Fil Scarpazza v. Municipal Property Assessment Corporation Region 05, 2020 CanLII 37224

Assessment Review Board / Commission de révision de l’évaluation foncière

ISSUE DATE: May 26, 2020 FILE NO.: WR 164842

Assessed Person(s): Gary Peter Stefan and Marjorie Carol Stefan, Filippo Scarpazza Appellant(s): Fil Scarpazza Respondent(s): Municipal Property Assessment Corporation Region 05 Respondent(s): City of Kingston

Property Location(s): 85 Aragon Road Municipality(ies): City of Kingston Roll Number(s): 1011-080-270-12500-0000 Appeal Number(s): 3375257 and 3397807 Taxation Year(s): 2019 and 2020 Hearing Event No.: 729870

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

Parties	Representative
Fil Scarpazza	Self-represented
Municipal Property Assessment Corporation	Kalin Doucet
City of Kingston	No one appeared

HEARD: April 1, 2020 by telephone conference call

ADJUDICATOR(S): Jennifer Griffith, Member

DECISION

OVERVIEW

1Gary Peter Stefan and Marjorie Carol Stefan were the previous owners whose names appear as the registered owners at the time the appeal was filed with the Board and remain the same as of today’s hearing. Fil Scarpazza (the “Appellant”) is the current owner of 85 Aragon Road (the “Subject Property”), in the City of Kingston (the “City”). The Appellant filed an appeal for the 2019 taxation year with the Assessment Review Board (the “Board”), pursuant to s. 40 of the Assessment Act, R.S.O. 1990, c. A.31 (the “Act”). Pursuant to s. 40(26) of the Act, the Appellant is deemed to have brought the same appeal in respect of the 2020 taxation year.

2It is the Appellant’s position that the Municipal Property Assessment Corporation’s (“MPAC”) current value assessment of $427,000 is too high and that the correct current value should be $277,500. MPAC takes the position that the correct current value is $425,000.

3Pursuant to s. 44(3)(b) of the Act, MPAC takes the position that an equitable reduction of the current value is not required. The Appellant asserts that an equitable reduction is required and believes that the equitable value should fall within the range of $203,529 and $298,136 or $250,800.

4Pursuant to s. 40(11) of the Act, the City is a party to this proceeding however, no one appeared on behalf of the City.

Issues for the Hearing

5At issue in this proceeding is:

1. A determination of the current value of the Subject Property for the 2019 and 2020 taxation years; a. Direct Comparison Approach based on Proposed Comparable Sales; b. Is the Sale of the Subject Property an Arm’s Length Sale that can be used to determine current value; and c. Negative Impacts on Value of Subject Property.
2. Whether there should be an equitable reduction of the current value pursuant to s. 44(3)(b) of the Act. And, if so, what the amount of this reduction should be.

Result

6The Board finds the correct current value of the Subject Property is $353,000 for the 2019 and 2020 taxation years for the reasons set out below.

7Pursuant to s. 44(3)(b) of the Act, the Board finds that an equity reduction is not required. The assessment is therefore reduced from $427,000 to $353,000 for the 2019 and 2020 taxation years.

ANALYSIS

Description of Subject Property

8The Subject Property is a two-storey residential dwelling. The Property Code is 313 Single-Family Detached on Water, with an effective site area of 1.73 acres, a total building area of 1,441 square feet, with a quality of construction rating of 6 and built in 1968.

Issue 1 - A determination of the current value of the Subject Property for the 2019 and 2020 taxation years;

9In determining the correct current value, the Board references s. 19(1) of the Act, which states that the assessment of land shall be based on its current value, which is defined 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”. In other words, what is the current value in an arm’s length and market-tested sale of the property on the valuation date or close to it. The valuation date for the 2017 to 2020 taxation years is January 1, 2016.

10In reviewing the following evidence presented in support of current value, the Board finds the best evidence is the two sales presented by both MPAC and the Appellant at 77 Aragon Road and 99 Aragon Road with an average time-adjusted sale price of $353,000. The Board finds the average time-adjusted sale price of $353,000 represents the best evidence of an arm’s length transaction between a willing buyer and a willing seller pursuant to s. 19(1).

MPAC’s Proposed Comparable Properties

11Kalin Doucet, a representative for MPAC presents a Valuation Report, dated October 16, 2019, which he prepared and testifies to the information contained therein.

12In support of current value, MPAC relies on the following six sales of suggested comparable properties, which occurred over the period 2015 and 2018. Mr. Doucet provides both the actual and time-adjusted sale prices and relies on the Direct Comparison Approach, which estimates the current value of the Subject Property by adjusting the sale price of other sold properties for differences in property characteristics between the Subject Property and other sold properties. The following is the analysis of the six suggested comparable properties:

MPAC’s Sales Analysis

6 SUGGESTED COMPARABLE PROPERTIES	LOT SIZE (acres)	TOTAL BUILDING AREA PER SQUARE FOOT (“sq. ft.”)	YEAR BUILT	SALE DATE	SALE PRICE	TIME ADJUSTED SALE PRICE (“TAS”)	TAS PRICE PER sq. ft.
99 Aragon Road	1.22	1,496	1964	2017	$370,000	$329,630	$220.34
452 Kingston Mills Road	1.19	1,365	1969	2016	$410,000	$404,243	$296.14
2320 Highway 15	0.73	1,515	1960	2018	$535.000	$445,012	$293.73
1658 Daylan Avenue	0.26	2,196	1967	2015	$403,500	$411,708	$187.48
3940 Waterfall Lane	0.59	1,266	1977	2017	$538,800	$482,462	$381.09
3066 Lindsay Lane	0.29	1,476	1948	2015	$595,000	$614,243	$416.15
Median	0.66	1,487	1965	2016	$472,500	$428,360	$294.94
Subject Property 85 Aragon Road	1.73	1,441	1968		Assessed Value $427,000 or ($296.32 per sq. ft.)

13Based on the above analysis, Mr. Doucet estimates the current value is $425,000 based on the median sale price per sq. ft. ($294.94 x 1,441 sq. ft. of total building area for the Subject Property).

Is the Sale of the Subject Property an Arm’s Length Sale That Can Be Used to Determine Current Value?

14Mr. Doucet states during his testimony that the Subject Property was purchased as a private sale for $300,000 on October 31, 2018. He further states that it is MPAC’s position that the sale is not a true reflection of current value because it was not exposed on the open-market (Multiple Listings for Sale (“MLS”)), nor was it advertised by the seller locally or on other websites. Mr. Doucet testifies that the sellers were the Appellant’s neighbours for approximately 38 years and sold the Subject Property to the Appellant without offering it to anyone else. The sale price of $300,000 was not negotiable, there was no official inspection, no cost to cure estimates for deficiencies and no appraisal of the Subject Property in support of the sale price.

Appellant’s Proposed Comparable Properties

15The Appellant presents three suggested comparable properties which sold in 2016 and 2017 on the same street as the Subject Property. The following is a sales analysis of these three sales:

Appellant’s Sales Analysis

3 SUGGESTED COMPARABLE PROPERTIES	LOT SIZE (acres)	TOTAL BUILDING AREA PER SQUARE FOOT (“sq. ft.”)	YEAR BUILT	ASSESSED VALUE	SALE DATE	SALE PRICE and TIME ADJUSTED SALE PRICE ("TAS)	SALE PRICE PER (sq. ft.)
17 Aragon Road	4.32	2,409	1964	$238,000	2017	$351,500 (TAS $308,032)	$145.91
77 Aragon Road	1.41	1,085	1970	$458,000	2016	$386,000 (TAS $$372,258)	$355.76
99 Aragon Road	1.22	1,496	1964	$367,000	2017	$370,000 (TAS $335,289)	$247.32
Median	1.41	1,496	1964	$367,000	2017	$370,000 (TAS $335,289)	$247.32
Subject Property 85 Aragon Road	1.73	1,441	1968	$427,000	2019	$300,000 (TAS $251,659)	$208.18

** TAS is provided by MPAC

16Regarding the above sales analysis, the Appellant offers his view of what he believes the current value should be based on each sale:

1. 17 Aragon Street is a farm property (Property Type 262) that is assessed at $238,000 and sold for $351,500 in 2017. The Appellant submits that the returned assessment is 65.6% of its sale price. Therefore, the Appellant is of the view that the sale price of the Subject Property should also be reduced to 65.6% or a value of $196,800 ($300,000 x 65.6%);
2. 77 Aragon Road assessed at $458,000 sold for $386,000 in 2016. The Appellant submits that MPAC assessed this suggested comparable property higher than its sale price. The Appellant is of the view that the current value of the Subject Property should be its sale price of $300,000 less three years of inflation (7.5%) or $277,500; and
3. 99 Aragon Road assessed at $367,000 and sold for $370,000 in 2017. The Appellant submits that the returned assessment is basically equal to the sale price. Therefore, the current value of the Subject Property should be its sale price of $300,000 less three years of inflation (7.5%) or $278,100.

Is the Sale of the Subject Property an Arm’s Length Sale That Can Be Used to Determine Current Value?

17In support of current value, the Appellant relies on the sale price of $300,000 for the Subject Property in 2019. The Subject Property was purchased privately from his neighbour of 38 years.

18The Appellant is of the view that the sale of the Subject Property in 2019 is an arm’s length transaction between a willing seller and a willing buyer and that it is the best evidence of current value.

19The Appellant testifies that MPAC’s interpretation of an arm’s length sale is inconsistent with other definitions. The Appellant testifies that MPAC’s definition is “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” whereas, the website of Realtor.com’s definition of an arm’s length transaction is “when the buyer and seller each act in their own self-interest to try to get the best deal they can”; and the website of Law.com’s definition is “the description of an agreement made by two parties freely and independently of each other, and without some special relationship, such as being a relative, having another deal on the side or one party having complete control of the other”. Based on these definitions, the Appellant is of the view that the private sale by the owner for $300,000 reflects the sale price of an arm’s length transaction.

20The Appellant submits that “…For Sale by Owner homes are found to have zero percent price difference when compared to homes sold with the help of real estate agents, …” according to a Wisconsin Study (date unknown), in the United States of America (“USA”).

21In support of the private sale price of the Subject Property, the Appellant called Gary Peter Stefan (the “seller”) to testify as a witness. Mr. Stefan testifies that he only offered to sell the Subject Property to his neighbour of 38 years, the Appellant, for $300,000. He further testifies that he did a walk-through with the Appellant and identified areas inside and outside the Subject Property that he felt needed repairs. He confirmed that the sale price was not negotiable and if the Appellant was not interested, he would have listed it for sale. The Appellant accepted the offer and purchased the Subject Property as presented for $300,000.

22Mr. Stefan testifies that he felt that the private sale price of $300,000 was reasonable, even though he believed that the Subject Property would have sold for more had he listed it on MLS or listed for sale by owner locally and on other websites.

23Mr. Stefan further testifies that he chose to sell the Subject Property to his neighbour because of an experience he had in 2013 when he sold another property he owned through MLS. He testifies that the amount of time and money he spent getting that property ready for sale was not worth the price it sold for in 2013. Therefore, he decided to sell the Subject Property in its current condition privately to the Appellant. Mr. Stefan testifies that he was not pressured to sell the Subject Property and he is not related to the Appellant.

24Mr. Stefan states that the current condition inside and outside of the Subject Property at the time of the sale included such issues as leaks, cracks, plumbing, drainage, and general repairs and maintenance. It was Mr. Stefan’s opinion that the sale price would have been in the range of $424,000 and $460,000 if these issues were corrected prior to the sale of the Subject Property.

Negative Impacts on Value of Subject Property

25The Appellant testifies that the Subject Property is negatively impacted by being in a high-water table zone and is land-locked because of the neighbour’s overhead hydro wires, which prevents him from putting his electrical services underground. He testifies that the Subject Property has two sump pumps and a French Drain was recently installed to help alleviate the water problem.

26The Appellant submits that MPAC’s methodology is flawed because MPAC is unfairly over-assessing older homes as compared to newly built homes in the neighbourhood.

27The Appellant is of the view that the current value should be $277,500.

Findings on Current Value

28In reviewing the above evidence presented in support of current value, the Board finds the best evidence is the two sales presented by both MPAC and the Appellant at 77 Aragon Road with a time-adjusted sale price of $372,258; and 99 Aragon Road with a time-adjusted sale price of $335,289. These two comparable properties are located on the same street close to the Subject Property, are on average similar in age, total lot size, total building area, same property type and sold at an average time-adjusted sale price of $353,000 (rounded). Based on this analysis, the Board finds the average time-adjusted sale price of $353,000 represents the best evidence of current value pursuant to s. 19(1).

29The remaining sales presented by MPAC were not relied on because the Board finds that the comparable properties on the same street, very close to the Subject Property are on average similar and would have similar market influences as the Subject Property. The Board also finds that the suggested comparable properties further away (2.3 to 11.21 kilometres from the Subject Property) sold significantly higher than sales on Aragon Road as demonstrated in the above Sales Analyses by MPAC and the Appellant.

30The Board rejects the sale presented by the Appellant at 17 Aragon Road, because this suggested comparable is not similar to the Subject Property and is Property Code 262 (Land owned by a farmer improved with a non-farm residence with a portion being farmed) and assessed differently under s. 19(5) of the Act, whereas, the Subject Property is a Property code 313 (Single family detached on water) and assessed under s. 19(1).

31The Board did not rely on the sale of the Subject Property in 2018 (date confirmed by MPAC as the registered sale date), because the sale price and time-adjusted sale price are significantly lower than the sale prices of similar properties on the same street as the Subject Property, as demonstrated in the Appellant’s Sales Analysis. The Board agrees that there are times when private sales have shown to be true reflection of current value when supported by open market sales evidence, however in this case, similar properties sold in the open market are significantly higher than the Subject Property.

32Regarding the poor condition of the Subject Property, the Appellant presented no receipts, no cost-to-cure and no official appraisal to demonstrate the degree of repairs that needed to be done and the estimated costs. Therefore, the Board puts no weight on this argument.

33Regarding the Appellant’s argument that the Subject Property is negatively impacted by being in a high-water table zone and is land-locked because of the neighbour’s overhead hydro wires, again, the Appellant presented to factual evidence to quantify the impact of these issues on the assessed value of the Subject Property. The Board puts no weight on this issue.

34Regarding the Appellant’s argument that MPAC’s methodology is flawed, the Board accepts MPAC’s methodology because it is used consistently throughout Ontario in the preparation of the assessment roll, regardless of whether a property is newer or older. This appeal process is to test whether the returned assessment $427,000 is correct. In this case, the Board reviewed all the evidence presented in support of current value and finds that the correct current value is $353,000, which is lower than the returned assessment of $427,000.

Issue 2 - Whether there should be an equitable reduction of the current value pursuant to [s. 44(3)](https://www.canlii.org/en/on/laws/stat/rso-1990-c-a31/latest/rso-1990-c-a31.html#sec44subsec3_smooth)(b) of the [Act](https://www.canlii.org/en/on/laws/stat/rso-1990-c-a31/latest/rso-1990-c-a31.html), and, if so, what the amount of this reduction should be.

35MPAC presents an Equity Analysis Report in which the assessments of 30 comparable properties are compared to their respective sale prices to determine the Assessment to Sales Ratio (“ASR”). The ASR is computed by dividing the assessed values of the property sold, by its sale price.

36MPAC states that these 30 comparable properties are Property Codes 313 – Single Family Detached on Water and Property Code 391 – Seasonal / Recreational Dwelling – First Tier on water; sold over the period in 2015 to 2019; and located within 21.0 kilometres of the Subject Property.

37The analysis of the sale of these 30 comparable properties shows a Level of Appraisal (“LOA”) of 1.017 and a Coefficient of Dispersion (“CoD”) 14.0. Based on this analysis, MPAC is of the opinion that an equity reduction is not required, because the findings fall within MPAC’s standards of 0.95 to 1.05 for the LOA and a CoD of 20.

38Based on this finding MPAC is of the opinion that the equitable value is $425,000.

39In support of equity, the Appellant presents the sale of three suggested comparable properties at 17 Aragon Road with an ASR of 0.656; 99 Aragon Road with an ASR of 0.991; and 77 Argon Road with an ASR of 1.186. The three sales have an average ASR of 0.944. The Appellant is of the view that when the ASR’s of these three suggested comparable properties are applied to the sale price ($300,000) of the Subject Property the equitable value should fall within the range of $203,529 and $298,136 or $250,800.

Findings on an Equitable Reduction

40In reviewing the equity analyses presented above, the Board finds that MPAC presents the best evidence with a median LOA of 1.017 based on 30 sales of similar property types, which occurred over the period 2015 to 2019 and located in the same vicinity as the Subject Property. However, the Board finds that the LOA of 1.017 does not support an equity reduction because it falls within MPAC’s acceptable standard of a LOA of 0.95 and 1.05.

41The Board rejects the Appellant’s equitable values for the following reason:

1. the suggested comparable property at 17 Aragon Road is not similar to the Subject Property, because it is Property Code 262 (Land owned by a farmer improved with a non-farm residence with a portion being farmed) and assessed differently under s. 19(5) of the Act, whereas, the Subject Property is a Property code 313 (Single family detached on water) and assessed under s. 19(1);
2. the suggested comparable property at 99 Aragon Road is already included in MPAC’s equity report and forms part of MPAC’s analysis. The Board is satisfied that the ASR of this suggested comparable property is included int the equity analysis and there is no need for a second analysis; and
3. the remaining suggested comparable property at 77 Aragon Road with an ASR of 1.186 was not relied on by the Board, because an ASR based on one sale is statistically not a reliable sample size for determining equity, because there are numerous factors that can affect the sale of a property which influences the ASR. The Board finds that an ASR finding based on a larger sample size (e.g. MPAC’s 30 sales) is more reliable.

42Based on the evidence, the Board finds that an equity reduction is not required.

CONCLUSION

43The Board finds the correct current value of the Subject Property is $353,000 for the 2019 and 2020 taxation years. The Board also finds that an equity reduction is not required pursuant to s. 44(3)(b).

ORDER

44The Board orders that the assessment is reduced from $427,000 to $353,000 for the 2019 and 2020 taxation years.