Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE: October 16, 2019

FILE NO.: WR 161942

Assessed Person(s): Brian Scott Hendrick; Kimberly Ann Thomson

Appellant(s): Megan McLeod

Respondent(s): Municipal Property Assessment Corporation (“MPAC”) Region 17

Respondent(s): Township of Lake of Bays

Property Location(s): 122 Bigwin Island

Municipality(ies): Township of Lake of Bays

Roll Number(s): 4427-010-022-11265-0000

Appeal Number(s): 3322594, 3382957, 3382956, 3382958

Taxation Year(s): 2017, 2018 and 2019

Hearing Event No.: 722675

Legislative Authority: Section 34, 32, and 40 of the Assessment Act, R.S.O. 1990, c. A.31, as amended

Heard: August 23, 2019 in Dwight, Ontario

APPEARANCES:

Parties	Representative
Brian Scott Hendrick; Kimberly Ann Thomson; Megan McLeod	Self-represented
MPAC	Lindsay Kaye
Township of Lake of Bays	No one appeared

DECISION OF THE BOARD DELIVERED BY LESLIE FLEMMING

BACKGROUND

1Brian Scott Hendrick is the owner of 122 Bigwin Island, a seasonal-residential home located on the largest island in Lake of Bays (the “Subject Property”). The home was built by the owner in 2017. The completed home was assessed at $1,870,000, and when added to the value of the land, the 2018 assessment was returned at $2,826,000. MPAC subsequently reduced the assessment for the land and improvements to $2,317,000. The Appellant appeals all three years from 2017 through 2019.

2Pursuant to the provisions of the Assessment Act, R.S.O. (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, the MPAC is required to assess this value as of the valuation date, January 1, 2016.

3Consequently, the Assessment Review Board (the “Board”) must determine the value of the Subject Property on January 1, 2016, for the 2017 to 2019 taxation years (“current value”).

4Megan McLeod (the “Appellant”) has filed appeals for taxation years 2017 to 2019 with the Board”, pursuant to s. 40 of the Act. It is her position that MPAC’s assessment of current value is too high and that the correct current value is $1,800,000. At this hearing, MPAC takes the position that its assessed value is correct.

5Pursuant to s. 40(11) of the Act, the Township of Lake of Bays (the “Township”) is a party to this proceeding. However, the Township did not advise the Board of its position on the issues raised in these appeals, and no one appeared at the hearing on its behalf. Stephen Watson, a member of the Township staff, gave evidence during the hearing, but simply for the purpose of confirming the state of the property standards by-laws and other regulations pertaining to fire safety and septic system requirements for sleeping areas. Mr. Watson did not represent the Township.

6Section 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 of the municipal tax burden according to the value of the property possessed by each ratepayer. MPAC takes the position that an equitable reduction is not required. The Appellant, who bears the onus of proving an equitable adjustment is required, did not assert that an equitable reduction is required. Therefore, in this proceeding, this ground for appeal is not in issue.

7At the completion of the hearing, the Board reserved its decision. For the reasons that follow, the Board finds that the 2017 to 2019 tax years is $2,317,000. The s. 34 value with respect to the new cottage is $1,361,000. An equitable reduction of these values is not required.

8In arriving at a decision, the Board had to consider the contents of the Act, including the definition of “current value”, which 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”. The “valuation day” for the current assessment cycle is January 1, 2016. Even though the subject property improvements did not exist at that time, values must be estimated so as to be as current as possible with that date.

ISSUE

9The issue to be determined on this appeal is: what is the correct current value of the Subject Property for the taxation years 2017, 2018 and 2019?

Discussion, Analysis and Findings

MPAC’S Evidence

10Lindsay Kaye, a Property Valuation Analyst, represented MPAC and gave most of the evidence on its behalf. She called Mr. Watson to testify briefly as noted above, and she gave the balance of the evidence following his appearance.

11Ms. Kaye explained the history of the Subject Property. It was built in 2017, after the owner acquired the property in 2015. MPAC returned the following assessments with respect to this property:

(a) Section 34 (supplementary assessment) of $1,870,000 (2017);

(b) Section 32 (correction of assessment) of $2,317,000 (2018);

(c) Section 40 (general assessment) of $2,826,000 (2018); and

(d) Section 40 (general assessment) of $2,317,000 (2019).

12Ms. Kaye gave a summary of the island’s history and amenities. Bigwin Island is the largest island in Muskoka, and home to a golf course and an assortment of “traditional” and modern cottages. While the island is accessible on a seasonal basis by private watercraft and a ferry capable of transporting automobiles, Ms. Kaye indicated that many island dwellers prefer to use golf carts to travel around the “ring road” which connects all the cottages and the golf course on the island.

13The Subject Property is a well-built home to which MPAC assigns a quality code of 8 out of 10. The home is located on a small point of land, with 864 actual feet of frontage and effective (usable) frontage of 482 feet. The lot itself measures 2.37 acres. The home is a bungalow of 3,455 square feet (“sq. ft.”) in size, consisting of two bedrooms, two and a half bathrooms, a great room, a Muskoka room, a dining room and kitchen and an office. There are two fireplaces, in-floor radiant heat, and a detached garage of 664 sq. ft. Ms. Kaye indicated that she had inspected the property.

14MPAC used the direct sales comparison method of establishing the value for the property. Ms. Kaye used four comparable seasonal/recreational property sales from the Township, one of which is located on Bigwin Island and three of which are seasonal/recreational dwellings located on the mainland surrounding Lake of Bays. In Table A below, the main details of the comparable sales are set out along with the sales dates and amounts. Note that the Appellant did not provide time-adjusted sales information, and so I will use actual sales prices in comparing the properties proposed by both parties.

15Ms. Kaye pointed out that the office in the Subject Property could be converted to a bedroom with the addition of hard-wired smoke detection system. She confirmed with Mr. Watson that the septic system in existence now would be sufficient for a third bedroom or the construction of a sleep cabin (“bunkie”), as long as the sleep cabin contained only one bedroom. Mr. Watson testified that a fourth bedroom, or the construction of a two-bedroom bunkie, would require an expansion of the current septic system.

MPAC’s Submissions

16Mr. Kaye concluded that, given the sales she presented, the Subject Property would have a current value of $2,317,000 in 2016.

Appellant’s Evidence

17The Appellant appealed the assessments relating to the Subject Property on behalf of the owner, Mr. Hendrick. The Appellant is a realtor with Sotheby’s International Realty Canada, and has been a real estate agent since 2000. Her main focus has been on the waterfront residential market, and she is very familiar with Bigwin Island because she has been engaged in many sales of residential properties there. Knowing the market well, she thought that MPAC’s assessment of the Hendrick’s cottage was too high. She also disagreed with MPAC’s use of time-adjusted sales, submitting that she could not sell many of the properties on the island that she had sold previously for the time-adjusted values shown in MPAC’ materials.

18The Appellant raised these main points of disagreement with MPAC’s assessment rationale:

(a) The Appellant argues that, in considering the ability of the owners to convert the office to a third bedroom, MPAC is assessing potential value rather than actual value, which is completely outside its mandate in this type of assessment.

(b) While MPAC considers the property to be two bedrooms with a possibility of a third bedroom in space presently used as an office, the Appellant testified that the transition of the office into a bedroom would not be feasible without the cost of installing appropriate smoke detection. She considers a two-bedroom home or cottage much less desirable than a three-bedroom unit. In addition, the Appellant

(c) Ms. Kaye testified that a garage was as valuable as a boathouse. The Appellant disagrees. She stated that on island properties, a boathouse is more essential than a garage. While many other homes on the island have garages, the Appellant’s experience is that very few people, if any, have an automobile in their garage. A boathouse would add value because it increases accessibility to the property.

(d) Use of a cottage property on an island is limited by the weather. Generally the property is impossible to access during times of freeze-up or spring thaw. Properties that are used only part of the year should not be assessed in the same category as properties on the mainland that are able to used year-round.

19The Appellant presented a large number of sales in the vicinity of the Subject Property over a span of approximately 12 years. She testified that the sales showed that the value given to the Subject Property was excessive.

20I have selected from the Appellant’s evidence only sales on Bigwin Island taking place between 2015 and 2018, which includes the “shoulder years” surrounding the valuation day. The Appellant presented sales on Lake of Bays between 2006 and 2019. However, because she did not present evidence of time adjustments, and because she disagreed with MPAC’s evidence in this regard, I will use only sales reasonably close in time to the valuation day, which in any event is a more reliable indicator of value. MPAC’s selected comparable sales took place from 2013 through 2016. The following table summarizes the evidence of both parties with respect to comparable property sales.

TABLE A – COMPARABLE PROPERTY SALES

MPAC’S SALES

Property	Lot Size	Waterfront (Effective)	Building Size (sq.ft.)	Year Built	Bedrooms/Bathrooms	Sale Date	Actual Sale Price	Secondary Structures (Sq. Ft)
Subject	2.37 ac.	482 ft.	3,455	2017	2 / 2.5	N/A	N/A	Garage 664 s.f.
1072 Rat Bay Road	1.7 ac.	305 ft.	3,398	2012	6 / 5	Sep 2013	$2,650,000	Boathouse 960 s.f.
162 Bigwin Island	1.53 ac.	202 ft.	2,461	2015	4 / 2.5	Jul 2016	$1,489,380	Garage & Carport
1022 Cliffdene Rd. Unit 3	3.67	239.63 ft.	3,090	2010	3 / 3	May 2013	$2,458,300	Boathouse 374 s.f.
1173 Boyce’s Rd.	2.03	225 ft.	4,232	2010	5 / 3.5	June 2014	$2,650,000	Boathouse 999 s.f.

APPELLANT’S SALES

Property	Lot Size	Waterfront (Effective)	Building Size (sq.ft.)	Year Built	Bedrooms/Bathrooms	Sale Date	Actual Sale Price	Secondary Structures (Sq. Ft)
Subject	2.37 ac.	482 ft.	3,455	2017	2 / 2.5	N/A	N/A	Garage 664 s.f.
44 Bigwin Island	1.12 ac.	155 ft.	1,800	Unknown	3 bed	Dec 2016	$593,000	None
24 Bigwin Island	Less than 1 acre	160 ft.	2,200	Unknown	3 / 2.5	Aug 2015	$1,295,000	Bunkie, garage
46 Bigwin Island	1 – 5.99 ac	200 ft.	5,500	2009	Unknown	June 2015	$3,050,000 (auction)	Underground garage
162 Bigwin Island	1.24	202 ft.	2,658	2014	4 / 2.5	Sep 2018	$2,175,000	Garage

Appellant’s Submissions

22Relying on her evidence, the Appellant submits that the correct current value for taxation years 2017 to 2019 is $1,800,000.

Analysis and Findings

23Comparing seasonal/recreational residential properties on water is difficult for the reason that these types of homes are usually idiosyncratic and their designs, locations, sizes, their proximity to roads or access points for boats, and the quality and size of their waterfront are vastly different.

25In the eight samples provided by the parties and reproduced above, are a selection of the most relevant comparable sales. Of these, the most expensive sale was the auction sale of 46 Bigwin Island. The next two most expensive sales were two mainland properties provided by MPAC: 1072 Rat Bay Road and 1022 Cliffdene. While the Appellant argued that island properties cannot command the same value as more accessible mainland properties, the evidence did not support this assumption.

26The Rat Bay Road property sold in 2013, well outside the preferred shoulder season. The site is slightly larger than half the size of the Subject Property site, while the residence is almost the same size. The waterfront is smaller than the effective waterfront of the Subject Property, but larger than any of the other samples. This property has six bedrooms, five baths and a boathouse. It would be worth more than the Subject Property. What is impossible to factor into the valuation is the portion of value attributed to its location on the mainland. However, based on Ms. McLeod’s testimony, the number of bedrooms (six) and the presence of a boathouse would have been value-added features that the subject does not have. This comparable property sold for $333,000 more than the assessed value of the Subject Property, which would reflect the presence of a boathouse and possibly the year-round accessibility of the location.

27The 162 Bigwin Island property, used by both parties as a comparable sale, sold in 2016. It has a smaller site, a significantly smaller waterfront, and approximately 1,000 sq. ft. less building area. Like the Subject Property, it lacks a boathouse, but unlike the Subject Property, has four bedrooms. This property is approximately one-third smaller than the Subject Property, and so the Subject Property would reasonably sell for significantly more money. The 2016 sale of this comparable property was for approximately one-half the assessed value of the Subject Property at $1,489,350. Both properties are island properties, yet the lack of convenient access does not seem to have affected the sale price of this comparable property. This comparable property was also included for its 2018 sale, discussed below.

281022 Cliffdene is situated on a site which is over an acre larger than the Subject Property’s. Its waterfront is significantly smaller and the building area is 365 sq. ft. smaller. It sold for $2,458,300 in 2013. It has three bedrooms and a boathouse, as well as being located on the mainland. Therefore, despite its smaller waterfront, the number of bedrooms and the boathouse would have made this property more valuable than the Subject Property. It sold for $141,300 more than the assessed value of the Subject Property. The additional acreage would account for this higher value.

291173 Boyce’s Road sold for $2,650,000 in 2014. It has a structure that is 777 sq. ft. larger than the Subject Property’s residence, but a smaller waterfront and site area. It has a relatively large boathouse at just under 1,000 sq. ft. It also has five bedrooms. This property is located on the mainland. The presence of the large boathouse and a larger residence would justify a value of over $300,000 more than the Subject Property.

3044 Bigwin Island is a property sold in December, 2016. The site area and the building area are approximately half the size of the Subject Property’s, and the waterfront, at 155 feet, is only one-third the size of the Subject Property’s effective waterfront. The property has three bedrooms, but no secondary structures such as a boathouse. For these reasons, this property would be worth significantly less than the Subject Property. It sold for $593,000, or approximately one-quarter the assessed value of the Subject Property. The smaller site, smaller building, smaller waterfront and absence of secondary structures such as garages or a boathouse make this property much less valuable than the Subject Property.

3124 Bigwin Island sold in 2015 for $1,295,000 or just slightly more than half the assessed value of the Subject Property. This comparable cottage property has a much smaller site area, and a waterfront approximately one-third that of the Subject Property. Its cottage is 1,255 sq. ft. smaller. While its additional structures include a sleep cabin and a garage, the much smaller lot and waterfront would limit future development on the site and would make it significantly less valuable than the Subject.

3246 Bigwin Island sold at auction in 2015 for $3,050,000. While this property has less than half the waterfront of the Subject Property, it has a structure of 5,500 sq. ft. or more than 2,000 sq. ft. larger when compared to the Subject Property. Unfortunately, precise information respecting the site area was not available, but it is more than one acre and less than six. The waterfront is 200 feet, smaller than the Subject Property’s waterfront. The property also possesses an underground garage. Given the very large cottage and large lot, this property would be approximately one-third more valuable than the Subject.

33Lastly, 162 Bigwin Island was put forward as a comparable by both parties. The Appellant included both the 2016 sale and a second sale in 2018. While 2018 is outside the most useful shoulder years, it is a helpful sale for the purpose of determining where the value of the Subject Property would fall. In this case, the two listings (2016 and 2018) are almost identical in their description of this property’s features. However, this property is over one acre smaller than the Subject Property with less than half the waterfront, and yet it sold for $2,175,000 in 2018. The Subject Property’s assessed value is $2,317,000 or $142,000 morethis property and the size difference in the lot and waterfront easily justify this difference.

34The comparable properties provided by both parties support the original assessment returned by MPAC. The sales provided confirm that the size of building, its quality, design and location provide value in the seasonal/recreational market. While a mainland, all-season property may be more desirable given its greater accessibility, the evidence shows that it is difficult to put a value on this feature. The cottages that were worth less than the Subject Property were smaller in almost all respects, from waterfront to acreage and building size. The value of the Subject Property is derived from its overall size and quality. The fact that it may have a shorter season of usage than the mainland properties does not seem to have affected the current value. The comparable sales provided by both parties served to confirm the current value of the Subject Property at $2,317,000.

DECISION

35The correct current value of the Subject Property is $2,317,000 for the 2017 to 2020 taxation years. The section 34 value in 2017 is $1,361,000, the value of the new cottage built on the property.

36An equitable reduction of the current value of the Subject Property, pursuant to s. 44.(3)(b) of the Act, is not required.