Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE: May 01, 2019

FILE NO.: WR 159592

Assessed Person(s): GlenPark Drive Apartment Holdings Limited

Appellant(s): GlenPark Drive Apartment Holdings Limited

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

Respondent(s): City of Welland

Property Location(s): See Schedule A attached

Municipality(ies): City of Welland

Roll Number(s): See Schedule A attached

Appeal Number(s): See Schedule A attached

Taxation Year(s): 2018 and 2019

Hearing Event No.: 711265

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

Heard: March 11, 2019 in Welland, Ontario

APPEARANCES:

Parties Representative

GlenPark Drive Apartment Holdings Limited Jonas Perov

MPAC Darren Cadeau

City of Welland No one appeared

DECISION OF THE BOARD DELIVERED BY JOANNE LAWS

OVERVIEW

1GlenPark Drive Apartment Holdings Limited (the “Appellant”) is the owner of the 51 properties listed in Schedule A (the “Subject Properties”), which are condominium units located in the City of Welland.

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”).

3In addition to the original appeals filed for the 2018 taxation year, a deemed appeal for each property was created for the 2019 taxation year. Section 40.(26) of the Act provides that an 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 Assessment Review Board (the “Board”) did not dispose of the 2018 appeals before March 31, 2019. For that reason, this decision also applies to the 2019 taxation year.

4It is the Appellant’s position that MPAC’s assessment of current value is too high. MPAC took the position at the hearing that its assessed values are correct.

5Pursuant to s. 40(11) of the Act, the City of Welland 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 Properties 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 Appellant argues that a reduction of the current value is required to make the Subject Properties equitable with similar lands in the vicinity. 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 and the deemed 2019 taxation years, the current value of the Subject Properties are those set out under column “Current Values” in Schedule A. Pursuant to s. 44.(3)(b) of the Act, an equitable reduction of these values are required. The equitable values of the Subject Properties are set out under column “Equitable Value” in Schedule A.

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) Burden of proof. – 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 issues to be determined on this appeal are:

1. The correct current value of the Subject Properties for the 2018 and 2019 taxation years; and

2. Whether there should be an equitable reduction of the current value of the Subject Properties pursuant to s. 44.(3)(b) of the Act, and, if so, what the amounts of this reductions should be.

Discussion, Analysis and Findings

What is the correct current value of the Subject Properties for the 2018 and 2019 taxation years?

MPAC’s Evidence

10Darren Cadeau represented MPAC and gave the evidence in support of the assessment corporation. He entered into evidence a valuation report in support of the current values.

11Mr. Cadeau explained that there are 51 residential condominium units owned by the Appellant and they are located at 22, 36, and 42 Glen Park Drive in the City of Welland. A list of the appealed units with their corresponding assessed values can be found in the attached Schedule A. All of the buildings in which the units are located are three storey low-rise walk-ups. All of the units were built in 1978, are a single storey in height, have either one or two bedrooms and a single bathroom and they all have a 6 out of 10 quality of construction.

12Using the direct sales comparison approach to valuation, Mr. Cadeau presented three sales of condominium units in support of the current value. Two are Units 104 and 319 at 36 Glen Park Drive and the third is Unit 105 at 22 Glen Park Drive. All three are two-bedroom, 728 square feet (“sq. ft.”) units. Mr. Cadeau submits that they are the only open market sales in the three buildings which occurred near the valuation day of January 1, 2016. The sale values are, from lowest to highest, $107,000, $113,000 and $116,500.

13Because the suggested comparable properties did not sell on the valuation day, Mr. Cadeau applied a time adjustment factor to each of the three sale values. The purpose of adjusting the sale values was to allow direct comparison between the sale properties and the Subject Properties as though they all sold on the common valuation day of January 1, 2016. The time adjusted sale values are, from lowest to highest, $102,007, $107,517 and $120,281.

14Mr. Cadeau then adjusted these values for two possible structural variances. One was $10,000 for open balconies and the other was $2,000 for abutting a stairwell. The net time adjusted sale values are, from lowest to highest, $92,007, $109,517 and $120,281. From these last values, he determined that the average sale value per sq. ft. for a one bedroom unit is $157 and $147 for a two bedroom unit.

15Applying these sq. ft. values and structural variances to the Subject Properties resulted in the recommended values which are listed in Schedule A.

16In cross-examination, Mr. Cadeau said that only 104 – 36 Glen Park Road was physically inspected because there had been a fire in the unit. He stated that MPAC investigated the sales for all three units and deemed them to be open market sales and that the condition of each unit was ‘average’.

MPAC’s Submissions

17Relying on its evidence, MPAC submits that the correct current value for the taxation years 2018 and 2019 are the recommended amounts listed in Schedule A.

Appellant’s Evidence

18Jonas Perov of Navitax Property Tax Consulting Paralegal Professional Corporation, acted as both advocate and witness for the Appellant. Mr. Perov stated that the Appellant is disputing the assessments of the Subject Properties on the basis that the current value is incorrect. However, the focus of his evidence and arguments are with regard to equitable reductions, which I will address later in these reasons.

19Although Mr. Perov stated that MPAC’s current value is incorrect, he said he was not calling any evidence with regard to current value, such as sales.

20Mr. Perov argued that the sales submitted by MPAC are superior to the Subject Properties. He submitted a copy of the MLS listing for Unit 105 – 22 Glen Park Drive and Unit 319 – 36 Glen Park Drive, and interior photographs of those units were provided by Joulia Tropinini. The photographic evidence shows clean and well maintained spaces. He states he was unable to provide similar evidence for MPAC’s third sale, 104 – 36 Glen Park Drive. He submitted an unsigned note which stated that the sale “was not through MLS, I don’t have any pics or data other than the sale price”. Neither Ms. Tropinina nor the note’s author was called as a witness.

21Mr. Perov submitted a number of interior and three front door photographs, which he said, were taken by the owner of the 51 units, Steven Massis. Mr. Perov also presented an email from Mr. Massis who appears to be agreeing that the photographs are “representative or similar to the current condition of all 51 units under appeal.” Mr. Massis was not called as a witness and did not attend the hearing.

22Mr. Perov testified that he has not inspected the Subject Properties.

Appellant’s Submissions

23The Appellant challenged MPAC’s three sales arguing that they are superior to the Subject Properties. He argued that the Subject Properties are in poor condition relative to MPAC’s three sale properties because the Subject Properties are all rentals, and they all receive the same level of maintenance and repair as illustrated by photographs.

24With regard to MPAC’s first sale, 105 – 22 Glen Park Drive, the Appellant argues that the MLS description and accompanying photographs show that it is superior to the Subject Properties because it has been maintained and the kitchen and flooring has been upgraded.

25With regard to MPAC’s second sale, 319 – 36 Glen Park Drive, the Appellant argues that the MLS description and accompanying photographs show that it, too, is superior to the Subject Properties with new laminate and ceramic flooring throughout, new kitchen cabinets, newer appliances, and an updated bathroom.

26With regard to MPAC’s third sale, 104 – 36 Glen Park Drive, the Appellant argues it should not be used to determine current value. He argues that because it was not listed on MLS, it was not an open market sale and because he was unable to obtain photographs of this unit, its condition is unknown.

27The Appellant argued that the direct substitute theory cannot be applied for these three sales without ‘severe’ adjustments for the differences. However, the Appellant did not call evidence or make arguments of what those adjustments should be.

Findings on Current Value

28The 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 anywhere near the valuation day, as here, the Board has to look to other methods of proving current value. Certainly, the direct sales comparison method is a “tried and true” method of determining value in relation to residential real estate, but it is not the only method. However, the Board has to base its decision on the evidence called by the parties. In this case, the only evidence of current value comes from MPAC’s sales data of three condominium units located in the same complex as the Subject Properties.

29The Appellant argues that two of the three units are superior to the Subject Properties and are not directly comparable and that the third sale should be disregarded. The evidence as to the condition of the Subject Properties, in relation to the three sales, was limited. No one who has first-hand knowledge of the condition of the Subject Properties was called as a witness.

30Mr. Perov argued that adjustments should be made to reflect the differences between the sales and the Subject Properties before the sales can be used to determine the current values. However, no evidence was called as to what adjustments should be made, or the value of those adjustments.

31Mr. Perov called no evidence with regard to establishing the current values nor did he indicate what the current values should be. At different points during the course of the hearing, both Mr. Cadeau and I asked Mr. Perov if he was calling any evidence of current value but he said he was not.

32The best evidence of current value is the only evidence presented at the hearing which are the three sales submitted by MPAC. I accept Mr. Cadeau’s testimony that all three sales were investigated by MPAC staff and were determined to be open market sales. Mr. Perov’s argument that the third sale was not an open market sale carries little weight. The person who suggested it was not an open market sale was not called as a witness and the statements made could not be clarified or tested in cross-examination.

33Therefore, I find that the current values of the Subject Properties are those recommended by MPAC and found in Schedule A.

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

34Mr. Perov presented a number of assessments for condominium units, which are set out in Schedule B, all of which have been allocated with the same 6 quality of construction as the Subject Properties.

35Mr. Perov submits that, in addition to the quality of construction, MPAC has qualified that the condition of each of the Subject Properties is ‘average’. Mr. Perov testified he could not obtain the condition of his properties in Schedule B, but takes the position that the Subject Properties’ condition is ‘below average’ based on the limited maintenance and lack of updates. Mr. Perov presented no evidence or arguments to quantify how average or below average condition might affect property values.

Appellants’ Submissions

36The Appellant’s position is that the assessments are too high compared to the assessments of other condominium properties in the vicinity. The Appellant calculates that the Subject Properties’ assessments range from $151 to $181 per sq. ft., whereas the median assessed value of his comparable properties is $116 per sq. ft.

37The Appellant submits that that an equitable reduction is required and the current value for the 2018 and 2019 taxation years should be reduced to $116 per sq. ft. The equitable values the appellant is seeking are set out in Schedule C.

38The Appellant argues that his suggested comparable properties are similar to his units in size, quality of construction and age. The Appellant argues that 12 Church Street is superior to the Subject Properties in age and unit size yet they are assessed at $115 - $116 per sq. ft. of unit area. The Appellant points out that all 20 units at 117 Wilson Road are superior to the Subject Properties in terms of age and unit size and yet they are assessed at just above $120 per sq. ft. The Appellant argues that the Subject Properties should be assessed for less than those at 117 Wilson Road but they are assessed for more, on a sq. ft. basis. The Appellant argues that 485 Thorold Road is older and the units are a similar size yet they are all assessed around $116 per sq. ft. The final six suggested properties are row houses yet they are all assessed for less than the Subject Properties on a sq. ft. basis.

39The Appellant takes the position that all of the Subject Properties, which are rental units, are in relatively poor condition, as reflected in the photographs. The carpeting is old, the cupboards and baseboards are broken and the kitchens, bathrooms and vinyl flooring are outdated. For these reasons, they should be assessed below the values of well-maintained units such as the sales presented by MPAC.

40The Appellant’s advocate cited three cases in support of using square foot values to determine equity with similar lands in the vicinity:

a. 1078285 Ontario Inc. v. Municipal Property Assessment Corp., Region No. 26, [2011] O.A.R.B.D. No. 333;

b. 2068747,Ontario Inc. v. Municipal Property Assessment Corp., Region No. 23, [2013] O.A.R.B.D. No. 232; and,

c. Berezansky v. Municipal Property Assessment Corp., Region No. 09, [2010] O.A.R.B.D. No. 69.

MPAC’s Evidence

41MPAC presented an equity study of 30 residential condominium sales which occurred from January 1, 2015 to December 31, 2016. The search parameters were limited to single story units located within 5 kilometres from the Subject Properties, with a 6 quality of construction. The median assessment to sale ratio (“ASR”) presented is 0.968 and the coefficient of dispersion is 6.8.

MPAC’s Submission

42Relying on its evidence, MPAC submits that an equitable reduction of the current value for the 2018 and 2019 taxation years 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.”

43MPAC argues that the units at 12 Church Street are not directly comparable to the Subject Properties because they are larger. MPAC argues that due to the economy of scale, the values per square foot of unit area would not reflect the values of the Subject Properties.

44MPAC argues that the units at 117 Wilson Road are not directly comparable to the Subject Properties because they are 20 years newer and larger.

Findings on Equity

45The concept of reducing the current value to make the Subject Properties’ assessments equitable with that of similar properties in the vicinity requires me to change correct assessments to those that are incorrect in order to make them fair and equitable. Adjustments for this purpose cannot, therefore, be made without compelling evidence to do so.

46Equity in assessments is governed by clause 44.(3)(b) of the Act. That clause requires the Board to “have reference to the value at which similar lands in the vicinity are assessed” in order to test the fairness of the assessment. Similarity is, therefore, a core component of any equity analysis.

47The Divisional Court recently clarified the proper test for similarity in Municipal Property Assessment Corporation v Loblaw Properties Limited, 2017 ONSC 1299. The Court held, at paragraph 23, that “all points of comparison must be considered… One point of similarity such as use may be, but is not necessarily, determinative”.

48In MPAC’s analysis, it compared assessments to sales as a test of whether MPAC’s model is accurately assessing similar lands accurately. MPAC’s search criteria were single storey, quality 6, condominium apartment units located within 5 kilometres of the Subject Properties. These criteria, to my mind, meet the “all points of comparison” test. The median ASR is 0.968 and I calculate that the average or mean ASR is 0.999. The 95% confidence interval of the mean is 0.967 to 1.030, which means the true mean of the population based on this sample is within MPAC’s target range of 0.95 to 1.05. Further, the coefficient of dispersion for the median is 6.8, which falls below the acceptable value of 15 for residential properties. This means that the assessments in the data are sufficiently uniform.

49The Appellant presented the assessments of 98 condominium units located in the vicinity of the Subject Properties. These properties are listed in Schedule B.

50I am disregarding the six assessments found at the bottom of Schedule B. They are all row houses, which are not directly comparable to the subject properties.

51The single assessment for Unit 1 at 42 Rice Road appears to be similar to the Subject Properties in terms of age and unit size. However, without more information, such as the number of units in its complex or how electric heat affects assessments, I am not convinced it will assist me in determining the equitable values of the Subject Properties.

52The units at 12 Church Street are similar to the Subject Properties in that they have two bedrooms and a single bathroom. They are superior to the Subject Properties in that they are newer and larger. However, they are assessed at $116 per sq. ft. compared to the Subject Properties which are assessed between $151 and $164 per sq. ft.

53The units at 117 Wilson Road are also similar to the Subject Properties in that they have two bedrooms and a single bathroom. They too, are superior to the Subject Properties in that they are newer and larger. They are assessed, on average, at $122 per sq. ft.

54The units at 485 Thorold Road are similar to the Subject Properties in that they have both one and two bedroom units and each has a single bathroom. They are older than the Subject Properties but are a similar size. They are assessed at either $114 or $116 per sq. ft.

55Comparing the Subject Properties to these properties on a sq. ft. basis is acceptable in this instance because the evidence shows that they are quite similar in size, structure, type of ownership, and location. This evidence indicates to me that the Subject Properties are assessed at a higher value, per sq. ft. of unit area, than other similar properties in their vicinity.

56Due to the economy of scale, I find that the 12 Church Street and 117 Wilson Road, which have larger units, may not be the best gauges of equity on a sq. ft. basis. The most similar units are those located at 485 Thorold Road. The assessments for these units lead me to conclude that the Subject Properties equitable assessments should not exceed $116 per sq. ft. of unit area.

57The Board generally accepts ASRs as evidence regarding equity. That does not mean that ASRs are the only type of evidence that may be used to establish whether or not a particular property is equitably assessed. Using the ASRs minimizes the likelihood that lower assessments are due to differences in the properties such as age, condition, size or location. In this instance, the Appellant has presented sufficient data to make a direct comparison with similar lands in the vicinity which satisfy me that Subject Properties are inequitably assessed. I find that the direct evidence of the assessments of similar apartment units are more compelling than the ASRs of a variety units in a fairly large area.

58Accordingly, a reduction in the current value is required to make the assessments equitable with similar lands in the vicinity. The equitable assessments are set out in Schedule A and are rounded values.

DECISION

59The correct current values of the Subject Properties are listed in Schedule A under the column “Recommended Current Value” for the 2018 and 2019 taxation years.

60An equitable reduction of the current value of the Subject Properties, pursuant to s. 44.(3)(b) of the Act, is required. The current values of the Subject Properties are reduced to the values set out in Schedule A under the column “Equitable Values”.

61Accordingly, the assessments are reduced from the values set out under the heading “Assessed Values” in Schedule A to the values set out under the heading “Equitable Values” in Schedule A for the 2018 and the deemed 2019 taxation years.