Peter Garrod v. Municipal Property Assessment Corporation, 2019 CanLII 91534

Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE: September 23, 2019

FILE NO.: WR 159843

Assessed Person(s): Peter Garrod, Elizabeth June Garrod

Appellant(s): Peter Garrod

Respondent(s): Municipal Property Assessment Corporation (“MPAC”) Region 15

Respondent(s): Town of Oakville

Property Location(s): 120 Watson Avenue

Municipality(ies): Town of Oakville

Roll Number(s): 2401-040-030-12700-0000

Appeal Number(s): 3262090, 3307717 and 3362041 (deemed 2019 appeal)

Taxation Year(s): 2017, 2018 and 2019 (deemed appeal)

Hearing Event No.: 701684

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

Heard: August 3, 2018 in Oakville, Ontario

APPEARANCES:

Parties

Representative

Peter Garrod

Robert Baranowski

MPAC

Sal Ladak, Michael Nitsos

Town of Oakville

Susan Price

DECISION OF THE BOARD DELIVERED BY MARK SPRAGGETT

REASONS

Background

1Peter Garrod is the owner of 120 Watson Avenue (the “Subject Property”), a two storey detached single family residential property.

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, MPAC is required to assess this value as of the valuation date, January 1, 2016.

3MPAC has assessed the current value of the Subject Property at $1,450,000 for the taxation years 2017 to 2018.

4Mr. Garrod (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 has been deemed to have brought the same appeal with respect to the Subject Property for the 2018 and 2019 taxation years pursuant to s. 40.(26) of the Act. It is the Appellant’s position that MPAC’s assessed value is too high.

5Pursuant to s. 40.(11) of the Act, the Municipality, (the Town of Oakville) is a party to this proceeding.

6As all parties agree that the correct current value of the Subject Property is $1,450,000, this ground of appeal is not in issue in this proceeding.

7However, s. 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 the municipal tax burden according to the value of the property.

8Both MPAC and the Municipality take the position that an equitable reduction is not required. The Appellant takes the position that the correct current value of the Subject Property should be reduced to $1,276,000 to make it equitable with that of similar lands in the vicinity.

9At the completion of the hearing, the Board reserved its decision. For the reasons that follow, the Board finds that the correct current value of $1,450,000 should be adjusted to $1,348,000 rounded.

Relevant Legislation and Rules

10The 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

11The issue to be determined on this appeal is whether the current value of the Subject Property should be reduced pursuant to s. 44(3) (b) of the Act, to make it equitable with the assessments of similar lands in the vicinity, and, if so, what the reduced value should be.

Description of the Subject Property

12The Subject Property is located in the original settlement of Oakville known as Old Oakville. The area is the historic shopping district for the Town of Oakville. There are a variety of property types inclusive of mixed housing, historic homes, large custom homes, lakefront mansions, townhomes and condominiums. The Subject Property is a two-storey detached single family residence. It has a total building area of 2,594 square feet (“sq. ft.”) and a lot area of 0.17 acres. The house has an effective year built of 1984. MPAC assigns a construction quality rating of 7.0 to the building. The most recent sale of the Subject Property occurred in 1999.

Discussion, Analysis and Findings

MPAC’s Evidence

13Terence Johnston, a Valuation Analyst, testified on behalf of MPAC. He submitted an equity study (“MPAC's Equity Study”) which concludes that an equity adjustment is not required.

14MPAC’s Equity Study relies on its corporate database to identify 30 sales of single family detached (not on water) properties from January 1, 2015 to December 31, 2016, within a 0.9 km of the Subject Property. This Study relied on the median assessment to sale ratio (“ASR”) as the preferred measure to determine the level of appraisal (“LOA”), which is defined as the typical ratio at which a group of properties is assessed. For the test of equity among similar properties, the Study maintains that equity is achieved if the median ASR falls between the range 0.95 and 1.05. In this instance the Study indicates that the median ASR is 0.95 which is within MPAC’s target range, suggesting an equity adjustment is not required.

15Mr. Johnson testified that he did not remember the exact criteria for selecting the 30 property sales for the equity test. However, he suggested the selection criteria relies mostly on location and property type.

MPAC’s Submissions

16Relying on its evidence, MPAC submits that an equitable reduction of the current value for the 2017 to 2018 taxation years is not required.

17MPAC disagrees with the Appellant’s characterization that it “cherry picked” the 30 property sales within the 0.9 km radial search.

18MPAC agreed with the Appellant that, if the current value of $1,450,000 is reduced by five per cent, the resulting reduced value would be $1,377,500. However, MPAC does not agree that such an adjustment is in fact required, based on the analysis and conclusion set out in its Equity Study.

19In response to the Appellant’s question of how many of the 30 properties fall outside the 0.95 - 1.05 range, MPAC agreed that eight properties are below this range.

Municipality’s Evidence

20Susan Price testified on behalf of and represented the Town of Oakville. The Municipality did not call any evidence on the issue of equitable reduction.

Municipality’s Submissions

21The Municipality maintains that the Subject Property is under assessed and any further reduction in the assessed value will create a further inequity. The Municipality agrees with MPAC’s evidence and submissions.

Appellant’s Evidence

22Robert Baranowski testified on behalf of and represented the Appellant. He stated his conclusion that an equity adjustment is required.

23Mr. Baranowski asserts that the ASR range of 0.95 to 1.05 is an arbitrary international standard, maintaining that it discriminates against the property owner.

24Mr. Baranowski rejects all but five of MPAC’s 30 property sales as the basis for determining equity, as he maintains that there is insufficient information available to establish whether they are similar to the Subject Property. He rejects MPAC’s derived ASR values from these property sales, due to his concern that they may be inaccurate if the property sample is flawed.

25Mr. Baranowski stated that MPAC did not follow its own policy of stratifying property characteristics, maintaining that the Valuation Analyst is unfamiliar with the 30 property sales.

26Mr. Baranowski relies on five of MPAC’s 30 properties to determine whether an equitable reduction is required. These five properties are the same properties MPAC relied on in its Valuation Report for determining the correct current value of the Subject Property. Mr. Baranowski maintains that the level of detailed information on the five properties demonstrate that these properties are similar to the Subject Property. He maintains that using this data sample will produce a more accurate analysis.

27Mr. Baranowski stated that the amount of equitable adjustment varies, depending on the approach used to determining the ASR. Using MPAC’s five properties, he calculates their respective ASR values as (0.84, 0.88, 0.88, 0.98 and 1.06). From these calculated values, he proposes three options, using either the average value of 0.93 or applying the median ASR value of 0.88 or lastly using MPAC’s ASR of 0.95.

28Mr. Baranowski stated that applying a median ASR of 0.88 to the current value of $1,450,000, results in an equitable adjustment of $1,276,000. Similarly, using the average ASR of 0.93 and lastly MPAC’s preferred ASR of 0.95, he arrives at equitable adjustments of $1,348,000 and $1,377,500, respectively.

29Mr. Baranowski relies on the median ASR of 0.88 for an equitable adjustment to current value of $1,276,000 for the Subject Property.

Appellant’s Submissions

30The Appellant relies on Mr. Baronowski’s evidence and submits that an equitable reduction is required and the current value for the 2017 to 2018 taxation years should be reduced to $1,276,000.

31The Appellant disagrees with MPAC’s arbitrary selection of a 0.9 km radial search criteria to source similar properties to the Subject Property. The Appellant argues that the search criteria is not a random process and that MPAC has “cherry picked” the properties for its equity study.

32The Appellant challenges MPAC’s decision that no equitable reduction is required, noting that MPAC’s accepted ASR of 0.95 results in a lower value of $1,377,500 (0.95 x $1,450,000), supporting his argument that an equitable adjustment is appropriate.

33The Appellant argues that MPAC’s reliance on an international standard for an appraisal range is arbitrary and discriminates against the property owner as a taxpayer. He asserts that the taxpayer should not be penalized because MPAC has arbitrarily chosen to apply an international standard.

Findings

34The Act requires the Board to lower an assessment below current value if required to make the assessment equitable with the assessments of similar properties in the vicinity.

35The purpose of an equitable reduction has been described by the Ontario Court of Appeal in Empire Realty Co. Ltd. and Assessment Commissioner for Metropolitan Toronto et al., [1968] 2 O.R. 388, 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 application of 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.

36In addressing equity in assessment, the Court 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.”

37However, the goal of the Act is to determine the correct current value. Any equitable reduction in the current value results in an incorrect current value. Consequently, an equitable reduction should only be made where there is clear evidence to support that such a reduction is warranted. In this regard, the burden of proof rests with the Appellant to establish, on a balance of probabilities, that an equitable reduction is required.

38The term “vicinity” is not defined in the Act, but refers to the appropriate geographical area that will yield meaningful comparable properties (see Ontario Regional Assessment Commissioner, Region No. 3 v. Graham, 16 O.R. (3d) 83, 1993 CanLII 8621 (Ont. C.A.) at page 6).

39The Board finds that MPAC's 30 property sales do fall within a broadly defined criteria for being similar to the Subject Property in terms of character, form and function. The Board finds that a property being similar to the Subject Property is not as exacting or detailed as, for example, determining current value where the standard of comparability is much higher.

40Whereas the Board accepts MPAC’s sample of properties as being similar to the Subject Property, it does not follow that these properties have not been under-assessed. MPAC maintains that, based on its analysis of the 30 properties, no adjustment for equity is required. However, the Board has considered the view that, if the analysis of 30 properties in the vicinity demonstrates that properties have not been under-assessed, this leads to the conclusion that all properties in the area have been accurately assessed and therefore no adjustment for equity is required. This however is not the case. The Appellant has noted that three properties fall outside of MPAC’s interval range, having ASR’s of less than 0.95, indicating that they are under-assessed.

41The Board notes that these three properties are part of both the Appellant’s equity analysis and MPAC's Equity Study. Furthermore, these three properties are also included in the five comparable properties utilized by MPAC in its valuation of the current value of the Subject Property. As all five comparable properties provide more detailed information to establish elements of similarity to the Subject Property. As such detailed information is not available for the other properties in MPAC’s data sample, the Board is persuaded to accept the Appellant’s smaller sample of five properties to evaluate whether an equitable reduction is required.

42Utilizing this smaller data set of comparable properties, the Board notes that the mean (or average) ASR value is 0.93. The Board finds that this ASR value is a more representative value for this dataset than the median value. Applying this ratio to the current value of $1,450,000 the Board calculates $1,348,500 or $1,348,000 rounded as the required adjustment to the current value of the Subject Property to make its assessment equitable with similar properties in the vicinity.

DECISION

43An equitable reduction of the correct current value of the Subject Property, pursuant to s. 44.(3)(b) of the Act, is required. The correct current value of the Subject Property is reduced to $1,348,000.