Kathleen Patricia Philip v. Township of South Algonquin and Municipal Property Assessment Corporation, 2019 CanLII 44279

Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE: February 06, 2019

FILE NO.: WR 158143A

AMENDED DECISION ISSUED ON: May 15, 2019

Assessed Person(s)/Appellant(s): Kathleen Patricia Philip

Respondent(s): Township of South Algonquin

Respondent(s): Municipal Property Assessment Corporation (“MPAC”) Region 28

Property Location(s): 264 Ferndale Lane

Municipality(ies): Township of South Algonquin

Roll Number(s): 4801-020-001-07900-0000

Appeal Number(s): 3262491 and 3262492

Taxation Year(s): 2016

Hearing Event No. 707284

Legislative Authority: Section 34 and 40 of the Assessment Act, R.S.O. 1990, c. A.31, as amended

Heard: November 20, 2018 by telephone conference call

APPEARANCES:

Parties

Representative

Kathleen Patricia Philip

Stephen Philip

MPAC

Andrew Doble

Township of South Algonquin

No one appeared

MEMORANDUM OF DECISION DELIVERED BY VINCENT STABILE

INTRODUCTION

1Kathleen Patricia Philip (“the Appellant”) was the registered owner of a seasonal

Amended pursuant to Rule 114 of the Assessment Review Board’s Rules of Practice and Procedure, effective April 1, 2017

recreational property known municipally as 264 Ferndale Lane (“subject property”). The subject property is a one and one-half storey detached residential dwelling on a water front lot, approximately one acre, on Aylen Lake, close to Algonquin Provincial Park. The lot has a water frontage of 300 feet and a depth of 145.2 feet. The dwelling was built in 2016. The total building area is 2,086 square feet (“sq. ft.”) with a quality of construction 7. In addition it has a Bunkie 8 ft. x 16 ft.

Background

2For the January 1, 2012 valuation date, MPAC returned the assessment for the then vacant residential land, under s. 40 of the Assessment Act, R.S.O. 1990, c. A.31, (“Act”), at $192,000. The building was completed in August 2016. MPAC issued a Supplementary Assessment under s. 34 effective August 23, 2016, for $476,000, using the Direct Sales Comparison Approach for both assessments. The total of the two assessments is $668,000. The assessor inspected the subject property on August 30, 2016. Upon completion of his valuation report, the assessor determined the correct current value to be $602,000 using the direct comparison approach.

3Mr. Philip, on behalf of the Appellant, takes no issue with assessment of $192,000 for the vacant land. He also agrees with the approach to value but submits that the total assessment should be $525,000 to $560,000.

ISSUE

4The issue to be determined is the correct current value of the land as of January 1, 2016 based on a valuation date of January 1, 2012 and the correct current value of the building as of August 23, 2016. Further, whether the values are equitable with the value of similar properties in the vicinity.

DECISION

5I have determined the correct current value of the land for the 2016 taxation years under s. 40 of the Act is $260,000 and the value of the buildings as of August 23, 2016 under s. 34 of the Act to be $338,000 for a total current value of $598,000. MPAC has not requested an increase in the assessment of the land, as required by Rule 40 of the Board’s Rules of Practice and Procedure. I therefore confirm the s. 40 assessment for the 2016 taxation year at $192,000. Removing the $192,000 from the total current value leaves a value for the s. 34 assessment of $406,000. I therefore reduce the s.34 assessment for the 2016 taxation year from $476,000 to $406,000. I have further determined that no adjustments for equity are warranted.

MPAC’s Evidence

6The assessor filed two valuation reports. One report relates to the assessment of the vacant land for the 2016 taxation year based on a valuation date of January 1, 2012.

7The second report relates to a Supplementary Assessment under s. 34 of the Act for the added value of a building completed August 23, 2016.

Vacant Land Value

8MPAC returned the assessed value for the vacant land at $192,000 for the 2016 taxation year. Accordingly, the valuation date is January 1, 2012.

9The assessor proposes five properties for comparison. The lot frontages are from 100 feet to 200 feet smaller than the subject property. All of the proposed comparable properties have structures of varying sizes and age.

10None of the proposed sales are vacant land.

11His report notes that the 2008 [prior assessment cycle] current value for the property was $264,000.

12Using the Direct Comparison Approach, he relies on the sales of five comparable properties. He readily admits that all of the proposed comparable properties are inferior to the subject property due to their age, size of structures, size of lots (frontage) as well as quality class for each. [See Valuation Report dated May 7, 2018]

13Relying upon a study of 519 sales from January 5, 2012 to May 1, 2018, a period of 76 months, the assessor states that there had been an overall change in the market of 25.36 per cent.

14The range of values of the comparable properties relied upon, time adjusted, is $347,071 to $570,047.

15In this valuation report, the assessor proposes a correct current value of $668,000 comprised $192,000 for the land and $476,000 for the new building. Following an inspection of the subject property he recommended an assessment of $602,000.

Appellant’s Evidence

16Mr. Philip proposes an assessment of $525,000 to $560,000 based on appraisals from RE/MAX Country Classics Ltd. (RE/MAX) and Bancroft Appraisal Service Ltd. (Bancroft), filed. Both reports are from independent appraisers.

RE/MAX Report

17The report from RE/MAX proposes the sales of six properties. They are bungalows and two-storeys. The sales range in value from $475,000 to $625,000. The appraiser expressed her opinion of value at $525,000, effectively by calculating the average of those sales.

18The proposed sales had not been time adjusted. Further, the report suggests that the opinion of value was as at January 2017.

19Sale No. 1 proposed by RE/MAX (42251 Combermere Road) sold July 7, 2014 for $625,000, the highest of the sales. I have discounted this sale as being too far removed for the valuation date of January 1, 2012. That leaves the range of sales for the other five properties from $475,000 to $550,000. All of those sales have much smaller water frontage, between 96 to 200 linear feet less.

20I did not receive any evidence to account for the differences in water frontage, size of structures, or location. Nor was there any evidence on the differences in values from bungalows and two-storeys compared to the subject property being one and one-half storey. I believe those are important considerations.

Bancroft Report

21The report from Bancroft (“Bancroft Report”) is quite comprehensive. Using the direct comparison approach, it proposes the sales of four properties. Each has been adjusted for various attributes including lot size, age, size of structure, basement, heating, garages, and driveways. Based on that analysis, Bancroft Report proposes a value of $560,000.

22Bancroft Report offers an alternative approach by using the cost approach to value. As result, Bancroft Report proposes a value of $597,800.

LEGISLATION

23Section 44.(3)(a) of the Act requires this Assessment Review Board (“Board”) to “determine the current value of the land.” Current value is defined in s. 1 as “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.” That is, the Board must determine what the subject property would have sold for in an arm’s length transaction on the relevant valuation day, set pursuant to s. 19.3 of the Act. In this case two determinations must be made: first, the value of the vacant land for the 2016 taxation year based on a valuation date of January 1, 2012. Second, what the newly built structure, completed August 23, 2016, would have sold for on January 1, 2012.

24Once the current value has been determined, s. 44.(3)(b) requires that the Board “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” but only if that adjustment would result in a reduction of the assessment.

ANALYSIS

25In respect to the proposed value of the vacant land, none of the proposed comparable properties were of vacant land. I did not receive clear evidence of adjustments by the use of assessment tools, such as pairing, to assist me in making a determination.

26I did not receive clear evidence as to adjustments considered by the assessor to arrive at his opinion of value at $602,000. I appreciated his testimony, however, that he had not been able to identify better comparable sales, either reasonably comparable or superior to the subject property to enable him to present a value based on a method known as bracketing.

27The RE/MAX report relied upon by the Appellants’ estimates the market value of the subject property as of January 2017. The valuation date under consideration in these appeals is January 1, 2012. I received no evidence of time adjustments of the comparable sales proposed.

28The Bancroft Report is clear that the intended use of the appraisal was to provide “current market value for HST purposes”. In his testimony, Mr. Philip explained the subject property was registered in the name of his spouse, Kathleen Patricia Philip. They intended to add his name to title, thus they required an opinion of value for that purpose.

29On balance, I prefer the opinions expressed in the Bancroft Report. I am mindful however that it was prepared for “HST purposes” which I infer is to keep the value on the low range to mitigate the HST payable upon transfer and registration of title. Although the value derived using the direct sales approach was explained with the various adjustments, the values fixed for those adjustments are subjective.

30The appraiser in Bancroft Report strongly recommends that the direct comparison approach be used for purposes of these appeals, it being “the best understood approach within the real estate community as it reflects the attitude and reactions of individual purchasers/byers in the marketplace”.

31I accept that there are three methods for estimating what a property would likely sell for: (1) the sales comparison approach; (2) the income approach; and (3) the cost approach.

32The direct sales approach is the most commonly used for residential properties as it considers what similar properties in the area sold for. The issues that arise in applying this method, generally, are the degree of comparability between the properties and the date on which the properties sold.

33The degree of similarity between the properties refers to the physical characteristics such as location, land, area, improvements, size, relative quality and age.

34I agree that the direct sales approach is generally more appropriate in residential property assessments. However, from the evidence presented, all of the comparable properties proposed required substantial adjustments, subjective in nature, to support the opinions expressed. Some have not been time adjusted, which process is a good tool to achieve a value on a specific valuation day.

35The cost approach to value provides a comparison of the subject property to a new and modern replacement property, accounting for differences in age, condition and utility.

36In this case the structure was newly built and completed in August 2016. However, since the valuation day is January 1, 2012, I must determine what the structure would have sold for on that date. I am satisfied that the cost approach is as appropriate, since it requires little to no adjustments for depreciation and other factors such as functional obsolescence or utility. The cost analysis and opinion of value in the Bancroft Report are as of May, 2017. I would have preferred a cost analysis based on 2012 construction values. However, this is the best evidence received, therefore I will accept it for my determination of current value both for the land under s. 40 and the structure under s. 34.

37The opinion of Bancroft, based on the cost approach, apportions the value of the land at $260,000 and the value of the building(s) at $338,800. I accept this to be the best evidence of value for each component.

38Accordingly, I find that the correct current value of the land for the 2016 taxation year under s. 40 of the Act is $260,000 and the value of the buildings $337,800 ($338,000 rounded), for a total current value of $598,000. This result is slightly higher than the upper range of sales proposed by the assessor and slightly less than his opinion as to value.

EQUITY

39The only evidence received on the issue of equity is from MPAC.

40The evidence consists of an Assessment Sales Ratio (“ASR”) Study of thirty properties resulting in a median of 1.023.

41The assessor states that equity is achieved if the median ASR falls between 0.95 – 1.05. I accept the evidence of the assessor on the issue of equity as it is the best evidence received.

CONCLUSION

42I have determined that the correct current value for the land for the 2016 taxation year under s. 40 of the Act to be $260,000 and the value of the buildings as of August 23, 2016 under s. 34 of the Act to be $338,000 (rounded) for a total current value of $598,000. Based on the evidence, I find that no reduction for equity is warranted in either value.

43MPAC has not served a notice of intention to seek an increase in the assessment of the land, as required by Rule 40 of the Board’s Rules of Practice and Procedure. I therefore confirm the s. 40 assessment for the 2016 taxation year at $192,000. The total current value I have determined for the latter part of 2016 is $598,000. Removing the $192,000 assessment from that value leaves a value for the s. 34 assessment of $406,000. I therefore reduce the s. 34 assessment for the 2016 taxation year from $476,000 to $406,000.