Leck v. Municipal Property Assessment Corporation, 2019 CanLII 22893

Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE: March 20, 2019 FILE NO.: WR 158992

Assessed Person(s): Margaret Kimberley Leck, Robert Andrew Leck Appellant(s): Margaret Kimberley Leck, Robert Andrew Leck Respondent(s): Municipal Property Assessment Corporation (“MPAC”) Region 07 Respondent(s): Dysart Et Al Township

Property Location(s): 1357 Watts Road Municipality(ies): Dysart Et Al Township Roll Number(s): 4624-061-000-05400-0000 Appeal Number(s): 3269938 and 3293026 (deemed 2018 appeal) Taxation Year(s): 2017 and 2018(deemed appeal) Hearing Event No. 703278

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

Heard: August 20, 2018 in Haliburton, Ontario

APPEARANCES:

Parties	Representative
Margaret Leck Robert Leck	Self-represented
MPAC	Matthew Sauder
Dysart Et Al Township	No one appeared

DECISION OF THE BOARD DELIVERED BY MARK SPRAGGETT

REASONS

Background

1Margaret Kimberley Leck is the owner of 1357 Watts Road (the “Subject Property”), in Dysart Et Al Township and the County of Haliburton.

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 initially assessed the value of the Subject Property, as of January 1, 2016 at $1,062,000. Upon reviewing the status of the building construction, MPAC reduced the property’s value by an additional 21%, taking the position that the value of the Subject Property is $891,000 not $1,062,000.

4Robert Leck, (the “Appellant”), representing the owner, has filed an appeal for the taxation year 2017 with the Assessment Review Board (the “Board”) pursuant to section 40(26) of the Act, and he has been deemed to have brought the same appeal with respect to the Subject Property for the 2018 taxation year. It is his position that MPAC’s assessment of current value is too high and that the correct current value is $500,000. At this hearing, MPAC takes the position that its assessed value of $891,000 is correct.

5Pursuant to section 40(11) of the Act, the Municipality, Dysart Et Al Township, is a party to this proceeding. However, the Municipality did not advise the Board of its position on the issues raised in these appeals, and no one appeared at the hearing on the Municipality’s 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.

7MPAC takes the position that an equitable reduction is not required. The Appellant did assert that an equitable reduction of current value is required. However, no factual evidence was provided to support his position. Therefore, in this proceeding, this ground for appeal is not in issue.

8At the completion of the hearing, the Board reserved its decision. For the reasons that follow, the Board finds that the current value of the Subject Property for the 2017 and 2018 tax years is $540,000.

Relevant Legislation

9The Act:

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:

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.

Issue

10The issue to be determined on this appeal is: What is the correct current value of the Subject Property for the taxation years 2017 and 2018;

Description of the Subject Property

11The Subject Property is a two-storey detached seasonal/recreational residential dwelling with a basement walkout. The dwelling structure has an effective year built of 2016 with a total building area of 3,457 square feet (“sf”), and a construction quality rating of 7.0. A quality rating of 7.0 identifies the property as better than an average house, utilizing better construction materials, having vaulted ceilings, larger windows etc. It has no bearing on structural issues. Located in the Dysart Et Al Township of Haliburton County on Little Kennisis Lake, the lot extends to the water’s edge. The property has year-round road access.

Discussion, Analysis and Findings

MPAC’S Evidence

12Matthew Sauder, a Property Valuation Analyst, represented and testified on behalf of MPAC.

13Mr. Sauder prepared and submitted a Valuation Report respecting the Subject Property, dated April 19, 2018 (“Valuation Report”)

14Relying on his evidence and analysis, Mr. Sauder’s opinion of the correct current value for the Subject Property as of January 1, 2016 is $891,000. Mr. Sauder states in his Report that the data, analysis and conclusions supporting his opinion are contained in the body of the Valuation Report.

15Mr. Sauder conducted an inspection of the Subject Property on May 25, 2017, taking exterior measurements of the new construction. He testified that MPAC determines its initial assessed value using computer assisted mass appraisal techniques that analyze the sales of all residential properties in the market area in which the Subject Property is located.

16Mr. Sauder testified that MPAC’s mass appraisal model provided a 21% downward adjustment in the assessed value to account for the unfinished state of the building. The breakdown of the adjustment included 4% for Kitchen; 5% for Exterior; 6% for Flooring; 2% for Doors/Trim; 2% for Painting/Priming; and 2% for Plumbing.

17Mr. Sauder testified that he searched MPAC’s corporate database for sales information and identified four suggested comparable properties for his analysis, that sold between June 2015 and September 2016.

18Mr. Sauder applied the Direct Comparison Approach to arrive at his opinion of the correct current value for the Subject Property. In lieu of a quantitative approach, Mr. Sauder adopted a bracketing approach, where he qualitatively classified suggested comparable properties as being either inferior, superior or closely comparable to the Subject Property. This approach provided a probable range of current value for the Subject Property.

19Mr. Sauder testified that all the suggested comparable properties have lot sizes that vary considerably. All have construction quality class ratings below that of the Subject Property’s 7.0 rating. Their effective year built range from 1978 to 1989, in contrast to 2016 for the Subject Property. Only one property is a two-storey building, with the remaining having only a single-storey. All have less than 50% in total building area compared to the Subject Property.

20Based on his analysis of the suggested comparable properties, Mr. Sauder concludes that they are all inferior to the Subject Property, due to the following limitations:

a. 2393 Watts Rd – Older dwelling, smaller building, lower quality class; Dwelling considered extremely inferior;

b. 1723 Watts Rd – Smaller waterfront, older dwelling, smaller building, lower quality class; Dwelling considered extremely inferior;

c. 1287 Watts Rd – Older dwelling, smaller building, lower quality class; Dwelling considered extremely inferior; and

d. 1009 Baffin Trail – Seasonal road, older dwelling, smaller building, lower quality class; Dwelling considered extremely inferior.

21Mr. Sauder testified that the suggested comparable properties have to be adjusted for differences in market conditions between their respective sale dates and the valuation day. He testified that, for the period from January 16, 2015 to December 30, 2016, a period of 23 months, his analysis of 322 sales of vacant and/or improved land from the Subject Property’s neighbourhood and adjacent areas, indicates that house prices increased approximately 9.44%. Mr. Sauder applied this price change over time to adjust the differing sale dates of the suggested comparable properties to reflect market conditions as of the January 1, 2016 valuation day.

22Mr. Sauder presented a time adjusted sale price range for the suggested four comparable properties between $470,609 to $753,894, with the values of three of the four properties being under $565,000. Applying the Direct Comparison Approach, Mr. Sauder concludes that MPAC’s mass appraisal model’s estimate of current value of $891,000 is reasonable, with $249,805 apportioned to land value and $642,110 for the building, as of January 1, 2016.

23Mr. Sauder testified that the suggested comparable properties have the following apportionments between land and building structures:

Properties	Land Value	Building Value	Other Structures
Subject Property	249,805	642,110	Na
#1(2393 Watts Rd)	253,241	300,062	Na
#2(1723 Watts Rd)	233,423	252,267	Na
#3(1287 Watts Rd)	272,112	248,609	18,544 (Garage)
#4(1009 Baffin Trail)	437,813	232,340	10,044 (Cabin)

MPAC’s Submissions

24Relying on its evidence, MPAC submits that the correct current value for the taxation years 2017 and 2018 is $891,000.

25MPAC disagreed with the Appellant’s argument that only his property has a steep driveway, noting that other lots also have steep driveways.

26MPAC disagrees with the opinion of value from the Appellant’s real estate agent, arguing that no property sales evidence was provided to support the opinion, and that the author of the opinion was not present at the hearing to answer questions or provide clarification of the opinions presented.

Appellant’s Evidence

27Robert Leck, the Appellant testified at the hearing.

28Mr. Leck submitted a document obtained from his real estate sales representative, which provides an opinion of value of the Subject Property.

29Mr. Leck agreed with MPAC on the general property description and he also agreed with MPAC’s value assigned to the land portion of his property. However, he disagrees with the value assigned to the building component.

30Mr. Leck testified that in May 2017, the newly built house was just a shell of a structure. He described that the exterior of the structure was largely exposed to the elements, with Tyvec sheeting material covering much of the exterior of the building. He described that the interior of the building consisted largely of wood framing, absent of any drywall finish, no kitchen, three bathrooms not yet built with the exception of one toilet in operation, a temporary sink for running water from the lake(no dug well), and ceilings with exposed insulation. Mr. Leck estimates the building was only 50% complete at the time of Mr. Sauder’s visit to the property.

31Mr. Leck asserts that the 1,000 square foot loft space is not part of the total living area, maintaining that the interior main floor area is approximately 2,000 sf.

32Mr. Leck estimates that he spent between $250,000 to $270,000 constructing the new house as of May 2017, not including landscaping ($20,000). He acknowledged that he has no receipts to corroborate his estimates.

33Mr. Leck stated that the property has a very steep slope from the road to the water’s edge, including the driveway. He testified that the previous house on the property had an almost vertical slope, which was modified to accommodate the new house.

34Mr. Leck testified that his property is in a hole, with his neighbouring properties situated at higher elevations overlooking his house. He further noted that the Town’s road culvert is located at a higher elevation overlooking his property and is responsible for considerable water runoff down onto his property. He also noted that water runoff from neighbouring properties also exacerbate the runoff problem.

35Mr. Leck testified that his waterfront view is not a clear open view of the lake. He claimed that a nearby protruding peninsula blocks his property from having a clear view of the lake.

36Mr. Leck testified that he sold his nearby property (1383 Watts Rd), in October 2015, for $300,000, stating that MPAC assessed it at $353,000 at that time. The lot is the same size as the Subject Property, however the property has some slight improvements that include a new roof, a series of stairs leading to the waterfront, and an assortment of fixed piers.

Appellants’ Submissions

37Relying on his evidence, the Appellant submits that the correct current value of the Subject Property for taxation years 2017 and 2018 is $500,000

38The Appellant disagrees with the property description provided by MPAC, in particular the degree of finished construction. At the time of MPAC’s inspection in May 2017, the Appellant contends only 50% of the building was complete, not 79% as stated by MPAC.

39The Appellant disputes MPAC’s estimate of a total building area of 3,500 square feet (“sf”), arguing that the estimated 1,000 sf interior loft area should not be counted as part of total building area.

40The Appellant is convinced his cottage has a number of negative features affecting its value, in particular:

a. It faces north, which, in his opinion is the worst direction for sunshine.

b. His neighbours’ trees limit sunlight onto his property.

c. His rock shoreline needs a dock in order to access the water.

d. His property’s value is affected by the surrounding properties and the topography of the land.

e. His property has limited privacy, as his neighbours overlook the property from higher grounds.

41The Appellant disagrees with MPAC’s assessed values for this area of the bay, claiming they are overvalued. He cites 1383 Watts Road, a property that sold in 2015 for $300,000, whereas MPAC assessed it at $353,000.

42The Appellant disagrees with MPAC’s choice of comparable properties, arguing they are finished properties, that, unlike the Subject Property, they have larger lot sizes, outbuildings, flatter topography, larger waterfront shorelines, and better unobstructed views of the lake. For these reasons, he argues they are not comparable to the Subject Property.

43The Appellant maintains that his property is unique and that MPAC’s computer algorithm model cannot measure the value of a property that is unique. He argues that the nearby suggested comparable properties fail to take into account the element of uniqueness.

44The Appellant disagrees with MPAC’s assessment of his property, arguing that MPAC's representative spent very little time in conducting the inspection. He maintains that a more comprehensive inspection is necessary in order to arrive at a proper assessment of the property’s value.

Findings

45Under section 44.(3)(a) of the Act, the Board must first determine “the current value of the land.” The best evidence the Board can receive of current value is an arm’s length and market-tested sale of the property on the valuation date or close to it. If, as in this case, no such transaction took place, the next best measure of current value is an arm’s length and market-tested sale of comparable properties located nearby, as close as possible to the legislated valuation date of January 1, 2016.

46To estimate a value for the Subject Property from the suggested comparable properties, there must be sufficient elements that are comparable, in terms of physical factors such as building area, land area, land frontage, age of construction and physical condition, etc. so that a direct comparison can be made.

47MPAC’s Valuation Report states that all the suggested comparable properties are to be inferior to that of the Subject Property, mainly because of the state of the dwellings on the properties. The Board nevertheless finds that some of the properties do have unique features that are superior to the Subject Property. In particular they have a larger shoreline, a larger lot size or additional out buildings. Due to these unique features, the Board finds that it can consider these properties for the purpose of determining current value.

48However, the Board finds that MPAC’s suggested comparable properties provide insufficient information to determine the current value for the Subject Property. MPAC has rated all four properties as inferior, describing their respective dwellings as extremely inferior in comparison to the Subject Property. The Board is not persuaded by the Valuation Reports’ analysis in support of a current value of $891,000. No explanation is given to demonstrate how these properties support this value.

49The Board finds that two of the suggested comparable properties, 2393 and 1723 Watts Road, are comparable to the Subject Property. The two properties exhibit characteristics that are comparable to the Subject Property, in terms of lot size, being first tier on water and their location in the same neighbourhood.

50The Board rejects 1009 Baffin Trail as a suggested comparable property. It has a superior lot size of over three times that of the Subject Property, with an effective frontage of 510 feet versus 130 feet for the Subject Property. Although it is also a first tier on water, it has an extremely inferior dwelling. The Board finds that due to these features, the property is too different to the Subject Property to be a reliable comparable property.

51The Board is not persuaded by MPAC’s limited qualitative valuation analysis in applying the direct comparison approach. The Board finds that the Subject Property ought to be valued less than 1009 Baffin Trail.

52The Board notes that the Subject Property has a significantly smaller lot, a much smaller water frontage with obstructed views of the lake, and an unfinished house that is sporadically occupied due to ongoing construction. 1009 Baffin Trail, is a property that has a lot that is three times larger. It also has a significantly larger water frontage.

53The Board also rejects 1287 Watts Road, as it is not a first tier on water property, has a larger water frontage, has a new garage, and has an extremely inferior dwelling.

54The Board notes that the parties disagree on the value of the unfinished building. MPAC argues that the building is 79% finished and, therefore, assigns a value of $642,110 to the building component, that is generated by its mass appraisal system. MPAC has not provided any evidence to account for this value.

55The Appellant takes an opposing viewpoint, maintaining that only 50% of the building is finished. Based on his recollection of the expenditures to date, he estimates that the building itself is valued at $270,000 not including $20,000 for landscaping. No factual evidence was provided to support this valuation of the building component.

56Although not formally qualified to provide opinion evidence, the Board has considered Mr. Leck’s views, based on his extensive involvement with the construction process, and has assigned the proportionate weight necessary when determining the correct current value of the Subject Property.

57In this case, the Subject Property is the second property Mr. Leck has owned in this neighbourhood, so he is familiar with property values in the area, and, as noted above, he has had extensive involvement in the construction work done on the Subject Property. For this reason, the Board accepts his views over MPAC’s computer generated results for the building’s value. Mr. Leck provided the details of the extent of the construction activities occurring over time, including the status of the unfinished interior and exterior of the property. He also provided a detailed description of negative features affecting the value of the property pending completion of the house, which includes landscaping. MPAC did not dispute Mr. Leck’s evidence. The Board notes that MPAC has not provided this level of detail in support of its analysis.

58Therefore, the Board finds that the best evidence to estimate the value for the building component in its’ unfinished condition, is the Appellant’s estimate. For these reasons, the Board finds that the value for the unfinished building is $270,000.

59For the Board to determine current value for the Subject Property, it must also consider the estimated value for the land as well. The Board accepts the land value of $249,805 associated with the Subject Property. This value is also supported from the range of land values for the suggested comparable properties. Furthermore, both parties agree with this value.

60The Board calculates the current value for the Subject Property by adding its land value of $249,805 to the estimated expenditures on building construction and landscaping, $270,000 and $20,000, resulting in a value of $539,805 or $540,000 rounded. When cross referenced with the land values of MPAC’s two best comparable properties using the same building estimates, the Board is satisfied that the correct current value is $540,000.

DECISION

61The Board reduces the assessment of the Subject Property for the 2017 taxation year from $1,062,000 to $540,000 and reduces the assessment for the 2018 taxation year from $891,000 to $540,000.