Simmatis v. Municipal Property Assessment Corporation, Region 2, 2019 CanLII 55254

Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE:

June 11, 2019

FILE NO.:

WR 155943

Assessed Person(s):

Holger Simmatis, Shirley Simmatis

Appellant(s):

Holger Simmatis, Shirley Simmatis

Respondent(s):

Municipal Property Assessment Corporation (“MPAC”) Region 2

Respondent(s):

The Township of Rideau Lakes

Property Location(s):

154 Centre Street

Municipality(ies):

The Township of Rideau Lakes

Roll Number(s):

0831-836-041-23305-0000

Appeal Number(s):

3260580, 3288912 and 3345214

Taxation Year(s):

2017, 2018 and 2019

Hearing Event No.:

701186

Legislative Authority:

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

Heard:

September 12, 2018 in Portland, Ontario

APPEARANCES:

Parties

Representative

Holger Simmatis, Shirley Simmatis

Self-represented

MPAC

James Van Winckle

The Township of Rideau Lakes

No one appeared

DECISION OF THE BOARD DELIVERED BY JOSEPH JEBREEN

OVERVIEW

1Holger Simmatis and Shirley Simmatis (the “Appellants”) appeal the assessment of their property located at 154 Centre Street in Lyndhurst, Ontario in the Township of Rideau Lakes (the “Property”).

2MPAC returned an assessment of $427,000 for the 2017 taxation year and $445,000 for the 2018 and 2019 taxation years. There are 2018 and 2019 appeals before me because, pursuant to subsection 40.(26) of the Act, an appeal is deemed to have been filed if the previous taxation year appeal is not finally disposed of before March 31. At the hearing, MPAC requested that I confirm these assessments but submitted that the correct January 1, 2016 current value of the Property is $445,000. MPAC did not request an increase in assessment for the 2017 taxation year.

3The Appellants take the position that the correct January 1, 2016 current value of the Property is between $270,000 and $282,000.

4For the reasons that follow, I find that the current value of the Property as of January 1, 2016 is $344,000 for the 2017, 2018 and 2019 taxation years and I further find that no equitable adjustment is warranted. I therefore reduce the January 1, 2016 assessment for the 2017 taxation year from $427,000 to $344,000. The assessments for the 2018 and 2019 taxation years are similarly reduced from $445,000 to $344,000.

PRELIMINARY ISSUE RAISED BY THE APPELLANTS

5The Appellants submit that the principle of issue estoppel applies in two ways and that MPAC is prevented from relitigating the issue of current value before the Assessment Review Board (“Board”).

6The Appellants appealed the January 1, 2008 assessment for the Property and the Board issued a decision on January 14, 2011 reducing the assessment from $481,000 to $375,000. The Appellants claim that estoppel applies based on the Board’s January 14, 2011 decision.

7The Appellants further contend that neither party appealed MPAC’s January 1, 2012 assessment of $320,000 and so, according to the Appellants, estoppel applies to prevent MPAC from seeking assessments of $427,000 and $445,000 for the 2017, 2018 and 2019 taxation years in this appeal.

8I will first deal with the Appellants’ argument that issue estoppel applies as a result of the January 14, 2011 decision of the Board.

9The two-step test for issue estoppel was confirmed by the Supreme Court of Canada in Danyluk v. Ainsworth Technologies Inc., 2001 SCC 44 (“Danyluk”), at paras 25 and 33. The first step is to determine whether the three preconditions of issue estoppel are established: (1) that the same question has been decided in earlier proceedings; (2) that the earlier judicial decision was final; and (3) that the parties to that decision or their privies are the same in both the proceedings. If the moving party successfully establishes these preconditions, the second step is to determine whether, as a matter of discretion, issue estoppel ought to be applied.

10In support of their position, the Appellants rely on the decision of this Board in Hamilton v Municipal Property Assessment Corporation, 2017 CanLII 280 (ON ARB) (“Hamilton”). However, Hamilton does not assist the Appellants.

11In Hamilton, Vice-Chair Bourassa (as she then was) cited the Danyluk test for issue estoppel and granted MPAC’s motion to dismiss appeals of the 2015 and 2016 taxation years on the basis that the January 1, 2012 current value had already been decided by the Board for the 2013 and 2014 taxation years. The important distinguishing factor in that case is that the same valuation day of January 1, 2012 applied to the 2013 and 2014 taxation years and the 2015 and 2016 taxation years. Also of importance is Vice-Chair Bourassa’s finding that the property in that case had not changed within the four-year assessment cycle.

12In this case, the January 14, 2011 Board decision applied to the current value of the Property on January 1, 2008. The issue before me is the current value of the Property on January 1, 2016. That is an entirely different issue which requires me to determine the amount of money the fee simple, if unencumbered, would realize if sold at arm’s length from a willing seller to a willing buyer on January 1, 2016, not January 1, 2008. The same question has not been decided and so the first precondition in Danyluk is not satisfied.

13The Appellants also submit that MPAC’s January 1, 2012 assessment is a “decision” that can form the basis of issue estoppel. As I find further below, the January 1, 2012 assessment is not such a decision. However, even if it were, for the same reasons cited above regarding the January 14, 2011 Board decision, the issue involved in MPAC’s January 1, 2012 assessment is different than the issue before me in this appeal. Once again, the issue in this appeal is the January 1, 2016 current value of the Property.

14A common element of the three preconditions of issue estoppel is the fundamental requirement that the decision in the prior proceeding be a judicial decision, see Danyluk at paragraph 35. MPAC does not exercise adjudicative authority in determining assessments nor are assessments determined in a judicial manner. MPAC’s assessments are not based on findings of fact and the application of an objective legal standard to those facts, see Danyluk at paragraph 41. MPAC’s assessments are not judicial decisions for the purpose of establishing issue estoppel.

15I therefore find that issue estoppel does not apply in this case.

BACKGROUND

16The Appellants purchased the Property as 4.77 acres of vacant waterfront land in 2008. MPAC stated that the actual water frontage of the Property is 500 feet but that the effective frontage is 442 feet. Mr. Simmatis testified that the useable water frontage is only about 50 feet because the rest of the waterfront is inaccessible. Mr. Simmatis submitted several pictures in evidence in support of his testimony that the remaining 450 feet of waterfront is not useable. The pictures show a heavily forested shoreline with a steep topography, rocks and tall weeds. I accept that the accessible waterfront is approximately 50 feet but that the Appellants own another approximately 450 feet of waterfront.

17Similarly, although the Appellants agree that they own 4.77 acres of land, they contend that only about 0.5 acres, or 10% of that area, is useful. The pictures in evidence show steep cliffs on either side of the residence of the Property and that there is no back or side yards. Mr. Simmatis testified that the house is about 50 feet long and about 100 feet from the water. That 5,000 square foot area leading to the shoreline and other small portions of land are, in his opinion, useable. Again, I accept that, due to the steep topography, heavy forest and rough terrain of the land on the Property, approximately 4 acres of land are not useable by the Appellants.

18The Property is located on Whitefish Lake in the township of Rideau Lakes. Under cross-examination, MPAC stated that the lakes in the area in descending order of property values are: Big Rideau, Upper Rideau, Newboro Lake, Indian Lake and then Whitefish Lake.

19The Appellants constructed a 1,700 square foot one-storey home on the Property in 2008. The pictures in evidence show a modern, well-built residence with a mostly brick and siding exterior. The residence has three bedrooms and two bathrooms, a fire place and air conditioning.

20The Property is accessed by a private road over farmland that is not owned by the Appellants (the “Private Road”). The Private Road is approximately 12 feet wide and runs from Thomas Road, a public road, for approximately one kilometre to the Property. The Appellants’ only means of accessing the Property is over the Private Road. There is no right registered on title to the Property to use the Private Road.

21Mr. Simmatis explained in cross-examination that the Appellants have four wheel drive vehicles with 20 inch tires to access the Property. He described a winding road with large rocks, swampy areas, bush, a sharp turn, and a steep hill. He testified that the sharp turn and steep hill prevent access to some cottagers and that some neighbours park at the bottom of the hill and then walk to their destinations. Mr. Simmatis also explained that the Appellants are part of (i) a group that pays to maintain the Private Road in the non-winter months and (ii) a smaller group that pays for snow removal during the winter months.

22The Appellants submit that the issues with the Private Road reduce the value of the Property as compared to other properties that have direct access to a public road. I agree with that submission. There is value in accessing a property directly from a publicly maintained road and not having to deal with the issues involved with the Private Road.

23The Appellants may be successful in obtaining a legal right to access the Property via the Private Road. However, that would require significant steps to be taken. This is a marked difference between the Property and other properties that have access to a public road.

ISSUE

24The issues to be determined in this appeal are:

I. What is the correct current value of the Property for the 2017, 2018 and 2019 taxation years?

II. Should there be an equitable reduction of the current value of the Property pursuant to subsection 44.(3)(b) of the Act? If so, what should this reduction be?

LAW AND ANALYSIS

Current Value

25Subsection 40.(17) of the Act states that MPAC has the burden of proving “the correctness of the current value of the land.” As this Board found in Patry Enterprises Inc. v Municipal Property Assessment Corporation, Region 05, 2019 CanLII 39629 (ON ARB), 2018 CanLII 70338 (ON ARB) (“Patry Enterprises”) at paragraph 21, the burden is around “current value” and not MPAC’s assessment. That is, MPAC is not required to prove the correctness of its returned assessment. It is required to prove the correctness of “the amount of money the fee simple, if unencumbered, would realize if sold at arm’s length from a willing seller to a willing buyer.”

26Patry Enterprises summarizes the procedure to follow in an appeal where current value is at issue, at paragraph 40:

…first look at MPAC’s evidence on its own and make a determination as to whether it can prove its suggested current value on a balance of probabilities. If MPAC meets its burden, the Board should review all of the evidence before it and determine the current value of the property. However, if MPAC has not met its burden, the taxpayer’s evidence must be analyzed to see if it is capable of proving that a particular current value is more likely than not. If there is insufficient evidence in the record that is capable of proving current value, the Board should fix the assessment at the last uncontested assessed value.

27I will follow that procedure here.

Can MPAC’s evidence prove its suggested current value?

28As stated in Patry Enterprises, at paragraph 23, in order for MPAC to meet its burden, MPAC’s evidence “must show how the current value MPAC is proposing is arrived at and why that value is correct. Without this bare minimum, the Board cannot possibly determine if MPAC’s proposed current value is correct.”

29Mr. Van Winckle submitted a Valuation Report to establish an opinion of current value. As with most residential properties, MPAC relies on the direct comparison approach to prove its suggested current value of $445,000 for the Property.

30To satisfy its burden when using the direct comparison approach, MPAC cannot simply present any properties. It must review the market data and select properties that are in fact comparable. In his Valuation Report, Mr. Van Winckle relies on four comparable properties in his current value analysis as summarized in the table below:

Property

Sale 1

Sale 2

Sale 3

Sale 4

Address

154 Centre Street

439A Deans Island Road

752 Indian Lake Road

817 Granite Height Lane

40 Sumac Lane

Lake

Whitefish

Whitefish

Indian

Whitefish

Whitefish

Distance from Property (km)

1.2

12.4

1.1

0.9

Access

Year round from private road

Year round from public road

Year round from public road

Year round from public road

Year round from private road

Building type / area (sq. ft.)

One-storey / 1,702

One-storey / 1,708

One-storey / 2,068

One-storey / 1,483

2.75-storey / 1,872 on concrete slab

Year built

2008

1994

1988

1990

2005

Basement area (sq. ft.)

n/a

280

1,546 – 750 of which is finished

n/a

n/a

Lot area (Acres)

4.77

2.97

0.58

1.15

0.89

Water frontage (ft)

500

400

118

300

160

Secondary structure type / area (sq. ft.)

n/a

Detached garage / 334

Attached garage / 480

Detached garage / 528

Detached garage / 1,080

Date sold

07/31/2014

12/20/2017

05/18/2016

07/21/2014

Sale price ($)

460,000

519,000

465,000

540,000

Time adjusted sale price ($)

459,217

496,036

464,437

539,080

31Like the Property, all of MPAC’s comparable properties are on private well and septic. They are also connected to hydro. Sales 1, 3 and 4 are on the same lake within approximately 1 kilometre of the Property.

32Unlike the Property, Sales 1 to 4 are all accessed from a public road. In his oral testimony, Mr. Van Winckle admitted that a Private Road usually means having a road committee. However, Mr. Van Winckle submitted that, based on his experience with properties in the area of the Property, the Private Road versus public road distinction does not have an effect on value. For this reason, Mr. Van Winckle’s opinion is that the four properties are comparable.

33Mr. Simmatis submitted that the four MPAC sales are not comparable largely because the properties have direct access to a public road. His position is that this significant difference, along with other features, makes it too difficult to compare Sales 1 to 4 to the Property as all four properties are far superior.

34Although the Private Road may be a factor in determining whether an adjustment of the sale price is required for a particular comparable sale, I do not agree that this is sufficient to treat all of MPAC’s properties as not comparable.

35However, I find that Sale 2 is not comparable to the Property. Sale 2 is located on Indian Lake which, according to Mr. Simmatis, has properties of higher value than comparable properties on Whitefish Lake. I accept that evidence. Mr. Van Winckle agreed on cross-examination that Indian Lake would be higher value than Whitefish Lake but lower than Newboro Lake. Sale 2 is also quite far at a bird’s eye distance of 2.4 kilometres from the Property and 30 driving kilometres away. It also sold nearly two years after the January 1, 2016 valuation day. The Property has superior landscaping and permanent docking. It also enjoys year around access to a public road.

36In addition to these significant differences, the superior nature of the dwelling on Sale 2 makes it too difficult to compare to the Property. Sale 2 has a 480 square foot attached garage, a 1,546 square foot basement with approximately half of it finished, and a 2,068 square foot dwelling. The Property has four times more waterfront than Sale 2; however, the difference of 500 feet vs 118 feet of waterfront is another reason why it is difficult to compare. Also, as I found above, the useable frontage on the Property is only approximately 50 feet. For all of these reasons, Sale 2 is not comparable.

37Nevertheless, the remaining three properties presented by Mr. Van Winckle are sufficiently comparable and can be used in his analysis. Mr. Van Winckle’s opinion is that Sale 4 is superior, Sale 3 is similar and Sale 1 is very similar to the Property. He also explained why he believes that the comparable properties are superior, similar, or very similar to the Property. As detailed further below, I disagree with some of Mr. Van Winckle’s opinions regarding whether a particular comparable sale is superior, similar or very similar. However, this is not considered in determining whether MPAC has met its burden.

38Based on the time adjusted sales prices in the table above, Mr. Van Winckle opined that the current value of the Property must be closer to the lower end of the range of $459,000 (Sale 1) and $539,000 (Sale 4) because of the high degree of similarity with Sale 1. He concluded that the correct current value of the Property is $460,000. However, his opinion is that the current value is approximately 3% less than $460,000, being $445,000, because the Property is listed as 97% complete due to unfinished drywall, and finishing touches including some trim.

39With this evidence, I find that MPAC has met its burden. Mr. Van Winckle showed a pathway to arriving at the proposed current value of $445,000 and why, in his opinion, that value is correct. That is what is required as a minimum.

40I note that I am not making a finding that the correct January 1, 2016 current value is $445,000. Rather, at this stage of the analysis, I am simply finding that MPAC’s evidence, if believed, can prove its proposed current value.

What is the correct current value of the Property?

41Following the framework in Patry Enterprises, if MPAC has met its burden, I must then determine current value based on all of the evidence before me.

42In response to MPAC’s evidence and in addition to his estoppel submissions, Mr. Simmatis put forward two ways of coming up with a current value for the Property. First, he submitted that, as the Appellants built their own home, the cost to build plus the purchase value of the land represent the current value of the Property. Second, he submitted one additional comparable into evidence and relied on that comparable to propose a current value for the Property. I will examine each of the Appellants’ methods of calculating current value in turn.

43Using a cost approach to valuation, Mr. Simmatis testified that he purchased the Property as vacant land for $170,000 in 2008. He stated that the Appellants built the dwelling on their own at an all-inclusive material cost of $84,087.18. Finally, Mr. Simmatis testified that 920 hours of labour would have to be taken consideration. He stated that $30 per hour seemed reasonable and that the labour costs would be approximately $27,600. In his opinion, the total value of the property based on the cost approach is therefore approximately $282,000.

44I have concerns with relying on this approach to determine current value. First, the purchase of the land and the materials were in 2008, a full eight years prior to the valuation day of January 1, 2016. I cannot rely on the $170,000 purchase price of the land in 2008 as being the value of the land in 2016 without further evidence that the land price has not changed. Similarly, I cannot rely on the costs of materials in 2008 when it is likely that the costs have changed since then.

45Second, I cannot accept the approach that Mr. Simmatis has taken to calculating the labour costs. Although it may have only taken 920 hours to build the dwelling, his estimate of a rate of $30 per hour seems low and is not supported by any evidence such as a quote. As Mr. Van Winckle pointed out in cross-examination, the hourly rates of a general contractor, electrician and plumber are likely much higher than $30. I do not accept that the labour costs for a 1,700 square foot home are as low as $27,600.

46I therefore do not accept the Appellants’ cost approach to determining current value.

47In their second approach to determining current value, the Appellants first presented another comparable property located at 806 Maple Rock Lane. I will refer to this property as Sale 5. The Appellants discovered that Sale 5 was listed for sale in early 2016. They submitted a newspaper clipping that showed an asking price of $249,803. The Appellants believe that Sale 5 is comparable in that its January 1, 2016 assessment of $296,000 is within 10% of the Property’s last assessed value of $320,000. Sale 5 sold for $249,800 in June 2017 after it was on the market for over a year. The Appellants then calculated the percentage below the assessed value that Sale 5 sold for to be 18.5%. They suggested that the current value of their property should also be 18.5% below their last assessed value of $320,000, or approximately $270,000.

48I do not accept this method of calculating current value. I must use sales data to determine current value, not assessments. Calculating a current value based on an assessment presupposes that the assessment is an accurate starting point. That may or may not be the case, but the point of an appeal is to determine the current value based on sales data. I therefore cannot accept the Appellants’ submission that the current value of the Property be determined based on the assessment of neighbouring land.

49Further, the Appellants’ methodology reduces the January 1, 2016 assessment of Sale 5 while reducing the January 1, 2012 assessment of the Property. There is no explanation for this discrepancy. If I were to accept this method, which I do not, the reduction of 18.5% would be applied to the January 1, 2016 assessment of $445,000, not the January 1, 2012 assessment of $320,000.

50This does not mean that Sale 5 is not a comparable property. I will consider Sale 5 below and the other comparable properties in evidence to determine the correct current value of the Property using the direct comparison approach.

51The details of Sales 1, 3 and 4 are summarized in the table at paragraph [30] above. Sale 1 sold for $460,000 in July 2014. I do not accept Mr. Van Winckle’s statement that there is no effect on value as between properties that have access to a public road and the Property that has access to the Private Road. No evidence was submitted to support such a statement and it is not reasonable. If two properties are otherwise identical but one has the access issues involved with the Private Road and the other has access to a public road, the latter would have a higher current value.

52Sale 1 is superior to the Property in that it has (i) access to a public road, (ii) superior landscaping and permanent docking, (iii) a 280 square foot basement and a 334 square foot garage, and (iv) superior quality water frontage. The Property is only superior in that the dwelling is newer, of slightly superior quality, and has air conditioning. All of the superior features of the Property do not offset the access to a public road that Sale 1 enjoys, much less the other superior features of Sale 1. I conclude that Sale 1 is superior to the Property.

53Sale 3 sold for $465,000 in May 2016. It is within one kilometre of the Property. Mr. Simmatis submitted that this property is in a subdivision with regular roads and ditches and is not comparable. Sale 3 is superior in that it has (i) access to a public road, (ii) a 528 square foot detached garage, and (iii) superior quality water frontage. The Property is superior in the dwelling is 250 square feet larger, newer and has air conditioning. Once again, I find that all of the superior features of the Property do not offset the access to a public road that Sale 3 enjoys, much less the other superior features of Sale 3. Sale 3 is also superior to the Property.

54Sale 4 sold for $540,000 in July 2014. Sale 4 is a subdivision property. It has a concrete slab foundation and 2 ¾ storey home as opposed to the one storey of the Property. Sale 4 also has a large 1,080 square foot detached garage with a residence above. I agree with MPAC that Sale 4 is superior to the Property.

55Sale 5 sold for $249,800 in June 2016. It is described by Mr. Simmatis as a comparable property because of its similar issues with access but primarily because it is assessed within 10% of the Property’s 2012 assessment of $320,000. I do not accept that a property is comparable to another property simply because their assessed values are close. It is the features of a property that make it comparable, not its assessed value. Two very different properties can have similar assessments but that does not mean they are comparable.

56Sale 5 is connected to hydro and serviced by a septic system and well like the Property. It is also in close proximity to the Property on Whitefish Lake and has similar access issues. However, the lot of Sale 5 only has 115 feet of waterfront and a site area of 0.6 acres. The dwelling is also significantly inferior in age, size and quality as it was built in 1973 and measures a modest 608 square feet. The Property’s dwelling is nearly 3 times the size and built in 2008. Sale 5 has two boathouses measuring 560 square feet and 118 square feet. The newspaper listing of Sale 5 states that the property has a “Bunkie.” Although I have found that the useable waterfront portion of the Property is significantly less than 500 feet, I do not have evidence to determine what portion of Sale 5’s waterfront is useable. However, MPAC’s property profile indicates that the shoreline is rocky and the topography is steep. Overall, I find Sale 5 is inferior to the Property.

57The following table summarizes my analysis of the four comparable sales in evidence from superior to inferior:

Address

Date Sold

Comparability

Sale Price

Sale 4

40 Sumac Lane

July 2014

Superior

$540,000

Sale 3

817 Granite Height Lane

May 2016

Superior

$465,000

Sale 1

439A Dean’s Island Road

July 2014

Superior

$460,000

Sale 5

806 Maple Rock Lane

June 2017

Inferior

$249,800

58For reasons given in previous decisions¹, I do not accept the time adjustment study presented by MPAC and I do not adjust the sale prices with MPAC’s proposed time adjustment factors.

59Based on this analysis, I find that the current value of the Property is between $250,000 (Sale 5) and $460,000 (Sale 3). The evidence does not support preferring the lower or upper end of this range. I find that the January 1, 2016 current value is at the midpoint of the range and is therefore $355,000.

60MPAC has submitted that the current value of the Property requires a 3% reduction due to the unfinished state of the Property. The Property still requires further drywall, and finishing touches including some trim. The Appellant agrees that there should be a reduction due to the Property’s unfinished state. I would have thought that such minor renovations would not change the current value of the Property especially when eight years have passed since the residence was constructed in 2008. However, given the evidence before me including the parties’ agreement that the 3% reduction is warranted, I will apply it. The current value is reduced to $344,000.

61I have rejected the Appellants’ cost approach to determining current value. Nevertheless, based on the evidence, I find that the current value of the Property is greater than $282,000, being the 2008 costs of purchasing the land and material and labour as presented by the Appellants. Mr. Simmatis agreed on cross-examination that those costs did not even consider inflation from 2008 to 2016. Even with a modest increase for inflation for that eight year period², the cost to purchase and build the house including materials and labour as suggested by the Appellants would result in a current value of $319,000. This value would represent the cost of building 97% of the Property and so no further adjustment is required to account for percent completion. However, based on my finding that the labour costs for a 1,700 square foot home would be higher than the $27,600 proposed by the Appellants, the current value of the Property at 97% completion is likely slightly greater than $319,000. This supports a current value of $344,000 as determined above.

Equity

62The Appellants did not submit evidence or make submissions regarding an equitable adjustment pursuant to subsection 44.(3)(b) of the Act. I therefore make no finding in that regard.

CONCLUSION

63The current value of the Property as of January 1, 2016 is $344,000 for the 2017, 2018 and 2019 taxation years and no equitable adjustment is required. I therefore reduce the January 1, 2016 assessment for the 2017 taxation year from $427,000 to $344,000 and the assessment for the 2018 and 2019 taxation years from $445,000 to $344,000.

Footnotes

1. 1See Bernier v Municipal Property Assessment Corporation, Region 2, 2018 CanLII 107728 (ON ARB) at paras 47-55; Patrick v Municipal Property Assessment Corporation, Region 02, 2019 CanLII 7194 (ON ARB) at paras 31-37; Patrick v Municipal Property Assessment Corporation, Region 02, 2019 CanLII 7196 (ON ARB) at paras 30-36.
2. 2https://inflationcalculator.ca/ontario/