Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE: March 21, 2019

FILE NO.: WR 159144

Assessed Person(s)/Appellant(s): Michael Zwiep and Victoria Zwiep

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

Respondent(s): Town of Pelham

Property Location(s): 306 Moore Drive

Municipality(ies): Town of Pelham

Roll Number(s): 2732-020-009-11601-0000

Appeal Number(s): 3323147

Taxation Year(s): 2018

Hearing Event No. 710570

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

Heard: February 27, 2019 in Fonthill, Ontario

APPEARANCES:

Parties	Representative
Michael Zwiep Victoria Zwiep	Self-represented
MPAC	Brittany Allen
Town of Pelham	No one appeared

DECISION OF THE BOARD DELIVERED BY JOANNE LAWS

OVERVIEW

1Michael and Victoria Zwiep are the owners of 306 Moore Drive, Ridgeville (the “Subject Property”), which is a single-family detached home located within 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”).

3MPAC has returned an assessment of $347,000 for the 2018 taxation year.

4The Appellants filed an appeal for 2018 taxation year with the Assessment Review Board (the “Board”) pursuant to section 40 of the Act. It is the Appellants’ position that MPAC’s assessment of current value is too high. MPAC took the position at the hearing that its assessed value is correct.

5Pursuant 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.

6Section 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. The Appellants take the position than an equity adjustment is required. MPAC takes the position that an equitable reduction is not required.

7At the completion of the hearing, I reserved my decision. For the reasons that follow, I find that for the 2018 taxation year, the current value of the Subject Property is $323,000. Accordingly, I reduce the returned assessment from $347,000 to $323,000. Pursuant to s. 44(3)(b) of the Act, an equitable reduction of this value is not required.

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:

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

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

1. The correct current value of the Subject Property for the 2018 taxation year; 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

What is the correct current value of the Subject Property for the 2018 taxation year?

9At the hearing, the parties agreed that the Appellants raised a new issue at the time of disclosure which occurred after the initial Request for Reconsideration but before the mandatory meeting for this hearing. The new issue is whether nearby cannabis production facilities have a negative effect on the current value of the Subject Property. MPAC did not raise an objection and presented evidence and arguments on this issue.

MPAC’s Evidence

10Brittany Allen represented MPAC. She called Sheryl McRoberts, a Property Valuation Analyst, as a witness. Ms. McRoberts has been employed by MPAC for 22 years, dealing primarily with assessments of residential properties. For the last 14 years she has held the title of Property Valuation Analyst.

11Ms. Allen entered into evidence a Valuation Report prepared by Sheryl McRoberts dated October 18, 2018.

12Ms. McRoberts, described the Subject Property as a residential single-family detached home, one and one quarter storeys in height, with a building area of 1,833 square feet (“sq. ft.”). The residence was built in 1948 however MPAC has assigned it an effective year built of 1994 due to a recent addition and renovations. It has two full bathrooms. There is a detached garage of 384 sq. ft. The sanitary system is a septic bed and the water supply is by a cistern. The Subject Property’s lot has an effective area of 19,940 sq. ft. with and effective width of 100 feet and an effective depth of 199 feet. MPAC has reduced the assessed value by 5% to reflect the lot’s sloping topography. MPAC has ranked the residence’s quality of construction as 5.5 out of 10 and the garage as 3 out of 10. MPAC values the addition at $99,000.

13The parties agree that:

a. The Appellant took out a building permit in 2016 for an addition;

b. The 936 sq. ft. addition was completed in September 2017; and

c. MPAC’s building measurements are correct.

14MPAC used the direct sales comparison method in order to determine the value of the Subject Property. MPAC selected five single-family residential homes located between 1.27 and 4.8 kilometres from the Subject Property. Only one of the suggested comparable properties, 263 Highway 20, is located in the same neighbourhood, which MPAC identifies as B01-223. Ms. McRoberts said that rural neighbourhoods are identified with the letter ‘B’ and urban neighbourhoods are identified by the letter ‘A’. The remaining four sales are located in neighbourhoods identified with the letter ‘A’.

15Ms. McRoberts’ proposed comparable properties sold during 2015, 2016 and 2017. She carried out a Sales Ratio Trend Analysis study in order to derive values in the residential real estate market during those years. This allowed her to adjust values to the valuation day, so that she could provide the estimated time-adjusted sale (“TAS”) amounts for each of her chosen comparable sales. The Appellants did not object to the use of TAS sales, and I have referred to those values here.

16The following chart sets out the details of Ms. McRoberts’ suggested comparable properties.

MPAC’S PROPOSED COMPARABLE PROPERTIES

	Subject Property	Sale 1 717 Welland Road	Sale 2 1 Burton Avenue	Sale 3 23 College Street	Sale 4 4 Broad Street	Sale 5 263 Highway 20
Date of Sale	N/A	September 2016	June 2015	February 2017	July 2017	June 2016
TAS Price ($)	N/A	297,991	368,220	255,837	226,005	377,802
Neighbourhood	B01-223	A30-86	A02-62	A07-85	A02-62	B01-223
Distance from Subject Property (Kilometre)	0	4.8	4.57	3.93	1.96	1.27
Year Built	1948	1947	1930	1948	1940	1947
Effective Year Built	1994	1984	1983	1954	1980	1947
Quality of Construction	5.5	6	6	6	6	6
Build. Area (sq. ft.)	1,833	1,627	1,899	1,525	1,456	2,147
Number of Storeys	1.25	1.25	1.5	1.25	1.25	1.75
Lot Size (Acres)	0.46	0.16	0.50	0.30	0.13	0.81
Garage (sq. ft.)	384	404	621	504	437	613
Basement Area (sq. ft.)	800	702	576	928	719	1,133
Finished Basement (sq. ft.)	0	347	0	0	222	300
Septic System	Septic Bed	Unknown*	Unknown*	Unknown*	Unknown*	Septic Bed
Water Source	Cistern	Unknown*	Unknown*	Unknown*	Unknown*	Cistern or Well

*In response to my query, Ms. McRoberts said that these properties likely receive the municipal services of sewage and water because, unlike the Subject Property, they are located in urban areas.

17Ms. McRoberts said she selected these five properties based on their building size, building age, whether they had renovations or additions and the dates the work was done, the sale dates and the distance from the Subject Property. Her evidence did not include the topography for these suggested comparable sale properties despite the Subject Property receiving a -5% adjustment for sloping topography.

18In response to the Appellants’ position that real estate values will decrease due to nearby cannabis production facilities and their associated odours, MPAC presented 28 sales of farms, single-family homes and mobile homes located less than 1 kilometre from one of the area’s largest cannabis production facilities, located at 770 Foss Road. More than 71 per cent of the TAS prices exceeded the assessed values and 93 percent of the non TAS prices exceeded the assessed values. Ms. McRoberts concludes from this data that cannabis production facilities have not had a negative effect on the residential market values in this area. Therefore, she takes the position that a nuisance adjustment for proximity to the production of cannabis is not warranted for the Subject Property.

MPAC’s Submission

19Relying on its evidence, MPAC submits that the correct current value for the 2018 taxation year is $347,000.

20MPAC used the bracketing method in its analysis. MPAC submits that Sales 1, 3 and 4 are inferior to the Subject Property, Sale 2 is similar and Sale 5, which is the most similar in terms of location, is superior. MPAC concludes that the assessment of $347,000 is correct because it falls within the range of these sales.

21In response to the Appellants’ argument that the increase in assessment is too high, MPAC argues that the increase in assessment from $219,000 for the 2017 taxation year to $347,000 for the 2018 taxation year reflect the value of the addition to the Subject Property plus the market increase in the area.

22Of the 22 assessments submitted by the Appellants, four have sales. In reviewing these sales, MPAC looked at the TAS values per square foot of building area and argued that the value for each of these sale properties exceeded the Subject Property’s assessed value per square foot of building area. MPAC also looked at the TAS values for the eight sales in evidence (MPAC’s five properties and the Appellants’ three properties) and noted that both the median and mean TAS value per square foot of building area was almost identical to the Subject Property’s assessed value per square foot of building area.

23Finally MPAC’s advocate cited five cases for me to consider. The first three to support her argument that sales, rather than assessments, must be used to determine the current value and the final two to support her argument that evidence is required to determine the value of a nuisance. Those cases are:

a. 1691498 Ontario Inc v Municipal Property Assessment Corporation, Region 15, 2016 CanLII 74067 (ON ARB);

b. Morellato v Municipal Property Assessment Corporation, Region 32, 2018 CanLII 118876 (ON ARB);

c. Dunlop v Orillia (City) 2019 CanLII 7195 (On ARB);

d. Quinn v Municipal Property Assessment Corporation, Region 03, 2018 CanLII 43333 (ON ARB); and

e. Bes v. Municipal Property Assessment Corp., Region No. 23 [2005] O.A.R.B.D. No. 297.

Appellant’s Evidence

24Michael Zwiep represented himself and his wife, Victoria Zwiep. He stated that he bought the Subject Property some years ago and that it was the least expensive home he could find in the area. At the time of purchase, he was single but he now provides the sole income for his family of six. He feels he is being ‘priced out of his home’. He said that his assessment was initially returned for the 2016 valuation day at $248,000. He filed a Request for Reconsideration for 2017 which resulted in a reduced assessment of $219,000. For the 2018 taxation year, his assessment was returned at $347,000 and he filed a Request for Reconsideration for that year as well. He acknowledges that the increase came about after the addition to his home was completed. He argues that this increase is too high in comparison with the assessments of similar properties in his area.

25Mr. Zwiep submitted 22 assessments of properties located near his home. He argues that 21 of the 22 properties have lower assessments despite having newer and larger residences and larger lots. He argues that his assessment is unfair because it is at the high end of the range of these assessments. He stated that after pre-hearing discussions with Ms. McRoberts, he understands that assessments without arm’s length sales are not strong evidence of current value.

26Of the 22 assessments submitted, four have sales. One of the sales occurred in 2012 which is too far from the January 1, 2016 valuation day to assist in the determination of current value. The remaining three sales are summarized in the chart below.

APPELLANTS’ SALE PROPERTIES

	Subject Property	Sale 1 281 Canboro Road	Sale 2 1020 Effingham Street	Sale 3 231 Welland Road
Date of Sale	N/A	August 2016	January 2017	August 2015
TA Price ($)	N/A	302,220	279,105	348,667
Neighbourhood	B01	B02	B03	B02
Year Built	1948	1972	1972	1959
Effective Year Built	1994	N/A	N/A	N/A
Quality of Construction	5.5	6	6.5	6
Build. Area (sq. ft.)	1,833	1,612	1,467	1,410
Number of Storeys	1.25	1.0	1.0	2.0
Effective Lot Size (sq. ft.)	19,940	31,680	20,000	21,402
Basement Area (sq. ft.)	800	1,244	1,440	710
Finished Basement (sq. ft.)	0	731	1,438	0
Septic System	Septic Bed	Unknown	Unknown	Unknown
Water Source	Cistern	Unknown	Unknown	Unknown

27In addition, Mr. Zwiep submitted:

a. An October 16, 2018 Zoocasa article entitled: A Joint Issue: How Canadian Homeowners and Renters Really Feel About Legal Cannabis;

b. A February 2, 2018 news release from the Town of Pelham entitled: Licensed Marijuana Facilities in Pelham: What you Need to Know;

c. An October, 16 and 17, 2018 CBC report entitled: Medical marijuana greenhouses causing a stink in rural Ontario;

d. An April 2018 Public Health Ontario document entitled: Evidence Brief, Odours from cannabis production;

e. An October 16, 2018 NiagaraThisWeek.com article entitled: Pelham puts the kibosh on new cannabis growers;

f. An August 2, 2016 MPAC publication entitled: Pelham Residential Property Values on Average have Increased 3.4 Per Cent Per Year Since 2012;

g. A June 22, 2018 Welland Tribune article entitled: Pot farms still causing concerns; and

h. A September 20, 2018 The Voice of Pelham article entitled: Residents organize to resist rise in Pelham pot operations.

28Mr. Zwiep testified that his home is located directly across from a cannabis production facility and that the odours emanating from that facility reduce the enjoyment of his land and, therefore, reduces its value. There are at least six such cannabis production facilities in the municipality. The facility nearest his property is relatively small and the producer was not permitted to expand. On cross-examination, he testified that, to his knowledge, home prices have not been negatively affected by the presence of cannabis production facilities. He also confirmed that he told Ms. McRoberts that he has a good relationship with the owner of the facility and that if he has any concerns or issues he is able to contact the owner directly.

Appellants’ Submission

29Relying on his evidence, Mr. Zwiep submits that the correct current value for the 2018 taxation year is less than $347,000.

30Mr. Zwiep argues that his property is located in a rural area and is not comparable to urban properties located in the Town of Pelham which is a more prestigious area.

31Mr. Zwiep argues that it is only logical that, eventually, property prices will be affected by the cannabis production and its resulting odours.

Findings on Current Value

32The Appellants argue that it is logical that a negative effect on property values will occur due to the cannabis production and its resulting odours. His numerous articles show that his belief is shared by many other people in his community. However, both parties testified that there is no evidence that property values have been negatively affected by this industry. Accordingly, I decline to make a finding of an effect on value that has not occurred. I cannot speculate on whether this new industry may affect property values nor can I quantify a value without evidence.

33The Appellants state they feel they are being priced out of their home. The Act provides that the assessment is based on the current value which is defined as the amount of money the property would realize in an arm’s length transaction between a willing buyer and a willing seller. The Act does not permit me to consider personal economic factors when determining current value.

34The Appellants presented an MPAC publication entitled: Pelham Residential Property Values on Average have Increased 3.4 Per Cent Per Year Since 2012. MPAC argued that this annual, average value added to the assessed value of the Subject Property with the new addition results in the 2018 assessed value. However, I give this document no weight in determining the current value. It addresses the average increases for all residential properties in Pelham, not, specifically, the value of the Subject Property.

35The direct sales approach to value is the best approach to determining the current value of the Subject Property. The issues that arise when using this method are the degree of comparability between the properties and the dates on which the properties were sold. The degree of similarity between properties refers to the physical characteristics and their locations. These issues must be considered when assigning weight to evidence of current value.

36Both parties presented sales of suggested comparable properties. In my determination of current value, I have analyzed the parties’ evidence using bracketing. MPAC used both bracketing and the TAS value per square foot of building area in its arguments. In this instance, I prefer bracketing over the sale value per square foot method. The sale value per square foot is best used when the sale properties are nearly identical to the Subject Property. This is not the case here. Bracketing is a very good method for comparing properties in the direct sales approach when very few properties are provided in evidence that can be considered directly comparable. Bracketing is based on the general principle that a comparable property that has superior attributes to the Subject Property will sell for more, those that have similar attributes will sell for similar amounts, and those with inferior attributes will sell for less.

37MPAC presented five suggested comparable properties that sold near the valuation day. All are similar to the Subject Property in that they have a second partial storey. The Appellants argue that properties located in an urban area are superior to properties located in a rural area, all other characteristics being equal. I agree. Those properties located in an urban area likely have more amenities and services. In addition, it is more likely than not that the urban properties have municipal water and sewage. The Appellants presented three suggested comparable properties that sold near the valuation day. These properties are similar to the Subject Property in that they, too, are located in rural areas.

38MPAC’s Sale 1, 717 Welland Road, is inferior to the Subject Property in lot size, building age and building size. However, it is superior in quality of construction and location. These differences likely balance each other out. Therefore, I find that this property is, on balance, similar to the Subject Property.

39MPAC’s Sale 2, 1 Burton Avenue, is inferior to the Subject Property in building age however it is similar in lot size and building size and is superior in quality of construction and location. On balance, I find that his property is superior to the Subject Property.

40MPAC’s Sale 3, 23 College Street, is inferior to the Subject Property in lot size, building age and building size. It is superior in quality of construction and location. On balance, I find that this property is slightly inferior to the Subject Property.

41MPAC’s Sale 4, 4 Broad Street, is inferior to the Subject Property in lot size and building age but it is similar in building size and superior in quality of construction and location. On balance, I find that it is slightly inferior to the Subject Property.

42MPAC’s Sale 5, 263 Highway 20 is similar to the Subject Property because it is also located in a rural area. It is superior in lot and building size and quality of construction. I find that this property is superior to the Subject Property.

43The Appellants’ Sale 1, 281 Canboro Road, is similar to the Subject Property in location but it is superior in lot size, quality of construction and because it has a single-storey building. Single-storey buildings tend to be superior to multiple-storey buildings due to the economy of scale in construction costs. Although it is inferior in age, I find that it is, on balance, superior to the Subject Property.

44The Appellant’s Sale 2, 1020 Effingham Street, is similar to the Subject Property in location and lot size. The building age and size are inferior but it is superior in terms of quality of construction and because it has a single-storey. On balance, I find that it is superior to the Subject Property.

45The Appellant’s Sale 3, 231 Welland Road, is similar to the Subject Property in location and lot size. The building age and size are inferior but it is superior in terms of quality of construction. On balance, I find that this property is similar to the Subject Property.

46Based on the above, I find that the Subject Property would likely sell for more than the TAS value of the most valuable inferior property. I also find that the Subject Property would likely sell for less than the TAS values of the superior properties. I further find that the Subject Property would likely sell for a similar value of the similar properties. The average TAS value of the similar properties is $323,329 (($297,991+$348,667)/2)). This is the current value 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 the amount of this reduction should be.

Appellant’s Evidence

47Mr. Zwiep presented 22 assessments of properties located near the Subject Property and argued that his assessment is not equitable because all but one have lower assessments than his property, despite having superior characteristics like larger lots or larger buildings.

Appellants’ Submission

48The Appellants submit that an equitable reduction is required but did not specify what that amount might be.

MPAC’s Evidence

49MPAC presented an equity study of 30 single-family detached property sales, which occurred from January 1, 2015 to December 31, 2017. The search parameters were limited to properties located within 2 kilometres from the Subject Property, built between 1930 to 1950, with structures that have been renovated and have one and a quarter to two storeys. The median assessment to sale ratio (“ASR”) presented is 0.966 and the coefficient of dispersion is 9.0.

MPAC’s Submission

50Relying on its evidence, MPAC’s submits that an equitable reduction of the current value for the 2018 taxation year is not required. MPAC takes the position that a median ASR falling between 0.95 and 1.05 indicates that equity has been achieved. MPAC also takes the position that a coefficient of dispersion of less than 15 for residential properties implies “good appraisal uniformity among individual properties.”

Findings on Equity

51The 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.

52The information contained in the Appellants’ evidence is insufficient to make a finding of whether the Subject Property is inequitably assessed. As a general rule, assessments alone are not strong evidence of whether MPAC is assessing similar lands equitably, especially when those assessed properties are not directly comparable to the Subject Property. A better measure of equity is to compare assessments to arm’s length sales. There are only three sales in this sample that occurred close to the valuation day. A larger sample of sales is more reliable when considering whether MPAC is tending to assess similar properties accurately.

53MPAC presented an analysis of 30 very similar properties located within 2 kilometres of the Subject Property. The median ASR is 0.966 and I calculate that the average or mean ASR is 0.974. Both measures of central tendency fall within MPAC’s target range of 0.95 to 1.05. The 95% confidence interval of the mean is 0.933 to 1.015 which means the true mean of the population based on this sample is more likely than not to be within MPAC’s target range. Further, the coefficient of dispersion for the median is 9.0, which falls below the acceptable value of 15 for residential properties. This means that the assessments in the data are sufficiently uniform.

54Based on the evidence before me, I find that no adjustment is required for the purpose of equity.

DECISION

55The correct current value of the Subject Property is $323,000, rounded, for the 2018 taxation year.

56An equitable reduction of the current value of the Subject Property, pursuant to s. 44.(3)(b) of the Act, is not required.

57Accordingly, the assessment is reduced from $347,000 to $323,000 for the 2018 taxation year.