Brent Hutzal and Carolyn Hutzal v. Municipal Property Assessment Corporation Region 21 and City of Kitchener, 2019 CanLII 7190

Assessment Review Board / Commission de révision de l’évaluation foncière

ISSUE DATE: January 30, 2019

FILE NO.: WR 154295

Assessed Person(s): Brent Douglas Hutzal, Carolyn Elaine Hutzal

Appellant(s): Brent Hutzal, Carolyn Hutzal

Respondent(s): Municipal Property Assessment Corporation Region 21

Respondent(s): City of Kitchener

Property Location(s): 34 Paige Street

Municipality(ies): City of Kitchener

Roll Number(s): 3012-060-005-09188-0000

Appeal Number(s): 3253855 and 3311524 (deemed 2018 appeal)

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

Hearing Event No. 685469

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

Heard: August 29, 2017 in Kitchener, Ontario

APPEARANCES:

Parties	Representative
Brent Hutzal	Self-represented
MPAC	Tony Pileggi
City of Kitchener	No one appeared

DECISION OF THE BOARD DELIVERED BY MARK SPRAGGETT

REASONS

Background

1Brent Hutzal is the owner of 34 Paige Street (the “Subject Property”), a two storey, single-family detached residential dwelling, in the City of Kitchener.

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, the Municipal Property Assessment Corporation (“MPAC”) is required to assess this value as of the valuation date, January 1, 2016. (“current value”).

3For the 2017 taxation year, MPAC has assessed the current value of the Subject Property at $846,000 as of the January 1, 2016 valuation date.

4Mr. Hutzal (the “Appellant”) has filed an appeal for the taxation year 2017 with the Assessment Review Board (the “Board”), pursuant to s. 40 of the Act, and he has been deemed to have brought the same appeal with respect to the Subject Property for the 2018 taxation year. It is his position that MPAC’s assessment of current value is too high and that the correct current value is between $790,000 and $800,000. At this hearing, MPAC takes the position that its assessed value is correct.

5Pursuant to s. 40(11) of the Act, the Municipality, in this case, the City of Kitchener is a party to this proceeding. However, the Municipality did not advise the Board of its position on the issues raised in these appeals, and Terry Grau appeared at the hearing for the Municipality as an observer only.

6Section 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.

7MPAC takes the position that an equitable reduction is not required. The Appellant did not assert that an equitable reduction is required. Therefore, in this proceeding, this ground for appeal is not in issue.

8At the completion of the hearing, the Board reserved its decision. For the reasons that follow, the Board finds that current value for the 2017 and 2018 (deemed) taxation years is $846,000.

Relevant Legislation

9The Act:

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:

3. For each subsequent period consisting of four consecutive taxation years, land is valued as of January 1 of the year preceding the first of those four taxation years.

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

10The issue to be determined on this appeal is what is the correct current value of the Subject Property for the taxation year 2017. In addressing this issue, the parties have raised a sub-issue which the Board must address:

a. What is the best approach to determining the time adjustment factor (“TAF”)?

Description of the Subject Property

11The Subject Property is located in an exclusive neighbourhood of single detached higher end homes, in the City of Kitchener. Built in 2009, it is a custom designed two storey residential dwelling with a double attached garage with inside entry, not on water, having an effective frontage of 53.25 feet (“ft”) and an effective depth of 141.21 ft. It is rated as quality 8 in terms of construction, and has four bedrooms, 2.5 baths and a private drive. It abuts a green space and a public walkway. The property was sold in October 2012 for $780,000 in an open market sale.

Discussion, Analysis and Findings

Preliminary Issue

12The Appellant sought to enter into evidence additional photos and other materials during the hearing. MPAC objected to the Appellant’s request to submit new additional evidence, arguing that it would prejudice MPAC as the material would require a review by a statistician. In response the Appellant asserted that these materials are simply a rehash of what has already been presented by MPAC.

13The Board notes the Appellant did not file the additional evidence by the due date set out in the Schedule of Events for this appeal proceeding, nor did he assert that the additional evidence could not have been provided by this due date. The Board accepts it would be reasonable that MPAC review the proposed evidence before proceeding with the hearing, and, therefore, if the evidence is allowed, an adjournment of the hearing would be required. For these reasons the Board did not allow any new evidence to be submitted.

MPAC’S Evidence

14Tony Pileggi, a paralegal, represented MPAC. Jim McAdam, a Property Valuation Specialist with MPAC, testified on behalf of MPAC. Mr. McAdam has over 20 years’ experience with MPAC, specializing in many areas, particularly in residential valuations.

15Mr. McAdam prepared a valuation report respecting the Subject Property, dated July 25, 2017 (“Valuation Report”) which he submitted into evidence.

16Mr. McAdam stated that he applied the Direct Comparison Approach to estimate the current value of the Subject Property and that he relied on MPAC’s corporate database to select six (6) suggested comparable properties. Four of the six properties are on the same street as the Subject Property.

17Mr. McAdam took a qualitative approach to his analysis, wherein the suggested comparable properties were grouped as inferior, superior or similar to the Subject Property. This enabled Mr. McAdam to estimate a probable range of current value by bracketing the Subject Property between the suggested comparable properties considered inferior and superior to it.

18Mr. McAdam stated that for the period from 2012 through 2016, property values increased 11.6% in the market place. He referred to 462 property sales located in the Subject Property’s neighbourhood and adjacent areas for the period from January 2014 to July 2017, equal to 42 months, to estimate how market conditions affected the price of real property over time. He stated in his Valuation Report that the overall change in the market for this time period is 35.8%.

19Mr. McAdam adjusted the sale price for differences in property characteristics, including time of sale, between the Subject Property and suggested comparable properties. Time adjustment factors were determined to address the different sale dates of properties and aligning sale prices to the valuation date for comparison purposes.

20Based on the most comparable of his suggested properties, Mr. McAdam estimates the current value of the Subject Property to be $865,000.

MPAC’s Submissions

21MPAC states that its assessment as returned of $846,000 for the Subject Property is the correct current value, arguing its assessment for the Subject Property is realistic for Kitchener’s market conditions.

22MPAC emphasizes that the appraisal document submitted by the Appellant was not prepared for the purposes of this appeal, and that nowhere in this document is there any mention of a value for the Subject Property as of January 1, 2016.

23MPAC argues that the Appellant has no real estate expertise or appraisal expertise to question MPAC's recommended suggested property sales, namely, 11 Old Cottage Place and 41 Margaret Avenue South.

24MPAC disputes the Appellant’s assertion that the three neighbouring properties overlooking his backyard is a factor which would reduce the current value of the Subject Property. MPAC argues that the Appellant purchased the property knowing this at the time of purchase.

25MPAC referenced the Appellant’s appraisal document, noting that it gave a positive assessment for the walkway, which contradicts the Appellant's own assertion that it is a negative feature.

26MPAC asserts that the sale dates in the Appellant's appraisal document are wrong, yet the sale prices are correct. MPAC questions the credibility of conclusions in the appraisal document, given the number of errors in this document, and the fact the author of this appraisal document was not called as witness to be questioned by the Board and MPAC.

27MPAC alleges Appellant has “cherry picked” properties to support his position.

28MPAC defends its use of suggested comparable properties with finished basements, noting that it is not uncommon to select properties that have elements of similarity, but are not identical. MPAC also remarked that the Appellant's appraisal document refers to three comparable properties in its analysis that have finished basements.

29MPAC disagrees with the Appellant’s view that amenities have to be factored into adjustments, arguing that there is a difference between a qualitative analysis and a quantitative analysis.

30MPAC emphasizes that even though the Appellant doesn’t accept its TAF criticizing how it is used in the trend line analysis, he does accept MPAC’s data.

31MPAC challenges the Appellant’s assertion that higher end properties, specifically over $400,000 in his neighbourhood are price stagnant up to January 1, 2016, citing 78 Paige Street that sold over $600,000 in 2010 and then $1,300,000 in 2017. MPAC also cited 118 Paige Street, which had a double sale, selling in July 2016 for $737,000 and then in February 2017 for $790,000, demonstrating that markets are not stagnant.

Appellant’s Evidence

32The Appellant represented himself and testified as a witness in this proceeding.

33The Appellant states that Riverbank Estates is the first development in the last 20 years in Bridgeport East. The development consists of 62 homes, including the Subject Property.

34Mr. Hutzal entered into evidence an appraisal document (“Appraisal”) of the Subject Property, dated April 28, 2017, prepared by Jim Jacques (“Appraiser”), a professional appraiser. Mr. Hutzal stated the Appraisal was prepared for financing purposes and not intended for this hearing, although he indicated to the Board that the Appraisal is his evidence. The Appraiser was not present at this hearing event.

35The Appraiser applied two approaches to value, the Direct Comparison Approach and the Cost Approach, giving most weight to the Direct Comparison Approach. In determining a market value for the Subject Property using these approaches, the Appraiser estimated a market value of $925,000 as of April 28, 2017. The Appellant stated that the Appraisal report was prepared for matters unrelated to the issue before the Board but was useful to estimate a current value.

36The Appellant maintains that MPAC’s TAF are incorrectly determined using a linear trend line, preferring instead his own approach using a polynomial function. When applied, he calculates a TAF of 0.82 as of the January 1, 2016 valuation date in contrast to MPAC’s TAF of 0.889 for the same time period. The Appellant’s TAF is then applied to the $925,000 estimated as the Appraiser’s market value as of April 2017 to arrive at an estimated value of $758,685 for his property, in contrast to MPAC’s $822,325. The Appellant views MPAC’s value the upper end of what his property should be worth.

37Mr. Hutzal relied on the three suggested comparable properties provided in the Appraisal document, as well as one of MPAC’s suggested comparable properties, namely 62 Paige Street, as the basis for recommending a current value in the range of $790,000 and $800,000.

Appellants’ Submissions

38The Appellant disagrees with MPAC’s selection of 11 Old Cottage Place and 41 Margaret Avenue South, claiming that they are not comparable. The Appellant expresses the view that 11 Old Cottage Place is too far removed from the Subject Property and it is located at a busy intersection. He maintains that 41 Margaret Avenue South is located in a subdivision still under construction with many unfinished homes in the area and suggests that the subdivisions for 11 Old Cottage Place and 41 Margaret Avenue South have a different character to that of the Subject Property.

39The Appellant maintains that, of MPAC's six suggested property sales, all but one have finished basements, in contrast to the Subject Property, which does not have a finished basement. He also believes that all but one has a walk out basement, and similarly an extra washroom, which contribute to added value for these properties.

40The Appellant claims that the Subject Property abuts a public walkway, contributing to significant pedestrian traffic and heavy equipment movement which he suggests reduces the value of the Subject Property.

41The Appellant suggests that three neighbouring properties abutting the public walkway have an uncluttered view of the Subject Property’s backyard which also reduces the value of the Subject Property.

42The Appellant maintains that 62 Paige Street has a walkout, an extra bathroom, a finished basement, is not within the public walkway and has an enclosed glass solarium. He stated that he is astonished that this property’s value is only $3500 more than the Subject Property. The Appellant suggests that 62 Paige Street should be valued much higher and the Subject Property should be valued much lower. He suggests that he focused on 62 Paige Street in his presentation because it is the only data he could find that has photos online.

43The Appellant expressed his view that MPAC’s TAF trendline is incorrect in measuring growth month over month in equal monthly amounts. He asserts that it is not a correct representation and suggests it should be a polynomial trend line instead. He argues that a polynomial trend line better reflects the actual market place.

44The Appellant claims that the growth rate of lesser valued homes is greater than that of higher valued homes, and that homes under $300,000 have increased 31% more than homes over $400,000 for the same forty two month time period used by MPAC. He suggests that, for homes over $400,000 their value has remained stagnant over a two year period, between 2014 to 2016.

45The Appellant suggests that Riverbank Estates is an anomaly at the edge of the city and that stagnation does occur. He claims that only now is the Estate experiencing activity.

46The Appellant agrees with MPAC that the Appraiser gave a positive value to the public walkway, however he disputes MPAC’s assessment as it has not gone up in value as MPAC says it has.

47The Appellant claims his concerns are for the period 2012 through 2016, maintaining that the average increase is too high, that during this period the TAF linear trend line is not accurate, and that the data is skewed.

48The Appellant suggests that the Appraisal document is his testimony and the Board should treat it as such.

49The Appellant claims that he has no issues with MPAC’s data, only how it is analyzed.

50Relying on his evidence and views, the Appellant submits that the correct current value for taxation year 2017 is between $790,000 and $800,000.

Findings

51The Board has reviewed the totality of the evidence provided by both parties, recognizing that their respective methods are the same, namely the Direct Comparison Approach. Both parties provided their own suggested comparable properties from which they presented their respective positions on current value for the Subject Property. Before addressing the issue of current value, the Board must address the sub issue of what is the correct time adjustment factor, TAF, as it affects the determination of current value by adjusting the sale prices of all the suggested comparable properties as of the legislated valuation date of January 1, 2016.

52The Appellant has stated that he does not disagree with MPAC’s data, but he challenges how the data is used in the analysis, suggesting the results are skewed as a result. For the Appellant, the major issue is MPAC’s derivation of its TAF. The Appellant is of the view that MPAC’s use of a linear trend line to arrive at the TAF does not reflect the actual market. He argues that it ought to be a polynomial function instead, which he suggests is a better reflection of growth trends month over month

53Given the anomalies of the Subject Property’s neighbourhood location and how property price points have differing growth rates, the Appellant submits that higher end properties like his have a different growth rate to properties valued under $400,000. The Board notes that the Appellant provided no evidence to support this submission.

54The Appellant maintains that his analysis supporting an alternate approach to deriving a more accurate time adjustment factor is the better analysis. Accordingly, the Appellant applied his own calculated TAF of 0.82 to the Appraiser’s estimated market value of $925,000 to arrive at an estimated value of $758,685 for his property’s value as of the valuation date.

55The Appellant states that MPAC’s TAF of 0.889 applied to his Appraiser’s estimate of value of $925,000, which results in a value of $822,325. He argues that is the upper end value for his property. The Appellant argues that his property’s current value should be in the range between $790,000 to $800,000.

56The Board finds that the Appellant’s method of determining the TAF is plausible. The Board finds that the Appellant has adduced insufficient evidence to establish that this method produces a reliable prediction of time adjusted value based on market trends. Instead, the Board finds that MPAC’s evidence on its derivation of the TAF is more persuasive.

57The Board now turns to its determination of correct current value. The best evidence of current value is an arm’s length and market-tested sale of the property on the valuation date or close to it. If, as in this case, no such transaction took place, the next best measure of current value are arm’s length and market-tested sales of comparable properties located nearby, as close as possible to the legislated valuation date of January 1, 2016.

58To enable an estimate of value for the property to be derived from comparable properties, there must be sufficient comparable elements, in terms of physical factors such as building area, land area, land frontage, age of construction, physical condition, etc. so as to enable a direct comparison to be made. The Board finds that the three suggested comparable properties used in the Appellant's Appraisal, are comparable to the Subject Property and that this supports the Appraisal’s conclusion that the market value as of April 28, 2017 is $925,000.

59The Board has analyzed MPAC’s six suggested comparable properties, noting that MPAC’s recommendation of two particular properties, namely 11 Old Cottage Place and 41 Margaret Avenue South as the best choice for comparability to that of the Subject Property. The Board finds 41 Margaret Avenue South too old in terms of year built (1963), to be of any value. Its lot size is also significantly larger, being 0.58 acres as compared to 0.17 acres for the Subject Property. For these reasons, the Board does not consider this property in its determination of current value.

60The Board finds 11 Old Cottage Place worthy of consideration. Having a similar lot size, an unfinished basement, and comparable floor area with its distribution on two floors, the Board finds that this property is comparable to the Subject Property. Although it is a newer building by six years, which has a time adjusted sale price of $908,323, with downward adjustments for its differences, it demonstrates that the Subject Property is valued less than this amount.

61Of the remaining four properties suggested by MPAC, the Board finds that 62 Paige Street, on which the Appellant also relies, is comparable to the Subject Property and should be considered in establishing a range of values from which the Board may determine current value. This property, although one year older, is of similar size in total floor area and distribution over two floors. It has a comparable lot size with the added value of a finished basement. As the Subject Property has an unfinished basement, the downward adjustment for the basement would put 62 Paige Street at the lower end of the range of values from which the Board may determine current value.

62Relying on MPAC’s best comparable properties cited above, the Board finds that the range of values includes, at the lower end, a value of $868,483 (with a finished basement) and at the higher end, a value of $908,323 (unfinished basement). MPAC’s proposed correct current value of $846,000 falls within this range. Applying MPAC’s TAF of 0.889 to the Appellant's Appraisal estimate of $925,000, the time adjusted value is $822,325. As this time-adjusted result is close to MPAC’s proposed current value, the Board finds that $846,000 is the correct current value for the Subject Property.

DECISION

63The current value of the Subject Property is $846,000 for the 2017 and 2018 (deemed) taxation years.