 2 slightly superior. However, there were no renovations done on the property at Sale 2 whereas the Property was somewhat renovated. These features would offset, or the difference is minor enough that no significant adjustment is warranted. Also, Sale 2 sold within 3 weeks of the valuation date. This is another factor that makes Sale 2 a good comparable property. In all respects, Sale 2 is the best comparable sale in evidence.

26Sale 4 is located at 94 Pleasant Drive and sold for $225,000 on July 15, 2015. The features of Sale 4 that make it superior to the Property are: (i) the lot frontage and depth are significantly larger, resulting in a site area that is 0.8 acres, or 50%, larger than the Property, and (ii) the basement has 450 square feet more of finished area than the Property. However, Sale 4 is inferior because the dwelling is 18 years older, has no fireplace, and is 200 square feet smaller. Another significant difference is that Sale 4 has no garage. Both dwellings were renovated but the extent of renovations to the dwelling on Sale 4, based on MPAC’s best evidence, was unknown.

27With this information, I agree with MPAC that Sale 4 appears to be inferior. However, at the hearing, the Appellant provided further details regarding the renovations of the dwelling of Sale 4. The Appellant testified that he goes by Sale 4 regularly when he takes his dog for a walk. He observed the renovations prior to the sale of Sale 4 and stated that it was completely gutted in the interior. The dwelling also had significant exterior renovations including new roof, doors, and windows. I accept this evidence as it is firsthand and there is no evidence to contradict it. The age of the dwelling on Sale 4 becomes less significant due to the significant renovations. The newly renovated dwelling, the larger lot, and the larger finished basement area offset the lack of a garage and smaller sized bungalow. I find that Sale 4 is similar to the Property.

28One other property was introduced into evidence. The Appellant noticed that MPAC used a property located at 159 Pleasant Drive in its equity report and asked Mr. McGuire why he did not use it as a comparable sale in his direct comparison approach. I will refer to this property as Sale 7. Sale 7 sold for $165,000 on March 4, 2016.

29Mr. McGuire initially testified that the dwelling of Sale 7 was older and in worse condition. After checking the information of Sale 7, Mr. McGuire corrected himself and stated that it had a similar year built as the Property, 1975, and was in similar condition. He further stated that that the dwelling was a smaller sized bungalow, measuring 1,083 square feet, but that the lot was a similar size. However, the dwelling on Sale 7 was not renovated. Mr. McGuire also indicated that this could be an estate sale because it was marked as a forced sale in his system. No further details were provided about the alleged forced sale.

30I cannot accept that an estate sale automatically disqualifies a property from being comparable. It may be that an estate sale is below market value, but MPAC has not provided sufficient evidence for me to make that determination and I am not prepared to make that assumption. However, the main point is that none of the features of sale 7 are superior to the Property. I find Sale 7 to be inferior because the dwelling was not renovated and it is 200 square feet smaller.

31The following table summarizes my analysis of the comparable properties in evidence:

Property	Date Sold	Comparability	Sale Price
Sale 1	January 2014	Similar	$243,000
Sale 4	July 2015	Similar	$225,000
Sale 2	December 2015	Similar	$200,000
Sale 7	March 2016	Inferior	$165,000

32For reasons given in previous decisions¹, I do not accept the time adjustment study presented by MPAC and I do not adjust the sale prices with MPAC’s proposed time adjustment factors.

33Based on the foregoing analysis, the current value of the Property is between $165,000 and $243,000 but the current value is more likely to be in the range of $200,000 to $243,000, being the range of sales prices of the similar properties. Due to the elapsed time between the sale date and the valuation date, I attribute less weight to Sale 1. I nevertheless consider it because of its high degree of comparability to the Property in terms of location, dwelling, and lot. In order to attribute more weight to Sales 4 and 2, I will use a weighted average of the three similar sales in which Sales 4 and 2 are given twice as much weight as Sale 1. The weighted average of the three sales is $218,600, or $219,000 rounded, which I find to be the January 1, 2016 current value.

Equity

34Section 44(3)(b) of the Act requires me to consider whether an equitable adjustment to the current value is required:

44(3) For 2009 and subsequent taxation years, in determining the value at which any land shall be assessed, the Board shall,…

(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.

35Mr. McGuire submits that the proper test for “similar lands in the vicinity” for equity purposes is that the properties only need to be of the same general nature, character or function as the Property.

36In Municipal Property Assessment Corporation v Loblaw Properties Limited, 2017 ONSC 1299 (“Loblaw”), the Divisional Court specifically considered whether the test of “the same general nature, character or function” was approved by the Supreme Court of Canada in Ontario Regional Assessment Commissioner v Downtown Oshawa Property Owners, [1978] 2 SCR 1030, 1978 CanLII 36 (SCC) (“Downtown Oshawa”). The Divisional Court found, at paragraph 22, that the Supreme Court of Canada in Downtown Oshawa did not adopt the test of the “the same general nature, character or function” as set out by the Court of Appeal in that case. Rather, the Supreme Court of Canada referred to “many points of comparison” in determining whether properties were similar. The Divisional Court further found, at paragraph 26, that the Downtown Oshawa Decision “does not decide the appropriate test”.

37The Divisional Court in Loblaw confirmed, at paragraph 25, that the “the proper approach to be taken to determining what are “similar lands in the vicinity” is… that all points of comparison must be considered.”

38The Divisional Court further found, at paragraph 25, that a single point of similarity, such as use, is not necessarily determinative of what “similar lands in the vicinity” are.

39In the analysis on current value above, I only used comparable sales of single family detached bungalows. I find that the points of comparison that must be considered for similar lands in the vicinity are:

a. Properties with single family detached dwellings;

b. Within 2 kilometres of the Property; and

c. That sold either in 2015 or 2016.

40I note that it is the taxpayer’s burden to prove that an equitable adjustment is required. However, the Appellant did not have any evidence or make any submissions relating to equity.

41In its equity report, MPAC included properties as far back as 2012. I do not accept that it is appropriate to use sales so far removed from the valuation date in an equity analysis. The sales should be as close to the valuation date as possible. Although Mr. McGuire did not use the proper test in determining what properties are similar lands in the vicinity, I find that 11 of the properties selected by MPAC in its equity report are nevertheless similar lands in the vicinity for equity purposes because they satisfy all points of comparison listed above. I also include Sale 2 from MPAC’s comparable sales in the direct comparison approach. MPAC did not include it in the equity report but I see no reason why it should be excluded. The following 12 properties sold in either 2015 or 2016, contain single-family detached dwellings, and are located within 2 kilometres of the Property:

Property Number	Assessment	Sale	Assessment to Sale Ratio
2	$216,000	$250,000	0.864
4	$209,000	$239,000	0.874
5	$273,000	$310,000	0.881
7	$210,000	$225,000	0.933
8	$144,000	$152,000	0.947
17	$257,000	$240,000	1.071
20	$257,000	$235,000	1.094
22	$291,000	$260,000	1.119
28	$203,000	$165,000	1.230
29	$262,000	$212,000	1.236
30	$263,000	$206,900	1.271
Sale 2	$258,000	$200,000	1.290

42Using these 12 properties, the mean assessment to sale ratio is 1.07 and the median is 1.08. Both measures of central tendency fall above MPAC’s target range of 0.95 to 1.05. The 95% confidence interval of the median is 1.024 to 1.141 which means that the true median of the population based on this sample is, with 95% confidence, above 1.0. The coefficient of dispersion for the median is 12.9, which falls within the acceptable range of 5.0 to 15.0 for single-family residential properties in older or more heterogeneous areas.

43The level of appraisal as indicated by the mean ratio of 1.07 is also outside of MPAC’s target of 0.95 to 1.05. The standard deviation from the mean is 0.164 and the 95% confidence interval is 1.01 to 1.13.

44The data analyses for the median and the mean suggest that properties in the vicinity are likely over-assessed. However, I am not confident in drawing any conclusions from this data. First, it is a small sample. Second, and more importantly, none of the 12 properties have an assessment to sale ratio that is within the acceptable range of 0.95 to 1.05. Five of the properties have ratios below 0.95 and seven have ratios above 1.05. The burden of equity is on the taxpayer and there is not sufficient evidence for me to find that a reduction in the current value of the Property to make it equitable with similar lands in the vicinity is warranted. In any event, even if meaning could be drawn from the equity data, over-assessment is not something that can be cured by section 44(3)(b).

CONCLUSION

45The current value of the Property as of January 1, 2016 is $219,000 for the 2017 and 2018 taxation years and no equitable adjustment is warranted. The assessment is therefore reduced from $252,000 to $219,000 for the 2017 and 2018 taxation years.

Footnotes

1. 1See Bernier v Municipal Property Assessment Corporation, Region 2, 2018 CanLII 107728 (ON ARB) at paras 47-55; Patrick v Municipal Property Assessment Corporation, Region 02, 2019 CanLII 7194 (ON ARB) at paras 31-47; Patrick v Municipal Property Assessment Corporation, Region 02, 2019 CanLII 7196 (ON ARB) at paras 30-36.