Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE: July 10, 2020 FILE NO.: WR 163494

Assessed Person(s): Ronald Taylor Appellant(s): Ronald Taylor Respondent(s): Municipal Property Assessment Corporation Region 09 Respondent(s): City of Toronto

Property Location(s): 340 Eglinton Avenue East Municipality(ies): City of Toronto Roll Number(s): 1904-104-040-07500-0000 Appeal Number(s): 3349929, 3299706, 3239630 and 3401477 Taxation Year(s): 2017, 2018, 2019 and 2020 Hearing Event No.: 726966

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

APPEARANCES:

Parties	Representative
Ronald Taylor	Self-represented
Municipal Property Assessment Corporation	Daniel Leduc
City of Toronto	No one appeared

HEARD: January 13, 2020 by telephone conference call

ADJUDICATOR(S): Joanne Laws, Member

DECISION

OVERVIEW

1Ronald Taylor (the “Appellant”) is the owner of 340 Eglinton Avenue East, Toronto (the ‘Subject Property’). He has filed an appeal for the 2017 taxation year with the Assessment Review Board (the “Board”), pursuant to s. 40 of the Assessment Act, R.S.O. 1990, c.A31 (the “Act”). Pursuant to s. 40(26) of the Act, the Appellant is deemed to have brought the same appeal in respect to the 2018, 2019 and 2020 taxation years.

2It is the Appellant’s position that the Municipal Property Assessment Corporation’s (“MPAC”) current value assessment of $1,073,000 is too high, and that it should be assessed at $513,833. He also argues that the Subject Property should be assessed in the Residential Tax Class, rather than the Commercial Tax Class. MPAC takes the position that the current value is $956,000 and that the Commercial Tax Classification is correct.

3Pursuant to s. 40(11) of the Act, the City of Toronto is a party to this proceeding. However, no one appeared on its behalf.

Issues for the Hearing

4At issues in this proceeding are:

1. The classification of the Subject Property;
2. A determination of the Subject Property’s current value for the 2017, 2018, 2019 and 2020 taxation years; and,
3. Whether an equity reduction to the current value pursuant to s. 44(3)(b) of the Act is justified.

Result

5At the completion of the hearing, I reserved my decision. For the reasons that follow, I find that, based on its use, the Property’s correct tax class is Commercial for the 2017. 2018, 2019 and 2020 taxation years. I find that the current value of the Subject Property is $813,900 for these taxation years. I also find that an equitable adjustment to $611,000 is required, pursuant to s. 44(3)(b) of the Act.

PRELIMINARY MATTERS - DISCLOSURE

6The Board issued a Schedule of Events to the Parties with a May 15, 2018 commencement date. The Appellant failed to disclose his material to the opposing Parties by the deadline of October 9, 2018, nor did he file his material with this Board by the deadline of August 20, 2019. However, the Appellant filed two late disclosures with MPAC and filed the material with this Board; the first was received on September 25, 2019 and the second was received on January 10, 2020. MPAC did not object to the September 25, 2019 late disclosure but did object to the January 10, 2020 disclosure because it had insufficient time to review the documents and cited the Board’s Rules of Practice and Procedure (the “Rules) Rule 48.

7Rule 48 provides that no new documents may be admitted into evidence if they have not been disclosed, and filed with the Board, in accordance with the Rules, unless the Board determines that there are exceptional circumstances.

8The Appellant argued that the January 10, 2020 disclosure be allowed because the information is likely in MPAC’s possession and that, regarding Rule 48, the exceptional circumstance to allow new documents is that he has health issues. He did not provide specific details as to the length and impact of his health issues. He concluded his arguments by saying he does not think anything turns on the contents of the late disclosure.

9I am not satisfied that there are exceptional circumstances to allow the Appellant’s late disclosure. The Appellant has had ample time to provide disclosure, as set out in the Schedule of Events. He has failed to comply with these dates and did not file pre-hearing motions for his late disclosures. Therefore, the January 10, 2020 disclosed information will not be admitted or considered. The prejudice to MPAC, who has had insufficient time to review the January 10, 2020 disclosure, is greater than the prejudice to the Appellant who failed to take reasonable steps to comply with the Schedule of Events or to file motions with this Board for late disclosure.

ANALYSIS

Description of Subject Property

10Chin-wei Li was called as a witness for MPAC and provided the following undisputed description of the Subject Property. It is a semi-detached building, purpose built as a residential single-family home in 1925. It sits on a small lot, 1,599 square feet (“sq. ft.”) in size, on the north side of Eglinton Avenue between Mount Pleasant Road and Bayview Avenue. The lot is 19.5 feet wide and 82 feet deep. The total building area on the first and second floors is 1,152 sq. ft. MPAC has amended the year built to 1973 due to minor renovations and identifies the building as residential converted to office use. It is located in a residentially zoned area.

Issue 1 – Classification of the Subject Property

11The evidence is that The Appellant conducted his law practice from the Subject Property for almost three decades, and that prior to 2016 the Subject Property was assessed with a 90% allocation in the Commercial Tax Class and 10% in the Residential Tax Class. The zoning does not allow for commercial use without a residential component and, after inspecting the Subject Property, MPAC determined that there is not a bona fide residential portion and assessed the Subject Property wholly in the Commercial Tax Class for the 2017, 2018, 2019 and 2020 taxation years.

12Mr. Taylor submits that the Subject Property is purpose-built as a residential home, that it is zoned residential and that it should be classified in the Residential Property Class.

13In the alternative, Mr. Taylor argues that the 10% residential portion should be re-instated because he has kept one bedroom for residential purposes. The bedroom is approximately 100 sq. ft., which Mr. Taylor calculates as 10% of the total building area, and contains a bed, stored clothes and other personal belongings. He testified he uses the room for taking naps in the daytime and, on occasion, sleeping there at night although not as often as in the past.

14He submits that in 2013 the City of Toronto amended the zoning requiring a 70% residential and only 30% commercial use. He argues that due to the zoning change he cannot sell the property to a commercial interest and, therefore, its market value will only be for residential use.

15Mr. Li testified he inspected the Subject Property on March 12, 2019 in Mr. Taylor’s presence and at that time he saw no indications of residential use; the kitchen and bathrooms were not set up for residential use, the basement was unfinished, and, the second floor’s three bedrooms were used for office storage. Mr. Li acknowledged that one of the bedrooms contained a bed but testified that Mr. Taylor advised him it is used for napping. Daniel Leduc, advocating on behalf of MPAC, argued that despite the residential zoning for the Property, it is correctly assessed in the Commercial Property Class based on use pursuant to the Act and its regulations.

Findings on Classification

16Section 36(1) of the Act requires the assessments to be made annually and s. 14(1) requires MPAC to return an assessment roll containing, amongst other things, the classification of the land. Section 7(2) sets out some of the classes of real property prescribed by the minister, including the Residential Property Class and the Commercial Property Class. Property classes are further outlined in Ontario Regulation 282/92 (the “Regulation”). Section 3(1) of that Regulation sets out the Residential Property Class as including “land used for residential purposes” (emphasis added). Section 5(1)1. of the Regulation states that “the commercial property class consists of… land… that is not included in any other property class”.

17The word “used” is key in determining a property’s classification and use overrides other factors such as zoning when determining a property tax class. Based on the evidence presented, I am satisfied that the Subject Property is not used for residential purposes. Mr. Taylor was clear in his description of the use of the Subject Property as a whole and, in particular that the bedroom is no longer used on a regular basis for residential use.

18Accordingly, I find that the Subject Property’s correct classification is wholly commercial for the 2017, 2018, 2019 and 2020 taxation years.

Issue 2 – Current Value

19The parties agree that the best approach to valuing the Subject Property is the direct comparison approach, also known as the sales approach to value.

20In determining the correct current value, s. 19(1) of the Act provides 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, the best evidence the Board can receive of current value is an arm’s length and market-tested sale of the Subject Property on the valuation day or close to it. When no such sale has occurred, the next best evidence is sales of similar properties near the location of the Subject Property. The valuation date for the 2017 to 2020 taxation years is January 1, 2016.

21Mr. Li presented a Valuation Report, testifying to its contents. He relies on the following four sales that occurred in 2015 and 2016. All four sale properties are located near the Subject Property and Mr. Li identified each as Office Use Converted From House. He has estimated their sale values as of the January 1, 2016 valuation day by time-adjusting sale values from their sale date using a Price Change over Time Analysis. Using the median time-adjusted sale value per square foot of above ground building area, Mr. Li calculates the Subject Property’s current value is $956,000 as of the January 1, 2016 valuation day.

22The first sale, 285 Eglinton Avenue East has a larger lot than the Subject Property with 2,439 sq. ft. and a larger building with 1,500 sq. ft. on the first two floors and 786 sq. ft. of basement area, 277 sq. ft. of which are finished. It was built in 1918 with an effective age of 1937 due to minor renovations. It is in a commercially zoned area and has a time-adjusted sale value of $1,162,196 or $774.80 per sq. ft. of above-ground floor area.

23The second sale, 291 Eglinton Avenue East, has a larger lot with 2,561.5 sq. ft. and a larger building with 2,084 sq. ft. on the first two floors and an unfinished basement area of 1,042 sq. ft. It was built in 1930 with an effective age of 1944 due to minor renovations. It is in a commercially zoned area and has a time-adjusted sale value of $1,472,372 or $706.51 per sq. ft. of above-ground floor area.

24The third sale, 331 Eglinton Avenue East has a larger lot with 2,750 sq. ft. and a larger building with 1,872 sq. ft. It was built in 1932. It is in a commercially zoned area and has a time-adjusted sale value of $1,178,328 or $991.86 per sq. ft. of above-ground floor area.

25The last sale, 532 Eglinton Avenue East has a larger lot with 2,250 sq. ft. and a slightly larger building with 1,188 sq. ft. on the first two floors and 682 sq. ft. of basement area, 582 sq. ft. of which are finished. It was built in 1927 with an effective age of 1937. It is in a residential zoned area and has a time-adjusted sale value of $1,655,384 or $884.28 per sq. ft. of floor area.

26Mr. Taylor submits that MPAC’s proposed comparable properties are not directly comparable to the Subject Property. He argues that because the Subject Property is zoned residential, the current value should reflect the Subject Property’s restrictions that include the residential zoning, the lot’s small footprint, and that it is semi-detached to another property. He argues that MPAC’s first three sales have commercial zoning, none are semi-detached and, therefore, all are superior to the Subject Property.

27Mr. Taylor agrees that MPAC’s fourth sale, 532 Eglinton Avenue East, has a similar zoning restriction to the Subject Property, but argues it is not directly comparable. He testified that it is superior to the Subject Property because it has a larger, corner lot that provides more exposure, it has been renovated, the building is not semi-detached, and, the basement is exposed and finished so that it appears to have three storeys from the side street. He argues that it is a stylish and modern property, that the sale price reflects this and that the Subject Property would not achieve this price in the market.

28Mr. Taylor submits that the Subject Property’s residential zoning limits its marketability because he does not have the right to sell it for commercial use. He also argues that he has not maintained the Subject Property relative to other residential properties in the vicinity and that a new purchaser would require a new residential kitchen and bathroom. Mr. Taylor argues that the assessed value should reflect the Subject Property’s zoning restrictions and its general condition. He submits that the area’s market is relatively stable and there are few sales of similar properties. He provided no sales evidence of directly comparable properties.

Findings on Current Value

29Based on the Parties’ evidence, I find that the zoning changes to the Subject Property have altered its marketability and accept Mr. Taylor’s undisputed evidence that it cannot be sold for commercial purposes, only residential. While the classification in the commercial tax class is based on use, the best comparable property sales would be residential to reflect the legally permissible use. However, I received no evidence of residential property sales.

30Of the sales presented, I find that all four are superior to the Subject Property. I accept Mr. Taylor’s testimony that commercially zoned properties command higher sale values than residentially zoned properties and three of the four sales are zoned for commercial use. All four have larger lots and larger finished building areas.

31The fourth sale, 532 Eglinton Avenue East, is zoned similar to the Subject Property. However, I find that it is superior to it because it is a corner lot, it is detached, and it has larger lot and larger building areas. Therefore, the Subject Property’s current value would be below the time-adjusted sale value of $884.28 per square foot of building area.

32Sales 1 through 3 have time-adjusted sale values, per square foot of building area, ranging from $706.51 to $991.86. Each is superior in that they are zoned commercial, have larger lot sizes and larger finished interior building areas and are detached. As such, the Subject Property would not sell for more than the lowest of these values.

33Accordingly, I find that the current value is $813,900, ($706.51 x 1,152 sq. ft.).

Issue 3 - 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.

34Mr. Taylor took the position that his assessment is not equitable when compared to similar properties in the vicinity. He presented data and photographs of three direct neighbouring properties. All three are very similar properties in that they are semi-detached, zoned residential, with very similar building and lot sizes. One is the 338 Eglington Avenue East which is attached to the Subject Property. The other two, 342 and 344 Eglinton Avenue East, are two semi-detached properties next door to the Subject Property.

35Mr. Taylor presented the assessment data, obtained from the City of Toronto, for these three properties for the 2014 through 2019 taxation years. He adjusted the assessed values for the differences between the three properties and his property, namely, the cost to replace a kitchen, a four-piece bathroom, a partially finished basement, a private driveway and a garage. He presented no evidence to support the values used but concluded that, based on the adjustments, the Subject Property’s equitable value should be $513,833.

36Mr. Taylor’s evidence is that the City of Toronto has ordered him to cease his commercial activity due to the 2013 change in zoning.

37MPAC presented an Equity Analysis Report in which the assessments of 30 commercial properties, located within 2 kilometres from the Subject Property, were compared to their time-adjusted sale prices to determine the Assessment to Sales Ratio (“ASR”). The median ASR is 1.034 with a 16.7 coefficient of dispersion. MPAC takes the position that an ASR falling between 0.95 and 1.05 and a coefficient of dispersion less than 20 indicates that an adjustment to the current value for the purpose of equity is not required.

Findings on Equitable Reduction of the Current Value

38Clause 44(3)(b) of the Act provides that, in determining whether an adjustment of the current value is required to make it equitable, I must “have reference to the value at which similar lands in the vicinity are assessed”. The word “similar” is not defined in the Act.

39In Municipal Property Assessment Corporation v Loblaw Properties Limited, 2017 ONSC 1299, the Divisional Court contemplated the meaning of ‘similar lands’ in relation to clause 44(3)(b) of the Act. Referencing Trizec Equities Ltd v Ontario (Regional Assessment Commissioner, Region No 27), [1988] OJ No 182, 27 OAC 203, 37 MPLR 175, 8 ACWS (3d) 399 (“Trizec”) it found, at paragraph 25, that “the proper approach to be taken to determining what are ‘similar lands in the vicinity’ is that set out by Saunders J. in Trizec, that is, that all points of comparison must be considered”. In Trizec, the Court also determined that: “The Board must make a factual finding based on such a consideration. One point of similarity such as use may be, but is not necessarily, determinative. Some similarities may be overridden by other characteristics and some differences may be subordinated.”

40The evidence is that the Subject Property is zoned as residential and that the City of Toronto has ordered Mr. Taylor to comply with the 2013 change in zoning by ceasing his commercial activity. The evidence is that due to a 2013 zoning change, the Subject Property does not have a commercial market value, only a residential market value.

41Although the Subject Property is being used for commercial purposes, I accept Mr. Taylor’s evidence that the market for the Subject Property is restricted by the residential zoning. Therefore, I find that the zoning is a significant point of similarity. After considering all points of comparison, I find that similar properties are zoned residential, are semi-detached, with similar building age, similar building size, similar lot size and similar location.

42Therefore, the Appellant’s equity analysis is the best evidence presented for the purpose of determining equity. However, I am not satisfied that the adjustments Mr. Taylor made to the assessed values are accurate as he provided no evidence to support his adjustment values.

43Mr. Taylor presented the assessment phase-in values for the first three years of the four-year assessment cycle, namely, 2014 through 2019. Although the final, or ‘destination’ phase-in value for the assessments was not included they are easily calculated. The increases in assessments between the valuation days (January 1, 2012 and January 1, 2016) are phased in by 25% per year. Therefore, based on the evidence provided, the full assessments for these three properties can be calculated at $612,000 for 338 Eglinton Avenue East, $611,000 for 342 Eglinton Avenue East and $581,000 for 344 Eglinton Avenue East. The median of these three values is $611,000. This is the equitable value of the Subject Property.

CONCLUSION

44I find the classification of the Subject Property to be Commercial. The correct current value of this Subject Property is $813,900 for the 2017 to 2020 taxation years. Pursuant to s. 44(3)(b) of the Act, a reduction for equity is required. The equitable value is $611,000.

ORDER

45The Board orders that the assessment is reduced from $1,073,000 to $611,000 for the 2017, 2018, 2019 and 2020 taxation years in the Commercial Tax Class.