Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE: April 29, 2019

FILE NO.: WR 157943

Assessed Person(s)/Appellant(s): Aaron James Ayotte

Respondent(s): Municipal Property Assessment Corporation (“MPAC”) Region 30

Respondent(s): Municipality of Greater Sudbury

Property Location(s): 1681 Pilon Crescent

Municipality(ies): Municipality of Greater Sudbury

Roll Number(s): 5307-160-003-22000-0000

Appeal Number(s): 3271155, 3314464 and 3367836 (deemed 2019 appeal)

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

Hearing Event No. 707293

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

Heard: November 30, 2018 by telephone conference call

APPEARANCES:

Parties	Representative
Aaron James Ayotte	Self-represented
MPAC	Justin Johnstone
Municipality of Greater Sudbury	No one appeared

DECISION OF THE BOARD DELIVERED BY JOANNE LAWS

OVERVIEW

1Aaron Ayotte (the “Appellant”) is the owner of 72 acres of land at 1681 Pilon Crescent, located west of Chelmsford in the Municipality of Greater Sudbury (the “Subject Property”). MPAC assessed the Subject Property in the Residential Tax Class as a farm property with a residence. MPAC submits that the Subject Property is more accurately described as a farm property with a non-farm residence owned by a non-farmer. Mr. Ayotte lives in the only building on the Subject Property, which is a single family detached residence. MPAC’s has assessed the Subject Property at $379,000 with $272,600 apportioned to the residence and $106,400 apportioned to farmland.

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.

3Mr. Ayotte has filed an appeal for 2017 taxation year with the Assessment Review Board (the “Board”), and has 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 Appellant’s position that MPAC’s assessment of current value is too high and that the correct current value is in the vicinity of $209,000. MPAC took the position at the hearing that its assessed value is correct and equitable.

4Pursuant to s. 40(11) of the Act, the Municipality of Greater Sudbury 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.

5Section 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 of the municipal tax burden according to the value of the property possessed by each ratepayer.

6At 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 $370,000. Pursuant to s. 44(3)(b) of the Act, this value is reduced to $334,000.

Relevant Legislation

7The 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.

8The Act contains specific requirements that must be met when valuing farmland, which is set out in s. 19(5). There are two main requirements. Clause (a) states that “consideration shall be given to the current value of the lands and buildings for farm purposes only”. Clause (b) states that “consideration shall not be given to the sales of lands and building to persons whose principal occupation is other than farming”. The significance of this clause is that non-farming uses for the land or buildings cannot be considered and that only sales of farmland to farmers intent on farming the land can be considered.

9The Act also provides:

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

10The issues to be determined on this appeal are:

1. The correct current value of the Subject Property for the 2017, 2018 and the deemed 2019 taxation years; 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.

MPAC’s Evidence

11Justin Johnstone represented MPAC. Marc Serré, a Property Valuation Analyst, testified on behalf of MPAC. Mr. Serré has been employed with MPAC since 2007, first as a Property Inspector for residential and farm properties, then, beginning in 2012 to the present, as a Property Valuation Analyst for residential and farm properties. In 2015 he received the designation of Associate Member of the Institute of Municipal Assessors (A.I.M.A).

12Mr. Johnstone entered into evidence a Valuation Report prepared by Mr. Serré dated November 7, 2018.

13MPAC describes the Subject Property as having 72 acres of land with a single family detached residence, built in 1972. An addition was added to the residence in 2015 which included an attached garage and a ‘breezeway’ connecting the home to the garage. MPAC amended the year built from 1972 to 1987 to reflect this renovation. The residence has 1,838 square feet (“sq. ft.”) of above-ground building area with an additional 1,496 sq. ft. in the basement, 672 sq. ft. of which are finished. The quality of construction of the residence was ranked by MPAC as 6 out of 10. The original detached garage, built in 1972 measures 459 sq. ft. and the newer detached garage measures 1,069 sq. ft.

14MPAC issued a notice of omitted assessment for the addition effective August 2015. At that time, the value of the omitted assessment was $36,000.

15The farm land includes 10 acres that is actively farmed as well as the remaining unfarmed land. According to MPAC there are 37 acres of Class 2 farm land, 3 acres of Class 5 farm land, and 32 acres of Class 6 farm land. MPAC also testified that the different classes of farm land carry different values which are summarized as follows:

• Class 1 - $3,250;

• Class 2 - $2,522;

• Class 3 - $1,975;

• Class 5 - $775; and

• Class 6 - $450.

16Mr. Serré testified that the Subject Property is not in the farm tax class but in the residential tax class. While the tenant farmer is a registered farmer, the Appellant is not. He takes the position that the Subject Property has the potential to be marketed as either farm land or non-farm land. As such, Mr. Serré presented two analyses of current value, one using farm sales and the other using residential sales.

17Mr. Serré used the direct sales comparison method in order to support the assessment of the Subject Property. He selected four farms with residences in the vicinity of the Subject Property which sold between July 2013 and January 2017. All have a similar number of acres. MPAC submitted the time-adjusted sales ranged from $378,000 to $539,000, rounded. MPAC provided a bracketing analysis, comparing each sale property to the Subject Property. MPAC also provided an analysis based on the time-adjusted sale values per square foot of residential building area which range from $204.06 to $345.45. Applying these values to the Subject Property’s building area resulted in values ranging from $384,000 to $650,000, rounded.

18Mr. Serré’s second analysis was of three residential property sales. All have similar acreage with single-family detached residences. The soil classifications were not included because the lands are not farmed. However, each property has a barn, two have a shed and one has a detached garage. They sold between 2013 and 2016 with time-adjusted sale values ranging between $366,000 and $440,000, rounded.

MPAC’s Submissions

19Relying on its evidence, MPAC submits that the correct current value is between $366,000 and $538,000 using the bracketing approach to valuation and, using the sale value per square foot of building for Farm Sale 2, it is $384,000.

20With regard to the four-lane highway issue raised by the Appellant, MPAC explained that it is a proposed highway, that there were originally six proposed locations that have been narrowed down to three, and, the process is in the fifth year of a 25 year study.

21MPAC cited two cases to assist me in my determination of current value:

i. Sun Life Assurance Co. of Canada v. Montreal (City), 1950 CanLII 29 (SCC), [1950] S.C.R. 220, to support MPAC’s proposition that an adjudicator should not speculate on a value, and

ii. Nichol v Municipal Property Assessment Corporation Region 3, 2015 CanLII 33607 (ON ARB) to support the proposition that the assessment model is not at issue, only the current value.

Appellant’s Evidence

22Mr. Ayotte represented himself. He presented:

a. A 1998 appraisal of the Subject Property, which was described as having 152 acres although the appraisal addresses only the residence plus 10 acres.

b. The Subject Property’s assessment notices from 1999 to present which included a 2015 omitted assessment notice to add $36,000 to reflect the value of the new addition.

c. Photographs of neighbouring properties.

d. Letters written by the Appellant and signed by neighbouring property owners indicating that a proposed four-lane highway, which is expected to cross through their properties, has reduced the market values of each of their properties by $100,000. None of the letter signers attended or was called as a witness.

e. A letter written by the Appellant and signed by his tenant farmer, Claude Bradley, indicating that Mr. Bradley has been farming Mr. Ayotte’s land for eight years, that he is currently farming only 10 acres, that he plans to open up another 10 acres and that the soil has potential for growing cash crops.

23Mr. Ayotte testified that the highway will cross through the Subject Property, about one quarter down from the northern edge.

24Mr. Ayotte testified that the sale of 1711 Pilon Crescent, one of the 106 sales MPAC used in its time adjustment study, included farm machinery. As such, he argues that none of MPAC’s sales can be trusted. Mr. Ayotte submitted a photograph of this property which shows at least two barn-like structures, a separate garage and a residence. It was assessed at $252,000 and sold for $392,000 in January 2017. He argues that there is a lot of value in the out buildings. He said that the replacement cost of one of this property’s barns is $200,000, and the Subject Property has no out buildings.

25Mr. Ayotte presented a photograph of a two-storey home with a barn located across the street from the Subject Property. He said the house is new, replacing the original which burned down, that it was listed for sale for two years at $375,000 and has not sold.

Appellant’s Submissions

26The Appellant argues that the direct sale comparable method of determining current value is not relevant in determining the value of his property. This is because, like many of his neighbours, he purchased the Subject Property from his father and he will sell it to his own child.

27The Appellant argues that his assessment increased slowly from 1999 to 2012 but it has increased significantly in the last four years, from $209,000 as of the January 1, 2012 valuation day to $379,000 as of the January 1, 2016 valuation day.

28The Appellant argues that the 2012 valuation day assessment of $209,000 with reasonable increases would be an acceptable assessment. He argues that he could not sell the Subject Property for $379,000. He argues that the sales or lack of sales of neighbouring properties indicate that his property’s value is less than $379,000.

29Finally, the Appellant argues that the value of his property has been reduced by $100,000 due to the proposed highway. He argues that he is obligated to disclose the proposed four-lane highway to any prospective purchaser which, he argues, will lessen its marketability and value.

What is the Current Value of the Subject Property?

30Mr. Ayotte argues that arm’s length sales are not the best indication of current value because his property, as well as others in his vicinity, has been and will be sold between family members. The Act provides that I must determine the current value of the Subject Property and current value is defined in the Act as the amount of money the property would realize in an arm’s length transaction between a willing buyer and a willing seller. The wording of the Act is clear in that a non-arm’s length sale, such as a sale between family members, and sales that are not exposed to the open market, are not indicative of current value.

31Mr. Ayotte testified that one of MPAC’s 106 sales used to determine the time adjustment factors is flawed because the sale value includes farm equipment. He argues that, therefore, none of MPAC’s sales is reliable. I disagree with this argument. I received evidence that only one of the sales may not be accurate which is insufficient to cast a shadow of doubt on the remaining 105 sales. In addition, removing this one sale will likely make little or no change to the time adjustment factors, the purpose for which these sales were gathered. Nevertheless, for the purpose of determining current value, I am using the actual sales, rather than the time adjusted sales, because the market has been somewhat stable in the area.

32Mr. Ayotte argues that the increase in his assessment between the 2012 and 2016 valuation days is excessive. Each valuation day stands on its own and reflects the market sales at that time. The valuation days have no relation to each other because the sales used to establish the assessments as of a valuation day are unique to that time period. I also note that Mr. Ayotte’s 2015 addition to the Subject Property occurred between these two valuation days and therefore, the value of the improvement is included in the increase he has experienced.

33The best evidence of the current value of property is an arm’s length sale of that property on or near the valuation day. When that evidence is not available, arm’s length sales of similar properties on or near the valuation day are the next best evidence.

34The only detailed and current sales evidence received was presented by MPAC. The Appellant’s appraisal report is 20 years old and concerns only the house and ten acres. Therefore, it does not assist me in determining the current value of the Subject Property as of January 1, 2016. In addition, the Appellant’s evidence of a listing without a sale does not assist me in determining current value.

35The question that then arises is: what is a similar property? MPAC suggests that the Appellant could sell the Subject Property to a non-farmer and presented a set of sales of similarly sized properties that are not farmed. However, the Subject Property is farmed, albeit only 10 acres and the evidence is that it was historically farmed by the Appellant and other family members. MPAC testified that they only recently learned that the Appellant is not personally farming the land. In Delta Bingo Inc. v Municipal Property Assessment Corporation, Region No. 18, 2013 CanLII 104841 (ON ARB), at paragraphs 69 and 70, the Board concluded that the term farm lands means lands that have in the past been used only for farm purposes and are currently capable of being used only for farm purposes and have never been used for anything other than farm purposes.

36Based on the above and the evidence presented, I find that section 19(5) applies to the Subject Property. This means that the evidence I can consider in determining current value is limited to sales of farm land for farm purposes. Section 19(5)(b) provides that for the purpose of determining current value “consideration shall not be given to sales of lands and building to persons whose principal occupation is other than farming.

37Accordingly, I find that the non-farm properties in MPAC’s second current value analysis are not directly comparable to the Subject Property. As such, I have not considered them in making my determination of current value.

38The other current value analyses presented by MPAC included only farm properties. Farm Sale 1, 323 St. Pothier Road, is inferior to the Subject Property in building size and soil class. It has a similar site area of 80 acres, but there are 15 acres of Class 3 land and 65 acres of Class 6 land. Like the Subject Property, there is a single-family detached residence with a partially finished basement. However, the residence is smaller at 1,437 sq. ft. There is a prefabricated metal farm building of 1,012 sq. ft. and a garage of 460 sq. ft. The Subject Property would sell for more than its July 2013 sale value of $370,000.

39Farm Sale 2, 2966 McKenzie Road, is, on balance, similar to the Subject Property in soil class. It has a larger site area of 93.56 acres but they are of poorer soil classes with only 9.89 acres of Class 2 land, 5 acres of Class 3 land, 53.67 acres of Class 5 land, and 25 acres of Class 6 land. Like the Subject Property, there is a single-family detached residence with a partially finished basement. The residence is a similar size at 1,854 sq. ft. There are two uninsulated barns, and a shed. It sold in March 2015 for $370,000.

40Farm Sale 3, 3341 St. Laurent Street, is superior to the Subject Property in building size and soil class. It has a similar site area of 78 acres, but 70 acres are Class 2 land and only 8 acres are Class 6 land. There is a single-family detached residence that is larger than the Subject Property with 2,164 sq. ft. There is also an attached garage and a large insulated barn of 2,568 sq. ft. The Subject Property would sell for less than its January 2017 sale value of $555,000.

41Farm Sale 4, 1950 Cote Boulevard, is inferior to the Subject Property in building size and soil class. It has a similar site area of 85 acres but there is only 16 acres of Class 2 land and the remaining acres are Class 4 land. The residence is older, having been built in 1971, and smaller, with only 1,061 sq. ft. It has no garage and the only out building is a small shed. The Subject Property would sell for more than its May 2014 sale value of $349,900.

42The sales evidence has a range of values from $349,000 to $555,000. The most similar property is MPAC’s Farm Sale 2 at 2966 McKenzie Road. As stated previously, I find that this property is, on balance, similar to the Subject Property. MPAC provided a suggested current value based on the sale value per square foot of building area. This analysis would only be appropriate if the two properties were identical or near identical. Because they are not identical but are, on balance, very similar, the best method is to use the whole property’s value. Accordingly, I find that the current value of the Subject Property is $370,000.

43The Appellant argued that the proposed highway, which may or may not bisect the Subject Property, has reduced its value by $100,000. His evidence is that some neighbours agree with this argument. However, I received no evidence to support this value, such as an appraisal or sales, and none of the letter signers were called as witnesses. As such, I have insufficient evidence to quantify the effect of the proposed highway on property values.

Should the Current Value Determined be Reduced for the Purpose of Equitable Assessment, when the Assessment of Similar Properties in the Vicinity are Considered?

44The Act requires that I look at the assessment of similar land in the vicinity to determine if it would be fair and equitable to assess the Subject Property at its current value. MPAC presented an equity study that compared the assessments of 23 properties to their sale prices. These 23 properties, according to MPAC, are all in the Municipality of Great Sudbury and are assessed as farm lands. The sales occurred between January 2012 and July 2017.

45MPAC’s argument is that the median level of appraisal of 1.034 indicates that similar properties are being assessed near their current value so no equity adjustment is required. MPAC also submits that the coefficient of disbursement for the properties in this study is 17.4 which fall below the International Association of Assessing Officer’s target of not more than 20 for rural land. The Appellant did not present evidence of an equitable adjustment but argued that MPAC’s assessments are inaccurate and do not reflect market values.

Findings on Equity

46In reviewing MPAC’s equity report I note that the majority of sales located near the Subject Property, that is, those with roll numbers starting with 5307, are assessed below their time adjusted sale values. Isolating the 14 properties starting with roll number 5307, I calculate the mean level of appraisal at 90.3%. In addition, I calculate the standard deviation to be 18.7%. Based on that standard deviation, I find the 95% confidence interval to vary by 9.8% from the mean. That means that there is a 95% chance that the true mean level of assessment of property in the vicinity is between 80.5% and 100.01%. This indicates that it is highly likely that property in the vicinity of the Subject Property is assessed below its market value.

47Given that properties in the vicinity are assessed, on average, at 90.3% of their current value, it would also be fair to assess the Subject Property at a similar level of assessment. I calculate 90.3% of $370,000 to be $334,110. That is an equitable assessment for the Subject Property.

DECISION

48The correct current value of the Subject Property is $370,000 for the 2017, 2018 and the deemed 2019 taxation years.

49An equitable reduction of the current value of the Subject Property, pursuant to s. 44.(3)(b) of the Act, is required. The assessment of the Subject Property is reduced to $334,000, rounded.

50Accordingly, the assessment is reduced from $379,000 to $334,000 for the 2017, 2018 and the deemed 2019 taxation years.