Tranter v. Municipal Property Assessment Corporation, 2019 CanLII 9709

Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE:

February 05, 2019

FILE NO.:

WR 156994

Assessed Person(s):

Linda Elizabeth Tranter and James Jamal Charles Kafieh

Appellant(s):

Linda Elizabeth Tranter and James Jamal Charles Kafief

Respondent(s):

Municipal Property Assessment Corporation (“MPAC”) Region 02

Respondent(s):

Township of Tay Valley

Property Location(s):

436 Lakewood Road

Municipality(ies):

Township of Tay Valley

Roll Number(s):

0911-911-010-25707-0000

Appeal Number(s):

3243175 and 3288913

Taxation Year(s):

2017 and 2018

Hearing Event No.

703564

Legislative Authority:

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

Heard:

November 2, 2018 in Tay Valley, Ontario

APPEARANCES:

Parties

Representative

Linda Elizabeth Tranter and James Jamal Charles Kafieh

Self-represented

MPAC

Lincoln Pearce

Township of Tay Valley

No one appeared

DECISION OF THE BOARD DELIVERED BY PIERRE R. LAVIGNE AND ANTHONY LaREGINA

Background

1Linda Elizabeth Tranter and James Jamal Charles Kafieh (the “Appellants”) are the owners of 436 Lakewood Road (the “subject property”) located in the Township of Tay Valley (Lanark County) (the “Township”), which is a 2.72 acre parcel of land classified as residential single-family detached. The subject property has a total actual frontage of 217.04 feet and an actual depth of 274.53 feet.

2The subject property is situated in Burgess Woods, an area of approximately 400 acres of mixed forest, out of which were subdivided 70 lots of varying dimensions and size, leaving approximately 200 acres in a natural state for restricted recreational purposes. This 200 acres, referred to as the “common lands” are co-owned by each of the owners of the 70 lots.

3Restrictive covenants on the title of each lot compel purchasers to acquire this 1/70th interest in the common lands. The purchasers acquire their lot and the 1/70th interest in the common lands for a single undivided price.

4The subject property has a residence with an actual and effective year built of 1990 and quality of construction of 6.5. The residence has a total building area of 2,422 square feet (“sq. ft.”) with 1,392 sq. ft. on the main level and 1,030 sq. ft. on the second level. The basement has a total building area of 1,427 sq. ft. with no finished space. The residence has three bedrooms, two and a half baths, air conditioning, forced air heating, and is listed as average condition. The subject property also has an attached garage with 473 sq. ft. of building area and a 433 sq. ft. shed, both built in 1990.

5Pursuant 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 (“current value”).

6MPAC’s has assessed the current value of the subject property at $344,000 for 2017 taxation year and $404,000 for 2018 taxation year.

7The Appellants have filed appeals for the 2017 and 2018 taxation years with the Assessment Review Board (the “Board”), pursuant to s. 40 of the Act. It is their position that MPAC’s assessment of current value is too high and that the correct current value is $350,000. At this hearing, MPAC takes the position that its assessed value is correct.

8Pursuant to s. 40(11) of the Act, the Township is a party to this proceeding. However, it did not advise the Board of its position and no one appeared at the hearing on behalf of the Township.

9Section 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 possessed by each ratepayer.

10MPAC takes the position that an equitable reduction is not required. The Appellants have presented no evidence in support of an equity reduction.

11At the completion of the hearing, the Board reserved its decision. For the reasons that follow, the Board finds that the current value for the 2017 and 2018 tax years is $377,000. Pursuant to s. 44(3)(b) of the Act, an equitable reduction of this value is not required.

12MPAC is not requesting an increase in assessment for the 2017 tax year and the Board therefore confirms the 2017 tax year at $344,000. The Board reduces the assessment from $404,000 to $377,000 for the 2018 taxation year.

REASONS FOR DECISION

Relevant Legislation

13Section 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.

14Section 19.(1) of the Act states:

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

15Section 19.2(1) of the Act states:

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:

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

16Section 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.

17Section 44.(3) of the Act states:

44.(3) 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

18The Issue to be determined on the appeal is the correct current value of the subject property for the 2017 and 2018 taxation years.

Discussion, Analysis for Current Value

MPAC’s Case

19Lincoln Pearce, a property valuation analyst for MPAC presented a Valuation Report, which included a time adjustment analysis and an equity analysis.

20Mr. Pearce used the Direct Comparison Approach to derive current value. He identified six properties he felt were comparable as they included in their purchase price lands held in common by co-owners. The first three of his comparable properties were in the same subdivision, Burgess Woods, as the subject property. The remaining three were in another common lands subdivision also fronting on Little Otty Lake, but a little more than three kilometres away. He felt that the properties in the same subdivision were most relevant.

21His first suggested comparable sale is situated at 355 Lakewood Road and is described as a 2,216 sq. ft., three bedrooms, two and a half baths, two-storey home on 1.61 acres of land, built in 1994 with well and septic tank and with a quality of construction class of 6.5. He states it is 200 sq. ft. smaller than the subject, has no outbuildings, and is approximately 1 acre smaller than the subject. His report states that “it has been observed that the road in front of this property is elevated to approximately the same height as the 2nd floor of the residence. This may make the site itself less desirable than other properties in the subdivision.” He considers this property slightly inferior to the subject property. It was sold on March 30, 2017 for $345,000.

22His second comparable is situated at 273 Lakewood Road and is described as a 2,538 sq.ft., four bedrooms, two and a half bathrooms, one and three quarters story home on 4.26 acres of land, built in 1992 with well and septic tank and a quality of construction class of 7. It has an attached garage of 480 sq. ft. and a further detached garage of 785 sq. ft. Mr. Pearce considers this comparable slightly superior to the subject property. It was sold on July 18, 2016 for $495,000.

23Mr. Pearce’s third comparable is situated at 414 Lakewood Road and is described as a 2,730 sq.ft, three bedrooms, two and a half bathrooms, one and three quarters story home on 2.93 acres of land, built in 1990 with well and septic and a quality of construction class of 7. It has an attached garage of 480 sq. ft. He considers it similar to the subject property. It was sold on March 30, 2012 for $460,000.

24Mr. Pearce’s fourth to sixth comparables are located in a different common lands subdivision, with a smaller area of common lands.

25His fourth comparable is situated at 126 Rideau Court. It is described as a 2,451 sq.ft., four bedrooms, two and a half baths, two-storey home on 2.35 acres, built in 1993 with well and septic and a quality of construction class of 7. It has an attached garage of 580 sq. ft. He considers it slightly inferior to the subject property. It was sold on September 27, 2013 for $379,000.

26The fifth comparable is situated at 152 Otty Way. It is described as a 2,168 sq. ft., three bedrooms, two and a half bathrooms, two-storey home on 1.83 acres, built in 1994 with well and septic and a quality of construction class of 7. It has no garage. Mr. Pearce considered it inferior to the subject property. It was sold on March 1, 2012 for $331,000.

27The sixth comparable is situated at 231 Poole Drive. It is described as a 2,997 sq. ft., three bedrooms, three bathrooms, two-storey home on 1.64 acres, of quality of construction class 7. It has an attached garage of 720 sq. ft. Mr. Pearce considers it superior to the subject property. It was sold on May 13, 2013 for $480,000.

28Mr. Pearce concludes that “Based on the sale prices of the most similar properties the current value of the subject property to be $404,000.” No explanation was provided to arrive at the precise figure of $404,000.

29In his final submissions, Mr. Pearce indicated he believed his first three comparables were the most relevant as they were all within the Burgess Woods subdivision.

Appellants’ Case

30The Appellants’ objection to the assessed value is twofold. They purchased their home, together with their share of the common lands, in January 2010 for $283,575 and it is now assessed with having a January 1, 2016 value of $404,000, an increase of 42% over 6 years, which they argue is inconsistent with market data. They also argue that MPAC has imputed to their property value a grossly inflated proportionate value of the common lands.

31Though historic prices are not evidence of current value, a review of the history of the assessment of the subject property was admitted for background and to understand the issue of the valuation of the common lands.

32The Appellants testified that in 2010 their property was assessed at $370,000. They requested reconsideration of this value in light of the purchase price. Following a site visit their assessment was revised to $283,000, reflecting the purchase price.

33In 2012 their property was reassessed for the new assessment cycle at a value of $404,000. Again they requested reconsideration and ultimately the parties settled upon a revised assessment of $344,000.

34In 2016, in the new assessment cycle, their property was again assessed at $404,000.

The Common Lands

35The purchase of the subject property included a 1/70th interest in the common lands. In the Appellants’ evidence this is described as:

a 1/70th interest in 8 parcels consisting of bush, rocky outcrops, swamp, beaver ponds, flood plain and some water access which is very restricted in use. These lands form the areas between and behind our lots that could not be developed because of swamps, beaver ponds, rocky outcrops and distance from the road. The lands are subject to restrictive covenants … that prevent sale of them separately except along with the residential lot in the Burgess Wood subdivision and prevent any structures being built upon the water access except for the existing swim platforms. These lots can never be sold or developed.

36These common lands, eight parcels totalling 205.28 acres, according to the past assessment notices filed by the Appellants, were required by s. 3 of the Act to be assessed and taxed.

37In 2012, the assessment for the eight parcels of common lands totalled $689,700, approximately $3,360 per acre. The share of assessment of each of the 70 subdivision lot owners was $9,852.86. The taxes on this assessment were paid by the property owners through their property association.

38It is worth noting that the assessment of the subdivision lots themselves was based on sale prices which included the 1/70th interest in the common lands. Subdivision lot owners were therefore being taxed twice on the same value of the common land: the first time when the value of the 1/70th interest in the common lands was part of the sale price upon from which current values of the individual subdivision lots were derived, and a second time when the common lands were separately assessed and taxed.

39The Province of Ontario remedied this situation for the 2013 and subsequent tax years, by amendment to Ont. Reg. 282/98, the General Regulation under the Act. This amendment added s. 45.4 provisions for the assessment of “Residential Communities”, which reads as follows:

45.4 (1) For the purposes of this section, a residential community is composed of the following parcels of land located in the same immediate vicinity:

1. Residential lots, which are parcels of land in the community that are used for residential purposes and that are owned by persons who also own common land in the community.

2. Common land, which are parcels of land,

i. that are parkland, pathways or other common amenities intended for the use of the owners of residential lots in the community,

ii. that are owned by two or more persons, each of whom also owns a residential lot in the community, and

iii. that are not subject to a condominium plan.

(2) The following rules apply to a residential community for the 2013 and subsequent taxation years:

1. The current value of a residential lot shall reflect the value that the common land in the community adds to the value of the residential lot.

2. The current value of common land is deemed to be zero.

3. No notice need be given under subsections 31 (1) or 35 (1) of the Act with respect to common land.

40The net effect was to eliminate the double assessment and taxation. The assessed value of the appellants property had in the past, as for the 2016 taxation year, “reflect(ed) the value that the common land in the community adds to the value of the residential lot” as the past assessed value were derived from sale prices which included the value of the interest in the common lands.

41Mr. Pearce’s suggested comparable sales used to establish January 1, 2016 current values all “reflected the value that the common land in the community adds to the value of the residential lot”. No attempt was made to isolate or value the interest of the common land as it was bound up in the sale prices of the suggested comparable sales.

42The Appellants however submitted an extract from MPAC’s “Aboutmyproperty.ca” website dated September 15, 2017 under the rubric “Your Property Adjustment Profile”, “Property Specific Analysis & Notes” which states: “$24,529 applied as per O.Reg. 341/12, the value of the common land(s) was calculated and distributed amongst the Roll Numbers that share the common interest.” O.Reg 341/12 was the regulation amending the General Regulation 282/98 by the addition of s. 45.4 provisions for “Residential Communities” that include common land.

43The Appellant submits that this represents a valuation of the common lands at $1,717,030 ($24,529 x 70), for which there is no substantiation and is grossly disproportionate to the 2012 valuation of the common lands at $689,700 and not a fair value for land which cannot be developed.

44The Appellants also submitted five suggested comparable sales. Their first comparable is the same property as Mr. Pearce’s No. 1 comparable. We shall identify the Appellants’ other comparables as No. 6 to No. 10 to continue the sequence from MPAC’s suggested comparable sales.

45Comparable No. 7, also within the Burgess Woods subdivision, at 878 McLaren Road, is described as a home of 2,183 sq. ft., built in 2002, on 3.44 acres with a quality of construction class of 6.0. This property was sold in November 2018 for $324,000.

46Comparable No. 8, also within the Burgess Woods subdivision, at 327 Lakewood Road, is described as a home of 1,683 sq. ft., built in 1987 on 3.87 acres with a quality of construction class of 7.0. This property was sold in April 2015 for $316,000.

47Comparable No. 9, in the common lands subdivision located approximately 3 kilometres from the subject property, at 152 Otty Way, is described as a home of 1,084 sq. ft., built in 1994 on 1.83 acres with a quality of construction class of 7.5. This property was sold in January 2012 for $310,000.

48Comparable No. 10, in the common lands subdivision located approximately 3 kilometres from the subject property, at 126 Rideau Court, is described as a home of 2,451 sq. ft., built on 2.35 acres with a quality of construction class of 6.5. This property was sold in September 2013 for $379,500.

49The Appellants also entered into evidence a document obtained from MPAC pursuant to a Freedom of Information and Protection of Privacy Act, RSO 1990, c F.31 search indicating the results of the 2016 base year reassessment for Tay Valley Township. The document states that the map “reflects data at the time of Notice mailing (April 11, 2016). Final values will be delivered to municipalities by December 2016.”

50The document also states:

Property values up less than 1% in Tay Valley Township. Residential property owners will see an average assessment increase of less than 1% in 2017.

Value of typical home

The assessed value of a typical residential home in Tay Valley Township is $216,000.

Waterfront property values

The assessed value of a typical residence on water in Tay Valley Township is $388,500.

51The map accompanying the document states that the average value of properties in Burgess Woods declined by 3% in 2017.

52The Appellants rely on this document to buttress their submission that their property, which is not a waterfront property, is over assessed.

53The Appellants submit that their property can be valued using time adjustment factors from the original sale in 2010. They submit that the general time adjustment factor from 2010 to 2016 is 20.61%. Applied to their initial purchase price of $283,575, this would produce a 2016 value of $ 342,019.81.

54In the alternative, using the time adjustment factor of 27.32% for Tay Valley properties, obtained from MPAC following their Freedom of Information request, their property would have a 2016 value of $361,047.69.

CURRENT VALUE

55The Board’s first duty is to determine the current value of the subject property as of the appropriate valuation date. Pursuant to s. 19.2(1), the valuation date for the 2017 and 2018 taxation years is January 1, 2016.

56The Appellants submitted that MPAC had unfairly included $24,529 in common lands value in the assessment of their property.

57How MPAC operates its linear regression model to produce estimates of value of individual properties is not a matter that is before the Board. The use of such a model as a tool to assist in assessment of properties is a practical necessity considering that MPAC must value an estimated five million properties across the Province of Ontario. The issue is not the algorithm design or the values used, the issue is whether MPAC’s returned assessment value ultimately is correct when analysed in relation to the sale price of comparable properties at or near the valuation date.

58Accordingly, how MPAC “reflect(ed) the value that the common land in the community adds to the value of the residential lot”, to use the words of s. 45.4 of Ont. Reg. 282/98 is not in issue. Such value is reflected in the aggregate purchase price for the individual property and the part interest in the common lands. Indeed the Appellant recognized this logic when she stated at the hearing that the “value of Common Lands probably should be in the property as we all bought our homes that way.”

59In fairness MPAC’s evidence made no reference to the value of the common lands and provided no evidence of their value. The Regulation is clear that the value of the common lands is zero.

60The Board must now determine the correct current value of the subject property, reflecting the value that the common lands add to, as of the valuation date.

61In Sundararaj v. Municipal Property Assessment Corporation, Region 03, 2018 CanLII 104619 (ON ARB) (“Sundararaj”), Vice-Chair McAnsh stated at paragraph 2 that “time adjustment of sale prices should be avoided if possible, especially where there is evidence from sale prices of similar properties that sold close to the valuation day.”

62As detailed in Sundararaj, the Appellant in that case had also argued for a valuation date value extrapolated from time adjustments over many years. This was rejected by the Board as an unreliable method of arriving at current value. For this reason the Board in the present case also rejects the Appellant’s extrapolation of a current value from time adjustments.

63As indicated further in paragraph 14 of Sundararaj, sales within one year on either side of the valuation date are the best indication of the value in a given market. In Sundararaj, there were 14 comparables, five of which were within 12 months of the valuation date. This is a sufficient number from which to make comparisons. In the present case there are only two comparables within 12 months of the valuation day. Expanding the time frame to 15 months from the valuation date would include three comparables, a more representative number of sales for the market. Accordingly the Board will consider comparables No. 1, 2, and 8.

64The following table sets out these comparables in chronological order:

Subject Property

8

2

1

Address

436 Lakewood Road

327 Lakewood Road

273 Lakewood Road

355 Lakewood Road

Sale date

n/a

April 5, 2015

July16, 2016

March17, 2017

Sale price

n/a

$316,000

$495,000

$345,000

Sq. ft.

2,422

1,683

2,538

2,216

Quality

6.5

7.0

7.0

6.5

Lot size

2.72 acres

3.87 acres

4.26 acres

1.61 acres

Year built

1990

1987

1990

1994

Bedrooms

3

4

3

Bathrooms

2.5

2.5

2.5

Accessory

900

785

65The Appellants’ comparable No. 8 is substantially inferior to the subject property by reason of its floor space of 1,683 sq. ft. compared to the subject property of 2,422 sq. ft. Comparable No. 2 is superior to the subject property by reason of its larger lot size, quality of build and larger floor space. The correct value will lie between the sale prices of these two comparables.

66As both MPAC and the Appellants agreed that comparable No. 1 was similar to the subject property, a closer comparison with the subject property is in order. The two properties are in the same quality class, though the Appellant disputed this, testifying that their home was constructed by the original owner not a professional builder. They state that much of the interior is of shoddy construction. Comparable No. 1’s lot size is 1.61 acres against 2.72 acres for the subject property. Comparable No.1’s floor area is 2,216 sq ft. verses 2,422 for the subject property. The subject property also has 433 sq. ft. shed accessory building and a 473 sq. ft. attached garage.

67On the whole, comparable No. 1 is likely slightly inferior to the subject. The subject property should be valued at a higher value than the sale price of this comparable. In light of the additional square footage, lot size and accessory buildings, the Board is of the view that the correct current value for the subject property is $377,000. This value is determined by using the sale value per square foot of comparable No. 1, of $155.68, and applying it to the building area of the subject property of 2,422 sq. ft. The Board acknowledges that the subject property has a larger lot and an attached garage as compared to comparable No. 1, 355 Lakewood Road, but this is balanced by the fact that 355 Lakewood Road abuts a green space while the subject property does not abut green space.

68The Board finds the current value of the subject property to be $377,000.

69Pursuant to s. 45.4 of the General Regulation the current value of common land is deemed to be zero. Accordingly, the Board will make no finding as to the value of the common lands as requested by the Appellants.

BOARD’S FINDING ON EQUITY

70As the issue of the equity of assessment compared to properties in the vicinity was not raised by the Appellants as a ground of appeal, there is no necessity of an equity adjustment.

DECISION

71The correct current value assessment of the subject property as of the January 1, 2016 valuation date is $377,000. The Board will therefore reduce the Current Value Assessment from $404,000 to $377,000 for the 2018 taxation year.

72MPAC has not filed a notice of intention to seek a higher assessment, as required by Rule 40 of the Board’s Rules of Practice and Procedure. The Board therefore confirms the assessment at $344,000 for the 2017 taxation year.