533818 Ontario Limited v. Municipal Property Assessment Corporation Region 23, 2022 CanLII 101420

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

ISSUE DATE: October 27, 2022

FILE NO.: ID 181794

Assessed Person(s): 533818 Ontario Limited

Appellant(s): 533818 Ontario Limited

Respondent(s): Municipal Property Assessment Corporation Region 23

Respondent(s): Southwold Township

Property Location(s): Iona Road E/S

Municipality(ies): Southwold Township

Roll Number(s): 3424-000-002-03000-0000

Appeal Number(s): 3478173 and 3490194

Taxation Year(s): 2021 and 2022

Hearing Event No.: 776068

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

APPEARANCES:

Parties	Representative
533818 Ontario Limited	Charles (Byung Chan) Lee
Municipal Property Assessment Corporation	Jamie Blake
Southwold Township	No one appeared

HEARD: September 22, 2022 by telephone conference call

ADJUDICATOR(S): Carly Stringer, Member

INTERIM DECISION

OVERVIEW

1533818 Ontario Ltd (the “Appellant”) is the assessed owner of Iona Road in Southwold Township, Ontario (the “Subject Property”). The Appellant has appealed the current value assessment of the Subject Property for the 2021 and 2022 taxation years to the Assessment Review Board (the “Board”) pursuant to s. 40 of the Assessment Act, R.S.O. 1990, c. A.31 (the “Act”).

2The Subject Property was assessed at $613,000 for the relevant taxation years. This value was apportioned with $42,500 in the Residential property class and $570,500 in the Farm property class. The portion of the Subject Property classified in the Residential property class is a wooded area with a creek running through the middle (the “Bushland”). The portion of the Subject Property classified in the Farm property class is being farmed by a tenant (the “Tenant Farm”).

3At the hearing, the Appellant did not dispute the value. Instead, the Appellant argued that the Bushland is “farm lands used only for farm purposes” pursuant to s. 19(5) of the Act, and that the Bushland ought to have been classified in the Farm property class.

4The Municipal Property Assessment Corporation (“MPAC”) is a respondent in these appeals. MPAC asks the Board to confirm the returned value of $613,000. MPAC says the value of the Subject Property is properly apportioned between the Farm property class and the Residential property class, and the Bushland is not “farm lands used only for farm purposes” pursuant to s. 19(5).

5Southwold Township has not responded to these appeals.

Issues for the Hearing

6At issue in this proceeding is:

1. Is the Bushland “farm lands used only for farm purposes” pursuant to s. 19(5) of the Act?

2. What is the current value of the Subject Property?

3. Is a reduction in the current value required for the purpose of equitable assessment?

Result

7For the reasons that follow, the Board finds:

1. that the Bushland is not “farm lands used only for farm purposes” in accordance with s. 19(5) of the Act;

2. that the correct current value of the Subject Property for the applicable taxation years is $613,000; and

3. that no reduction is required to make this current value equitable with the assessments of similar lands in the vicinity, resulting in an assessment of $613,000.

PRELIMINARY MATTERS

Farm Property Classification

8The Board spent a fair bit of time at the hearing clarifying whether the Appellant was asking the Board to find that the Bushland should be classified as land in the Farm property class; or to find that the Bushland is “farm lands used only for farm purposes” pursuant to s. 19(5) of the Act. Section 19(5) of the Act states that:

Farm lands and buildings

(5) For the purposes of determining the current value of farm lands used only for farm purposes by the owner or used only for farm purposes by a tenant of the owner and buildings thereon used solely for farm purposes, including the residence of the owner or tenant and of the owner’s or tenant’s employees and their families on the farm lands,

(a) consideration shall be given to the current value of the lands and buildings for farm purposes only;

(b) consideration shall not be given to sales of lands and buildings to persons whose principal occupation is other than farming; and

(c) the Minister may, by regulation, define “farm lands” and “farm purposes”.

9The Appellant asked the Board to make both findings.

10The Board does not have jurisdiction to change the property classification to Farm. Under s. 31 of O. Reg. 282/98, the Board’s role is limited to determining whether lands are “farm lands used only for farm purposes by the owner” such that s. 19(5) of the Act applies and, if required as a result of that determination, redetermining the current value of the land.

11To simplify, if the Appellant was only asking the Board to include the Bushland in the Farm property class, the Board would be without jurisdiction. However, since the Appellant asked the Board to make a finding with respect to whether the Bushland is “farm lands used only for farm purposes by the owner” for valuation purposes pursuant to s. 19(5) of the Act, the Board has jurisdiction to answer that question.

ANALYSIS

Description of Subject Property

12The Subject Property is located in Southwold Township, north of the corner of Talbot Line and Iona Road. The Appellant, a non-farmer, is the owner. The Subject Property consists of just under 90 acres, with 76.4 acres being the Tenant Farm that is leased to a farmer. The remaining 12.47 acres is the Bushland, which is classified in the Residential property class and is being assessed as residential lands.

Returned Assessment

13As noted above, the Subject Property was assessed at $613,000 for the relevant taxation years. This value was apportioned with $42,500 in the Residential property class for the Bushland and $570,500 in the Farm property class for the Tenant Farm.

Issue 1 – Is the Bushland “farm lands used only for farm purposes” pursuant to [s. 19(5)](https://www.canlii.org/en/on/laws/stat/rso-1990-c-a31/latest/rso-1990-c-a31.html#sec19subsec5_smooth) of the [Act](https://www.canlii.org/en/on/laws/stat/rso-1990-c-a31/latest/rso-1990-c-a31.html)?

Applicable Law

14In accordance with s. 44(3)(a) of the Act, the Board must 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.”

15Accordingly, the Board must first determine what the Subject Property would have sold for in an arm’s length transaction on the statutory valuation day. Section 19.2(1) of the Act confirms that the valuation day for the applicable taxation years is January 1, 2016.

16In general, the Act does not dictate a particular methodology the Board must apply to determine current value of a property. However, there is a provision of the Act that applies when determining the current value of farm lands. As noted above and repeated here for ease of reference, s. 19(5) of the Act states that:

Farm lands and buildings

(5) For the purposes of determining the current value of farm lands used only for farm purposes by the owner or used only for farm purposes by a tenant of the owner and buildings thereon used solely for farm purposes, including the residence of the owner or tenant and of the owner’s or tenant’s employees and their families on the farm lands,

(a) consideration shall be given to the current value of the lands and buildings for farm purposes only;

(b) consideration shall not be given to sales of lands and buildings to persons whose principal occupation is other than farming; and

(c) the Minister may, by regulation, define “farm lands” and “farm purposes”.

17Essentially, if lands qualify as “farm lands used only for farm purposes,” then the valuation evidence is limited to sales of land and buildings to persons whose principal occupation is farming. Therefore, before determining current value, the Board must determine whether the Subject Property, or a portion thereof, is “farm lands used only for farm purposes” such that s. 19(5) applies to circumscribe how to value it.

18The Board recently considered the interpretation of s. 19(5) in a review decision, Lortie v Municipal Property Assessment Corporation, Region 01, 2022 CanLII 25778 (ON ARB) (“Lortie”). The Board held that s. 19(5) is to be narrowly construed, the purpose of this provision within the scheme of the Act is to maintain and preserve farm lands in production: see Lortie at paragraphs 35 and 36.

19The Board considered the common definition of farming as “an activity undertaken by a person to grow crops or raise livestock for the purpose of producing food or other products, either for the consumption of other persons or as component of the farming activity itself (for example, growing hay as food for livestock being raised on the property)”: see Lortie at paragraph 42.

20The Board confirmed at paragraph 67 that “a determination of whether a parcel of land qualifies as farm land is a case specific determination.” Relevant factors will be considered on a case-by-case basis based on the submissions of the parties and the factual circumstances of the case. A non-exhaustive list of the factors that may be considered in determining whether farming takes place on a property includes:

1. Physical characteristics of the land, including soil quality and its capacity to support crops if the activity is raising crops.
2. Use of surrounding lands, to the extent that activities in the immediate vicinity suggest that the land on the property will support a farming activity.
3. The history of use of the property, including whether the land has previously been farmed.
4. Whether the activities are undertaken with a legitimate intention to “farm”, as opposed to activities intended to create an appearance of farming, for purposes of obtaining favourable tax treatment.
5. The scale of the farming activity (i.e. whether the activity is too limited to indicate that farming is taking place).
6. Permitted use of the land, including zoning.
7. The general nature of the locality.
8. Whether the lands have physical characteristics of a farm; and
9. Whether the lands involve a bona fide farmer.

21It is important to note that these are factors that may be considered, where relevant: see Lortie at paragraph 47.

Evidence and Submissions on Farm Lands Used Only For Farm Purposes

22Both MPAC and the Appellant are in agreement that the Tenant Farm is farm land used only for farm purposes such that s. 19(5) applies. Where the parties disagree is with respect to the Bushland.

23The Appellant is asking the Board to find that the Bushland is “farm lands used only for farm purposes.” In support of this position, the Appellant pointed to the fact that the entire Subject Property, including the Bushland, had been previously classified in the Farm property class for over 60 years. The Appellant provided evidence that the Bushland is not being actively farmed, although he would permit the tenant farmer to use that land if required. The Appellant also provided evidence that the topography of the Bushland prevents farming traditional cash crops or constructing improvements, but it could be used to grow indigenous plants.

24MPAC took the position that there was no evidence of farming activity on the Bushland. The tenant farmer is not using the Bushland, nor is the tenant farmer paying to lease the Bushland.

Findings on Farm Lands Used Only For Farm Purposes

25Considering the relevant factors in Lortie and the evidence provided by the parties, the Board finds that the Bushland is not farm land used only for farm purposes. The Board makes this finding because of the uncontested evidence that the Bushland is not being actively farmed by a farmer, nor is it serving any purpose ancillary to the farming activity on the tenant-farmed portion of the Subject Property. The Appellant’s own evidence is that the topography of the Bushland entirely prevents it from being used both for farming of cash crops, and ancillary uses such as farm outbuildings. The Appellant primarily pointed to the historical property classification in the Farm property class in support of his position. In the Board’s view, the historical property classification is not a sufficient basis to find that the Bushland is “farm land used only for farm purposes”, particularly given the evidence that the Bushland is not being farmed and serves no purpose ancillary to farming.

Issue 2 - What is the current value of the Subject Property as of January 1, 2016?

Evidence and Submissions on Current Value

26MPAC provided the Board with evidence regarding sales of proposed comparable farm land properties at or within one year of January 1, 2016. MPAC performed a time adjustment on the sale price of each property to reflect what they would have sold for on January 1, 2016 and arrived at a median time adjusted rate per acre of $7,353 for farm land. Using this evidence, MPAC submits that the $7,467 assessed rate per acre, or $570,500, for the Tenant Farm is reasonably correct.

27MPAC did not provide evidence in support of the current value of $47,500 for the Bushland. MPAC stated that it did not provide evidence on this portion of the valuation because the Appellant was not challenging the value of the Bushland.

28The Appellant did not provide submissions or evidence regarding current value, nor did the Appellant dispute MPAC’s evidence. The Appellant stated he had no opinion on the current value of either the Tenant Farm or the Bushland.

Findings on Current Value

29Based on the evidence provided by MPAC, the Board finds that the assessed rate of $7,467 per acre, or $570,500 is reasonably correct for the Tenant Farm. The Board is satisfied that the $47,500 value for the Bushland is not in dispute. Therefore, the Board confirms the returned value of $613,000.

Issue 3 - Is the current value equitable with the assessments of similar lands in the vicinity?

Applicable Law

30Section 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.”

Evidence and Submissions on Equitable Assessment

31The Appellant did not provide the Board with evidence to support an equitable adjustment, nor did the Appellant ask the Board to make an equitable adjustment.

32MPAC did not provide evidence on this issue.

Findings on Equitable Assessment

33The Board finds there is insufficient evidence to support a reduction in the current value for the purposes of equitable assessment.

CONCLUSION

34The Board finds that the Bushland does not qualify as farm lands under s. 19(5). The Board finds that the correct current value of the Subject Property is $613,000. The Board finds there is insufficient evidence to support a reduction in this amount for the purposes of equitable assessment, resulting in an assessment of $613,000.

ORDER

35The Board orders that the returned assessment of $613,000 is confirmed.

36The parties are directed to consult with one another, and advise the Board within 30 days of the issuance of this decision as to whether the Farm property classification of the Bushland portion of the Subject Property is still in issue.

37If no response is received within 30 days of the issuance of this decision, the Board will find that there is no issue as to whether the Bushland should be included in the farm property class, and the Board will confirm the current value of $613,000 apportioned as $42,500 in the Residential property class and $570,500 in the Farm property class.

38If the parties advise the Board within 30 days that inclusion of the Bushland portion of the Subject Property in the Farm property class is still an issue, the Board will refer that issue to AFRAAT pursuant to s. 31 of O. Reg. 282/98.

"Carly Stringer"

CARLY STRINGER MEMBER Assessment Review Board Website: www.tribunalsontario.ca/arb