Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE: February 06, 2019

FILE NO.: WR 158144

Assessed Person(s)/Appellant(s):

Nancy Isabel Carefoote David Frederick Carefoote

Respondent(s):

Township of Severn

Respondent(s):

Municipal Property Assessment Corporation (“MPAC”) Region 16

Property Location(s):

4217 Smith Lane

Municipality(ies):

Township of Severn

Roll Number(s):

4351-050-005-18000-0000

Appeal Number(s):

3260250 and 3308199

Taxation Year(s):

2017 and 2018

Hearing Event No.

708367

Legislative Authority:

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

Heard:

December 17, 2018 in Severn, Ontario

APPEARANCES:

Parties

Representative

Nancy Isabel Carefoote David Frederick Carefoote

Self-represented

MPAC

Ziad Al-Hillal

Township of Severn

No one appeared

MEMORANDUM OF ORAL DECISION DELIVERED BY VINCENT STABILE

INTRODUCTION

1At the conclusion of the hearing I advised the parties, orally, of my decision as to current value. Immediately, the assessor requested written reasons. I had not yet given the context to my decision. What follows are my reasons.

REASONS

2Nancy Isabel Carefoote and David Frederick Carefoote (the “Appellants”) are the registered owners of a seasonal recreational property known municipally as 4217 Smith Lane (“subject property”). The subject property is a one-storey detached residential dwelling on a water front lot, approximately one acre, on the Severn River. The lot has a water frontage of 98.26 feet and a depth of 247.8 feet. The dwelling was built in 2008. The total building area is 2562 square feet (“sq. ft.”) with a quality of construction changed to 7.5 from 7, as had been set in the previous cycle. In addition it has one attached garage built in 2008 and one detached garage built in 2012. It also has a carport built in 2013.

3In accordance with the Board’s Rules of Practice and Procedures, the parties were required to file all documents to be relied upon at the hearing with the Board. Those documents would then be directed to the hearing member electronically. MPAC complied. The Appellants also complied, however due to the sheer volume of documents filed by the Appellants they could not reasonably be directed electronically. Thus I was provided with a physical file.

4At the commencement of the hearing, the assessor, Ziad Al-Hillal, objected to me receiving and relying on the documents filed by Appellants, as in his view, the documents had been filed late; the narrative was a detailed analysis of the report and comparable properties relied upon by the assessor and in some respects was critical of MPAC’s requests and the assessor’s qualifications.

5Accordingly, the assessor objected to me receiving and relying on the Appellants documents. Alternatively, the assessor suggested that the hearing be adjourned to allow him to fully respond to the arguments advanced by the Appellants. As a further alternative, if the hearing was to proceed, the assessor requested that I receive an Amended Valuation Report prepared by him to better explain the logic used by him in arriving at his proposed current value.

6The Appellants objected to me receiving and relying upon the proposed Amended Valuation Report from the assessor as they had not received the report prior to the hearing.

7I was not inclined to adjourn the hearing. It became clear that the Appellants had spent a great deal of time analyzing the original Valuation Report filed by the assessor and were ready for the hearing. As well, I was satisfied that the assessor had indeed considered the arguments of the Appellants, thus had prepared an Amended Valuation Report. Accordingly, I gave the Appellants sufficient time to review the proposed Amended Valuation Report. After some time, all parties agreed that I would receive into evidence the Amended Valuation Report of the assessor and proceed with the hearing.

8For the January 1, 2016 valuation date, MPAC returned the assessment for the subject property at $880,000.

9The assessor determined the correct current value to be $990,000 using the direct comparison approach placing substantial emphasis on an analysis known as ‘pairing’.

10The Appellants agreed on the approach to value but proposed that a value of $770,000 to $780,000 was more appropriate.

ISSUE

11The issue to be determined is the correct current value of the subject property as of January 1, 2016 for the taxation years 2017 and 2018. Further, whether the value is equitable with the value of similar properties in the vicinity.

DECISION

12I determined the correct current value for the 2017 and 2018 taxation years is $845,000. I also determined that no further adjustment for equity is warranted. The assessments as returned are therefore reduced from $880,000 to $845,000.

EVIDENCE

MPAC

13As already stated, I received an Amended Valuation Report from the assessor, marked as Exhibit 1. I also had the original Valuation Report, received electronically.

14The assessor stated that he had not been able to find sales with attributes comparable to the subject property, thus he undertook an analysis of various sales in the vicinity and made adjustments, specifically for waterfront footage and structure size. The process is amply explained by the assessor in page 9 of Exhibit 1.

15In using the pairing analysis, the assessor determined the value of 100 feet of waterfront frontage, since the subject property has 98 feet waterfront frontage. Further, he determined the value of the structure on a square foot basis, having made adjustments for structure size of the comparable properties.

16The assessor relied upon a time adjustment study of 312 sales of waterfront improved land for the period March 3, 2014 to March 1, 2018, a period of 48 months which resulted in the market change of 21.9%.

17The assessor relied upon various sales for his analysis, found at pages 10 – 13 of Exhibit 1. Specifically, he relied upon comparable properties numbers 3, 4, and 6. Using those comparable properties, he determined the average value to be $430.00 per square foot, including land and structures.

18Applying $430 per square foot to the total structure of 2,562 sq. ft., the assessor determined the correct current value for the subject property to be $1,101,660.

19In both reports, the assessor indicates that the subject property has a negative adjustment of 18.12% comprising 5% for economic obsolescence for a hydro pole to the home; 5% for economic obsolescence for a right-of-way access point and the balance, 8.12%, to account for a decision of the Board following an appeal for the 2012 base year, carried forward to the new 2016 base year.

20Applying the 18.12% reduction to the $1,101,660 would result in the sum of $902,039.30.

21In both reports, and as stated by the assessor in his oral testimony, after accounting for the negative adjustments, his final estimate of current value was $990,000. Thus, he reasoned the assessment of $880,000 as returned was correct.

22On cross-examination, the assessor acknowledged that the adjustment of $90,000 (8.12%) had not been applied.

23Additional issues raised and developed during cross-examination relate to the following:

(i) Allowances for shallow water and weeds along the waterfrontage of the subject property;

(ii) Proper ‘quality class’ classification;

(iii) A reasonable allowance for lack of legal access to the subject property from municipal access roads; and

(iv) A reasonable allowance for the ‘detached garage’.

APPELLANTS

24The Appellants presented a very comprehensive package of documents addressing each of the issues raised. The package was marked Exhibit 3.

25For the most part, the hearing was conducted by Ms. Carefoote. In Tab 3 of Exhibit 3, she describes her work experience and familiarity with assessment issues as follows:

Based on my previous experience of 30+ years working for a major Canadian bank in a senior capacity in the areas of mortgage, property appraisal, valuation, risk, real estate law, compliance and lending divisions, I meet MPAC’s qualification requirements for a Valuation Analyst.

26The summary included in Tab 2 sets out in some detail the Appellants’ position in respect to this hearing, which has been consistent throughout. It appears that the issues raised have been litigated in the past.

27The summary was supported by the oral testimony of the Appellants and not displaced on cross examination.

28Of significance is the section dealing with the ‘quality factor/cost per square foot’. It is worth re-producing relevant and informative portions of that section:

… At the July 2012 ARB hearing, MPAC agreed, in writing, that the quality factor set by MPAC for the house and the resultant cost per square foot was high and the cause of the unfairly high assessments for the 2010 – 2012 taxation years. Accordingly, an agreement was reached with MPAC (John O’Leary) to reduce the cost per square foot to the same used by MPAC for other comparable properties in our area that have the same or superior quality of finish. Nothing has changed since MPAC was in the house multiple times in 2012 or since the 2012 agreement was reached. A copy of the agreement prepared and signed by MPAC is in MPAC’s files, copy available if needed.

Unfortunately, MPAC did not update its records to reflect the quality factor and cost per square foot agreed to by their assessor, Mr. O’Leary, just months earlier. The result: an incorrect quality factor and unfairly high cost per square foot was again used by MPAC for the 2013 - 2016 assessment period … The ARB’s Feb 11, 2015 decision for the 2013 – 2014 taxation years was to grant a $90,000 reduction to the assessed value …

29Evidently the assessor had requested permission to conduct a further inspection for purposes of this hearing. The Appellants agreed to one inspector attending. MPAC wanted at least two inspectors, to which the Appellants objected.

30The quality class agreed to in July 2012 was 7.0, a reduction from 7.5. MPAC has reverted back to 7.5. The assessor explained that it was a decision made by “management”.

LEGISLATION

31Section 44.(3)(a) of the Assessment Act, RSO c A. 31 (“Act”) requires this Assessment Review Board (“Board”) to “determine the current value of the land.” Current value is defined in s. 1 as “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.” That is, the Board must determine what the subject property would have sold for in an arm’s length transaction on the relevant valuation day, set pursuant to s. 19.3 of the Act, in this case January 1, 2016 for the 2017 and 2018 taxation years.

32Once the current value has been determined, s. 44.(3)(b) requires that the Board “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.

ANALYSIS

33The assessor used the direct sales comparison approach to value. He testified that he had not been able to identify sales with similar attributes of the subject property, therefore he used ‘pairing’ as an assessment tool to determine current value.

34The direct sales approach is the most commonly used for residential properties as it considers what similar properties in the area sold for. The issues that arise in applying this method, generally, are the degree of comparability between the properties and the date on which the properties sold.

35The degree of similarity between the properties refers to the physical characteristics and their locations.

36The Appellants challenged the findings of the assessor but otherwise agreed that ‘pairings’ which results in determining values on a linear foot basis for the land and square foot basis for the structures, was an acceptable approach. I agree.

37Although I found the arguments and submissions of the Appellants credible and compelling, on the issue of the correct current value, before any adjustments, I accepted the assessor’s evidence that the correct value is $1,101,660.

38I am deeply troubled however as to the reductions proposed by the assessor.

39I have already noted that the $90,000 (8.12%) purported negative adjustment was not implemented, notwithstanding the assessor’s assertion to the contrary, in both written reports.

40Dealing with the ‘quality class’ issue, I accept fully the history as submitted by the Appellants. I accept also the assessor’s explanation that the quality class was increased to 7.5 as a result a unilateral decision made by ‘management’. This, despite a written agreement entered into by the Appellants and an assessor in the course of a prior appeal to the Board.

41On the evidence received, I do not approve of the manner in which the quality class has been changed. Past Member Marques and I dealt with a similar issue in Reininghaus v Municipal Property Assessment Corporation, Region 15, 2016 CanLII 2583 (ON ARB) (“Reininghaus”). For clarity, a review of this decision was requested by MPAC and granted by the Board in Reininghaus v Municipal Property Assessment Corporation, Region 15, 2017 CanLII 27412 (ON ARB), but not pursued.

42In Reininghaus, the quality class had already been changed once from 8.0 to 7.5 by another assessor (paragraph 45). At the hearing, the assessor was requesting an increase from 7.5 to 8.5, following an inspection by him of the subject property under appeal (paragraph 23).

43The issue was resolved as set out in passages found in paragraphs 63 – 66 of our decision:

63At p. 15 – 18 of Exhibit 7, there are excerpts of MPAC’s policy and consideration titled” Residential Data Collection and Sales Investigations” in respect to quality classes.

64Significantly, when dealing with half classes the assessor is expected to follow certain principles. In particular: “Great care must be exercised as half classes can require more judgement than whole classes and therefore more subjectivity. Half classes should be used judiciously. As much as possible full classes should be employed. Where half classes are warranted, the assessor must substantiate the use of half classes with comments on the field document/card. The remarks or special features section is appropriate.

66We have assumed that the term “judicious’ is not to be interpreted within the context of legal decisions.

44I adopt the principles and criteria set out in Reininghaus and find that the quality class for the subject property ought to have been left at 7.0, considering the agreement of the parties in 2012 and the lack of any evidence that the change was implemented judiciously.

45I find further support in my decision from excerpts of a report of the Ombudsman of Ontario released March 28, 2006, “Getting It Right”: Investigation into the Transparency of the Property assessment Process and the Integrity of Decision Making at the Municipal Property Assessment Corporation. The report identified various systemic issues in the way in which the taxpayer was treated by MPAC in the assessment process.

46In response to the report, important amendments to the Act were enacted by the Legislature. Notably, the burden of proof was shifted to MPAC and the Board was given expanded jurisdiction under s 40 and 44 of the Act.

4720 recommendations were made in that report. MPAC voluntarily agreed to implement 16 without further consideration or legislative direction. Among the 16 were the following:

14. That the Municipal Property Assessment Corporation should apply Assessment Review Board findings of value at specific dates when carrying out assessments for future years based on the same date.

15. That the Municipal Assessment Corporation should be bound to apply any assessment reductions imposed by the Assessment Review Board to future years’ market value assessments of the same property, unless they have been determined to be wrong by a court of law or the Municipal Property Assessment Corporation can clearly demonstrate that the circumstances justifying the assessment reduction have changed. In such case the reasons justifying the change should be set out in the taxpayer’s assessment notice.

16. That the Municipal Property Assessment Corporation should ensure that all minutes of settlement it enters into relating to assessment reductions contain reasons clearly explaining why a reduction has been agreed to, and that these reasons be recorded.

17. That the Municipal Property Assessment Corporation should be bound to apply reductions agreed to in minutes of settlement to future years’ assessments of the same property unless the Municipal Property Assessment Corporation can clearly demonstrate that the circumstances justifying the assessment reduction have changed. In such case the reasons justifying the change should be set out in the taxpayer’s assessment notice…

48I received no evidence that would support a unilateral change of quality class by MPAC, thereby deviating from the recommendations noted above and agreed to by MPAC.

49I am satisfied that the Appellants’ knowledge of the condition of the shoreline and structures is superior to that of the assessor. I accept their testimony that there have been no changes to the structure since it was built in 2008 and no change to the water level and weeds issue at the shoreline of their property. The photographs filed provide visual support. They do not have legal access to their property and have submitted and relied upon a written opinion of counsel as to the resulting negative impact on the value of the subject property.

50As to the $90,000 reduction determined by the Board on a prior hearing, it seems that MPAC ‘intended to carry the reduction forward’ but did not, in fact, do so. Had the Appellants not been as astute and knowledgeable as to the property assessment process as they are, the misrepresentation would likely have gone unnoticed.

51Three other sections of the assessor’s report (Exhibit 1), in my view, require attention:

Page 2: Executive Summary, 1.1 Valuation Assignment states: “I have been engaged to provide an opinion of current value for the subject property as of January 1st, 2016. This report is intended to support the Municipal Property Assessment Corporation’s (MPAC) position in any proceedings under the jurisdiction of the Assessment Review Board (ARB).

Page 14: Assumptions & Limitations….Client and Intended Users: “The client of this report is the Municipal Property Assessment Corporation (MPAC). The intended users of this report are the members of the ARB panel and all the parties to the stated appeal.”

Page 3: 2.6 Scope of Work: The subject property has been inspected and property details confirmed by MPAC employees for prior reviews.

I will seek permission from the Appellants to inspect the subject property prior to mandatory settlement meeting.

I’ve verified the classification is correct on the subject property.

52In my respectful view, the assessor at this hearing is not an independent contractor. He is not an independent expert “engaged by MPAC to provide an opinion as to current value”. At best, the assessor would be considered a participating expert. In this respect I invite the parties to read Reininghaus, paragraphs 10 – 18 inclusive, and the decisions of the Ontario Court of Appeal referred to therein, Westerhof, 2015 ONCA 206 and Moore v Getahun, 2015 ONCA 443.

53The assessor, Ziad Hal-Hillal, is an employee of MPAC. As stated in Reininghaus, supra, (paragraph 17):

It would be disingenuous for the Board to expect that an employee of MPAC would not be put in a very real conflict were his or her opinion to differ from the argument advanced by MPAC in a particular case.

54MPAC has been tasked to determine the correct current vale. It does so by using a multi regression model.

55The Ombudsman noted MPAC frequently was wrong in its assessment results. That has not changed. The task of MPAC and its employees, servants or agents, is to determine the correct current value. Once an appeal is filed, the assessor’s task is to determine the correct current value of the property under appeal having reference to the specific attributes of the property that normally would not be factored by a multi regression model.

56The Ombudsman also noted that MPAC is a public servant and not an entrepreneurial corporation. As such it owes a special duty of care, fairness and transparency to the taxpayer. MPAC and its employees are expected to act with utmost good faith. Any deviation from those duties ought not to be acceptable. For the assessor to suggest that his task is to “support the position of MPAC” is simply wrong. His task is to present probative and reliable evidence to the Board to enable the Board to determine the correct current value, not to focus on and gather evidence to “support the position of MPAC”. This approach is disingenuous to the taxpayer.

57The issues argued at this hearing have been raised by the Appellants for at least the past two assessment cycles during the Requests for Reconsideration and prior hearings. The assessor acknowledges that the subject property has been inspected and all property details confirmed. Further, he confirms having verified the classification as being correct. He does not state whether the verification was simply by taking direction from “management”. In any event, it is difficult to understand the need for further inspections.

58Much too often, at hearings before the Board, assessors simply submit that for each new cycle of assessments MPAC starts fresh, without regard and consideration to reductions, agreements or decisions of the Board relating to prior assessment cycles. This approach was clearly not acceptable to the Ombudsman in 2006 and ought not to be acceptable now.

59I accept that the issues raised by the Appellants at this hearing are genuine and require consideration and rectification, if possible.

60Upon inquiry of the assessor for assistance in ‘quantifying’ the issues raised, to his credit, he provided the following values for purposes of applying appropriate negative discounts, in addition to the 10% already calculated, starting with a reduced value of $991,149.40 ($990,000 rounded):

(i) Shallow Water and Weeds $25,000 - $45,000

(ii) Quality Class $95,000

(iii) Legal Access $12,000 [This value is in addition to the discount already applied and is supported by the evidence presented by the appellants …see Tab 10 Exhibit 3]

(iv) Detached garage $11,000

Totals (range) $143,000 - $188,000

61I applied the lower of the range which resulted in a value of $847,700 ($990,000 less $143,000 = $847,000) and reduced that figure to $845,000 as the correct current value for the 2017 and 2018 taxation years.

EQUITY

62The only evidence received on the issue of equity was from MPAC.

63The evidence consisted of an Assessment to Sales Ratio (“ASR”) Study of 30 properties resulting in a median ASR of 0.992 – 0.993. Marked as Exhibit 2. The range, however, was from 0.895 to 1.233, without accounting for outliers which had been removed from the study.

64The assessor stated that equity was achieved if the median ASR falls between 0.95 – 1.05. Although some flaws were noted in the entire study, as pointed out by the Appellants, this was the best evidence available. Therefore I find that there is no evidence before me to support an equitable adjustment.

CONCLUSION

65I have determined that the correct current value for the 2017 and 2018 taxation years is $845,000. Further, that no reduction for equity is warranted. The assessments as returned are therefore reduced from $880,000 to $845,000.