Jason (Jake) and Alison Ryan v. Municipal Property Assessment Corporation Region 03, 2021 CanLII 15223

Tribunals Ontario

Tribunaux décisionnels Ontario

Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE: February 23, 2021

FILE NO.: WR 167846

Assessed Person(s): Jason (Jake) and Alison Ryan

Appellant(s): Jason (Jake) and Alison Ryan

Respondent(s): Municipal Property Assessment Corporation Region 03

Respondent(s): City of Ottawa

Property Location(s): 2900 Jockvale Road

Municipality(ies): City of Ottawa

Roll Number(s): 0614-120-768-07100-0000

Appeal Number(s): 3392325 and 3397492

Taxation Year(s): 2019 and 2020

Hearing Event No.: 736064

Legislative Authority: Sections 32 and 40 of the Assessment Act, R.S.O. 1990, c. A.31

APPEARANCES:

Parties	Representative
Jason and Alison Ryan	Jason Ryan, Alison Ryan
Municipal Property Assessment Corporation	Jonathan Lapp
City of Ottawa	No one appeared

HEARD: November 9, 2020 by telephone conference call

ADJUDICATOR: Anthony LaRegina, Member

DECISION

OVERVIEW

1Jason and Alison Ryan (the “Appellants”) filed appeals for the 2019 and 2020 taxation years with the Assessment Review Board (the “Board”) regarding their property located at 2900 Jockvale Road (“Subject Property”) in the City of Ottawa (“City”). It is the Appellants’ position that the Municipal Property Assessment Corporation (“MPAC”) incorrectly classified the Subject Property as Commercial CT for the 2019 taxation year. At this hearing, MPAC has taken the position that the Commercial classification should include the period from January 1, 2019 to September 12, 2019.

2Both Parties agree that the classification should be revised to Residential Full from September 13, 2019 to December 31, 2019 and that the 2020 classification should remain as Residential Full.

3Both Parties are also in agreement with the returned current value assessment (“CVA”) of $391,000 for both 2019 and 2020 taxation years.

Issue for the Hearing

4At issue in this proceeding is a determination of the classification of the Subject Property from January 1, 2019 to September 12, 2019.

Result

5The Board finds that the classification of the Subject Property is Commercial CT from January 1, 2019 to September 12, 2019.

ANALYSIS

Description of Subject Property

6The Subject Property is a single-family detached residence located at 2900 Jockvale Road in the City of Ottawa. In and around 2013, the Appellants made an application to the City allowing them to convert this property for daycare usage. The Subject Property was then renovated to house a daycare and leased to Pickles and Poppets Day Care, which used the premises to run a for-profit daycare operation. The current zoning imposed by the City is “Residential Second Density Zone (R2M)” with exception number 1562 which permits the operation of a daycare at the Subject Property.

Legal Framework

7Section 32 of the Assessment Act states that:

Correction of errors, etc., in assessment roll

32(1) Despite the delivery of any notice provided for under this Act, the assessment corporation at any time before the time fixed for the return of the assessment roll may correct any defect, error, omission or misstatement in any assessment and alter the roll accordingly.

Same, factual error only

(1.1) Despite the delivery of any notice provided for under this Act, for 2009 and subsequent taxation years, the assessment corporation may, at any time during the taxation year, correct any error in the assessment or classification of a property that has resulted from incorrect factual information about the property, and not from a change in opinion as to current value, and the following rules apply:

1. If the land is located in a municipality, the clerk of the municipality shall alter the tax roll upon receiving notice of the correction, and the municipality shall,

i. refund or credit to the owner the amount of any overpayment of taxes and any interest paid by the owner on the amount of the overpayment, or

ii levy and collect from the owner any additional taxes that have become payable as a result of the correction.

Change in classification

32(2) The following rules apply if, as a result of a change in the regulations made under this Act or the Education Act, the classification of land is changed and taxes have been levied on the land that exceed the amount of taxes that would have been levied on the land if it had been classified in accordance with the change in the regulations:

1. The assessment corporation shall make any assessment necessary to change the classification.

2. If the land is located in a municipality, the clerk of the municipality shall alter the tax roll upon receiving notice of the change, and the municipality shall refund or credit to the owner the amount of any overpayment and any interest paid by the owner on the amount of the overpayment.

8Section 3 of Ontario Regulation 282/98 states that:

3.(1) The residential property class consists of the following:

3(1)2. Land not used for residential purposes that is, …

ii. land used by a non-profit organization for childcare purposes that is either,

A. land owned by the organization, or

B. land leased by the organization, other than land that would otherwise be in the commercial property class or the industrial property class,

9Section 5 of Ontario Regulation 282/98 states that:

5(1) The commercial property class consists of the following:

1. Land and vacant land that is not included in any other property class.

Appellants’ Case

10The Appellants submit that in and around 2013 they applied for a Commercial zoning with the City to allow them to operate a daycare on the premises of the Subject Property. The City approved the daycare but left the zoning as Residential Second Density with a 1562 permit allowing the operation of the daycare. The Appellants admit that the Subject Property has been used as a for-profit daycare from 2013 until September 12, 2019, when the daycare closed.

11The Appellants further submit that after 10 years of operation MPAC is now attempting to change the classification to Commercial, which means that they are required to pay the higher commercial rate of taxation when the Subject Property is still zoned as Residential.

12The Appellants argue that if the City charges the commercial rate based on the use of the Subject Property then it should change the zoning to Commercial from Residential.

13The Appellants enter into evidence a letter from Susan Carkner, Assistant to Councillor Jan Harder, Ward 3 Barrhaven in the City. The letter is addressed to the Appellants and explains that it was less expensive to amend the Residential zoning to allow the daycare and that a daycare was the only other permissible use on the Subject Property. Ms. Carkner also explained that the rate of taxes paid is based on the daycare being a for-profit operation and not the zoning of the Subject Property. Ms. Carkner’s letter further explains that zoning and usage of the building have nothing to do with each other. Zoning addresses what you can have on the property while usage of the building is the basis for classification and therefore the taxation rate.

14The Appellants at this point revise their position and admit that the Commercial classification may be correct but they were not aware of the change until June 20, 2019 and therefore, assert that it is unreasonable that the change in classification should begin as of January 1, 2019. During cross-examination Mr. Ryan is asked how the Appellants determined the classification had been changed if, as he claimed, they did not receive the notice from MPAC. Mr. Ryan responded that he could not remember how he became aware of the change in classification.

15The Appellants submit that they should only be required to pay three months of taxation at the higher rate and therefore, request the Board to revise the classification from Residential RU RT to Commercial CT from June 20, 2019 to September 12, 2019, reflecting the day they became aware of the change in classification to the day Pickles and Poppets Day Care vacated the Subject Property.

MPAC’s Case

16MPAC submits the Appellants listed the Subject Property on Multiple Listing Service (MLS®) claiming that the Subject Property has huge cash flow potential for the right investor and that it would be perfect for a Doctor, Lawyer or Dentist. Also stating that it was a residential property zoned for a Day Care and that the seller had done the preliminary work to change the zoning to Commercial. The property was listed at $1,100,000.

17MPAC inspected the property on March 5, 2019 and confirmed that the Subject Property was incorrectly classified and needed to apply the commercial tax class as the entire property was used exclusively for daycare purposes. MPAC confirmed that the daycare, Pickles & Poppets was housed on the premises operating a for-profit daycare center.

18MPAC issued a Post Role Assessment Notice (“PRAN”) on March 29, 2019 requesting a change to the classification from Residential RU RT to Commercial CT back dated to January 1, 2019. There was no change requested to the CVA of the Subject Property valued at $391,000.

19MPAC claims the Appellants contacted MPAC during the month of June 2019 to inquire as to the reason for the classification change which had occurred. MPAC emailed the Appellants the Assessment Act regulation which is associated with tax classification required for daycare centres, specifically O. Reg. 282/98 section 3(1).2.ii and section 5(1).1.

20MPAC responded to the Request for Reconsideration (RFR), which was filed by the Appellants on July 29, 2019, stating that it would not increase the valuation of the Subject Property due to the commercial use however, the entire use of the Subject Property is a for-profit daycare centre. O. Reg. 282/98 dictates that the commercial classification applies therefore the Subject Property has been correctly assessed as Commercial CT.

21In October 2019, MPAC further learned that Pickles and Poppets Day Care vacated the Subject Property on September 12, 2019. MPAC confirmed this information by inspecting the property and subsequently changed the classification back to Residential RU RT from Commercial CT based on the use as of September 13, 2019.

22MPAC requests the classification be confirmed as Commercial Full CT from January 1, 2019 to September 12, 2019.

CONCLUSION – Classification of the Subject Property

23The Board agrees with MPAC and the City that the classification of a property is based on the use of the Subject Property and not the zoning. According to O. Reg. 282/98, section 3(1)2.ii only a non-profit organization using a property for childcare purposes falls in the Residential property class. In this case, the Pickles and Poppets Day Care was run as a for-profit operation and therefore, falls in the Commercial property class as per O. Reg. 282/98 section 5(1)1.

24At the time of the inspection, which occurred on March 5, 2019, Kate Hazelton, MPAC’s inspector, witnessed that the entire property was being used as a for-profit daycare operation supporting the Commercial classification. On March 29, 2019 MPAC issued a PRAN under s. 32 to correct the error in classification.

25Mr. Ryan submitted in his evidence that he received $5,000 per month from the daycare and that Pickles and Poppets Day Care had three locations in the Ottawa area when the business filed for bankruptcy in 2019. They vacated the Subject Property on September 12, 2019 leaving the Appellants with the outstanding tax bill. This evidence further supports that this was a for-profit daycare operation which had leased the Subject Property from the Appellants.

26Initially, the Appellants were somewhat doubtful that the change in classification was legitimate as the property remained in the Residential classification since the daycare began operation around 2013. It was only when MPAC did the inspection in March 2019 that MPAC discovered the classification was incorrect and that the Subject Property went all these years with the incorrect classification.

27The fact that the Appellants did not know and could not remember how they learned about the change in classification until June 20, 2019 is unfortunate considering MPAC claims the notice was sent out in March. Regardless, this does not change the fact that the Subject Property was being used as a for-profit daycare since 2013 and not reflected in MPAC’s records until 2019 when MPAC noticed the Subject Property was for sale.

28Based on the foregoing, the Board is in agreement with MPAC that the classification of the Subject Property should be changed from Residential RU RT to Commercial CT as of January 1, 2019 to September 12, 2019 and that the classification be changed back to Residential Full starting September 13, 2019 to reflect that Pickles and Poppets Day Care vacated the Subject Property.

ORDER

29The Board finds that the correct classification of the Subject Property is Commercial CT between January 1, 2019 and September 12, 2019. The classification changes back to Residential RU RT from September 13, 2019 to December 31, 2020.