Tribunals Ontario Tribunaux décisionnels Ontario Assessment Review Board Commission de révision de l’évaluation foncière

ISSUE DATE: April 16, 2021

FILE NO.: WR 168848

Assessed Person(s): 1174757 Ontario Inc.

Appellant(s): 1174757 Ontario Inc., Ashak Merani

Respondent(s): Municipal Property Assessment Corporation Region 18

Respondent(s): City of Niagara Falls

Property Location(s): 5781 Ellen Avenue

Municipality(ies): City of Niagara Falls

Roll Number(s): 2725-030-003-04905-0000

Appeal Number(s): 3320190, 3362899, 3407967 and 3446699

Taxation Year(s): 2018, 2019,2020 and 2021

Hearing Event No. 737584

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

APPEARANCES:

Parties	Representative
1174757 Ontario Inc., Ashak Merani	Michael Marsch, Paula Mastrangelo
Municipal Property Assessment Corporation	Michael Radan
City of Niagara Falls	Amber Ferguson (observing)

HEARD: March 2, 2021 by video conference call

ADJUDICATOR(S): Subuola Awoleri, Member

DECISION

OVERVIEW

11174757 Ontario Inc. (the “Appellant”), the owner of 5781 Ellen Avenue (the “Subject Property”), appealed the 2018 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 ground that the assessment is too high.

2The Appellant argues that the current value of the Subject Property should be $1,920,837. The Appellant is deemed to have brought the same appeal in respect of the 2019, 2020 and 2021 taxation years, pursuant to s. 40(26) of the Act.

3The Subject Property was assessed by the Municipal Property Assessment Corporation (“MPAC”) at $2,620,000 for the 2018 to 2021 taxation years in the commercial property class. MPAC requests that the Board confirms this current value assessment (“CVA”).

4At the completion of the hearing, the Board reserved its decision.

Issues for the Hearing

5The issues to be determined are:

1. What is the correct current value of the Subject Property for the 2018, 2019, 2020, and 2021 taxation years?

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 determines the correct current value of the Subject Property to be $2,620,000 (rounded), as returned in the commercial property class.

7The Board finds that no equitable reduction of the correct current value of the Subject Property pursuant to s. 44 (3)(b) of the Act is required.

ANALYSIS

Description of the Subject Property

8The Subject Property is a commercial/industrial property improved with a theatre and located in the City of Niagara Falls. It is located less than 500 meters from Victoria Avenue and Centre Street/Clifton Hill intersection. The Subject Property has a weighted average year built of 1970, with a total floor area of 40,270 square feet (“sq. ft.”), and an effective and actual site area of 2.24 acres.

Issue 1 - What is the correct current value of the Subject Property for the 2018 to 2021 taxation years?

9In 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 2018 to 2021 taxation years, the Board must determine what the Subject Property would have been sold for in an arm’s length transaction on the January 1, 2016 valuation day set by the Act.

10The 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, 2016.

11The Board finds the current value of the Subject Property for the 2018 to 2021 taxation years to be $2,620,000 (rounded).

Valuation Methodology - Cost Approach

12In 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. The value of the building and the estimate value of the land will result in an estimate value of the Subject Property.

13MPAC used the cost approach to obtain the CVA of the Subject Property at $2,620,000. MPAC submits that the CVA is reasonable and below the sales of similar properties within the vicinity.

14The parties agree on the value of the improvement (building) at $1,019,917 for the 2018, 2019, 2020 and 2021 taxation years.

Land Value

MPAC’s Proposed Comparable Property Sales

15MPAC used the direct comparison approach based on sales of similar properties in the vicinity to confirm the total value of the Subject Property as assessed at $2,620,000. Vincent Pascuzzi, MPAC’s witness, testified that the land value of the Subject Property at $1,600,132.50, was obtained from MPAC’s model. However, he added that the market sales of similar properties in the vicinity, provided by MPAC in its valuation report, shows that the land value is reasonable and below the sales of similar properties within the vicinity.

16MPAC presented sales of four proposed comparable properties. Mr. Pascuzzi testified that there are not many sales of similar properties in the vicinity of the Subject Property within the valuation date of January 1, 2016. Consequently, MPAC provided sales of comparable properties with sale dates ranging from December 2011 to July 2020.

17The details of MPAC’s proposed comparable property sales are provided in Table 1 below.

Table 1

Market Analysis Grid

	Subject Property	Property #1	Property #2	Property #3	Property #4
Roll Number	2725-030-0030-4905	2725-030-008-01700	2725-100-005-04100	2725-030-003-00300	2725-030-002-16100
Address	5781 ELLEN AVE	6170 FALLSVIEW BLVD	8585 LUNDY'S LANE	5019 CENTRE ST	5651 RIVER RD
Neighbourhood	Q15 – 4021	Q19 - 4021	Q05 - 4026	Q15 - 4021	Q11 - 4021
Property Code & Desc.	(416) Concert Hall/Live Theatre	(415) Cinema/Movie House/Drive-In	(411) Restaurant - Conventional	(411) Restaurant - Conventional	(730) Museum And/Or Art Gallery
Distance in km		0.8095	5.0838	0.2127	0.8584
Valuation
Current Value Assessment	$2,620,000	$5,152,000	$857,000	$868,000	$4,972,000
Total Land Value	$1,600,132.5	$3,692,545.87	$338,174.89	$330,294.01	$421,719.64
Sale
Sale Date		2014-03-20	2020-07-14	2016-04-12	2011-12-15
Sale Amount		$5,050,000	$1,600,000	$975,000	$4,285,000
Time Adjusted Sale Amount		$5,591,293	$946,320	$943,529	$5,149,857
Site
Effective Site Area (Acres)	2.24	2.55	1.04	0.18	0.88
Actual Site Area (Acres)	2.24	2.55	1.04	0.88
Source Improvements
Total Floor Area (SF)	40,270	21,825	8,048	13,294	51,570
Weighted Average Year Built	1970	1980	1999	1929	1958
Total Improvement Value	$1,019,917.03	$1,460,441.56	$519,479.28	$537,994.88	$4,550,994.36

Appellant’s Proposed Comparable Property Sales

18The Appellant presented two proposed comparable property sales, 5611 North Street and 8585 Lundy’s Lane. Both MPAC and the Appellant used 8585 Lundy’s Lane in their sales analysis, which will be further analyzed as Sale 2 below.

19The CVA of 5611 North Street is $1,087,000. It has a site area of 5.23 acres and a gross floor area of 78,088 sq. ft. Mr. Pascuzzi testified that MPAC did not use 5611 North Street, because it has an industrial zoning compared to the Subject Property that has a tourist/commercial zoning. MPAC submitted that a property with an industrial zoning may have commercial uses but not as much as a tourist/commercial zoning, and since the zoning determines the land value, an industrial property will have a lower value due to its zoning, as was the case for 5611 North Street which has a site area of 5.23 acres but a low land value of $466,058.

20Michael Marsch, the representative of the Appellant, testified that 5611 North Street was presented because the Appellant was the owner of this property and sold it in 1996 for $2,000,000, and its assessed value of $1,087,000 is less than the assessment of the Subject Property at $2,620,000. Mr. Marsch submitted that this shows that the Subject Property is unfairly assessed.

21The Board finds that 5611 North Street is not comparable to the Subject Property. A property with an industrial zoning will have a lower value than a property with a tourist/commercial zoning, as admitted by the Appellant during cross-examination. Furthermore, the Appellant did not use this property sale to make submissions on the current value of the Subject Property. The Appellant used 8585 Lundy’s Lane and MPAC’s property Sale 4 to obtain $402,196 as the land rate per acre and further applied it to the site area of the Subject Property at 2.24 acres to arrive at $900,920.66, which the Appellant argued as the land value of the Subject Property.

Finding on Land Value

22In determining the land value of the Subject Property, the Board reviewed and used the sales presented by MPAC and the Appellant. The Board reviewed the characteristics of each of the proposed comparable property sales. The Board notes that based on the parties’ evidence, the closer the proposed comparable properties are to the downtown core of Niagara Falls, the higher the land value due to the attraction to tourist traffic.

Sale 1 - 6170 Fallsview Boulevard

23The Board agrees with the parties that this property is superior to the Subject Property, due to its location on Fallsview Boulevard, which has more tourist attraction. This property has the largest site area of 2.55 acres among the four sales. The Board notes that this sale is less than 1 kilometer (“km”) from the Subject Property. It was sold in March 2014 for $5,050,000, which leads to a time-adjusted sale price of $5,591,293. The total land value is $3,692,545.87. The land rate per acre is $1,448,057.

Sale 2 - 8585 Lundy’s Lane

24MPAC submitted that this property is 5.0838 km from the main downtown core commercial area of Niagara Falls. MPAC argued that based on its location, this property is inferior to the Subject Property. This property was sold in July 2020 for $1,600,000, which leads to a time-adjusted sale price of $946,320. The site area is 1.04 acres. The land value of this property is $338,174.89, with a land rate per acre of $325,167.

25The Appellant used this sale to provide the Board with the land value of the Subject Property. The Appellant argued that this is the most similar property to the Subject Property since it has the same use as the Subject Property as a dinner theatre and it is also located in a busy commercial area that attracts car traffic. The Board finds that this property is inferior to the Subject Property due to its location. As reviewed on the map presented by MPAC in evidence, it is not located near the Subject Property compared to the other comparable property sales and lacks exposure to tourist traffic like the Subject Property.

Sale 3 - 5019 Centre Street

26MPAC argued that this property is slightly superior to the Subject Property due to its location, being closer to Clifton Hill area of Niagara Falls, and will have greater exposure to tourist traffic. The Appellant argued that this property is different from the Subject Property and it has a smaller site area of 0.18 acres. It was sold in April 2016, for $975,000, leading to a time-adjusted sale price of $943,529. The land value of this property is $330,294.01, with a land rate per acre of $1,834,966.

27This is the only sale within the shoulder years of the valuation date, which is within 12 months on either side of the valuation date. Using only this property sale to determine the current value of the Subject Property will provide a current value out of the range of sales of similar properties in the vicinity.

28The Board agrees with the Appellant that the site area of this property is smaller than the Subject Property’s site area of 2.24 acres, however, it is only 212 meters from the Subject Property, making it the closest comparable property sale to the Subject Property. This sale has the same property code of 411 (restaurant) as comparable property Sale 2 that the Appellant preferred to use to make submissions on the current value of the Subject Property. MPAC did not make any adjustment for economies of scale, therefore the Board determines that this comparable property sale is superior and not slightly superior to the Subject Property due to its location and size.

Sale 4 - 5651 River Road

29This property was sold in December 2011 for $4,285,000, leading to a time-adjusted sale price of $5,149,857. It has a site area of 0.88 acres with a land value of $421,719.64. The land rate per acre is $479,226. MPAC argued that this property is slightly superior to the Subject Property due to its location close to Rainbow Bridge, which is a major entry point for tourists into Niagara Falls. The Appellant agreed that this property is superior to the Subject Property for the same reason. Mr. Marsch argued that using this property sale, together with comparable property Sale 2 (an inferior property) will “even things out.” During cross-examination, he did not provide a response when he was asked why he preferred to use this property, rather than Sale 1, which is 6-7 minutes’ drive from the Subject Property, and is similar in size to the Subject Property.

30The Board finds that this property is superior to the Subject Property due to its location.

Land Value

31The average land rate per acre of the superior comparable property Sales 1, 3 and 4 is $1,254,083. The land rate per acre for the inferior comparable property Sale 2 is $325,167. MPAC provided the Board with the land rate per acre at which the Subject Property is assessed as $714,344. This is below the average land rate per acre of the three superior comparable property sales but above the inferior comparable property sale. However, it is not at the mid-point, it tilts towards the average land rate per acre of the three superior comparable property sales, due to the location of the Subject Property, which is closer in location to the superior comparable property sales. MPAC submitted that the Subject Property is within a reasonable walking distance to Clifton Hill, which receives a high volume of tourists due to the attractions and restaurants located on the street. The Board finds that the location of properties closer to the downtown core of Niagara Falls has more value due to the exposure to tourist traffic. The Board notes that inferior comparable property Sale 2 has a site area of 1.04 acres, and its land value is $338,174.89, compared to superior comparable property Sale 1, with a site area of 2.55 acres. Superior comparable property Sale 1 is less than 1 km from the Subject Property, and it has a land value of $3,692,545.87. Even though these properties are almost close in size range, the inferior comparable property Sale 2 has a much lower land value.

32On a balance of probabilities, the land value of the Subject Property should not be higher or within the average land rate per acre of the three superior comparable property sales and not lower or close to the land rate per acre of the inferior comparable property sale. The Board determines that the land value of the Subject Property is $1,600,132.50 at a land rate per acre of $714,344 as returned for the 2018 to 2021 taxation years.

Findings on Current Value

33The Board determines the value of the building of the Subject Property as agreed by the parties to be $1,019,917 and the land value is $1,600,132.50 for a current value of $2,620,000 (rounded) as returned for the 2018 to 2021 taxation years.

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)(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.

34Section 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.

35The 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.

36The 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.

37MPAC presented an equity analysis of 30 properties sales similar to the Subject Property, which sold from January 1, 2015 to December 31, 2016, within 5 kilometres of the Subject Property. MPAC presented a median Assessment to Sales Ratio (“ASR”) of 1.024.

38MPAC submitted that MPAC standards indicate that equity is achieved if the median ASR falls between 0.95 and 1.05, which is in line with the International Association of Assessing Officers standards, which state that the median ratio should fall between 0.90 and 1.10. MPAC further added that based on this analysis in accordance with the Act, similar properties in the vicinity are being assessed at or near their current values and therefore an equitable reduction of the current value is not required.

39The Board reviewed the 30 property sales used by MPAC in its equity analysis, the period of sales which was between January 2015 to December 2016, the location of the properties and the use. The Board finds that similar properties in the vicinity are being assessed at or near their current values and therefore an equitable reduction to the correct current value is not required.

40The Board finds that the correct current value of the Subject Property is $2,620,000 (rounded) with no equitable adjustment.

CONCLUSION

41The Board determines that the current value of the Subject Property is $2,620,000 (rounded) in the commercial property class, with no adjustment for equity. The Board confirms the returned assessment at $2,620,000 for the 2018, 2019, 2020 and 2021 taxation years in the commercial property class.