Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE: April 04, 2019

FILE NO.: WR 159297

Assessed Person(s): Bryce Stephen Phillips and Elizabeth Pettapiece-Phillips

Appellant(s): Bryce Stephen Phillips and Elizabeth Pettapiece-Phillips

Respondent(s): Municipal Property Assessment Corporation, (“MPAC”), Region 27

Respondent(s): Town of Leamington

Property Location(s): 10 Lower Road

Municipality(ies): Town of Leamington

Roll Number(s): 3706-530-000-30000-0000

Appeal Number(s): 3262537, 3313809 and 3367413 (deemed 2019 appeal)

Taxation Year(s): 2017, 2018, and 2019 (deemed appeal)

Hearing Event No.: 706467

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

Heard: November 15, 2018 in Leamington, Ontario

APPEARANCES:

Parties

Representative

Bryce Stephen Phillips

Self-represented

MPAC

Jason Holmes

Town of Leamington

Laura Rauch

DECISION OF THE BOARD DELIVERED BY JOANNE LAWS

OVERVIEW

1Bryce Phillips and Elizabeth Pettapiece-Phillips are the owners of 10 Lower Road (the “Subject Property”), which is a recently built, waterfront, two-storey, single family detached home on the north shore of Lake Erie and at the south end of the Town of Leamington.

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’s has assessed the current value of the Subject Property at $1,063,000.

4The Appellants have filed an appeal for 2017 taxation year with the Assessment Review Board (the “Board”), and have been deemed to have brought the same appeal with respect to the Subject Property for the 2018 and 2019 taxation years pursuant to s. 40 of the Act. It was the Appellants’ position that MPAC’s assessment of current value is too high and that the correct current value is less than $900,000. MPAC took the position at the hearing that its assessed value is correct.

5Pursuant to s. 40(11) of the Act, the Town of Leamington is a party to this proceeding. The Town of Leamington attended the hearing but presented no evidence.

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. Both MPAC and the Appellants took the position that an equitable reduction is not required. Therefore, in this proceeding, this ground for appeal is not in issue.

7At the completion of the hearing, I reserved my decision. For the reasons that follow, I find that for the 2017, 2018, and 2019 taxation years, the current value of the subject Property as of the January 1, 2016 valuation day is $1,063,000 and, therefore, I confirm the assessment as returned.

Relevant Legislation and Rules

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:

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

9The issue to be determined on this appeal is what the correct current value of the Subject Property is for the 2017, 2018 and 2019 taxation years.

Discussion, Analysis and Findings

MPAC’s Evidence

10Jason Holmes represented MPAC at the hearing and gave the evidence in support of the assessment corporation. He entered into evidence a valuation report dated August 22, 2017.

11MPAC described the Subject Property as a residential, single family detached waterfront home, two-storeys in height, with a building area of 4,595 square feet (“sq. ft.”) with 2,892 sq. ft. on the first floor and 1,703 sq. ft. on the second floor. The home was built in 2014 and MPAC has allocated a quality of construction of 8.5 (out of 10). The Subject Property has 113.5 feet of waterfront on Lake Erie and a site area of 1.33 acres. MPAC adjusted the site area to 1.04 acres to reflect an irregular shaped lot. The home has three and one-half bathrooms and three fireplaces. There is no basement; however, there is a 1,341 sq. ft. attached garage with a second storey storage area above.

12MPAC uses a method of residential property assessment called direct sales comparison. In order to support the Subject Property’s returned assessment for the January 1, 2016 valuation day Mr. Holmes chose six waterfront property sales which occurred from 2014 to 2016 in or near the Towns of Leamington and nearby Kingsville. These properties are located between 1 and 17 kilometres from the Subject Property. All are located on Lake Erie, but are older and smaller than the Subject Property. All but one have basements and all but one have smaller garages. Two have single storey homes while the remainder are two storeys. Mr. Holmes used bracketing in his analysis and identified all six sale properties as inferior to the Subject Property. He stated he would prefer to have an equal number of inferior, similar and superior properties but was unable to find sales of similar or superior properties.

13MPAC carried out a Sales Ratio Trend Analysis Study (“TAS”), which allowed MPAC to estimate the sale values as of the January 1, 2016 valuation day. The Appellant did not object to the use of TAS sales, and I have referred to those values in this decision.

MPAC’s Submissions

14Relying on its evidence, MPAC submits that the correct current value for the taxation years 2017, 2018, and 2019 is $1,063,000; that the Subject Property should sell at the top of the range of these inferior sales.

15MPAC notes that the assessments the Appellants used in their analysis are from the January 1, 2012 valuation day, which are not relevant to this appeal of the January 1, 2016 valuation day assessment.

16In response to the Appellants’ arguments, MPAC states that it does not reduce assessments for lack of municipal services; that the tax rate is set by the municipality with no regard for services or private roads; that it looks to sales to determine a property’s assessed value and; that the assessed value reflects a 1% reduction to acknowledge the cost to maintain and repair the private roads.

Appellant’s Evidence

17Bryce Phillips represented himself and Elizabeth Pettapiece-Phillips.

18Mr. Phillips testified that, although he pays taxes at a municipal rate rather than a rural rate, the Subject Property is not provided with a number of municipal services such as on-site garbage pick-up, mail delivery or the Town’s sewer and water systems. At the hearing, the parties agreed that Lower Road is a private, un-assumed road and is not maintained or cleared of snow by the Town of Leamington.

19He presented photographs of the surface of the Lower Road which show a cracked and broken surface. He testified he must pay for road maintenance and snow removal however, he submitted no evidence of those costs.

20Mr. Phillips also testified that because the Subject Property does not have a basement, it is not directly comparable to other properties that have basements.

21Mr. Phillips presented statistical analyses of assessments and sales for Lake Erie waterfront properties in or near the Towns of Leamington and nearby Kingsville. He utilized MPAC’s five key factors of value: building size, lot size, location, age (including renovations and additions) and quality. He identified house size and lot size as the first and second parameters and noted that location, being waterfront, was a constant. He concluded from his analysis of 17 assessments of waterfront properties that an assessment of $823,913 for the Subject Property is fair. The assessments he used in his analysis are those set as of the January 1, 2012 valuation day.

22Mr. Phillips conducted a similar statistical analysis of 16 sale properties. The sales occurred between 2011 and 2016 and he included the building sizes, lot sizes and build dates. He found that sales are not as good an indicator of value as the assessments. His analysis indicates that, “on the whole MPAC’s modeling of properties produces results that ‘average out’ when many properties are considered, i.e., overall, across the province, the model produces results that have variances/uncertainties that cancel each other out such that the model produces a good correlation of assessed value to sales value; and that, not surprisingly, there are uncertainties in their modelling that cause individual assessment results to have large variations from sales values”. He concluded that MPAC’s modelling can result in variances as much as $200,000 for unique homes similar to the Subject Property. Again, the assessments he used in his analysis are those set as of the January 1, 2012 valuation day.

Appellants’ Submissions

23Relying on his evidence, the Appellant submits that the correct current value for the 2017, 2018 and 2019 taxation years is $823,913.

24The Appellant argues that the reduced municipal services and potential capital costs to maintain the road would negatively impact the sale price of his property. He asks that the service omissions be considered when assessing the fair value of the Subject Property relative to other similar homes that have municipal services.

25He concluded from his analyses that age had little impact on the sale values. He also pointed out that MPAC’s data may not accurately reflect maintenance and repairs that have occurred for a particular property but that they are likely reflected in the sale value.

26He acknowledged that sales are the best indicator of current value. Comparing assessments to sale values indicate that, generally, MPAC’s model is working well, however, for a new home, the best method to establish a value is a “correlation of comparator home assessed values and not sales prices”.

27He argues that the age of the home is not a factor in establishing its value for waterfront properties in the vicinity; that the market place has already accounted for this effect, along with inflation.

28The parties agree that the tax rate is lower in Kingsville than in Leamington. The Appellant argues that Leamington’s higher tax rate results in lower property values relative to Kingsville, because prospective purchasers will factor in the higher taxes when purchasing Leamington properties. He also argues that the higher tax rate likely results in fewer prospective purchasers, which will also result in lower sale values.

Findings on Current Value

29The Appellants argue that, while MPAC’s assessment model works well for most properties, unique properties within a market, such as the Subject Property, are not assessed correctly. I am unable to give much weight to the Appellants’ statistical analyses because the assessments used in the analyses were from the previous valuation day of January 1, 2012 rather than the valuation day for these appeals, which is January 1, 2016. However, I have considered their sales data which is summarized below.

30The parties agree that the Subject Property is unique in its size and age for the vicinity and that there are no direct comparable sales. The parties presented 18 sales of Lake Erie waterfront properties in the Leamington and Kingsville areas. I have considered only the sales which occurred within 12 months of the valuation day to capture the market near that date. This also reduces the number of sale properties to eight. The following chart sets out the details for these properties.

	Sale Date	Sale Price	Time Adjusted Sale Price	Waterfront (ft.)	Lot Size (acres)	Bldg. Age	Bldg. Area (sq. ft.)	Bsmt. Area/ Finished Bsmt. Area (sq. ft.)	Garage Area (sq. ft.)
Subject Property				113 ft.	1.04	2014	4,595	N/A	1,341
413 Lakeview Avenue* (K)	May 2016	750,000	725,900	150	0.89	1977	3,337	1,650/ 1,001	571
31 James Court (L)	Aug. 2015	730,000	753,719	117	0.46	1981	2,434	1,515/ 582	663
1310 McRae Avenue (K)	June 2015	1,100,000	1,164,285	220	0.65	1990	3,548	1,972/0	871
2 Beth Crescent (L)	Apr. 2016	787,500	772,139	138	1.46	1976	2,517	2,517/ 840	914
368 Seacliffe Drive West (L)	Dec. 2015	540,000	540,540	122	1.73	1948/ 1961	2,897	0	0
64 Harbour-view Drive (K)	Sept. 2015	650,000		96	0.37	1973/ 1995	2,842	0	0
102 Harbour-view Drive (K)	Sept.2015	585,000	597,000	106	0.55	1988	2,777	1,087	360
865 McRae Avenue (K)	June 2015	700,000	740,600	180	1.18	1984	2,957	772/331	1,040

• This property has a pool built in 1977 K= Kingsville, L= Leamington

31The very best way of determining the current value of a property is if it has recently been sold. That gives a market-tested value for the property which is essentially its current value at the time of the sale. Where a sale has not taken place, as here, the Board has to look to other methods of proving value.

32In this case, the 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 sold. As mentioned above, I have limited the dates of the sales. The degree of comparability between properties refers to the physical characteristics and their locations. These issues must be considered when assigning weight to evidence of current value.

33The Appellants argue that MPAC’s assessment data may not reflect maintenance and renovations or the quality of the work done but that these factors will be reflected in the sales values. I agree. Here we have a number of sales and, while I have limited data on the quality of the workmanship of any maintenance and repairs, I do know their ages, lot and building sizes, that they are waterfront and their location relative to the Subject Property.

34In my determination of current value, I have analyzed the parties’ sale properties using bracketing. 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 will sell for more, those that have similar attributes will sell for similar amounts, and inferior attributes will sell for less.

35The Subject Property does not have a basement. MPAC traditionally takes the position that basements are valued differently than above-ground space and that, due to this valuation method, it only compares like-to-like spaces. However, based on the parties agreement that there are no comparably sized properties, in terms of above-ground area, it is reasonable to consider the sum of the above ground and basement areas of the suggested comparable properties, when comparing them to the Subject Property.

36I find that 413 Lakeview Avenue is inferior to the Subject Property. While it has a larger waterfront, the residence is significantly older.

37I find that 31 James Court is inferior to the Subject Property. It has a similar waterfront but a smaller lot and an older and smaller residence.

38I find that 2 Beth Crescent is inferior to the Subject Property. While it has a larger waterfront and a similar total building area, it is significantly older.

39I find that 368 Seacliffe Drive West, 64 Harbourview Drive and 102 Harbourview Drive are inferior to the Subject Property. They have smaller total building areas and are older.

40I find that 865 McRae Avenue is inferior to the Subject Property. It has a larger waterfront, a similar sized lot and a similar sized garage. However, the building is thirty years older and it is smaller.

41I find that 1310 McRae Avenue is similar to the Subject Property. It has a significantly larger waterfront and, although the residence is older with a smaller garage, it is larger than the Subject Property. These differences likely balance each other out. The parties agree that Kingsville is a superior market due to a lower tax rate. As such, I find that the Subject Property would sell for less than the time-adjusted sale value of $1,164,285.

42Based on the above, I find that the Subject Property would sell for more than $772,139 but for slightly less than $1,164,285. Based on the age of the Subject Property, relative to these two sales, I find it likely that it would sell at the top end of this range. Accordingly, I find that the assessed value of $1,063,000 is likely its current value.

43The Appellants argued that they lack municipal services that other urban properties receive and that they have the added costs for maintaining the private road. I was presented with no evidence to establish a value for the municipal services nor was I presented with the costs incurred to maintain the private road. Without such evidence, I cannot determine how the value of the Subject Property may be affected.

44Accordingly, I find that the Subject Property is assessed at its current value of $1,063,000.

DECISION

45The correct current value of the Subject Property is $1,063,000 for the 2017, 2018 and 2019 taxation years.

2019 DEEMED APPEAL

46An appeal for the 2017 taxation year is presently before the Board. Section 40.(26) of the Act provides that the Appellant is deemed to have made the same appeal for the subsequent taxation year if the appeal is not finally disposed of before March 31 of the subsequent taxation year. The Board has not disposed of the 2017 appeal before March 31, 2018 or March 31, 2019. For that reason, this decision also applies to the 2018 and 2019 taxation years.

47Section 40.(26) of the Act directs:

Deemed appeals, 2009 and subsequent years

(26) For 2009 and subsequent taxation years, an appellant shall be deemed to have brought the same appeal in respect of a property,

(a) in relation to the assessments under sections 32, 33 and 34 for the year; and

(b) in relation to the assessment, including assessments under sections 32, 33 and 34, for a subsequent taxation year to which the same general reassessment applies, if the appeal is not finally disposed of before March 31 of the subsequent taxation year or, if an assessment has been made under section 32, 33 or 34, before the 90th day after the notice of assessment was mailed.