Tribunals Ontario

Tribunaux décisionnels Ontario

Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE: January 18, 2022

FILE NO.: WR 170842

Assessed Person(s): 933863 Ontario Limited

Appellant(s): 933863 Ontario Limited

Respondent(s): Municipal Property Assessment Corporation Region 16

Respondent(s): Town of Innisfil

Property Location(s): 280 Bells Lane

Municipality(ies): Town of Innisfil

Roll Number(s): 4316-030-074-09000-0000

Appeal Number(s): 3262503, 3308676, 3362582, 3407663 and 3446483

Taxation Year(s): 2017, 2018, 2019, 2020 and 2021

Hearing Event No.: 742388

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

APPEARANCES:

Parties

Representative

933863 Ontario Limited

Dusan Umicevic, Jelena Papageorge

Municipal Property Assessment Corporation

David Zhao

Town of Innisfil

No one appeared

HEARD: May 19, 2021 by telephone conference call

ADJUDICATOR(S): Joanne Laws, Member

DECISION

OVERVIEW

1This decision relates to an appeal pursuant to s. 40 of the Assessment Act R.S.O. 1990, c. A.31 (the “Act”) for 280 Bells Lane (the “Subject Property”) in the Town of Innisfil.

2The Appellant, 933863 Ontario Limited, is seeking a determination of the Subject Property’s correct current and equitable value. The taxation years subject to this decision are 2017 through 2021 with a valuation date of January 1, 2016.

3The Subject Property was assessed in the commercial property class with both commercial and residential portions.

a. For the 2017 and 2018 taxation years the Municipal Property Assessment Corporations (“MPAC”) has returned an assessment of $362,000 with $121,600 in the residential property class and $240,400 in the commercial property class.

b. For the 2019 and 2020 taxation years MPAC has returned an assessment of $362,000 with $116,300 in the residential property class and $245,700 in the commercial property class.

c. For the 2021 taxation year MPAC has returned an assessment of $286,000 with $91,900 in the residential property class and $194,100 in the commercial property class.

4MPAC takes the position that the current value does not exceed 286,000 for the 2017 through 2021 taxation years.

5The Appellant, represented at the hearing by Dusan Umicevic and Jelena Papageorge, takes the position that the current and equitable value is $121,738.

Issues for the Hearing

6At issue in this proceeding is:

1. A determination of the current value.

2. Whether an equity reduction in the current value should be made?

Result

7For the 2017 to 2021 taxation years, the current value of the Property is $286,000, rounded, allocated as follows:

$92,000 in the residential property class and

$194,000 in the commercial property class.

8For the purpose of an equitable assessment, the current value is reduced to $127,000, rounded, allocated as follows:

$40,700 in the residential property class and

$86,300 in the commercial property class.

ANALYSIS

Description of the Property

9The Subject Property is located in the community of Gilford, in the Town of Innisfil, at the corner of Bells Lane and Gilford Road. Bells Lane is part of an unpaved circular road within the community of Gilford and Gilford Road is a secondary road leading towards the southern edge of Town of Innisfil.

10The Subject Property has a site area of 0.32 acres (13,992 square feet (“sq. ft.”)) and is improved with a two-storey wood-cladded building built in 1865. A garage and shed were added in 1940. The first storey is a commercial space and the second storey has three residential rental units. MPAC calculated the building’s total gross floor area as 5,363 sq. ft. Based on maintenance and updates that have occurred over the years, MPAC has allocated effective ages for different parts of the building, ranging between 1954 to 1979.

11MPAC described the Subject Property as having “excellent visibility, located minutes from Gilford Beach, and surrounded by the newly constructed Seasons Landing subdivision” (see section 3.3 of MPAC’s Valuation Report). Disagreeing with MPAC’s description, the Appellant described the Subject Property as having limited visibility because it is located on a road with reduced traffic, that the distance to Gilford Beach would not be a significant market value factor and a reduced value due to storm water flooding on the land, subsequent water damages to the land and building, the inability to obtain property insurance and limitations to the re-development of the land (“flooding and related issues”).

12The parties agree that the growth of and limited land supply in the City of Barrie to the north and the Greater Toronto Area to the south has led to an expanded land development in the vicinity of the Subject Property. Part of that expansion includes the Seasons Landing Subdivision which MPAC describes as surrounding the Subject Property.

Comments on the Board’s Rules of Practice and Procedure (“Rules”)

13MPAC was represented by Dawn Leahy, a Property Valuation specialist, who authored MPAC’s initial valuation report, and David Zhao, a Senior Case Management Analyst, who authored MPAC’s statement of response. Mr. Zhao argued that the Appellant failed to comply with Rule 38(1) of the Board’s Rules which sets out the required contents of a Statement of Issues. Effective April 1, 2021 the Board’s Rules were amended, changing the rule numbers. For ease of reference, the Board will reference the Rules prior to April 1, 2021, as they stood at the time of the hearing.

14The Board has considered the Appellant’s Statement of Issues and Mr. Zhao’s argument and finds that the Appellant has fulfilled the requitement of Rule 38. The thrust of the Appellant’s evidence and arguments is an equitable assessment and the Appellant has met the requirements of Rule 38(2). While the Appellant did not provide evidence regarding the current value (see Rule 38(1)), it did provide a detailed analysis of MPAC’s current value evidence and analysis.

15Had the Appellant failed to meet the requirements of Rule 38, the Board had the discretion to proceed. Rule 4 provided that the Rules shall be liberally interpreted to ensure the just, most expedition and least expensive determination of every proceeding and Rule 7 provides that substantial compliance with requirements of these rules is sufficient.

Issue 1 – What is the current value of the Property?

16Section 19(1) of the Assessment Act provides that the assessment of land shall be based on its current value. 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.” Section 19.2 of the Act provides that for 2017 through 2021 taxation years the valuation day is January 1, 2016.

17Generally, there are three methods of valuing a property. The income approach, the cost approach, and the direct sale comparison approach.

18Neither party used the income approach to value.

19MPAC has assessed the Subject Property using the cost approach to value. In the cost approach, the theory of substitution is used to estimate the value of the buildings and structures and then adding the land value. The land value is usually determined by considering vacant land sales. The cost approach to valuation 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 property with its defects. Therefore, the cost approach takes into consideration the depreciation of the structures in order to arrive at the correct value. The value of the building and the value of the land will result in an estimate value a property. (1174757 Ontario Inc. v. Municipal Property Assessment Corporation, Region 18, 2021 CanLII 32403 (ON ARB).

Building Value

20Both parties agreed that the Subject Property is unique and that there are no directly similar properties in the area.

21Upon review of the Subject Property and discussions with the Appellant MPAC adjusted its costing data for the structural depreciation of the building portion and adjusted the land value to reflect parking restrictions. After applying the adjustments, Ms. Leahy’s opinion of current value was reduced to from $362,000, as returned for the 2017 to 2020 taxation years, to $286,000 for the 2017 through 2021 taxation years. In their evidence and arguments both Ms. Leahy and Mr. Zhao used the total land and building value of $286,000. For the building portion MPAC allocated $34,440 to the residential property class and $72,552 to the commercial property class for a total current value of $106,992 for the building.

22MPAC made no reference to the flooding and related issues being included in the adjusted current value.

23Neither Party utilized the direct sale comparison approach for the building portion. However, the Appellant presented 6 properties improved with a mix of residential and commercial property classes or solely in the commercial property class. All six properties had sales. It is significant to note that neither party relied on the sales to support a current value but, instead, used the assessments in their analysis of an equitable assessment; see Issue 2 to this decision. Despite the parties not relying on the sale evidence, the Board reviewed the six sales but found the data was insufficient to make a finding on the current value of the building area or on the property as a whole.

24The Board concludes that MPAC’s cost approach evidence is the best evidence to determine the building portion’s current value. Using this evidence, the Board finds that the current value of the building is $106,992 allocated as follows: $34,440 in the residential property class and $72,552 in the commercial property class.

Land Value

25In using the cost approach to valuation, the value of the land portion is most often determined by sales of vacant land with similar attributes to the property being valued. MPAC relied on a single sale of commercial vacant land, 760 Mosley Street. Ms. Leahy stated it is similar to the Subject Property in lot size and that it is a corner lot but is superior because it has a heavier traffic pattern and the possibility of more parking spaces.

26The Appellant agrees with MPAC that the location is superior, adding it is only 500 metres from Lake Huron’s waterfront. The Appellant argued it is not directly comparable to the Subject Property because it is located 70 km north of the Subject Property, in a different municipality. The Appellant argues the Subject Property’s land value should be less than 760 Mosely Street which, overall, is a superior property.

27MPAC’s calculation of 760 Mosely Street’s land value is $719,288 per acre. After adjusting for the inferior location and parking, MPAC’s opinion of Subject Property’s current value for the land was reduced to $559,886 per acre. Applying this value to the to the Subject Property’s land size, MPAC’s resulting value was $179,157 allocating $121,595 in the commercial property class and $57,563 in the residential property class calculated as follows: $559,886 per acre divided by the number of sq. ft. in an acre (43,560) x the size of the Subject Property (13,992 sq. ft.). MPAC used rounded numbers in its calculations, reflecting a slightly different value but the rounded value of $719,000 is the same.

28When utilizing the direct comparison approach to value, it is preferable to have more than one sale when determining of a property’s current value. However, the Board has received only one sale, 760 Mosely Street, which is superior to the Subject Property in location and development potential. The Board accepts MPAC’s adjustments for the differences between the two properties as reasonable. Accordingly, the Board finds that the current value for the land is $179,158. Using MPAC’s evidence, $121,595 is allocated to the commercial property class and $57,563 allocated to the residential property class.

Finding Issue 1: The Current Value of the Building and Land

29Based on the above, the current value of the Subject Property is $286,000 (rounded) with $194,147 in the commercial property class (comprised of $72,552 for the building portion and $121,595 for the land portion) and $92,003 in the residential property class (comprised of $34,440 for the building portion and $57,563 for the land portion).

Issue 2 – Should the current value determined be reduced to reflect an equitable assessment when reference is made to the assessments of similar lands in the vicinity?

30The Appellant’s evidence and arguments focused on whether the Subject Property was equitably assessed when compared to the assessments of other lands in the vicinity. The Appellant argued other properties in the vicinity do not have the same negative impacts as the Subject Property: storm water flooding on the land, the subsequent water damages to the land and building, the inability to obtain property insurance and limitations to the re-development of the land.

31In comparing the Subject Property’s assessed value to other properties in the vicinity, the Appellant argued that the equitable value is $121,738 with $32,749 for the building and $88,989 for the land.

32The Appellant submitted video and photographic evidence of storm water flooding onto and over the land and water damage to the building. Also submitted was report from a structural engineer, Andrew Jasek, of AJA Engineering Group, dated October 5, 2020. In his report, Mr. Jasek, who inspected the Subject Property on September 30, 2020, reviewed a video of a storm event dated July 22, 2018 provided by Conte Law, an Assessment Report dated February 14, 2018 prepared by Clarke Basement Systems and a memorandum letter dated September 24, 2020 for “Project 15 #4219” prepared by Bruce A. Brown Associates Limited summarizing the observations and flooding history overview. Mr. Jasek confirmed extensive water damage to the building and that “Adjacent (neighbouring) north, west and south properties recently built-up grading preventing storm water flow and trapping stormwater (pooling) at Property swales/ditches appear inadequate”. Mr. Jasek concluded: “Presently, associated building structural components though damaged and severely deteriorated are stable. However, we strongly suggest refurbishment/reinstalment/replacement as necessary in a timely fashion, pending further hydrostatic pressure/storm water ingress/potential frost heave/damage effects.”

33At the hearing Mr. Zhao stated MPAC had conducted a recent review of the equitable assessment and determined that, when considering the assessment to sale ratios of similar lands in the vicinity of the Subject Property, a reduction of 14% was warranted. Applying that to the Subject Property’s recommended current value of $286,000 results in an equitable assessment of $245,000 rounded.

Equitable Value of the Building

34Ms. Papageorge testified that Subject Property is the only property on Gilford Road that does not have a swale to re-direct storm water away and that the Subject Property’s size is insufficient to install a swale. She testified that the Appellant has installed basement window wells which has had some remedial effect and that the Appellant has obtained quotes for other remedial measures, but none could be guaranteed as long-term resolutions. She stated that as a result of the flooding the Appellant has been unable to secure insurance nor has it been able to rent the first floor of the Subject Property.

35The Appellant argued that:

a. The basement area has no value because, due to the water damage, it cannot be used.

b. Due to its age and the flooding and related issues, the most reasonable action would be to demolish and replace the building but that, based on current zoning bylaws for setbacks and a larger septic bed, the existing building could not be replaced, that only a smaller, residential building would be allowed.

c. Selling the Subject Property will be unlikely because it has limited redevelopment potential and because the flooding and related issues and related legal challenges must be disclosed.

36In reviewing the six properties submitted into evidence, the Appellant argued 1208 Ewart Street is most comparable building because, like the Subject Property, it is a wood structure. All other buildings are concrete blocks or masonry. The Appellant argued that 1208 Ewart Street is superior to the Subject Property because the building is newer (1950 vs 1865), it does not have flooding, and it is on a sewer system (whereas the Subject Property has a septic system). The Appellant noted that the building is smaller than the Subject Property’s (based on MPAC’s data: 3,864 sq ft. vs 5,360 sq. ft.) but it is enhanced by a larger lot (0.39 acres vs. 0.32 acres), more parking and increased visibility due to more frontage (150 ft. vs. 132 ft.). Based on MPAC’s data, the Appellant notes that 1208 Ewart Street was assessed at $13.78 per sq. ft. of building area. The Appellant argued that the Subject Property’s value per sq. ft before adjustments for negative factors such as flooding and damage by flooding should not exceed that value. The Appellant further argued that due to the Subject Property’s negative factors a reasonable assessed value for the Subject Property’s building is 50% less than $13.78. The Appellant also argued that Subject Property’s building area should be reduced by 600 sq ft to reflect an area of the building that cannot be finished due to the lot size’s septic restrictions.

37Based on the above, the Appellant argued that the equitable value of the Subject Property’s building is $32,749 (rounded) calculated as follows: the reduced building area of 4,760 sq. ft (5,360 less 600 sq. ft) sq. ft. multiplied by $6.88 per sq. ft. ($13.76 less 50%).

38MPAC’s initial position was that $286,000 is the Subject Property’s current and equitable value. For the building portion, MPAC analyzed the assessments of the six properties submitted by the Appellant. Taking the total assessed value for the building and land and dividing that value by the sq. ft. of building area for each of the six properties, resulted in an average assessed value of $40.89 per sq. ft. and a median of $38.46. MPAC concluded that the Subject Property’s current value of $286,000, or $19.94 per sq ft of building area, is an equitable when compared to the six properties.

Equitable Value of the Land

39Of the six properties addressed by the parties, the Appellant identified 1454 Gilford Road as the most comparable to the Subject Property for the land value because it is located nearest the Subject Property. The Appellant had been provided with MPAC’s allocation of that property’s assessed land and building values. MPAC assessed the land at $8.48 per sq. ft. The Appellant argued that while 1454 Guilford Road is the most comparable property, it is superior to the Subject Property with a larger lot size (28,258 vs. 13,992 sq ft), more parking, no flooding and is located on a busier street which provides higher visibility for commercial purposes.

40The Appellant argued that the equitable value of the Subject Property’s land should be no more than $118,652 ($8.48 per sq. ft. multiplied by the Subject Property’s lot size of 13,992 sq. ft.) and that an equitable value, based on the Subject Property’s negative factors, should be 25% less or $6.36 per sq. ft. for a total value of $89,000, rounded.

41MPAC analyzed the land portion noting that the Subject Property’s land value is based on $559,865.62 per acre whereas 1208 Ewart Street, which MPAC identifies as similar in lot size (0.39 acres vs the Subject Property’s 0.32 acres) was assessed at a comparable value of $534,226.15 per acre.

Findings: Issue 2, the Equitable Value

42Pursuant to s. 44(3)(b) 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.

43For the following reasons the Board finds that when comparing the Subject Property to similar lands in the vicinity that do not have the flooding and/or the related issues, a downward adjustment to the assessment is warranted and that the quantum of the reductions advanced by the Appellant are reasonable.

44The Appellant argued that due to the flooding and related issues the Subject Property is not equitably assessed when comparing it to similar lands in the vicinity and that a reduction is warranted. The Appellant provided both the quantum of relief sought and why that quantum is reasonable.

45MPAC did not address the stormwater flooding, water damage and related issues in relation to its recommended reduction. MPAC based its recommended reduction of 14% based on an assessment to sale equity study. That study was not submitted into evidence nor did MPAC bring a motion to submit that study after the disclosure dates set by the Board.

46In making its calculations, the Board reviewed the assessments of the six properties referenced by the parties and their proposed method of calculating an equitable adjustment and prefers a separate analysis of the land and building which follows the cost approach methodology used by MPAC to assess the Subject Property.

47In reviewing the six properties submitted by the Appellant, the Board agrees with the Appellant that the best comparable property for the purpose of determining an equitable assessment of the building is 1208 Ewart Street because it is the only wood structure. On balance, it is superior to the Subject Property in terms of age and it is on a sewer system rather than on a septic system. The assessed value per sq. ft. of building area is $14.25 based on MPAC’s data of $55,071 for the building area 3,864 sq. ft. There is no evidence that this property has experienced flooding or water damage or that it has a portion that is unusable. Based on these factors, a 50% reduction from $14.25 to $7.13 per sq. ft. to reflect the Subject Property’s inferiority to 1208 Ewart Street is reasonable. However, the Board disagrees with the Appellant that the building area should be reduced by 600 sq. ft. to reflect the area that cannot be finished due to septic restrictions. There is no evidence that the 600 sq. ft. cannot be used despite its unfinished state. Accordingly, the equitable value of the building is $38,238 ($7.13 multiplied by 5,363 sq. ft.).

48For the land portion, the prefers 1454 Guilford Road for the purpose of determining an equitable assessment. It is nearest to the Subject Property at 0.3 kilometres away and while the land size is not similar (28,358 sq. ft. vs 13,992 sq. ft.), it is located on a busier street with higher visibility and there is no evidence of flooding. MPAC assessed the land portion at $8.48 per sq. ft. The Appellant’s estimate of a 25% reduction to $6.36 per sq. ft. to account for the Subject Property’s inferiority is reasonable. This results in a land value of $88,989 ($8.48 multiplied by 13,992 sq. ft.).

49The total equitable value of the building and land is $127,227. Using the same ratio used by MPAC to calculate the allocations for the current value of $286,000 (32% residential and 68% commercial), $40,713 is assessed in the residential property class and $86,514 is assessed in the commercial property class.

CONCLUSION

50The Board finds that the current value of the Subject Property, using rounded values is $286,000 with $92,000 in the residential property class and $194,000 in the commercial property class.

51The Board finds that an adjustment to the current value is required to make the assessment equitable. Using rounded values, the current value is reduced to $127,000 with $40,700 in the residential property class and $86,300 in the commercial property class.

ORDER

52The Board orders that for the 2017, 2018, 2019 and 2020 taxation years the assessed value is reduced from $362,000 to $127,000 apportioned as follows:

• $40,700 - residential property class

• $86,300 - commercial property class

53The Board orders for the 2021 taxation year the assessed value is reduced from $286,000 to $127,000 apportioned as follows:

• $40,700 - residential property class

• $86,300 - commercial property class