Vincenza Sandhu v. Municipal Property Assessment Corporation, 2019 CanLII 81683

Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE: August 30, 2019

FILE NO.: WR 161194

Assessed Person(s): Vincenza Sandhu

Appellant(s): Vincenza Sandhu C/O Emanuel Sandhu

Respondent(s): Municipal Property Assessment Corporation (“MPAC”) Region 14

Respondent(s): Town of Richmond Hill

Property Location(s): 176 Lennox Avenue

Municipality(ies): Town of Richmond Hill

Roll Number(s): 1938-030-021-13700-0000

Appeal Number(s): 3320289, 3338074, 3338075 and 3357879

Taxation Year(s): 2017, 2018 and 2019

Hearing Event No.: 715179

Legislative Authority: Sections 32 and 40 of the Assessment Act, R.S.O. 1990, c. A.31, as amended

Heard: June 17, 2019 in Richmond Hill, Ontario

APPEARANCES:

Parties	Representative
Vincenza Sandhu	Self-represented
MPAC	Lisa Williams
Town of Richmond Hill	No one appeared

DECISION OF THE BOARD DELIVERED BY ALAN BUTCHER

BACKGROUND

1This is an appeal by Vincenza Sandhu (“appellant”) regarding the assessed value of her home located at 176 Lennox Avenue in Richmond Hill (the “Property”), as returned to the rolls for the taxation years 2017, 2018 and 2019. The determination of the assessed value for these years is based on the valuation date of January 1, 2016.

2MPAC returned the value of the Property to the rolls as at the valuation date of January 1, 2016 at $1,151,000. On this appeal, MPAC has filed a report which concludes a current value assessment (“CVA”) of $1,161,000. The CVA is arrived at by estimating market value at $1,256,231 and adjusting with a reduction of $95,000 due to the poor condition of the Property. MPAC also subsequently concluded as a result of its Equity Analysis Report prepared in conjunction with this appeal that similar properties in the vicinity have been assessed below their current value, and that an equity adjustment is warranted. MPAC recommended an assessed value for the 2019 taxation year at $945,000, and is recommending the same value be set for the 2017 and 2018 taxation years.

3The appellant says the assessed value is too high. She disputes the CVA of $1,161,000, maintains that the $95,000 adjustment for condition is not sufficient to account for the extensive disrepair of the Property, and suggests that after taking the equity adjustment into account the Property should be assessed at $860,000.

ISSUE

4The issues to be determined on this appeal are:

a) what is the current value of the Property as of the January 1, 2016 valuation date;

b) whether there should be an equitable reduction of the current value and, if so, what should the amount of this reduction be.

DECISION

5This Assessment Review Board (“Board”) finds that for the 2017, 2018, and 2019 tax years the current value of the subject Property, as of the January 1, 2016 valuation date, is $1,065,000. Furthermore, the Board finds that the evidence before it supports the conclusion that an equitable adjustment is required under s. 44.(3)(b) of the Assessment Act, R.S.O. 1990, c. A.31, (“Act”) in the amount of $198,000. The value returned to the rolls for the 2017, 2018 and 2019 taxation years is therefore reduced from $1,151,000 to $867,000.

RELEVANT LEGISLATION

6Section 1 of the Act states:

“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.

7Section 19.1(1) of the Act states:

19.(1) Assessment based on current value. – The assessment of land shall be based on its current value.

8Section 19.2(1) of the Act states:

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:

4. For the period consisting of the four taxation years from 2017 to 2020, land is valued as of January 1, 2016.

9Section 40.(17) of the Act states:

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.

10Section 44.(3) of the Act states:

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.

What is the correct current value of the property as of the January 1, 2016 valuation date?

MPAC’s Evidence and Submissions

11MPAC’s representative, Lisa Williams, estimates a current value of $1,161,000 based on the direct comparison approach.

12Ms. Williams also conducted an equity study and determined that an equity adjustment is required. It is MPAC’s position that the assessment should be set at $945,000 for the 2017, 2018, and 2019 taxation years.

13Ms. Williams states that she inspected the Property on November 23, 2017. She again visited the Property in November 2018 and noted there were no updates or changes. She agrees that the Property is in poor condition.

14Ms. Williams presented her Valuation Report of the Property, observing that it is a 2,660 square feet (“sq. ft.”) single family detached home built in 1975 on a 65 x 210 feet (“ft.”) lot. It is a 2-storey home with 1,330 sq. ft. on each floor, and 1,567 sq. ft. of unfinished basement. There is an attached garage with an area of 480 sq. ft. The quality of construction is rated at 6.5.

15She observed in her evidence that the Property shows no changes or updates, there has been no maintenance, and it is in poor condition. The report states, supported by photographs:

The exterior of the house requires maintenance, the wood framed windows are rotting, the roof is leaking and the front door has air gaps. The ceiling in the dining room shows signs of a leak and there are electrical issues on main floor. The shower in the three piece bath on main floor is leaking it is not usable. The basement is unfinished there are water issues on the cold cellar ceiling. The second floor main bath is in poor condition owner confirmed toilet cannot be used. The powder room bidet is not working.

16MPAC uses and relies upon a statistical tool known as multiple regression analysis (“MRA”) to quantify the value adjustment of -$95,000 for poor condition.

17Ms. Williams noted that although the severity of the poor condition is a matter of contention, the appellant is nonetheless living in the Property. She says that it cannot, therefore, be assessed at land value, and indeed the valuation report does not make any attempt to quantify the land value separately. Ms. Williams stated that based on her review she would assign $834,000 for land value on the Property.

18MPAC submitted 6 comparable sales as set out below in Table A. All are single family detached homes. All sales have been time adjusted to the legislated valuation date.

Table A

Property	Site Area (Acres)	Frontage (ft.)	Year Built (effective)	Building Area (sq. ft.)	Residential and Secondary Structure	Sale (Time Adjusted)	2016 Assessed Value
176 Lennox Avenue (Subject Property)	0.31	65	1975	2,660	-2 storey - attached garage - basement unfinished - Quality of constr: 6.5	n/a	1,151,000
456 Paliser Crescent South (Sale #1)	0.32	39	1956	2,852	-2 storey - finished basement area 312 sq. ft. - quality of constr. 6 - modifications “N” (1999) 1,460 sq. ft. - detached garage built 2004	1,234,477	1,129,000
169 Lennox Avenue (Sale #2)	0.25	52.5	1956	777	-1 storey - finished basement area 330 sq. ft. - quality of constr. 5.5 -Detached garage built 1980	1,212,563	852,000
165 Lennox Avenue (Sale #3)	0.25	52.5	1940	800	-1 storey - quality of constr. 5 - “B” reno 1980 -Detached garage (1940)	885,682	801,000
233 Lennox Avenue (Sale #4)	0.29	60	2009	2,902	-2 storey - quality of constr. 8 -attached garage	1,755,986	1,651,000
232 Lennox Avenue (Sale #5)	0.24	50	2005	2,247	-1 storey - finished basement area 1,904 sq. ft. - quality of constr. 7 -attached garage	1,292,087	1,367,000
254 Lennox Avenue (Sale #6)	0.17	60	1956	1,120	-1 storey - finished basement area 468 sq. ft. - quality of constr. 5.5 -attached garage - corner lot	857,578	777,000

19Ms. Williams acknowledges in her report that there were limited sales available and that the chosen sales are not similar to the Property in house size, year built, or quality. On the other hand, they are located within very close proximity and have similar lot sizes to the Property. Of these 6 sales Ms. Williams relies primarily on Sales 1 and 4 on the basis that they are both 2-storey single family dwellings with similar lot sizes, whereas the other sales are bungalows which attract a different buyer and market value. She acknowledges that both Sales 1 and 4 are superior in quality to the Property. She reviewed the structure characteristics and adjusted for assessment differences to estimate the market value for the Property. Her conclusion was an estimated market value for the Property of $1,256,477 as compared to Sale 1, and $1,255,986 as compared to Sale 4. She selected the average of those two numbers, or $1,256,231 as her conclusion of market value for the Property.

20As noted above, Ms. Williams then adjusted the estimate of market value for poor condition of the house by -$95,000, resulting in her final estimate of market value for the Property of $1,161,231, which she rounds down to $1,161,000 as her final conclusion of current value as at the valuation date.

21Finally, Ms. Williams in her evidence noted her view that land values are a significant factor driving sales and property values on the street. In support of this she referenced in particular Sale 2 at 169 Lennox Avenue, which is across the street and sold for $1,328,000 in December of 2016. She testified that this property was fenced off, unoccupied, and clearly sold for land value. Accordingly, she says, the evidence of strong land values on the street supports her conclusion on the direct comparison approach.

Appellant’s Evidence and Submissions

22The appellant explained to the Board how she moved into the Property many years ago from a small apartment, ignoring the problems that existed even then because it seemed incredible to have so much space for her three children. But her husband left and it was all she could afford to work and try to put food on the table. She had neither the means nor the ability to conduct repairs or maintenance over the years. A year or so ago she suffered a stroke and expressed difficulty with thinking and communicating in an organized way. Her son Emanuel Sandhu assisted her at the hearing, and both gave evidence regarding the Property. They were both strongly of the view that the assessed value of $1,151,000 is unfair as compared to other properties on the street, when the state of disrepair is considered and in comparison to the assessed values of other properties.

23State of Disrepair: The appellant filed materials itemizing and detailing the various deficiencies at the property, supported by 145 photographs filed as a physical exhibit. In summary, they attested to mould and water damage throughout the house; the existence of aluminum wiring that needs to be replaced; lack of functioning electrical wiring, fixtures and outlets in various parts of the house; two of four rooms on the upper level without heating or cooling; carpeting requires replacement throughout; the roof and attic insulation need to be replaced; the bathrooms leak and have caused water damage requiring complete replacement and renovation; there are holes in the walls, ceiling and missing tiles in various locations; the wooden window frames are rotten; the garage door and entrance doors require replacement; there are broken window panes; the kitchen counters and cabinets are damaged and in a state of disrepair; the dishwasher and central vacuum are broken; the “cantina” or cold cellar in the basement under the concrete slab at the entrance is collapsing and supported by 2x4s; the exterior brick is peeling away; retaining walls require replacement; trees need to be cut down.

24In terms of evidence to support the cost of repairs and remediation, the appellant filed 2 quotes, one from DryShield and one from Nusite Contractors both for approximately $25,000 to waterproof the exterior of the basement, and the latter added options of $10,500 + HST to remove and repour the concrete slab over the “cantina” or cold room, an extra $5,500 + HST to seal the top of the slab (and even then the quote appears to be incomplete, stating “Fix the wall inside no idea $ $”). A letter from AC Electrical reporting on a minor repair to 2 circuits in 2006 describes the condition of the electrical system in the house as “terrible.”

25Assessed Value of Other Properties: The appellant and her son obtained a list from the MPAC website of other properties in the area with their particulars and assessed values. They then went around the area and found properties they considered similar or at least comparable. These lists they filed in two groups of 24 properties. At the hearing, they made submissions on eight of these properties for which they made various comparisons on the similarities and differences as compared to the Property. They concluded from these various comparisons that the fair assessed value of the Property should be $860,000.

26Finally, the appellant testified that in February or March of this year (2019) someone came to the house and telephoned, making a verbal offer of $860,000 to purchase the Property on the basis that they intended to demolish the house and construct a new home. There was some contention in cross-examination over whether it was the analysis of comparables or this verbal offer that formed the basis for the appellant’s final conclusion of value ($860,000), but the appellant insisted it was the evidence as a whole, which the verbal offer confirmed.

Board’s Analysis and Findings

27The determination of current value in this case requires a multi-step approach. First, I must determine the current value, and then I must determine whether any reduction should be allowed for the poor condition of the Property.

28Under s. 44.(3)(a) of the Act, the Board must first determine “the current value of the land.” The best evidence the Board can receive of current value, in the absence of any actual sale of the property at issue, is by a direct comparison to an arm’s length and market-tested sale of similar properties on the valuation date or close to it.

29With respect to comparable properties, I find that the evidence of the appellant is problematic: she and her son did not provide me evidence of actual sales, but rather provided a list of properties they submitted as being similar and made a comparison to their assessed values based on information available on the MPAC website. While I appreciate the effort involved, I cannot rely on these comparables to determine current value, particularly when it is conceded that properties in the area have been assessed under value and an equity adjustment is warranted. The evidence submitted by the appellant is in fact more directed to this latter point: the argument is that the property is unfairly assessed as compared to the assessed values of other properties, and this will be addressed under the equity analysis below.

30The best available evidence before me of comparable sales is the list provided by MPAC as set out in Table A above. Ms. Williams selected and relied primarily on two sales of single family homes (Sales 1 and 4) which she acknowledges are superior to the Property, and made adjustments for assessment differences to each and then used the average adjusted sale price to reach her conclusion of value for the Property. However, I have reservations about this approach. For Sale 1, the resulting estimated comparable market value for the Property is $1,256,477, which is $22,000 higher than the time adjusted sale amount for Sale 1 of $1,234,477. Since Sale 1 is admittedly superior the comparable estimated value for the Property should be lower. It may be that Ms. Williams intended to subtract $22,000 from Sale 1 instead of adding it, but in light of my conclusions below I do not consider it necessary to request clarification. With respect to Sale 4, it has a current value assessment difference of $500,000 and a time adjusted sale value of $1,755,986. This is the high end outlier of the comparables and reflects the fact that it is a relatively new, larger home built in 2009 with higher quality construction (8). The value difference compared to other homes on the street (including the Property) is significant and will attract a different kind of buyer. I do not therefore agree that this comparable should be a primary point of reliance in reaching a conclusion of market value for the Property. Finally, and significantly, in making her adjustments between both these comparables and the Property, Ms. Williams references the differences in their respective assessed values as part of her calculations. I find this problematic because a comparison on this basis inherently assumes that the properties are assessed equitably, or at least consistently, whereas on the evidence before me it is admitted that this is not the case.

31The determination of current value is best determined by direct comparison to actual sales, as adjusted to the valuation date. I prefer to start by reviewing the six comparable sales as a whole. I agree with MPAC and find that Sales 1 and 4 are superior to the Property. I also find that Sale 5 is superior: although only 1-storey it has a building area of 2,247 sq. ft. and a finished basement area of 1,904 sq. ft., making a larger living area than the Property. It also has an effective build year of 2005 which is 30 years newer. That leaves Sales 2, 3 and 6.

32Sale 2 at 169 Lennox Avenue was relied on by MPAC as evidence of strong land values on the street. However, I find the adjusted sale value at $1,212,563 as a land value sale to be incongruous with the sale prices for similar lots with completed newer homes such as Sales 1 and 4. Further, I note that Appendix A to MPAC’s Equity Analysis Report shows that there were two sales of 169 Lennox Avenue in 2016: a prior sale on April 27 for $1,000,000, and then again on December 8 this time for $1,328,000, despite the fact that the evidence shows there had been no improvements or development of that property during the intervening period. I infer from this evidence that there were clearly other factors at play beyond the property description before me for Sale 2, but there is no evidence before me as to what those factors might be and I cannot speculate. Accordingly, I find Sale 2 unreliable and do not give it any weight as a comparable arm’s length sale at market value for determining the value of the Property.

33Sales 3 and 6 are clearly inferior to the Property. They have smaller lots, they are older, they are smaller single-storey homes.

34If Table A is now adjusted to order the comparables (excluding Sale 2) and the Property in terms of superior and inferior value it shows that the value of the Property is somewhere between $885,682 and $1,234,477 (see Table B below). This is a spread of $348,795 and I must consider where to place the Property in this range.

Table B

Property	Site Area (Acres)	Frontage (ft.)	Year Built (effective)	Building Area (sq. ft.)	Residential and Secondary Structure	Sale (Time Adjusted)	2016 Assessed Value
233 Lennox Avenue (Sale #4)	0.29	60	2009	2,902	-2 storey - quality of constr. 8 -attached garage	1,755,986	1,651,000
232 Lennox Avenue (Sale #5)	0.24	50	2005	2,247	-1 storey - finished basement area 1,904 sq. ft. - quality of constr. 7 -attached garage	1,292,087	1,367,000
456 Paliser Cres South (Sale #1)	0.32	39	1956	2,852	-2 storey - finished basement area 312 sq. ft. - quality of constr. 6 - modifications “N” (1999) 1,460 sq. ft. - detached garage built 2004	1,234,477	1,129,000
176 Lennox Avenue (Subject Property)	0.31	65	1975	2,660	-2 storey - attached garage - basement unfinished - Quality of constr: 6.5	n/a	1,151,000
165 Lennox Avenue (Sale #3)	0.25	52.5	1940	800	-1 storey - quality of constr. 5 - “B” reno 1980 -Detached garage (1940)	885,682	801,000
254 Lennox Avenue (Sale #6)	0.17	60	1956	1,120	-1 storey - finished basement area 468 sq. ft. - quality of constr. 5.5 -attached garage - corner lot	857,578	777,000

35The Property is inferior to Sale 1 as it has 192 sq. ft. (7%) less building area, has no recent modifications or updates (compared to 1,460 sq. ft. of modifications in 1999), and no finished basement area (compared to 312 sq. ft. in Sale 1).

36In terms of quantifying these differences, I deduct 6% ($74,068) from the adjusted sale value of Sale 1 to account for the building area difference, the lack of updates, and the lack of basement finishing in the Property, which results in my conclusion that the current value of the Property as at the valuation date (if in normal condition) is $1,160,408, which I round to $1,160,000. In reaching this conclusion I considered where this would place the property in the range between Sales 1 and 3: $1,160,000 is $74,477 lower than Sale 1 and $274,318 higher than Sale 3, placing my conclusion of value for the Property at around the 80th percentile (78.65 exactly) of the range between the closest superior and inferior comparable. I am satisfied this result accords with the evidence before me.

37I now turn to the allowance for poor condition. This is otherwise known as the “cost to cure.” In other words, as stated most recently in the decision of this Board in Milosek v. Municipal Property Assessment Corporation, Region 03, 2018 CanLII 102247 (ON ARB) at para 19:

…A cost to cure adjustment is an adjustment of the likely sale value to reflect the fact that there is a defect with the property that most buyers would insist be repaired before a sale. It is appropriate for deficiencies that are not in comparable sales because it is the expense that must be incurred to bring the property into the same market.

38In this case, MPAC agreed that the comparable sales provided can all be assumed to be in “normal” condition, or without such deficiencies. There is no question that the Property on the evidence before me is replete with deficiencies; the issue is how to quantify the cost to cure.

39In terms of the evidence, MPAC has provided me with a number based on a statistical model for the appropriate deduction for a house in poor condition, which it states in this case is $95,000. The appellant has provided extensive evidence of poor condition, but very little to quantify it (only two quotes for basement work). I have great sympathy for the arguments of the appellant that it would take much more than $95,000 to bring this Property up to normal standards, as in looking at the photographs and the undisputed list of deficiencies, it is difficult to imagine the extent of the work required. I have little doubt it would cost more than $95,000, but I have no basis in the evidence before me to quantify what that might be, and any attempt to do so would be pure speculation.

40I therefore accept the evidence of MPAC and find that a $95,000 allowance or reduction is established as the cost to cure for the Property. When deducted from my conclusion on value above, the result is a current market value as at the January 1, 2016 valuation date of $1,065,000.

Whether there should be an equitable reduction of the current value pursuant to s. 44.(3)(b) of the Act, and, if so, what should the amount of this reduction be?

MPAC’s Evidence and Submissions

41Ms. Williams relies on an Equity Analysis Report that considers the time adjusted sales of 30 properties that occurred between January 1, 2015 and December 31, 2016. The distance parameters are not stated but the map at Appendix A indicates all are located within the same general neighbourhood in close proximity to the Property.

42In her report, Ms. Williams states that the level of appraisal is established by determining the median Assessment to Sale Ratio (“ASR”) in the sales sample. For purposes of the equity test, MPAC takes the position that equity is achieved if the median ASR falls between 0.95 and 1.05. In this case, the median ASR is 0.814, which indicates that similar properties in the vicinity have not been assessed at or near their current values. MPAC agrees an adjustment is required and calculates that adjustment by multiplying the CVA of the Property by the median ASR.

Appellant’s Evidence and Submissions

43As noted above, the appellant spent some time comparing assessed values of selected properties which she and her son asserted were sufficiently similar to be comparable.

Board’s Analysis and Findings

44Section 44.(3)(b) of the Act directs that after determining current value, the Board shall 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.”

45The purpose of equitable adjustment has been described as the equitable distribution of the tax burden according to the assessed value of properties owned by taxpayers as follows by the Ontario Court of Appeal in Empire Realty Co. Ltd. and Assessment Commissioner for Metropolitan Toronto et al., 1968 CanLII 183 (ON CA) at page 2:

A prime objective of municipal taxation is the equitable distribution of the burden according to the value of the property possessed by each ratepayer; in the system prevailing in Ontario, the tax levied on the ratepayer is determined by the a uniform mill rate upon the assessed value of the ratepayer's taxable property set down in the assessment roll. If equity in taxation is to be achieved, it must result from equity in assessment.

46In addressing equity in assessment, the Court, at page 6, also noted that:

an assessment made at the actual value of lands and buildings … would be an unequitable assessment if all similar lands in the vicinity were assessed at some percentage of actual value substantially less than one hundred [emphasis added].

47The term “vicinity” is not defined in the Act, but refers to the appropriate geographical area that will yield a meaningful number of comparables (see Ontario Regional Assessment Commissioner, Region No. 3 v. Graham, 1993 CanLII 8621 (ON CA) at page 6).

48The ASR analysis of a reasonable sample of sold properties is one method used to determine if properties in the vicinity are assessed below their current value. If other properties are assessed substantially below their current value, then a reduction is required to make the assessment of the subject Property equitable with the assessments of similar lands in the vicinity. The ASR is determined by dividing the assessment as returned by the time adjusted sale price.

49In this case, I am satisfied that the Equity Analysis Report submitted by MPAC represents a reasonable sample of sold properties sufficient to rely upon for the purposes of an ASR analysis. While the Board appreciates efforts made by the appellant to compare specific similar properties, I find that a statistical analysis of the ratio between the assessed values and the actual adjusted sale values of a sample of 30 properties in the immediate vicinity as set out in the Equity Analysis Report to be the best evidence before me by which to measure whether an equity adjustment is warranted, and by what amount. Further, I am in any event satisfied that the results of the equity analysis reflect a fair adjustment and conclusion of value in relation to the assessed values of other properties as presented by the appellant, once it is applied to the revised conclusion of current value that I reached above.

50MPAC has concluded that an adjustment is warranted and the best measure to calculate an adjustment is to multiply the CVA by the median ASR (0.814) from the sample of 30 sales provided. I accept this evidence and find that an adjustment for equity is warranted and should be calculated on this basis.

51Accordingly, the current market value of $1,065,000 requires an adjustment for equity to $866,910 ($1,065,000 x 0.814), which I round to $867,000.

CONCLUSION

52The Board finds that the current value of the subject Property, as of the January 1, 2016 valuation date, is $1,065,000. Furthermore, the Board finds that the evidence before it supports the conclusion that an equitable adjustment is required under s. 44.(3)(b) of the Act to reach a final assessed value of $867,000 for the 2017, 2018, and 2019 taxation years.