MacWilliam v. Municipal Property Assessment Corporation, Region 31, 2019 CanLII 42126

Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE:

May 06, 2019

FILE NO.:

WR 156792

Assessed Person(s)/Appellant(s):

Scott James Claymore MacWilliam

Respondent(s):

Municipal Property Assessment Corporation (“MPAC”), Region 31

Respondent(s):

City of Sault Ste. Marie

Property Location(s):

152 Moss Road

Municipality(ies):

City of Sault Ste. Marie

Roll Number(s):

5761-050-023-09500-0000

Appeal Number(s):

3279955, 3314763, and 3368131 (deemed 2019 appeal)

Taxation Year(s):

2017, 2018 and 2019 (deemed appeal)

Hearing Event No.

703867

Legislative Authority:

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

Heard:

October 25, 2018 in Sault Ste. Marie, Ontario

APPEARANCES:

Parties

Representative

Scott MacWilliam

Self-represented

MPAC

Pierre Lefebvre

City of Sault Ste. Marie

No one appeared

DECISION OF THE BOARD DELIVERED BY LESLIE FLEMMING

Background

1Scott MacWilliam (the “Appellant”) is the owner of 152 Moss Road, (the “Subject Property”), which is a farm with a residence. This property consists of 63.53 acres located in Sault Ste. Marie complete with a two-storey home on the land, plus farm outbuildings. The Appellant purchased the property in 2013 as vacant land.

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 land as of the valuation date, January 1, 2016.

3MPAC has assessed the value of the Subject Property, as of January 1, 2016, at $1,231,000 apportioned as follows:

• Residential Property Class: $1,148,000
• Farm Property Class: $83,000

4Consequently, the Assessment Review Board (“Board”) must determine the value of the Subject Property on January 1, 2016, for the 2017 and 2018 taxation years. (“current value”).

5The Appellant has filed appeals for taxation years 2017 and 2018 with the Board, pursuant to s. 40 of the Act. In addition to the 2017 and 2018 taxation year appeals before the Board, there is also an appeal of the 2019 taxation year assessment of property. This is because subsection 40(26) of the Act deems that an appellant has brought the same appeal for the 2019 taxation year if the 2018 taxation year appeal has not been finally disposed of by March 31, 2019.

6It is the Appellant’s position that MPAC’s assessment of current value is too high and that the correct current value is in the range of $700,000 to $850,000. At this hearing, MPAC takes the position that its assessed value should be changed to $1,004,000, apportioned as follows:

• Residential Property Class: $938,300
• Farm Property Class: $65,700

7Pursuant to s. 40(11) of the Act, the City of Sault Ste. Marie is a party to this proceeding. However, the City of Sault Ste. Marie 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.

8Section 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. MPAC presented the Equity Analysis Report based on the sales of 30 farm properties with houses. MPAC’s position is that the median level of assessment of those sales is 0.968, indicating an acceptable level of assessment by the standards set out by the International Association of Assessing Officers. For that reason, MPAC says that an equitable reduction is not required. The Appellant did not assert that an equitable reduction was required. Therefore, in this proceeding, this ground for appeal is not in issue.

9At the completion of the hearing, the Board reserved its decision. For the reasons that follow, the Board finds that the current value is $800,500, apportioned as follows:

• Residence plus one acre: $676,000
• Farm: $124,500

10Pursuant to section 44(3)(b) of the Act, an equitable reduction of this value is not required.

Relevant Legislation

11The 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 (5) Farm lands and buildings. – For the purposes of determining the current value of farm lands used only for farm purposes by the owner or used only for farm purposes by a tenant of the owner and buildings thereon used solely for farm purposes, including the residence of the owner or tenant and of the owner’s or tenant’s employees and families on the farm lands,

(a) consideration shall be given to the current value of the lands and buildings for farm purposes only;

(b) consideration shall not be given to sales of lands and buildings to persons whose principal occupation is other than farming; and

(c) The Minister may, by regulation, define “farm lands” and “farm purposes”.

Valuation days

19.2 (1) Subject to subsection (5), the day as of which land is valued for a taxation year is determined as follows:

3. For the period consisting of the four taxation years from 2013 to 2016, land is valued as of January 1, 2012.

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.

Issue

12The issue to be determined on this appeal is the correct current value of the Subject Property for the taxation years 2017 and 2018.

Discussion, Analysis and Findings

MPAC’s Evidence

13Pierre Lefebvre represented MPAC, and testified on MPAC’s behalf. He filed his Equity Analysis Report and Valuation Report, dated July 10, 2018.

14Mr. Lefebvre described the Subject Property as a two-storey home on 63.5 acres of land, of which approximately 12 acres are workable. Mr. Lefebvre inspected the property in 2016. At that time a number of changes were made to MPAC’s information about this property. The area of the house was reduced to the present size of 4,035 square feet (“sq. ft.”), and the construction quality rating was reduced by half a point from 9 to 8.5. There were minor adjustments to the area of the covered porch and to the basement. Mr. Lefebvre also obtained a number of photographs which were included in his Valuation Report.

15One of the most significant changes was that the Subject Property had been assessed as a home, but now it is clearly classified as a farm. At the hearing Mr. Lefebvre advised of changes to the apportionment as follows:

(a) The residential portion of the land was reduced in value to $938,300;

(b) The farm land portion of the property remained the same at $65,700.

(c) The resulting current value was $1,004,000, a reduction from $1,231,000.

16MPAC uses a technique of tracing the increase or decrease in property values over time (Sales Ratio Trend Analysis). Mr. Lefebvre explained the process—he used 103 sales occurring between March 2008 and May 2018. This is an unusually long period of tracking sales, but the low number of sales in the area made it necessary. Using the change in values over time, MPAC is able to estimate the price of real estate as of the valuation day, which in this case is January 1, 2016. The properties forming the study were all farm properties.

17The Subject Property was purchased in 2014 by the present owner as vacant land for $90,000. The house was built after the purchase, and the effective year built is 2016. Generally, MPAC uses the cost approach to determine the value of a farm with improvements, and to that it adds the value of the land.

18Mr. Lefebvre estimated the cost to produce the improvements on the site, and then estimated the accrued depreciation from all sources. The depreciation is deducted from the cost of construction and then the resulting cost of improvements is added to the value of the land.

19The Subject Property includes, in addition to the residence, an attached garage of 2,257 sq. ft., a “Coverall” of 2,512 sq. ft.; a Type III uninsulated barn of 2,160 sq. ft., and a second Type III uninsulated barn of 588 sq. ft. The Subject Property also included 13 acres in each of the Class 2 and 3 farm lands, plus 37.53 acres in Class 5 farm land.

20MPAC next checked the valuation obtained using the cost approach against sales value of similar properties. Mr. Lefebvre chose four farms, but noted that the house on the Subject Property is newer than the proposed comparable properties used in his report. The four proposed comparable sales included the following:

(a) Sale 1: 2195 Huron Line

21Mr. Lefebvre testified that this property is the closest to the Subject Property of the four selected sales. The time-adjusted sale price for this property was $578,585. The main residence is 19 years older than the Subject Property residence, and ranked by MPAC as Quality 7 in construction. This home is approximately half the size of the Subject Property’s residence, with a basement approximately half the size of the Subject Property’s basement. The property sold in November 2015, very close to the valuation day. The land consists of 54.74 acres with four secondary structures including a carport, a detached garage, a miscellaneous shed, and a Type III uninsulated barn built in 1920. This farm has 54.74 acres of farm land, with the bulk of the land (42.11 acres) in Class 1 land, and 3.5 acres in Class 3 farm land and the remaining 9.13 acres in Class 5 lands. The Subject Property is more valuable than this proposed comparable farm.

(b) Sale 2: 40 Sherwood Road

22This property consists of 158 acres and a single-family detached home built in 1910 with an effective year built of 1946. The property sold in December 2012, for $382,500, which is time-adjusted to $443,941. The home itself is one and three-quarter storeys with a construction quality of 5. The total area of the residence is 1,742 sq. ft. and the basement is 560 sq. ft. This property has many outbuildings, including six Type III uninsulated barns ranging in size from 2,628 sq. ft. to 761 sq. ft. There is also a Type I barn of 4,060 sq. ft., two sheds, and a milk house. The outbuildings were constructed over many years, from 1930 to 1998. The farm land has 79 acres in Class 1, 70 acres in Class 2, and the remaining 9 acres in Class 6. Despite the number of buildings and superior farm lands when compared to the Subject Property, the residence is significantly older and smaller, and this property is much less valuable than the Subject Property.

(c) Sale 3: 197 Bar River Road

23This is a 168.14 acre farm with a residence which was built in 1920. The property sold in May 2013 for $340,000, time-adjusted to $385,375. The home is two and one-quarter storeys tall and ranked a Quality 7 by MPAC. It is 3,296 sq. ft. in size with a basement of 1,020 sq. ft. The farm was originally in the dairy business, and the farm structures include silo, a milk house built in 1974, a Type II barn built in 1958, a steel grain bin, a second milk house, built in 1982, and a Quonset built in 1973 of 5,543 sq. ft. The farm lands are all in Class 1 (55 acres) and Class 2 (113.14 acres). The current use of this property is for horse ranching and cash crops. MPAC determines that the property has not been well maintained and is in only fair condition. The Subject Property is more valuable than this farm.

(d) Sale 4: 844 East Line Road

24Property 4 is a farm with a single-family detached residence built in 1900 and effectively built in 1971. MPAC ranks the construction quality of this home at 5.5. It is one and three-quarter storeys tall and 1.592 sq. ft. in area with a basement area of 593 sq. ft. There is no garage and the farm structures include one Type I barn built in 1925 and 1,307 sq. ft. in area.

25This property sold in June 2013 for $332,000, which is time-adjusted to $371,094. The property has 205.44 acres, with 64 acres in Class 2 farm land and the remaining 141.44 acres in Class 5 lands.

26Despite having a much smaller acreage, the Subject Property is more valuable than this property.

MPAC’s Submission

27Relying on its evidence, MPAC submits that the correct current value for the taxation years 2017 and 2018 is $1,004,000, apportioned as follows:

• Residential Improvements (plus one acre land): $938,300;
• Farm Improvements: $29,017
• Farm Land: 12 acres at $1,156 = $13,872 13 acres at $899.15 = $11,687 37.53 acres at $298.80 = $11,214
• Total Current Value: $1,004,090 or $1,004,000 rounded.

Appellant’s Evidence

28The Appellant represented himself, and gave all of the evidence on his behalf. He filed a number of exhibits including photographs, aerial photographs, a letter of opinion of value from a realtor, information on several proposed comparable properties, and a three-page written submission.

29The Appellant set out that MPAC has overvalued both the home and the land. The Appellant described the home, built in 2016 by Norm Clement of Custom Innovations of Sault Ste. Marie. Mr. Clement was not present to testify, but the Appellant entered a statement on a Custom Innovations invoice form dated February 3, 2017 advising that Mr. Clement had been the home builder responsible for building 152 Moss Street. He indicated that the cost to build the home was approximately $675,000. He stated that “[M]ost of the details in the house were created by me and my staff at a cost to the owner of only labour hours.” He goes on to explain that the materials for this custom work included “old wood that would have otherwise been discarded, i.e.: trim made from old flooring, details made from old hydro poles, fallen wood from the property…” Mr. Clement’s note also indicated that some of the work, including changes to access and attic spaces was unfinished at the time of writing. A subsequent note from him confirms that the attic space was closed off from direct access through the house and remains accessible through the garage. The attic, 1,100 sq. ft. in size, is unheated and used as a storage space only, according to both Mr. Clement and the Appellant.

30The Appellant elaborated on the unfinished portions of the home, including the basement, and attic. MPAC shows the home being a total of 4,035 sq. ft. in size; the Appellant disputes this and advises that the home measures 3,777 sq. ft. He provided a floor plan with his submission. The note on the “Main Floor Plan” states: “Note, all exterior dimensions to outside of stud framing, add 2’ to ext. wall thickness to allow for ½” sheathing and 1.5” cultured stone where applicable.” The floor area is broken down by Living Area 1st Floor of 2,588 sq. ft. and the second floor area is 1,189 sq. ft.

31In addition to disputing the area of the home as measured by MPAC, the Appellant also disputes the value per square foot assessed against the home. He testified that the home is very much an open concept design. Where a property may be 1,200 sq. ft., he notes, it would be much more expensive to build with more in the way of partitions and doors, electrical materials, hallways and doors. In an open concept design such as his, he maintains that 60 to 65 per cent of the area is open space. The Appellant also disputes that the home is a two-storey home, but states that it is only one and one-half storeys.

32The Appellant supplied a document which gave contradictory information when compared to the statement by his contractor. The contradictory document purported to be a partially-completed goods and service tax (GST) rebate application which was undated and unsigned. This document will be given no weight because it is undated and unsigned.

33The Appellant also provided a Letter of Opinion of Value from Violette Amimi, sales representative with Re/Max Sault Ste. Marie. The letter is dated July 10, 2018, and clearly references values for the year 2018. Ms. Amimi notes that in her opinion the Subject Property would have been listed for $850,000, with an expectation of selling for $820,000. Ms. Amimi certified that the letter is not an expert opinion or a comprehensive appraisal of the Subject Property.

34With respect to the farm land included in the Subject Property, the Appellant submitted that the terrain was largely unsuited to agriculture, with 30 to 35 per cent of the land being wetland most of the year, and 50 to 60 per cent of the land being treed. The Appellant stated that, at most 26 acres could be used. On an aerial photograph of the Subject Property, the Appellant has detailed the marshy area of the land. The lengthy driveway from Moss Road to the house is also shown, and described by the Appellant as subject to erosion. The Appellant testified that culverts need to be replaced where the driveway crosses the ravine, and that this cost will be significant.

35With respect to the outbuildings, the Appellant testified that the largest of the buildings is a “coverall” which cost $45,000 and can be taken down and removed. In addition, there are two “sheds” which are actually metal shipping containers and are essentially portable and should not be appraised as buildings. They cost $7,000, although the Appellant did not confirm whether this was individually or together.

36The Appellant also provided information on one proposed comparable farm property sale in his neighbourhood at 365 Maki Road. This property is just under 76 acres, a 3,065 sq. ft. home, a 3,000 sq. ft. horse barn with stalls and a concrete floor; a second two-stall horse barn, and a 60-foot by 20-foot coverall. The Maki Road property sold for $500,000 in October 2013. This property was identified on MPAC’s website “About My Property” as a “Farm with Residence with or without Secondary Structures, with farm outbuildings.” According to MPAC, however, 365 Maki Road was not registered as a farm, although it had been in the past. The Appellant’s other examples of similar properties had not been sold in recent years and did not assist in establishing current value of the Subject Property.

Appellant’s Submission

37Relying on his evidence, the Appellant submits that the correct current value for taxation years 2017 and 2018 is in the range of $820,000 to $850,000.

Findings

38In assessing value, the very best gauge of current value is the sale of the Subject Property close to the Valuation Day, which in this case is January 1, 2016. In this case, the Appellant acquired the land in 2014 for $90,000, and then built the home and outbuildings. It is usual in assessing farm properties to use the cost method to determine the current value of the property, and then to test that value against the sales of similar farm properties in the neighbourhood.

39MPAC presented evidence on the cost of the various components of the farm property, with the farm residence being the most significant. The assessment was returned in the amount of $1,231,000, although MPAC in the course of the appeal reduced its estimate of value to $1,004,000, with a value of $938,300 assigned to the residence and $65,700 assigned to the farmland. The reduction in value occurred when MPAC reduced the construction quality of the house from 9.0 to 8.5. The Appellant argued that the current value of the whole property was much lower at approximately $820,000 to $850,000.

40On cross examination, MPAC’s representative was asked this question by the Appellant: “Why is the valuation so much higher than the actual cost of building the house?” The answer was that MPAC’s costing system uses standard costs from the valuation manual. The residential costs come from a manual originally published in 1980 and updated over time to give a value as of January 1, 2016. The farm structures manual has been updated to 2016.

41While MPAC maintains correctly that the assessment systems or tools are not under appeal, MPAC assessment tools are just that—a generally accepted method of estimating property value, but not the only accepted method of estimating property value. In this case, the Appellant has supplied evidence of the actual cost of building the Subject Property, and this evidence must be given weight because it is based on fact. Where evidence is available from the builder in a situation like this one, that evidence must be accorded weight. It would have been stronger evidence had the builder, Mr. Clement, been present and subjected to cross-examination by MPAC, but in this case he has provided two statements in writing for the purpose of the valuation of the Subject Property.

42The evidence of the builder, Mr. Clement, is that the entire home cost $675,000 to build, inclusive of labour and materials. This included the attached garage and unheated attic above it, plus certain custom components made of locally-sourced trees and hydro poles. The Board finds that this value is supported by the evidence provided by the builder.

43The farm buildings included the coverall barn which originally cost $45,000, plus two shipping containers used as storage sheds, and two Type III uninsulated barns. MPAC depreciated these farm improvements, so that the cost less depreciation was $29,017, and the Board accepts that value.

44The farmland cost $90,000, and was purchased from a farmer in May, 2014. The entire parcel was originally 63.53 acres, or $1,416.65 per acre. Because this amount accurately reflected the value approximately 18 months before the Valuation day, it will continue to have a similar value. Land doesn’t generally go down in value over time, and in this case, MPAC’s own time adjustment calculations show it to have increased 1.078%. Subtracting the one acre that accompanies the residence, the remaining farmland value is calculated as:

62.53 acres x $1,416.65 x 1.078 = $95,492.60 or $95,500 rounded.

45This value includes only the farmland, minus one acre of land associated with the residence. Added together, the total current value is $800,500 (rounded) apportioned as follows:

• Residence: $676,416.65, or $676,000 rounded; (including one acre of land at $1,416.65);
• Farm Improvements: $29,017 (rounded to $29,000);
• Farm Land: $95,500.

46The comparable properties put forward by both parties show that farm property in the neighbourhood of the Subject Property has been selling for modest amounts of money. MPAC’s Sale 1, 2195 Huron Line is described by MPAC as having the most similarity to the Subject Property, with an older, smaller residence and approximately nine acres less land, sold in late 2015 for $575,000, which was adjusted to $578,585 to January 1, 2016. This property has over 40 acres in Class 1 lands, which makes the farm property more valuable than the Subject Property’s 63 acres. The Subject Property, with a larger, newer residence, would be worth more than this comparable property.

47The other comparable properties suggested by MPAC are significantly older than the Subject Property. While Sale 2, 40 Sherwood Road, has many more farm structures in place than the Subject Property, they are much older. This farm has over twice the acreage, with the majority of the lands in Classes 1 and 2. However, it sold in 2012 for $382,500, which is $443,941 when time-adjusted to January, 2016. The quality and age of the buildings contribute to the fact that the Subject Property is more valuable than this farm.

48MPAC’s comparable Sales 3 and 4 both sold for less than $400,000 in 2013, while having more than twice the acreage of the Subject Property. Like Property 2, these farms are much older, with smaller and lower quality homes. Sale 4 has only one barn, a Type I barn built in 1925 and no other noted farm buildings or secondary structures.

49The comparable sales produced by both parties tend to show that the Subject Property is more valuable than a property assessed at $575,000.

DECISION

50The correct current value of the Subject Property is $800,500 for the 2017 and 2018 taxation years, apportioned as follows:

• Residence $676,000;
• Farm: $124,500.

51An equitable reduction of the current value of the Subject Property, pursuant to s. 44.(3)(b) of the Act, is not required.

52The Board therefore reduces the assessed value of the Subject Property for the 2017 and 2018 taxation years from $1,231,000 to $800,500, apportioned as follows:

• Residence: $676,000
• Farm Land: $124,500