Tribunals Ontario
Tribunaux décisionnels Ontario
Assessment Review Board
Commission de révision de l’évaluation foncière
ISSUE DATE:
January 11, 2021
FILE NO.:
WR 167647
Assessed Person(s):
RY-Court Holdings Inc.
Appellant(s):
RY-Court Holdings Inc.
Respondent(s):
Municipal Property Assessment Corporation Region 16
Respondent(s):
Town of Collingwood
Property Location(s):
480 Hume Street
Municipality(ies):
Town of Collingwood
Roll Number(s):
4331-030-003-09900-0000
Appeal Number(s):
2970994, 3022588, 3087711 and 3155244
Taxation Year(s):
2013, 2014, 2015 and 2016
Hearing Event No.
736991
Legislative Authority:
Section 40 of the Assessment Act, R.S.O. 1990, c. A.31
APPEARANCES:
Parties
Representative
RY-Court Holdings Inc.
Allan Holmes
Municipal Property Assessment Corporation
Justin Johnstone
Town of Collingwood
No one appeared
HEARD:
December 1, 2020 by telephone conference call
ADJUDICATOR(S):
Subuola Awoleri, Member
DECISION
OVERVIEW
1Ry-Court Holdings Inc. (the “Appellant”), the owner of 480 Hume Street (the “Subject Property”), by its representative Allan Holmes, appeals the 2013 assessment of the Subject Property to the Assessment Review Board (the “Board”) under s. 40 of the Assessment Act, R.S.O. 1990, c. A.31 (the “Act”) on the grounds that the assessment is too high. The Appellant argues that the current value of the Subject Property should be $2,558,543. Section 40(26) of the Act provides that “… an appellant shall be deemed to have brought the same appeal in respect of a property…if the appeal is not finally disposed of by March 31 of the subsequent taxation year....”. The Appellant is deemed to have brought the same appeal in respect of the 2014 to 2016 taxation years.
2The Subject Property was assessed by the Municipal Property Assessment Corporation (“MPAC”) at $3,513,000 for the 2013 to 2016 taxation years in the commercial property tax class. MPAC requests that the Board confirms this current value assessment (“CVA”).
Preliminary Issue
3Pursuant to Rule 14 of the Board’s Rules of Practice and Procedure (the “Rules”) MPAC objected to Mr. Holmes, the Appellant’s representative, acting as both an advocate and a witness on behalf of the Appellant without first obtaining the leave of the Board. MPAC submits that although it will not suffer any prejudice, however, there is no guarantee that Mr. Holmes will provide an objective and fair testimony since his duty is to his client.
4At the hearing, Mr. Holmes asked the Board for leave to act as both an advocate and a witness or, in the alternative, for an adjournment to request leave. Mr. Holmes submits that the assessed owner, Mike Jackson, was available at the hearing as a witness. However, Mr. Holmes submits that the disclosure that was filed with the Board prior to the hearing was prepared by him and it will be unfair for Mr. Jackson to provide evidence on a document which he has no knowledge about the contents.
5MPAC submits that Mr. Holmes should have requested leave to be both advocate and witness prior to the hearing and objected to adjourning the hearing.
6MPAC only raised this objection when the Appellant wanted to present its evidence. MPAC did not identify any prejudice to it. This appears to be a technical objection by MPAC. The Board determined that although Mr. Holmes is technically in breach of Rule 14, nevertheless, pursuant to Rule 4 which provides that the Rules “shall be liberally interpreted to ensure the just, most expeditious and least expensive determination of every proceeding”, it granted leave for Mr. Holmes to act as both a witness and an advocate at the hearing. The Board may adjust the weight given to Mr. Holmes’ evidence, if on hearing the evidence, the Board is concerned about objectivity.
7At the completion of the hearing, the Board reserved its decision.
Issues for the Hearing
8The issues to be determined are:
What is the correct current value of the Subject Property for the 2013, 2014, 2015, and 2016 taxation years?
Is the current value as determined by the Board equitable in reference to the assessments of similar lands in the vicinity?
Result
9The Board determines the correct current value of the Subject Property to be $3,367,000 (rounded), in the commercial property tax class.
10The Board finds that there is no evidence to support a conclusion that the Subject Property requires a reduction in its determined current value in order to make it equitable with the assessment of similar properties in the vicinity.
11The Board reduces the assessment of the Subject Property from $3,513,000 to $3,367,000 (rounded) for the 2013, 2014, 2015 and 2016 taxation years.
ANALYSIS
Description of the Subject Property
12The Subject Property is a General Motors Automobile dealership. The dealership name is Mike Jackson GM, located in the Town of Collingwood. The Subject Property was built in 2005, with a total floor area of 23,039 square feet (“sq. ft.”), an office area of 3,264 sq. ft., a showroom area of 7,165 sq. ft. and site area of 3.76 acres. The Subject Property is zoned Highway Commercial (C5) zone.
Issue 1 - What is the correct current value of the Subject Property for the 2013 to 2016 taxation years?
13In accordance with s. 44(3)(a) of the Act, the first mandate of the Board is to determine “the current value of the land”. Section 1 of the Act defines current value 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”. That is, for the 2013 to 2016 taxation years, the Board must determine what the Subject Property would have sold for in an arm’s length transaction on the January 1, 2012 valuation day set by the Act.
14The best evidence the Board can receive of current value is an arm’s length and market-tested sale of the property on the valuation date or close to it. If, as in this case, no such transaction took place, the next best measure of current value is arm’s length and market-tested sales of comparable properties located nearby, as close as possible to the legislated valuation date of January 1, 2012.
15The Board finds that the current value of the Subject Property for the 2013 to 2016 taxation years to be $3,367,000 (rounded).
Valuation Methodology - Market Modified Cost Approach
16The cost approach to value is typically used when properties cannot be valued using the direct sales comparison or income approach to value. In the cost approach, the theory of substitution is used to estimate the value of the buildings/structures. The theory is based on the principle that a purchaser will not pay more for a property than it will cost to build a new one that performs the same function. However, the purchaser is not buying the replacement property but the Subject Property with its defects, therefore the cost approach takes into consideration the depreciation on the Subject Property, in order to arrive at the correct value of the Subject Property.
17Jeff Thompson, MPAC’s witness, testified that MPAC considers “an estimate of the losses in value that have taken place due to wear and tear, design and plan deficiencies or external influences”. Furthermore, Mr. Thompson added that MPAC obtained the value of the land using the sales of comparable properties in the vicinity. He testified that the value of the building and the estimate value of the land will result in an estimate value of the Subject Property.
Building/Improvement Value
18The Board finds that the value of the building is $2,261,848, with no deduction for functional (showroom) obsolescence.
19MPAC uses the Automated Cost System, a component-based cost system, to value major building components in place. MPAC provided the building replacement cost new (“RCN”) as $2,406,220, after factoring in only the life table depreciation of $144,372, the replacement cost new less depreciation (“RCNLD”) is $2,261,848. MPAC submits that the value of the building is $2,261,848 with no deduction for functional and economic obsolescence.
20The Appellant’s only objection to MPAC’s building value is that MPAC did not make any deduction for functional obsolescence.
21Mr. Thompson testified that for automobile dealerships, functional obsolescence is only applied to the showroom, since the quality and condition of the showroom is important to the viability of the business. Accordingly, it is sometimes referred to as “showroom” obsolescence. He added that MPAC only applied functional obsolescence to older car dealerships, and it is applied in the sixth year after its last renovation and not the year built. He further presented a table which showed the percentages of functional obsolescence depreciation to be applied based on the year of renovation. He also presented a table of the Town of Collingwood’s automobile dealerships, which showed that newer car dealerships, including the Subject Property, built between 2005 to 2014 did not qualify for showroom obsolescence. While some older car dealerships built between 1961 to 1992 qualified for showroom obsolescence from 12% to a maximum of 20%.
22Mr. Holmes argues that the Subject Property should qualify for a 28% deduction for showroom obsolescence in the amount of $325,757.60 from the 2013 to 2016 taxation years. He submits that MPAC’s reason for not making a deduction for showroom obsolescence is irrational, because there could not have been a renovation on the Subject Property since it is a new built from the valuation date of January 1, 2012. The Appellant asserts that the Subject Property suffers from functional obsolescence based on an e-mail sent by an MPAC employee, David Zhao, about how showroom obsolescence was applied to three car dealerships in the Town of Collingwood. Mr. Holmes submits that since MPAC applied showroom obsolescence to these three car dealerships, the Subject Property should also benefit from it. He submits that the value of the building should be $2,144,943.
Findings on Building Value
23To support its argument that the Appellant does not qualify for functional obsolescence, MPAC cites the decision in Armstrong Inc. v. Municipal Property Assessment Corp. Region 17, [2015] O.A.R.B.D. No. 268 (“Armstrong”). In Armstrong, Mr. Holmes represented the appellant, the owner of a building, which was used as an automobile dealership. The appellant argued partly that MPAC failed to consider functional obsolescence in its assessment of the property. The appellant requested for a reduction for depreciation and traffic. The Board determined at paragraph 24 that:
Mr. Holmes provided an argument to the assessment but failed to support it with facts. In the absence of a detailed explanation of the value he believes is lost in his examples of functional obsolescence and economic obsolescence, Mr. Holmes' evidence was of a speculative nature at best and of little assistance to the Board. Reports from a builder or contractor may have assisted in identifying structural depreciation in contrast to cosmetic depreciation, while the evidence presented on this issue by the Appellant merely raises the possibility that one or both forms of deterioration exists without providing specifics.
24In this appeal, the Board finds that the Appellant was unable to substantiate its argument with facts. The Appellant did not provide the Board with how it arrived at the ratio for showroom obsolescence and the factual basis to support this deduction. The three automobile dealerships the Appellant provides as qualifying for showroom obsolescence were also presented in MPAC’s evidence. They have effective years built of 1961, 1984 and 1992 respectively with a deduction of 12% to 20% for showroom obsolescence. This corroborates Mr. Thompson’s testimony, and MPAC’s submission, that newer car dealerships do not qualify for showroom obsolescence. The Subject Property was built in 2005 and it is only seven years from the 2012 CVA, therefore, it is a new built from the valuation date and does not qualify for showroom obsolescence.
25The Board determines that the value of the building is $2,261,848, with no deduction for functional (showroom) obsolescence.
Land Value
Proposed Comparable Property Sales
26MPAC used the direct comparison approach to provide the land value for the Subject Property. According to Mr. Thompson, this approach “uses the sale prices of properties that have sold of a similar nature to develop market-driven price adjustments to value a subject property”.
27The Board prefers sales of comparable properties within 12 months on either side of the valuation date of January 1, 2012, referred to as the shoulder years. The Board can also go as far back as 18 months on either side of the valuation date of January 1, 2012. The caution being that the further a sale is from the valuation date, the less likely it reflects the market value on the valuation date.
28MPAC presented sales of 10 proposed comparable properties. According to Mr. Thompson, seven of these sales are located within the immediate vicinity to the Subject Property, while three of the sales are located outside the immediate vicinity but still within the Town of Collingwood. MPAC used vacant land sales and the land residual from an improved sale. Mr. Thompson testified that the sale land residue is calculated by deducting the RCNLD from the sale price.
29Mr. Thompson testified that the market vicinity of the Subject Property is “properties having frontage of Highway 26 leading into Collingwood, Pretty River Parkway or Hume Street”. He added that Highway 26 runs into Collingwood from the South, reaches a major intersection where it splits into Hume Street and Pretty River Parkway.
30The details of MPAC’s proposed comparable property sales are provided in Table 1 (see Attachment 1 to this decision).
31The Appellant did not present any comparable property sales for the Board to determine the current value of the Subject Property. Mr. Holmes presented three commercial land properties that are on Highway 26, which he testified are exposed to traffic, while the Subject Property does not face Highway 26, but Hume Street. He argues that these three properties have 181% higher traffic counts than the Subject Property. He added that this feature makes these three properties more valuable than the Subject Property, which he submits makes commercial business more viable. Consequently, Mr. Holmes submits that the land value of the Subject Property should be $110,000 per acre. He submits that he used economies of scale and the fact that the three properties are more valuable than the Subject Property to arrive at the land value of the Subject Property at $110,000 per acre, to provide a land value of $413,600.
32During cross-examination, Mr. Holmes could not justify how he quantified the traffic count to the assessed value of the Subject Property. He advised the Board that he provided a table which shows the traffic count on Highway 26. The Board and the parties could not view this document as it was not legible. Mr. Holmes arbitrarily provided the land value to be $110,000 per acre, without any evidence to quantify his adjustment and even though Mr. Jackson admitted during cross-examination that he purchased the Subject Property in 2004 for $700,000. Mr. Jackson added that he paid more money than the Subject Property was worth because he was need driven due to the urgency to move from the previous location and he did not want to make 50 of his employees unemployed.
33There was no evidence to quantify the downward adjustment made by the Appellant to the land value. Evidence is required to quantify or measure the impact of any unique situation against the assessed value of the Subject Property. The Board cannot speculate or arbitrarily calculate an impact to the Appellant’s assessed current value. Accordingly, the Board cannot make any downward adjustment to the current value of the Subject Property without quantitative evidence.
Finding on Land Value
34In determining the land value of the Subject Property, the Board used MPAC’s proposed comparable sales. The Board determines that MPAC’s comparable property Sale 1 is the best comparable property to the Subject Property. This comparable property sold as a vacant commercial land with no improvements. It has the same zoning as the Subject Property. It sold March 2011 for $310,000, which is within 12 months of the valuation date of January 1, 2012. This comparable property sale has a site area of 0.55 acres, which is smaller than the Subject Property, however, MPAC made an adjustment for economies of scale. MPAC provided a map showing the location of all its proposed comparable property sales. The location of comparable property Sale 1 is within the market vicinity of the Subject Property.
35The Board will disregard comparable property Sales 2, 3, 4, 7, and 8 as their sales dates range from July 2007 to September 2014, which are too far removed from the valuation date of January 1, 2012. The further a sale is from the valuation date, the less likely it reflects the market on the valuation date.
36The Board finds that comparable property Sales 9 and 10 are not comparable to the Subject Property due to their location. Unlike the other MPAC comparable property sales, MPAC did not provide the zoning for these sales. Mr. Thompson testified that these properties are not located in the market vicinity of the Subject Property, which are properties having frontage on Highway 26 leading to the Town of Collingwood, Pretty River Parkway or Hume Street. He added that these property sales are on a superior location and the purpose of adding these property sales was due to expanding his search area for vacant land sales.
37The Board determines that comparable property Sales 5 and 6 are not comparable to the Subject Property. These properties sold as retail properties, not as vacant commercial land and were purchased by willing buyers as retail properties with improvements. The purchase price reflects the value of the land and the improvements. The deduction of the RCNLD is based on MPAC’s system of valuation of properties.
38The Board used MPAC’s comparable property Sale 1, being the best comparable property to the Subject Property to determine the land value of the Subject Property. The adjusted sale land residue1 provided by MPAC for this sale is $293,880, applying this against the site area of the Subject Property of 3.76 acres provides a land value of $1,104,988.80. The Board finds that the land value of the Subject Property is $1,104,988.80.
Findings on Current Value
39The Board determines that the current value of the Subject Property is $3,367,000 (rounded) being the value of the building $2,261,848 and the land value of $1,104,988.80.
Issue 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.
40Section 44(3)(b) of the Act directs that after determining current value, the Board shall 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.
41The goal of the Act is to determine the correct current value of properties. Any equitable reduction in the current value results in an incorrect current value. Consequently, an equitable reduction should only be made where there is clear evidence to support that such a reduction is warranted. In this regard, the burden of proof rests with the party that alleges that it would be inequitable to assess the Subject Property at its current value, and in this appeal is the Appellant. The Appellant has to establish, on a balance of probabilities, that an equitable reduction is required.
42The Appellant did not raise this issue in its Statement of Issues, and it did not present any evidence on the appropriate reduction based on equity.
43The Board finds that there is no evidence provided by the parties to support a reduction in the current value of the Subject Property, in order to make it equitable with the assessment of similar properties in the vicinity.
44The Board determines that the correct current value of the Subject Property is $3,367,000 (rounded) with no equitable adjustment.
CONCLUSION
45The Board determines that the current value of the Subject Property is $3,367,000 (rounded) in the commercial property tax class, with no adjustment for equity.
ORDER
46The Board orders that the assessment of the Subject Property is reduced from $3,513,000 to $3,367,000 (rounded) for the 2013, 2014, 2015 and 2016 taxation years.
“Subuola Awoleri”
SUBUOLA AWOLERI
MEMBER
Assessment Review Board
Website: www.tribunalsontario.ca/arb
Telephone: 416-212-6349 Toll Free: 1-866-448-2248
Table 1
Subject Property
Sale 1
Sale 2
Sale 3
Sale 4
Sale 5
Sale 6
Sale 7
Sale 8
Sale 9
Sale 10
Roll Number
4331 030 003 09900
4331 030 003 13900
4331 020 002 11701
4331 020 002 11704
4331 020 001 11600
4331 030 003 12000
4331 030 003 08300
4331 020 001 05400
4331 080 007 15102
4331 010 001 06336
4331 050 002 17700
Property Location
480 Hume Street
39 Elliot Avenue
298 Pretty River Parkway North
284 Pretty River Parkway
143 Hume Street
10138 Highway 26
336 Hume Street
297 St. Marie Street
804 Hurontario Street
25 Huron Street
4 High Street
Property Code
422-Car Dealership
105
520
520
422
410
406
405
105
105
105
Property Use Description
Mike Jackson GM
Vacant commercial land
Retail
Commercial
Retail Plaza
Retail
Retail
Small Office
Vacant commercial land
Vacant commercial land
Vacant commercial land
2012CVA
$3,513,000
351000**
$764,000*
$650,000
$1,161,000
$646,000
$277,000
$350,000
$515,000
$1,128,000**
$664,000**
Zoning
C5
C5
C5
C5
C4-1
C5
C4
C1
C5
Valuation Method
Cost
Cost
Cost
Cost
Cost
Cost
Cost
Cost
Cost
Cost
Cost
ASR
1.13
1.09
0.92
1.06
0.96
0.99
1.06
1.00
0.97
1.00
Sale Date
15-Mar-2011
1-Jun-2007
24-Jun-2010
26-Sep-14
30-Mar-12
16-Nov-2010
15-Dec-2009
30-Sep-2013
10-Aug-12
19-Dec-2011
Sale Amount
$310,000
$700,000
$710,000
$1,100,000
$670,000
$275,000
$329,000
$515,000
$1,165,000
$665,000
Sale Type Suffix
Vacant land**
Commercial
Commercial
Commercial
Commercial
Commercial
Commercial
Vacant Land
Vacant Land**
Vacant Land**
Instrument Number
SC889011
SC549247
SC831371
SC1163055
SC972082
SC866092
SC789949
SC1003325
SC953350
Site Area
3.76
0.55
1.19
0.52
0.71
0.68
0.25
0.17
1.74
1.36
1.02
Site Area UOM
A
A
A
A
A
A
A
A
A
A
A
Total Land Value from 2012CVA
$1,251,715
$351,164
$506,151
$321,297
$382,698
$373,866
$220,935
$199,667
$515,000
$1,128,000
$664,000
Number of Stories
1
1
1
1
1
1
2
Total Floor Area
23,039
7,737
7,290
8,105
5,094
2,153
2,410
Basement or Total Interior Office Area or Mezzanine
3,264
Int. Off-3403
Int. Off-2796
Bsmt-989
Effective Year Built
2005
1974
1990
1995
1980
1936
1970
Total Property RCN
$2,406,220
$554,275
$567,308
$1,002,747
$610,267
$129,315
$358,589
Total Building RCNLD
$2,261,848
$258,724
$329,038
$779,091
$272,860
$56,634
$150,609
Total Obsolescence
$0
Total Building Net Value (RCNLD)
$2,261,848
$258,724
$329,038
$779,091
$272,860
$56,634
$150,609
Table 1 - continued
Subject Property
Sale 1
Sale 2
Sale 3
Sale 4
Sale 5
Sale 6
Sale 7
Sale 8
Sale 9
Sale 10
Total Property Value Rounded
$3,513,000
$351,000
$764,000
$650,000
$1,161,000
$646,000
$277,000
$350,000
$515,000
Sale Land Residual - (calculated by deducting RCNLD from the sale price or using vacant land sale)
$310,000
441,276
$380,962
$320,909
$397,140
$218,366
$178,391
$515,000
$1,165,000
$665,000
Sale land residual Rate Per Acre
$563,636
$370,820
$732,619
$451,985
$584,029
$873,464
$1,049,359
$295,977
$856,618
$651,961
2012CVA Land Rate per Acre
$332,903
638,480
425,337
617,879
539,011
549,803
883,740
1,174,512
$295,977
$829,412
$650,980
Adjusted Sale land residual per Acre sale land residual adjusted for economies of scale and location by relating the land 2012 CVA of the sale to the subjects land 2012 CVA
$293,880
$290,234
$394,723
$279,154
$353,627
$329,032
$297,430
$332,903
$343,823
$333,404
Calculation Details:
332,903/638,480 x 563,636
332903/425,337 x 370,820
332,903/617,879 x 732,619
332,903/539011 x 451,985
332,903/549,803 x 584,029
332,903/883,740 x 873,464
332,903/1,174,512 x 1,049,359
332,903/295,977 x 295,977
332,903/829,412 x 856,618
332,903/650,980 x 651,961
Predicted Value for the subject property using the adjusted sale land residual per acre with the subjects land size and building value
$3,366,835
$3,353,127
$3,746,007
$3,311,466
$3,591,485
$3,499,008
$3,380,183
$3,513,563
$3,554,621
$3,515,448
Calculation Details:
(293,880 x 3.76 A) + 2,261,848 (RCNLD)
(290,234 x 3.76 A) + 2,261,848 (RCNLD)
(394,723 x 3.76 A) + 2,261,848 (RCNLD)
(279,154 x 3.76 A) + 2,261,848 (RCNLD)
(353,627 x 3.76 A) + 2,261,848 (RCNLD)
(329,032 x 3.76 A) + 2,261,848 (RCNLD)
(297,430 x 3.76 A) + 2,261,848 (RCNLD)
(332,903 x 3.76 A) + 2,261,848 (RCNLD)
(343,823 x 3.76 A) + 2,261,848 (RCNLD)
(333,404 x 3.76 A) + 2,261,848 (RCNLD)
*2012CVA at time of sale **2012CVA of Vacant Land, property has been improved after vacant land sale
ASR - Assessment to Sale Ratio, RCN = Replacement Cost New, RCNLD = Replacement Cost New Less Depreciation, CVA = Current Value Assessment, UOM=Unit of Measure
Average ASR=1.02, Median ASR=1.00
Copyright © reserved to Municipal Property Assessment Corporation (MPAC) and its suppliers. Copying or distribution, in whole or in part, is prohibited without the written permission of MPAC. Data, including values, could change.