Albrecht Family Holdings Ltd. v. Municipal Property Assessment Corporation, Region 21, 2022 CanLII 37671

Tribunals Ontario

Tribunaux décisionnels Ontario

Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE:

May 02, 2022

FILE NO.:

WR 177992

Assessed Person(s):

Albrecht Family Holdings Ltd.

Appellant(s):

Albrecht Family Holdings Ltd.

Respondent(s):

Municipal Property Assessment Corporation, Region 21

Respondent(s):

City of Waterloo

Property Location(s):

9 Lodge Street

Municipality(ies):

City of Waterloo

Roll Number(s):

3016-012-200-01400-0000

Appeal Number(s):

3273725, 3310997, 3365214, 3409210, 3447747 and 3489863

Taxation Year(s):

2017, 2018, 2019, 2020, 2021, and 2022

Hearing Event No.:

762868

Legislative Authority:

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

APPEARANCES:

Parties

Representative

Albrecht Family Holdings Ltd.

Daniel Attard

Municipal Property Assessment Corporation

Michael Radan

City of Waterloo

Lynda Newport (observing)

HEARD:

April 5, 2022, by video conference call

ADJUDICATOR(S):

Subuola Awoleri, Member

DECISION

OVERVIEW

1Albrecht Family Holdings Ltd., (the “Appellant”), owner of 9 Lodge Street (the “Subject Property”), appealed the 2017 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. The Appellant is deemed to have brought the same appeal in respect of the 2018 to 2022 taxation years, pursuant to s. 40(26) of the Act.

2The Subject Property was assessed by the Municipal Property Assessment Corporation (“MPAC”) at $7,736,000, in the multi-residential property class (RU MT). MPAC’s position on current value is $7,616,902. MPAC submitted that the current value for the Subject Property is $7,616,902 in the multi-residential property class (RU MT), without any reduction for equity.

3The Appellant agrees with MPAC’s position on current value for the Subject Property at $7,616,902 in the multi-residential property class (RU MT) for the 2017 to 2022 taxation years. However, it argued that a further downward adjustment to the current value to $6,625,000 (rounded) is necessary to make the current value equitable with the assessment of similar properties in the vicinity.

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

Issue

5Should there be an equitable reduction to the current value of the Subject Property pursuant to s. 44(3) (b) of the Act, and, if so, what the amount of this reduction should be?

Result

6The Board finds that a downward adjustment to the current value to $6,627,000 (rounded) is necessary to ensure that the assessment of the Subject Property is equitable with the assessments of similar lands in the vicinity.

7The Board reduces the assessment of the Subject Property from $7,736,000 to $6,627,000 (rounded) in the multi-residential property class (RU MT) for the 2017 to 2022 taxation years.

ANALYSIS

Description of the Subject Property

8The Subject Property is a multi-residential property, with seven or more self-contained units (excluding row-housing) located in the City of Waterloo. It has an effective built year of 1990 with 55 units, which is composed of two bachelor units, eight one-bedroom units, and 45 two-bedroom units.

Issue - Should there be an equitable reduction to the agreed upon current value of the Subject Property pursuant to s. 44(3) (b) of the Act, and, if so, what the amount of this reduction should be?

9MPAC provides the assessed values of properties, using its model to make an estimation, since most properties would not have been sold on the valuation date of January 1, 2016. This is what MPAC refers to as the assessed value of the Subject Property.

10Current value is defined under s. 1 of the Act, 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”.

11The income approach to value is the agreed valuation methodology to determine the current value of the Subject Property. In the income approach, the property is purchased for its income generating capacity. The expected income is calculated, and an appropriate capitalization rate is also utilized to reflect the investor’s rate of return on the investment. The valuation parameters used such as fair market rent, vacancy allowance, expense allowance and capitalization rates are market derived components, which analysis will determine the current value of the Subject Property. The Appellant, as stated earlier in this Decision, is in agreement with MPAC’s position on the current value of the Subject Property at $7,616,902.

12Part of the Board’s mandate is to determine if this current value is equitable with the assessment of similar properties in the vicinity. Section 19(1) of the Act provides that land shall be assessed at its current value. If this current value is compared with the assessment of similar lands in the vicinity and there is inequity, based on s. 44(3)(b), the Board can correct this inequity.

13Section 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

14The Assessment to Sales Ratio (“ASR”) is a tool often used to determine if a reduction in the assessment below current value is required to make an assessment equitable with the assessments of similar lands in the vicinity. The ASR is determined by dividing the assessment as returned by the time adjusted sale price.

15The ASR is expressed in the form of a ratio, where a property’s assessed value (provided by MPAC, based on MPAC’s model) is compared to its market value (sale price). If the ASR is 1.00, this means the assessed value is the same as the market value, which reveals that MPAC is properly assessing properties at their market value. In Re Empire Realty Co. Ltd. and Assessment Commissioner for Metropolitan Toronto et al., 1968 CanLII 183 (ON CA) the Ontario Court of Appeal addressed equity in assessment by stating that:

… an assessment made at the actual value of lands and buildings in compliance with the provisions of s. 35(1) would be an unequitable assessment if all similar lands in the vicinity were assessed at some percentage of actual value substantially less than one hundred; … [emphasis added]

16Usually, MPAC utilizes a range of 0.95 – 1.05, which is close to 1.00 to argue that similar properties have been assessed close to their current value. However, where the ratio is less than 0.95, this will indicate that similar properties in the vicinity have been under-assessed, and an equitable reduction may be necessary. The Board will consider all the relevant factors, as s. 44(3)(b) does not indicate a specific method to determine if an equitable reduction should be made.

17The Appellant argued that MPAC’s expert report introduced seven new property sales, which were not included in MPAC’s original statement of response (“SOR”). The Appellant submitted that MPAC used these sales to provide its position on the current value of the Subject Property at $7,616,902. The Appellant also argued that these seven property sales have lower assessed values than their market value. The Appellant provided the Board with the median ASR of these seven properties as 0.87 and average ASR as 0.85. The Appellant submitted that the Subject Property should also benefit from a similar discount to the agreed current value of $7,616,000 (Appellant rounded down, MPAC provided it as $7,616,902). The Appellant used the median ASR of the seven properties at 0.87 and applied it against MPAC’s current value figure and provided the Board with a reduced value of $6,625,000 (rounded) as the current value of the Subject Property for the 2017 to 2022 taxation years.

18MPAC’s witness and assessor, Dorota Bochenek, testified that, upon reviewing the Appellant’s Statement of Issues (“SOI”), she did not believe equity was correctly stated as an issue, since the Appellant did not provide any property sales to justify that a reduction is warranted. MPAC’s SOR provides that: “The appellant references equity of the assessment but has failed to submit an equity analysis nor has it sought an additional adjustment for equity” [emphasis added]. At the same time the SOR further states that: “The appellant raises no issue with respect to the equity of the assessment” [emphasis added].

19In essence, MPAC argued that the Appellant did not take issue with equity in assessment in accordance with s. 44(3)(b), but rather it took issues with the equity using the parameters of the income approach, specifically the expense allowance and capitalization rate. However, the Appellant pled equity as an issue in its SOI. MPAC had notice that equity was an issue since the assessor provided in MPAC’s valuation report that:

“I completed an equity study that demonstrates that similar properties in the vicinity have been assessed at or near their current values. Therefore, an equity adjustment is not required” [emphasis added].

20Although MPAC did not present this equity study into evidence, this report reveals that, regardless of how the Appellant pled the issue of equity in its SOI, MPAC had notice and was aware that the Appellant had an issue with equity in assessment as indicated in MPAC’s SOR. After receiving notice from the Appellant, MPAC took a further step in carrying out an equity study without presenting it into evidence.

21MPAC further argued that where MPAC’s model is used to determine the value of the Subject Property, equity is already built into the model. MPAC submitted that since MPAC’s model has under-assessed these seven properties, this means that the Subject Property was equally under-assessed, therefore applying a further reduction to its position of current value will be double dipping. To support its argument, MPAC cited an unreported review decision of the Board, Elmhurst Holding Limited/ Sun Life Assurance/Vanderclay Development co. Ltd. v. The Municipal Assessment Corporation Region No. 9 (Unreported – DM 68315) (“Elmhurst”).

22The Appellant disagreed with MPAC. The Appellant argued that in the present appeal, MPAC’s model value (assessed value) is $7,736,000 and MPAC had an opportunity to revisit this value by reviewing market evidence. Furthermore, the Appellant argued that MPAC looked at similar properties to determine the fair market rent, vacancy allowance, expense allowance and capitalization rate. Using these parameters, MPAC provided its position on the current value of the Subject Property as $7,616,902, therefore the Appellant submitted that the case law is not applicable to the facts of this appeal.

23In Elmhurst, the hearing panel reviewed two decisions from the Board, which determined that the properties assessed values, which were already reduced based on the recommendation of MPAC, should be further reduced beyond the recommendations of MPAC, based on the ASR of comparable properties. The reviewing panel cancelled the two decisions from the Board and ordered new hearings to be scheduled before a different panel.

Findings on Equity

24The Board finds that an equitable reduction is required to the current value of $7,616,902 and reduces it to $6,627,000 (rounded).

25The goal of the Act is to determine the correct current value of properties. The Board must be persuaded on the balance of probabilities that there will be unfairness to the Subject Property if there is no equity reduction. 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 that is the Appellant. The Appellant must establish, on a balance of probabilities, that an equitable reduction is required.

26The facts in Elmhurst are distinguishable from the present appeal and this decision is not binding on this panel. In Elmhurst, MPAC argued that the Board:

…misapplied the ASA, (sic) applying a reduction to the assessed values of properties, whose assessments were already at the lower level of assessment of the comparable properties

27Furthermore, in Elmhurst, MPAC advised the Board that the parties agreed that “there was an error in the assessment model, and that the recommended assessments were the result of corrections and adjustments made by the assessor within that model”. Therefore, MPAC concluded that the Board created an inequity, where none existed, by applying a reduction to under-valued assessments. MPAC clearly argued that “an equity adjustment must be applied to value and not assessments”. In Elmhurst, MPAC was arguing that upon determination of the current value of the properties, and after this value is compared with the assessment of similar lands in the vicinity, and it is determined that an equity adjustment is necessary, this adjustment should be applied to the determined current value and not the returned assessed value of the properties, which MPAC argued was already under-assessed.

28The Board agrees with MPAC that an equitable reduction should not be applied to the assessment of the Subject Property as returned but to the current value. This position was reiterated in R.J. Dodge Enterprises Ltd. v. Municipal Property Assessment Corp., Region No. 2, [2012] O.A.R.B.D. No. 286 at paragraph 29. In the present appeal, MPAC provided the Board with its position on current value of the Subject Property as $7,616,902 based on market evidence, such as fair market rents, vacancy and expense allowance, and capitalization rate, which the Appellant agreed with. In fact, the capitalization rate was derived from the sale of six similar properties within the vicinity of the Subject Property. This current value is not the assessed value of the Subject Property.

29MPAC used these seven properties to provide its position of current value. The Appellant provided the Board with the same seven properties, six properties of which were used by MPAC to determine the capitalization rate for the Subject Property, and one additional property MPAC used in the direct comparison analysis to verify its position of current value using the income approach. The details of these properties can be seen in Table 1 below:

Table 1

Address

Assessment

Sale Amount ($)

Sale Date

Property Code

ASR

Subject Property

9 Lodge Street

7,736,000

N/A

N/A

340

N/A

Sale 1

383 Albert Street, Waterloo

19,968,000

23,025,000

December 2015

340

0.87

Sale 2

37 Vanier Drive, Kitchener

11,615,000

15,158,330

November 2015

340

0.77

Sale 3

49 Vanier Drive, Kitchener

10,061,000

13,331,430

November 2015

340

0.75

Sale 4

19-21 Dalegrove Drive, Kitchener

8,752,000

9,652,943

November 2015

340

0.91

Sale 5

57 Union Street East, Waterloo

13,327,000

14,600,000

February 2016

340

0.91

Sale 6

367 Highland Road West, Kitchener

4,883,000

8,516,000

September 2017

340

0.57

Sale 7

508 Beechwood Drive, Waterloo

6,344,000

5,450,000

July 2017

340

1.16

30The Appellant submitted that the average and median ASR’s are 0.85 and 0.87 respectively. These properties all have the same property code as the Subject Property. The ASR analysis presented by the Appellant reveals that an equitable reduction should be applied to the current value of the Subject Property, as similar properties in the vicinity are assessed less than their current value. The Appellant will be paying higher taxes in comparison with similar properties within the vicinity. In such a situation, in accordance with the Act, there should be a reduction in the current value, to achieve equity. MPAC did not present any evidence to show that the current value of the Subject Property is equitable with the assessment of similar properties within the vicinity.

31The Board will use only five sales of properties that sold within the shoulder years from the valuation date of January 1, 2016, which is 12 months on either side of the valuation date, which is 2015 and 2016 sales, as these are close to the valuation date and a time adjustment of these sale prices is not necessary. The remaining two properties sold in July and September 2017, which are 18 and 20 months after the valuation date. The Board prefers to use sales of properties that are closer to the valuation date, as the further a sale is from the valuation date, the less likely it reflects the market. The median ASR of properties 1 to 5 is 0.87. Applying this to the current value of the Subject Property of $7,616,902 provides an equitable assessment of $6,627,000 (rounded).

CONCLUSION

32The Board determines that an equitable reduction to the current value is required in order to make the current value equitable with the assessment of similar properties in the vicinity.

ORDER

33The Board orders that the assessment of the Subject Property is reduced from $7,736,000 to $6,627,000 (rounded) in the multi-residential property class (RU MT) for the 2017 to 2022 taxation years.