Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE: February 1, 2019

FILE NO.: WR 152894

Assessed Person(s): Richard Patrick, Donna Patrick

Appellant(s): Richard Patrick

Respondent(s): Municipal Property Assessment Corporation (“MPAC”) Region 02

Respondent(s): Township of Edwardsburgh Cardinal

Property Location(s): 413 King’s Highway 2

Municipality(ies): Township of Edwardsburgh Cardinal

Roll Number(s): 0701-702-005-37000-0000

Appeal Number(s): 3135543 and 3143684

Taxation Year(s): 2015 and 2016

Hearing Event No.: 696476

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

Heard: April 10, 2018 in Spencerville, Ontario

APPEARANCES:

Parties	Representative
Richard Patrick, Donna Patrick	Self-represented
MPAC	Christina Smith
Township of Edwardsburgh Cardinal	No one appeared

DECISION OF THE BOARD DELIVERED BY JOSEPH JEBREEN

OVERVIEW

1Richard Patrick and Donna Patrick appeal the assessment of their property located at 413 King’s Highway 2 in the Township of Edwardsburgh Cardinal (the “Property”). MPAC submits that the correct January 1, 2012 current value of the Property based on the direct comparison approach is $287,000. However, it only seeks confirmation of the returned assessment for the Property of $263,000. Mr. and Mrs. Patrick take the position that the correct current value of the Property is $172,000.

2For the reasons that follow, I find that MPAC has failed to discharge its statutory burden to prove the correctness of the current value of the Property. Following the framework set out in Jay Patry Enterprises v Municipal Property Assessment Corporation, Region 05, 2019 CanLII 39629 (ON ARB), 2018 CanLII 70338 (ON ARB) WR 152892 (“Patry Enterprises”) on the appropriate steps to take when MPAC has failed to meet its burden, I find that Mr. and Mrs. Patrick have not provided sufficient evidence to prove that a particular current value is more likely than not. I therefore reduce the January 1, 2012 assessment for the 2015 and 2016 taxation years from $263,000 to the last uncontested value of $137,000.

BACKGROUND

3The Property is situated along the Galop Canal in Cardinal, Ontario with a view of the St. Lawrence Seaway beyond the Galop Canal. There is a strip of land owned by the Township that separates the Property from the Galop Canal and a second strip of Township land separating the Galop Canal from the St. Lawrence Seaway.

4Although the Appellants do not own the land adjacent to the waterfront, the parties agree that Mr. and Mrs. Patrick have the right to cross the Township land and enjoy unrestricted access to the Galop Canal, and ultimately the St. Lawrence Seaway.

5There is a steep slope from the Property to the shore of the Galop Canal. MPAC showed a walkway leading down to the water and a dock on the shore, however Mr. Patrick clarified that the walkway and the dock were owned by the neighbour. The Appellants nevertheless have access to the water and use of the dock. The Property has an approximate frontage of 145 feet, and a site area of 18,730 feet. It is connected to hydro and to the Township sewer and water systems.

6There are three structures on the Property: i) a single family detached residence, (ii) a 982 square foot detached garage built in 1910 and (iii) a second 288 square foot shed built in 1910. The detached garage is over 100 years old and unfinished and the pictures show a below average condition structure. The shed is also over 100 years old. It is in need of repair and is in poor condition.

7The residence is a 1,791 square foot, two storey, single family detached home built in 1910 with a basement area of 882 square feet. It has 3 bedrooms, 2 full bathrooms, and a fireplace. The home was renovated by Mr. and Mrs. Patrick in 1997. The siding was replaced and the kitchen and bathroom were renovated (the “1997 Renovations”). The 1997 Renovations were discovered by MPAC during an inspection of the Property on May 4, 2016 and are the basis upon which MPAC proposes that the current value of the Property is $287,000, as compared to its returned assessment of $263,000.

ISSUES

8The first issue to decide is the current value of the Property. In other words, I must determine what the Property would have sold for in an arm’s length transaction on January 1, 2016. Once the current value has been determined, clause 44(3)(b) of the Assessment Act, R.S.O. 1990, c. A.31 (the “Act”) requires that I “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.

9In addition to the 2015 taxation year appeal, the 2016 taxation year appeal is also before me because, pursuant to subsection 44(26) of the Act, a 2016 appeal is deemed to have been filed if the 2015 taxation year appeal was not finally disposed of before March 31, 2016.

LAW AND ANALYSIS

Current Value

10Subsection 40(17) of the Act states that MPAC has the burden of proving “the correctness of the current value of the land.” As this Assessment Review Board (the “Board”) found in Patry Enterprises at paragraph 21, the burden is around “current value” and not the 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.”

11Patry 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 no evidence in the record that is capable of proving current value, the Board should fix the assessment at the last uncontested assessed value.

12I will follow that procedure here.

Can MPAC’s evidence prove its suggested current value?

13As 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.”

14MPAC 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 $287,000 for the Property.

15To 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 her Valuation Report, Christina Smith relies on five properties in her current value analysis as summarized in the table below:

Property		Sale 1	Sale 2	Sale 3	Sale 4	Sale 5
Date sold		2010/12	20111/12	2010/08	2011/07	2011/11
Sale price		$315,000	$335,000	$386,500	$315,000	$380,000
Address	413 King’s Highway 2	213 County Road 2	219 County Road 2	14 Flett Street	801 County Road 2	103 Moore Road
Lot area (square feet)	18,731	53,579	58,370	11,008	14,810	12,632
Frontage (feet)	145	106	140	95	138	211
Primary building type	Two storey single fam. detached	One storey single fam. detached	One storey single fam. detached	One storey single fam. detached	One storey single fam. detached	One storey single fam. detached
Building area (square feet)	1,791 (909 plus 882)	1756	1058	1809	1193	983
Year built	1910	1987	1965	2004	1990	1993
Number of bathrooms	2	1.5	1.5	2.5	2	2
Quality of construction	6	6	5.5	7	6	6
Secondary buildings	Detached garage/shed	Attached garage/detached garage/shed	Detached garage	Attached garage	n/a	Detached garage/shed
Secondary building area (square feet) and year built	982/288 1910/1910	532/590/228 1987/1984/1940	736 1986	492 2004	n/a	720/221 2005/1998

16Like the Property, all of MPAC’s suggested comparable sales are located along the Galop Canal and have indirect waterfront with no waterfront ownership.

17Unlike the Property, all of the properties presented by MPAC have bungalows as the primary building type whereas the Property is a two storey structure. This is a significant difference. Also, all of the bungalows on the comparable properties are built from 1965 to 2004 whereas the two storey building on the Property was built in 1910. The bungalows are between 55 and 74 years newer. Ms. Smith points out that the 1997 Renovations on the Property increase the effective year built whereas none of the comparable properties have renovations recorded by MPAC prior to their sale dates. Ms. Smith’s opinion is that the five properties are comparable to the Property and that it is important to have a range of inferior to superior comparable properties to allow her to bracket a range for current value.

18However, the comparable properties presented in evidence are, according to MPAC’s own evidence, either similar or superior to the Property. There are no inferior comparable properties. Ms. Smith’s opinion is that Sale 1 is superior to the Property, Sale 2 is relatively similar, Sale 3 is much more superior, Sale 4 is relatively similar and Sale 5 is superior. Ms. Smith also explained why she believes that the five comparable properties are similar or superior to the Property.

19The range of values for the relatively similar comparable properties (Sales 2 and 4) is $315,000 to $335,000. The range of values for the superior comparable properties (Sales 1, 3 and 5) is $315,000 to $386,500. Based on this analysis, Ms. Smith can only prove that the Property’s January 1, 2012 current value is less than $315,000 but she provides no lower limit in her analysis.

20When I asked for an analytical pathway from the evidence presented to MPAC’s proposed value of $287,000 using the direct comparison approach, MPAC was unable to provide one. MPAC submits that its current value was produced by its computer system but could not give any particulars of how the current value was calculated, or how the evidence it submitted supported a current value of $287,000. The only conclusion that can be drawn from MPAC’s evidence is that the Property is worth less than $315,000.

21To meet its burden using the direct comparison approach, MPAC must not only select comparable properties, it must also show a pathway to arrive at its proposed current value of $287,000 and why, in its opinion, that value is correct. This, MPAC has failed to do.

22The minimum threshold in Patry Enterprises is not met, and so I find that MPAC has not met its burden.

Does the taxpayer’s evidence prove a current value?

23Following the framework in Patry Enterprises, if MPAC has not met its burden, I must analyze the taxpayer’s evidence to see if it is capable of proving that a particular current value is more likely than not.

24Mr. Patrick, on behalf of the Appellants, submits that MPAC has over assessed properties in his area and that a 92% increase over the 2008 assessment is not justifiable. He submits three ways of determining the current value of the Property:

a. Using MPAC’s own finding that the market has changed by 25.2% from January 2009 to December 2012, the current value of the Property is $171,661.

b. Using the average of MPAC’s January 1, 2012 assessments for seven two storey dwellings within 1.5 kilometers of the Property, the current value of the Property is $144,571.

c. Using the average of 15 comparable sales obtained from MPAC’s website aboutmyproperty.ca, the current value of the Property is $166,000.

25I will address each of these submissions in turn.

Using MPAC’s Market Adjustment

26In 2009, the Appellants agreed with MPAC that the January 1, 2008 current value of the Property was $137,000. Mr. Patrick submits that I should apply MPAC’s own finding in this matter that the market has changed by 25.2% from January 2009 to December 2012. In Mr. Patrick’s submission, applying that 25.2% market adjustment to the January 1, 2008 current value of $137,000 results in a January 1, 2012 current value of $171,662, or $172,000 rounded.

27Mr. Patrick further submits that this evidence significantly undermines the 92% increase over the January 1, 2008 current value that MPAC is seeking. Mr. Patrick argues that a doubling of the Property’s value in four years to $287,000 is not justified.

28I do not accept these submissions.

29As this Board held in Milosek v Municipal Property Assessment Corporation, Region 03, 2018 CanLII 102247 (ON ARB) WR 155992 (“Milosek”) at paragraphs 14-18, assessment-based market adjustment is not an appropriate way to determine the current value of property. For the same reasons as stated by Vice Chair McAnsh in Milosek, I find that a market adjustment based on sale to assessment ratios is not a reliable method of determining current value.

30Further, as I stated in Bernier v Municipal Property Assessment Corporation, Region 2, 2018 CanLII 107728 (ON ARB) WR 152792 at paragraphs 47-54, I have concerns regarding the reliability of the sale to assessment ratio (“SAR”) study as presented by MPAC.

31I rely on those reasons here. First, there is no indication of the type of properties selected for the SAR Study. MPAC states that its SAR Study is based on 480 sales from the Property’s neighbourhood and adjacent neighbourhoods. The properties could be in a subdivision, rural, or on a highway; they could be large multimillion dollar mansions, simple bungalows, two or more storey homes, or even vacant properties; they could be in poor, average, or excellent condition; they could be built in the early 1900s or be brand new builds.

32Different classes of properties may have different rates of change and so different time adjustments. For example, rural bungalows may have a negative time adjustment factor whereas two storey detached homes in a subdivision may have a positive time adjustment factor over the same period. MPAC has not provided evidence to show that applying the same time adjustment factors to different properties is a valid method for adjusting sale prices. Although MPAC provided the addresses of the 480 properties and their roll numbers, no further details are provided such as the type of properties selected for the study.

33Second, MPAC does not specify the geographic area to which its study is confined. At some point, a market trend is no longer relevant to a particular property if the geographic area is too far reaching. Different locations may also have different rates of change over time. There is no evidence that the geographic area chosen results in a reliable dataset which can be used to determine appropriate time adjustment factors or an overall market increase of 25.2%.

34Third, MPAC’s methodology adjusts for time before adjustments are made for other possible elements affecting the sale prices. MPAC does not adjust the comparable sales prices for other possible factors which could entirely account for the price differences.

35Sale prices should only be adjusted for time if the prices have indeed changed as a function of time. If the prices have changed because of other factors such as the condition of the property, then no adjustment for time should be made. MPAC cannot eliminate other factors that could be the cause of the change in sale prices and, as a result, time adjustments may not be justifiable.

36For these reasons, I cannot rely on the SAR Study presented by MPAC to either come up with time adjustment factors or with an overall market increase of 25.2%.

Using MPAC’s Assessments

37Mr. Patrick submits that he relies on seven properties with two storey dwellings that were found by the Board to be similar properties to the Property in a previous hearing in 2004. Mr. Patrick further submits the assessed values of those seven properties and calculates an average increase of 66.2% from the 2004 valuation date to the 2012 valuation date. Mr. Patrick argues that an increase of 66.2% of the 2004 assessed value of $103,000 for the Property results in a 2012 current value of $171,000. Finally, Mr. Patrick states that the average January 1, 2012 assessed value of those seven properties is $144,571 and that MPAC cannot justify the increase of the Property to $263,000.

38Once again, as the Board found in Milosek, assessment-based market adjustment is not an appropriate way to determine current value (see paragraph [29] above). I must use sales data to determine current value, not assessments. I therefore cannot accept Mr. Patrick’s submission that the current value of the Property be determined based on assessments.

39Further, I do not accept the Appellants’ submissions that such a large increase from one valuation date to another is in and of itself unfair. Some properties may increase significantly from one valuation date to another. There is no problem with a large increase as long as the evidence confirms that such an increase is warranted.

Using Comparable Sales

40The Appellants presented 15 sales which they submit are comparable to the Property. They further submit that an average of those comparable sales is $166,000 and that this is more in line with the current value of the Property.

41However, as MPAC points out, none of these 15 sales have the unrestricted access to the Galop Canal that Mr. and Mrs. Patrick enjoy. I agree with Ms. Smith that this feature has some value but there is no evidence before me as to how much this water access is worth. It could be $100,000, it could be $10,000, or it could be another number. I simply do not have the evidence and without this evidence, I cannot use these 15 sales. They are not comparable.

42Mr. Patrick also presented sales evidence of properties located at 409 County Road 2 and 415 County Road 2. Although both of these properties are in close proximity to the Property and located on the Galop Canal, the sales occurred in March 2016 and August 2017 respectively. These sales may be evidence of a January 1, 2016 current value but I find that they are too far removed from the valuation date to be of assistance in determining the January 1, 2012 current value.

43I find that the Appellants have not provided sufficient evidence to prove that any particular current value is more likely than not.

Last Uncontested Assessment

44As indicated in Patry Enterprises, when neither party provides evidence that can support a current value, the Board should return the last uncontested value to the assessment roll. The parties agreed on a January 1, 2008 assessment of $137,000. I therefore reduce the January 1, 2012 assessment from $263,000 to $137,000 for the 2015 and 2016 taxation years.

45I make the following additional comments. The Board should not be put in a position where it must guess a current value for a property. Yet, that is exactly what happens when MPAC fails to satisfy its burden and an Appellant fails to adduce sufficient evidence of a current value.

46In its valuation report, MPAC concludes as follows:

The Current Value of the Subject Property falls below the range defined by the sales outlined in the analysis. Additionally, the adjusted sale prices of these sales demonstrate that the Current Value of $263,000 for the subject property is reasonable and is therefore “correct” in the context of Section 40(17) of the Assessment Act.

47MPAC’s evidence only establishes that the Property is worth less than $315,000. It does not follow that the comparable sales demonstrate a current value of $263,000. Evidence showing that the value could be any number below $315,000 is not sufficient.

48Finally, MPAC’s position that its proposed current value only needs to be reasonable was not accepted by the Board in Patry Enterprises. At paragraph 25 of Patry Enterprises, the Board found that “MPAC must prove that its proposed current value is more likely than not, not just reasonably correct.”

Previous Cases before the Board

49Ms. Smith submitted two cases in which the Board determined the current value of two other properties along the Galop Canal: Hennessy v Municipal Property Assessment Corporation, Region 02, 2016 CanLII 619 (ON ARB) WR 137036 (“Hennessy”) and Tierney v Municipal Property Assessment Corporation, Region No. 25 [2015] O.A.R.B.D. No. 17 WR 129338 (“Tierney”).

50In Hennessy, the property at issue was Mr. and Mrs. Patrick’s neighbour located at 411 King’s Highway 2 and had a similar unrestricted access to the Galop Canal. MPAC used the same five comparable sales as those used in this proceeding. However, the one and a half storey home at 411 King’s Highway was built in 1985 with an addition in 1991 for a total square footage of 2,342 square feet and MPAC proposed a current value of $321,000. Member McAnsh (as he then was) held, at paragraph 15 of Hennessy, that the evidence of the comparable sales with a range of $315,000 to $380,000 amply supported MPAC’s opinion that the current value of the property is $321,000. That is not the case here. MPAC’s opinion is that the current value of the Property is $287,000 and there is no logical connection in the evidence between that value and the range of values for the superior properties of $315,000 to $386,500.

51In Tierney, the property at issue was located at 9 Flett Street. It did not have the same access to the Galop Canal as the Property. One of the comparable sales used by MPAC in Tierney, and in the present case, is the property at 14 Flett Street. Member Whitehurst found that the sales evidence indicated a current value range of $334,000 to $418,000. Member Whitehurst accepted MPAC’s opinion of value of $406,000, at the upper end of the value range, because 9 Flett Street was most similar to 14 Flett Street, which sold for $418,411. Again, that is not the case here. MPAC has proposed a value that is outside of the range of the comparable sales presented without explanation. I note that in Tierney, MPAC presented another comparable sale built in 1961 that sold for $222,777, but that comparable sale was not in evidence before me.

Equity

52In Zarichansky v Municipal Property Assessment Corporation, Region 2, 2018 CanLII 70341 (ON ARB) WR 150192, the Board held:

We find that an equity assessment is not necessary when MPAC has failed to discharge its burden. We have not made a current value determination, but have instead imposed a previous assessed value due to MPAC’s failure to discharge its burden. There is therefore no current value determined in clause 44(3)(a) to compare to the assessments of similar lands in the vicinity in clause 44(3)(b). Other land is assessed at its current value pursuant to subsection 19(1) while this property is not. It is likely that there will be an inequity that results from MPAC failing to discharge its burden, but the inequity is that the property is likely assessed lower than other property in the vicinity. That is not an inequity that clause 44(3)(b) can cure.

53For the same reasons, I similarly find that no equity assessment is required in this case.

CONCLUSION

54MPAC has failed to meet its burden to prove the correctness of the January 1, 2012 current value and there is insufficient evidence before me to determine that current value. I therefore reduce the assessment from $263,000 to the January 1, 2008 current value of $137,000 for the 2015 and 2016 taxation years.