Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE: February 19, 2019

FILE NO.: WR 158042

Assessed Person: John L. MacMillan and Molly Carvalho

Appellant: John MacMillan

Respondent: Municipal Property Assessment Corporation (“MPAC”), Region 03

Respondent: City of Ottawa

Property Location: 1380 Prince of Wales Drive, Unit 1009

Municipality: City of Ottawa

Roll Number: 0614-074-201-09795-0000

Appeal Number: 3321163

Taxation Year: 2018

Hearing Event No.: 708178

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

Heard: December 5, 2018 in Ottawa, Ontario

APPEARANCES:

Parties	Representative
John MacMillan	Self-represented
MPAC	Amanda Gordon
City of Ottawa	No one appeared

DECISION OF THE BOARD DELIVERED BY PIERRE R. LAVIGNE AND SCOTT McANSH

1John MacMillan (the “Appellant”) is the co-owner of Unit 1009 (the “subject property”), a condominium unit situated at 1380 Prince of Wales Drive, in the City of Ottawa. He appeals his assessment on the basis that it is too high.

2The subject property is on the tenth floor of a high rise condominium with an actual and effective year build of 1977 and a quality of construction of 6.0. The residence has a total living area of 1,268 square feet.

3Pursuant to the provisions of subsection 19(1) 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 in subsection 19.2(1) that, for the 2017 to 2020 taxation years, MPAC is required to assess this value as of the valuation date, January 1, 2016.

4MPAC has assessed the current value of the subject property at $216,000.

5The Appellant has filed an appeal for the 2018 taxation year with the Assessment Review Board (the “Board”), pursuant to section 40 of the Act. It is his position that MPAC’s assessment of current value is too high and that the correct current value is $180,000. At this hearing, MPAC takes the position that its assessed value is correct.

6Pursuant to s. 40(11) of the Act, the City of Ottawa is a party to this proceeding. However, it did not advise the Board of its position and no one appeared at the hearing on its behalf.

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. 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 is not required. The Appellant has presented no evidence in support of an equity reduction.

9At the completion of the hearing, the Board reserved its decision. For the reasons that follow, the Board finds that the current value for the 2018 tax years is $182,500. Pursuant to s. 44(3)(b) of the Act, an equitable reduction of this value is not required.

10The Board reduces the assessment from $216,000 to $182,500 for the 2018 taxation year.

REASONS FOR DECISION

Relevant Legislation

11Section 1 of the Assessment 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.

12Subsection 19 (1) of the Act states:

Assessment based on current value

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

13Subsection 19.2 (1) of the Act states:

Valuation Days

19.2 (1) Subject to subsection (5), the day as of which land is valued for a taxation year is determined as follows:

4. For the period consisting of the four taxation years from 2017 to 2020, land is valued as of January 1, 2016.

14Subsection 40 (17) of the Act states:

Burden of proof

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.

15Subsection 44.(3) of the Act states:

Same 2009 and subsequent years

44 (3) 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

(a) 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.

THE ISSUE

16The issue to be determined on the appeal is the correct current value of the subject property for the 2018 taxation year.

Discussion and Analysis for Current Value

MPAC’s Case

17To better understand the suggested comparable sales used by MPAC, we will describe the subject property and surrounding area. There are two adjacent condominium developments occupying the southwest corner of the intersection of Prince of Wales Drive and Dynes Road in the City of Ottawa. Each is a high rise tower. One tower fronts on the west side of Prince of Wales Drive. This is the condominium known municipally as 1380 Prince of Wales Drive in which the subject property is located. The other tower, 900 Dynes Road, is similar in height and construction, and is located on the southern side of Dynes Road. Though each tower is a separate condominium corporation, they abut each other and share some common amenities.

Sales Ratio Trend Analysis

18Section 19.2 of the Act requires that the assessment be based on the current value of the subject property on January 1, 2016. MPAC’s Valuation Analyst conducted a Sales Ratio Trend Analysis to permit the extrapolation to a January 1, 2016 date, of sales occurring on a different date.

19The analysis was based on 253 sales of residential condominiums from the subject property’s neighbourhood and adjacent areas from January 6, 2015 to December 22, 2016, approximately one year on either side of the legislated valuation date. This analysis showed that, on average, the ratio of sale prices to assessments declined 5.54% over the period. This was used to develop time adjustment factors based on a straight line decline of 5.54% over the period. We do not find the time adjustment factors to be compelling and do not see them as necessary for sales that occurred relatively close to the valuation day.

Direct Comparison Analysis

20MPAC has presented as suggested comparable sales six units, four in the 1380 Prince of Wales Drive condominium and two in the 900 Dynes Road condominium.

21The following table summarises the six suggested comparable sales:

Property	Size (sq.ft.)	Year Built	Beds	Baths	Sale Date	Price
Unit 1009 (subject property)	1,268	1977	3	2
1 Unit 1209	1,268	1977	3	2	2015/04/30	$234,500
2 Unit 1409	1,268	1977	3	2	2015/05/01	$229,000
3 Unit 709	1,268	1977	3	2	2016/09/30	$225,000
4 Unit 1609	1,268	1977	3	2	2016/08/31	$182,500
5 Unit 1401, Dynes	1,053	1974	3	1	2016/09/20	$210,000
6 Unit 1602, Dynes	891	1974	2	1	2016/09/05	$178,000

22The property valuation analyst’s opinion was that Sales 5 and 6 were inferior to the subject property; the implication being that subject property value was higher. Sale 5 sold for $210,000, so MPAC argued that this would support the returned assessment of $216,000.

Appellant’s Case

23The Appellant testified that for the last five years he has been President of the Condominium Corporation situated at 1380 Prince of Wales and has resided in the building for 21 years. He also states that he and his common law partner have owned units in both the 1380 Prince of Wales Drive condominium tower and the 900 Dynes Road condominium tower. He still owns a unit in 900 Dynes Road. As such he states that he is knowledgeable of most sales that have occurred in both buildings.

24The Appellant testifies that the value of units at 1380 Prince of Wales Drive has been adversely impacted by litigation and a change in permitted uses which has not been taken into account in the determination of the assessment.

25In summary, his evidence is that some owners of units at 1380 Prince of Wales Drive commenced litigation to enforce the requirement in the condominium declaration that units be used only for “single family” use.

26Over the years, student housing pressures from nearby Carleton University had created a market for investor owners to rent their units to unrelated students. Some residents felt that this was changing the nature of the use of the buildings from “single family” use to something closer resembling a rooming house use for those units that were used for student rentals.

27The Appellant states that of the 243 units in the building, roughly half are resident owners and the other half are investor landlords.

28Eventually, in the course of extensive litigation, the majority of the owners agreed, in June 2015, to settle the litigation by the adoption of a by-law which would define “single-family” use in a manner which was not discriminatory to various configurations of families but would still exclude the sharing of premises by unrelated persons not meeting the extended definition of family. It was felt by the majority that this would be sufficient to reduce the use of units for rental to large numbers of unrelated students.

29The Appellant testified that the individual owners of units at 900 Dynes Road, the neighbouring tower, did not engage in similar litigation or change their definition of “single family” use.

30The result, according to the Appellant, was that the units in 1380 Prince of Wales Drive became less attractive as investments, certainly in comparison to units at 900 Dynes Road, as the potential of student rentals was significantly undermined.

31The Appellant testified that when asked by prospective purchasers whether they could rent to students, he could only refer them to the new by-law and advise them to consult their lawyers for an answer. It is not unreasonable to conclude that this would cause investors to seek opportunities elsewhere rather than risk litigation at the instance of those owners who had instigated the by-law change and would be looking for its strict enforcement. In the alternative, investors could ask for a significant discount to assume this litigation risk and reduced rental potential.

32The Appellant testified that the foot print for unit numbers ending with the digits “09” is the same from the 6th to the 26th floor of the building (1,268 square feet, 3 bedrooms, 2 washrooms). He states that he and his common law partner sold units numbered 1209 and 1409 in the spring of 2015 for $234,000 and $229,000 but argues that these prices are no longer relevant because they were before the “single family definition” by-law was passed in June, 2015. These two sales are MPAC’s Sale 1 and Sale 2.

33He states that the following sales are representative of what unit numbers ending with the digits “09” sell for after the change in the definition. He states that the following are sales of units which like his have not been renovated or updated and that occurred after the change in the condominium by-law definition.

Unit	Sale Date	Sale Price
1609	August 2016	$182,000
909	January 2017	$175,000
1709	October 2017	$140,000
2409	February 2018	$184,500

34With respect to the sale of Unit 709, MPAC’s Sale 3, the Appellant states that the sale is not a fair comparison because the unit was initially purchased in a Power of Sale proceeding in the spring of 2016 and was subsequently renovated.

35The photographs submitted by the Appellant of unit 709 prior to its sale in September 2016 amply demonstrate that the unit has been extensively renovated. Both the kitchen and bathrooms have been renovated. From the photographs one could conclude it is a newly constructed unit.

36The Appellant states that his unit has not been renovated or updated. MPAC made no adjustment to the sale price to take into account these major renovations to unit 709, its Sale 3.

37The Appellant also objected generally that assessments in any given year should be based on current values of that year not on values of 2015 and 2016.

CURRENT VALUE

38The Appellant’s general objection that assessments in any given year should reflect the current values of that year is not the law. As referenced above, section 19.2, paragraph 4, of the Act requires that property taxation for the years 2017 to 2020 shall be assessed based on the current value of property at January 1, 2016. All property owners, as well as this Board, are bound by these provisions of the Assessment Act.

39There are usually insufficient sales on the January 1, 2016 legislated valuation date, so this Board will normally considers sales of comparable properties within one year of that date to be reflective of current market value at the legislated valuation date. This would exclude the Appellant’s submitted sales occurring in 2017 and 2018. We will not consider the sales that took place in 2017 and 2018 because they took place too far from the January 1, 2016 valuation day. The only relevant sale presented by the Appellant is the August 2016 sale of unit 1609 at $182,000, which is also MPAC`s Sale 4.

40Though sales occurring in 2015 are to be considered, they must still be comparable.

41One of the elements of comparability is the permitted use that a property can be put to. Permitted uses are usually found in municipal zoning by-laws, but any restriction on use can have an impact on value.

42In the present case, the adoption of a condominium by-law, the purpose of which was to create a definition “single-family use” which would exclude unrelated students as tenants, was a substantial change in the permitted uses to which the property could be put. The impact on value was inevitable considering that half of the unit owners were landlords, many of which were renting to students of nearby Carleton University. It was these student tenants which instigated the litigation which prompted the by-law change.

43This change in permitted uses has an impact on which properties can be considered comparable to the subject property. Only properties with similar permitted uses can be said to be truly comparable.

44We find that sales subject to the same restrictions as the subject property are the best for determining its value. They are subject to the same market pressures as the subject property. Any sales prior to the by-law change in June 2015 are not subject to the same restrictions, so are not adequately comparable. For the same reason we find that sales at 900 Dynes Road, which are not subject to this rental restriction, are not as comparable to the subject property.

45The Appellant’s evidence of the extensive renovations to Unit 709, MPAC’s Sale 4, also makes its comparability questionable. We find that an extensively renovated property is not a good guide to the value of the subject property, which is not renovated.

46This leaves only the sale of Unit 1609 as a comparable property. Its reliability is bolstered by the fact that both MPAC and the Appellant agreed on its comparability. The property sold on August 31, 2016 for $182,500. We find that this sale is a good indication of what the subject property likely would have sold for on January 1, 2016. We find that the current value of the subject property, as of the January 1, 2016 valuation date, is $182,500.

EQUITY

47Neither party led any evidence to show that it would be unfair or inequitable to assess the subject property at its current value. We therefore have no basis on which to adjust the assessment for equity.

DECISION

48The correct current value of the subject property as of the January 1, 2016 valuation date is $182,500. There is no evidence that assessing the property at that value would be unfair or inequitable. The Board therefore reduces the assessment of the subject property for the 2018 taxation year from $216,000 to $182,500.