Tribunals Ontario / Tribunaux décisionnels Ontario

Assessment Review Board / Commission de révision de l’évaluation foncière

ISSUE DATE: May 27, 2022

FILE NO.: WR 178293

Assessed Person(s): Dkgk Holdings Inc.

Appellant(s): Dkgk Holdings Inc.

Respondent(s): Municipal Property Assessment Corporation Region 14

Respondent(s): Town of Georgina

Property Location(s): 22869 Woodbine Avenue

Municipality(ies): Town of Georgina

Roll Number(s): 1970-000-100-71800-0000

Appeal Number(s): 3419685, 3444097 and 3488250

Taxation Year(s): 2020, 2021 and 2022

Hearing Event No.: 765079

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

APPEARANCES:

Parties	Representative
Dkgk Holdings Inc.	Gary Foch
Municipal Property Assessment Corporation	Dennis Hughes
Town of Georgina	No one appeared

HEARD: April 7, 2022, by video conference

ADJUDICATOR(S): Carly Stringer, Member

DECISION

OVERVIEW

1Dkgk Holdings Inc. (the “Appellant”) is the assessed owner of 22869 Woodbine Avenue in the Town of Georgina, Ontario (the “Subject Property”). The Appellant has appealed the current value assessment of the Subject Property for the 2020, 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 $238,000 for the relevant taxation years. The Appellant argues that this value is too high. The Appellant says that a portion of the Subject Property should have been valued as farm land because it is used for non-commercial tree farming. The Appellant asks the Board to reduce the current value assessment to $175,000.

3The Municipal Property Assessment Corporation (“MPAC”) is a respondent in these appeals. MPAC asks the Board to confirm the returned value of $238,000. MPAC says the Subject Property should be valued as a residential property and there is no evidence of farming activity.

4The Town of Georgina has not responded to these appeals.

Issues for the Hearing

5At issue in this proceeding is:

1. What is the current value of the Subject Property as of the statutory valuation date of January 1, 2016? a. Is a portion of the Subject Property farm lands used only for farm purposes per s. 19(5) of the Act?
2. Is the current value equitable with the assessments of similar lands in the vicinity?

Result

6For the reasons that follow, the Board finds that the correct current value of the Subject Property for the 2020 to 2022 taxation years is $304,342.

7The Board finds 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 $304,342 or $304,000 rounded.

PRELIMINARY MATTERS

New Documents

8At the outset of the hearing, the Appellant sought to introduce new documents that were not previously disclosed to MPAC. The Appellant stated these documents were relevant to showing the effective tax rate applicable to other properties with farm land use, which the Appellant stated is relevant to value. The Appellant said that they did not realize this information could be helpful to its case until the morning of the hearing.

9MPAC objected to the evidence on the basis that it was irrelevant; did not relate to a comparable property; and was not provided in accordance with the timelines prescribed in the Board’s Rules of Practice and Procedure (the “Rules”).

10The Board refused to admit the Appellant’s new documents because Rule 48 of the Board’s Rules provides that a document may only be admitted into evidence at a hearing event if it has been served on all other parties and filed with the Board in accordance with the Rules, unless there are exceptional circumstances. The Appellant was required to serve and file their materials by March 15, 2021. The Appellant did not satisfy the Board that there were exceptional circumstances warranting the late introduction of these new documents. Moreover, the Rules are meant to ensure procedural fairness; enable the parties to adequately prepare for the hearing; and avoid “trial by ambush.” It would not be fair to admit the documents at this stage when MPAC has not had a reasonable opportunity to prepare for and respond to them. For these reasons, the Board did not permit the Appellant’s new documents to be admitted into evidence.

The Appellant’s Position on Farm Property Classification

11The Board spent a fair bit of time at the hearing clarifying whether the Appellant was asking that a portion of the Subject Property be classified as land in the Farm property class; or whether the Appellant was seeking a reduction to the current value of the Subject Property on the basis that a portion of it is “farm lands used only for farm purposes by the owner” pursuant to s. 19(5) of the Act; or both.

12This question is relevant because the Board does not have jurisdiction to change the property classification to Farm. Jurisdiction to adjudicate whether land should be classified in the Farm property class sits with the Agriculture, Food and Rural Affairs Appeal Tribunal (“AFRAAT”) pursuant to s. 31 of O. Reg. 282/98.

13The Board’s role is limited to determining whether lands are “farm lands used only for farm purposes by the owner” pursuant to s. 19(5) of the Act, which is a question that affects the value of land. Therefore, if the Appellant was raising an issue as to whether a portion of the Subject Property should be classified in the Farm property class, the Board would have to first determine whether a portion of the Subject Property is “farm lands used only for farm purposes by the owner” as well as the value of the Subject Property, before referring the property classification issue to AFRAAT.

14The Appellant confirmed at the hearing that they were not seeking a change in property class from Residential to Farm. The Appellant confirmed that they were only seeking that a portion of the Subject Property be valued as farm land. This is an issue within the Board’s jurisdiction.

ANALYSIS

Description of Subject Property

15The Subject Property consists of 1.0 acre of lands improved by a single family detached residence. The residence has an effective year built of 1971. It has a quality of construction of 5. It has three bedrooms and one bathroom.

Returned Assessment

16The Subject Property was assessed at $238,000 for the relevant taxation years. This assessment was apportioned $229,400 in the Residential property class and $8,600 in the Commercial property class due to a billboard situated on a portion of the Subject Property.

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

Applicable Law

17In accordance with s. 44(3)(a) of the Act, the Board must first 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”.

18Accordingly, 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.

19In this case, the Appellant argues that a portion of the land should be valued as farm land. There is a provision of the Act that applies to determining the current value of farm lands. Section 19(5) of the Act states that:

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”.

20Essentially, 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 a portion of the Subject Property is “farm lands used only for farm purposes” such that s. 19(5) applies to circumscribe how to value that portion.

21Neither MPAC nor the Appellant provided the Board with case law to guide its analysis of s. 19(5). However, the Board recently considered the interpretation of s. 19(5) of the Act 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. The Board held that there are two separate and distinct criteria: i) “farm lands” meaning lands that are used for farming; and ii) “used only for farm purposes” meaning the lands cannot also be used for any other purpose: see Lortie at paragraphs 38-39.

22The Board then 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.

23The Board confirmed at paragraph 67 that “a determination of whether a parcel of land qualifies as farm land is a case specific determination.” Therefore, 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:

a. Physical characteristics of the land, including soil quality and its capacity to support crops if the activity is raising crops.

b. 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.

c. The history of use of the property, including whether the land has previously been farmed.

d. 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.

e. The scale of the farming activity (i.e. whether the activity is too limited to indicate that farming is taking place).

f. Permitted use of the land, including zoning.

g. The general nature of the locality.

h. Whether the lands have physical characteristics of a farm; and

i. Whether the lands involve a bona fide farmer.

24It is important to note that these are factors that may be considered, where relevant: see Lortie at paragraph 47.

a. Is a portion of the Subject Property farm lands used only for farm purposes per [s. 19(5)](https://www.canlii.org/en/on/laws/stat/rso-1990-c-a31/latest/rso-1990-c-a31.html) of the [Act](https://www.canlii.org/en/on/laws/stat/rso-1990-c-a31/latest/rso-1990-c-a31.html)?

Evidence and Submissions on Farm Lands Used Only For Farm Purposes

25The Appellant provided evidence that they perform “non-commercial tree farming” on roughly two-thirds of the Subject Property. The Appellant provided evidence that the current zoning for the Subject Property is Residential, but they obtained a minor variance from the Committee of Adjustment for the Town of Georgina on June 26, 2018, to permit a “non-commercial tree farm on [the] north 2/3s” of the Subject Property. The Appellant says they planted their first saplings on the Subject Property in the spring of 2019, including various species like birch, fruit-bearing trees and some “designer Japanese trees”. The Appellant stated that there is no commercial purpose to planting these trees. The Appellant stated the intent was to grow trees to raffle them off and raise funds for the community, however this did not transpire during any of the taxation years under appeal. The Appellant confirmed that they receive no income from this tree planting, nor do they have a farm business registration.

26Citing the above-noted evidence, the Appellant took the position that this two-thirds portion of the Subject Property should be valued as farm land.

27MPAC took the position that there was no evidence of farming activity at the Subject Property.

Findings on Farm Lands Used Only For Farm Purposes

28First, the Board must determine whether the portion of the Subject Property used for non-commercial tree farming is “farm lands used only for farm purposes”. This is of primary importance to the valuation exercise, because s. 19(5) of the Act requires that the value of farm land be determined solely by considering the land’s market value for farming purposes.

29The Appellant took the position their non-commercial tree farm constitutes farm lands used only for farm purposes while MPAC took the position that there was no evidence of farming activity at the Subject Property.

30Considering the relevant factors identified in Lortie and the evidence provided by the parties in this case, the following factors weigh in favour of a finding that a portion of the Subject Property is farm land:

a. The Appellant provided evidence that the Subject Property is surrounded by farms, and that the Subject Property was farmed up to the early 1990s. This suggests the subject lands could support farming;

b. The Appellant has a minor variance to the residential zoning that permits a “non-commercial tree farm” on the Subject Property; and

c. The Appellant planted saplings in spring 2019. In 2020, the Appellant marked the saplings that could be salvaged after the flood and “re-fertilized with rows left to fallow for 2021 rehabilitation, aeration, and cultivation.” At an unspecified time after that, the Appellant “trimmed the lands of the overgrowth from fallow” and tilled between the rows.

31The following factors weigh against a finding that a portion of the Subject Property is farm land:

a. The Subject Property is very small in size and the portion that is used for “non-commercial tree farming” is even smaller, just over half an acre;

b. The Appellant acknowledges the trees are not being grown for commercial purposes, and the Appellant garners no income from the activity. While the Appellant stated their initial intent was to “grow trees to raffle them off and raise funds for the community,” the Appellant did not provide the Board with much further detail regarding the purpose of their activity. At the very least, there was insufficient evidence of the Appellant intending to sell its trees or use them for other farming activity on the lands. There was insufficient evidence for the Board to be satisfied that the overall purpose of the Appellant’s activity was “producing food or other products for the consumption of other persons or as a component of the farm activity itself”, as defined in Lortie.

c. The nature of the farming activity at this site is very limited:

i. There is insufficient evidence of farm outbuildings or secondary structures typically required to support farming.

ii. There is insufficient evidence of using farm equipment/machinery.

iii. The only evidence for purchases of farm supplies is an order form for 450 tree seedlings dated March 5, 2019.

iv. There is insufficient evidence regarding the scope and timing of the activity on-site. While the Appellant provided some general information as referenced at paragraph 32(c) above, this is simply not enough detailed evidence supporting exactly what activity was undertaken on-site, and when. There is not sufficient evidence for the Board to confirm that the full scope, scale and timing of activity on the Subject Property amounts to farming.

32While no single factor is determinative, the Board finds that the limited scale of the activity, the lack of clear evidence regarding purpose, and the lack of clear and detailed evidence regarding the scope of activity weigh more heavily towards a finding that the Appellant’s non-commercial tree farm does not render a portion of the Subject Property “farm land used only for farm purposes”.

33Given the narrow construction of “farm land used only for farm purposes” and weighing the relevant information, the Board finds that the portion of the Subject Property used for non-commercial tree farming is not “farm land used only for farm purposes” for the relevant taxation years. Accordingly, s. 19(5) does not apply to the Board’s determination of current value.

34As a final note, the Board confirms that none of the factors above are determinative in and of themselves. The determination of whether lands are “farm lands used for farm purposes” is a fact-specific decision that will vary in every case.

b. What is the current value of the Subject Property as of January 1, 2016?

Evidence and Submissions on Current Value

35MPAC provided the Board with evidence regarding sales of proposed comparable properties at or within one year of January 1, 2016. MPAC made a series of adjustments to the sale amounts for these proposed comparable properties to arrive at a final adjusted sale amount for each proposed comparable property. MPAC performed the following adjustments:

a. a time adjustment to reflect what the properties would have sold for on January 1, 2016.

b. a medium traffic pattern adjustment (- 4%) and an “abutting commercial” adjustment (- 9%) to reflect conditions at the Subject Property; and

c. MPAC removed the value of the detached garage from any proposed comparable properties that had detached garages, since the Subject Property does not have one.

MPAC’s Proposed Comparable Properties and Sales Information

Property Address	381 The Queensway S	159 Bayview Avenue	176 Spring Road	300 Pasadena Drive
Sale Date	May 2016	February 2016	December 2016	December 2015
Time Adjusted Sale Amount	$322,714	$311,539	$293,109	$298,652
Building Area (sq. ft.)	793	800	732	788
Effective Site Area (acres)	0.33	0.21	0.14	0.15
Effective Year Built	1972	1963	1990	1985
Quality of Construction	5	5	4.5	5.5
Storeys	1	1	1	1
Secondary Structures	Shed	Detached Garage	Detached Garage	Detached Garage
Final Adjusted Sale Amount (With Adjustments for Time, Traffic, Abuts Commercial, and Garage)	$290,403	$262,731	$250,068	$251,431

36MPAC established a probable range of current value for the Subject Property by bracketing the Subject Property between the above-noted properties. Based on MPAC’s sales evidence, the range of value is $250,068 to $290,403. MPAC stated that the Subject Property has a significantly larger lot size than all four proposed comparable properties and would sell for more. MPAC then adjusted its proposed comparable property sale amounts to reflect the same lot size as the Subject Property and arrived at a range of value of $256,166 to $304,342. MPAC stated that 381 The Queensway S is the most comparable to the Subject Property and stated that without adjusting for the land, the Subject Property would still sell for a higher amount. MPAC’s final estimate of current value was therefore $322,714, being the time-adjusted sale amount of 381 The Queensway without adjustments for traffic, for being next to a commercial property, or for lot size. In light of that evidence, MPAC stated, the Board should confirm the returned assessment of $238,000.

37The Appellant disputed MPAC’s proposed comparable property sales on the basis that MPAC did not include any farm land. The Appellant took the position that the Board should reduce the current value assessment to $175,000. The Appellant did not provide the Board with evidence supporting a proposed value of $175,000.

Findings on Current Value

38Generally, the best evidence of current value is the sale amount of the Subject Property on or close to the valuation day of January 1, 2016. If no such sale occurred, the Board will consider sale amounts of comparable properties to establish the current value of the Subject Property.

39The Appellant did not provide evidence of comparable property sales, or any other evidence supporting its proposed current value of $175,000. Therefore, there is no basis in the evidence for the Board to find a current value of $175,000.

40The Board has analyzed the proposed comparable property sales submitted by MPAC and finds that all four property sales relied on by MPAC are sufficiently comparable to the Subject Property because:

a. They all sold within the shoulder years of the valuation date.

b. They are very close in terms of building area.

c. They are very similar in terms of the quality of construction; and

d. Appropriate adjustments were made to address areas of difference with the Subject Property including lot size, traffic patterns, being next to a commercial property, and lack of detached garage.

41The Appellant has not challenged these proposed comparable properties on any basis other than they do not include farm land. Since the Board has found that no portion of the Subject Property is farm land for the relevant taxation years, this is irrelevant. There is no other challenge from the Appellant as to the appropriateness of these comparable properties. Therefore, the Board finds MPAC’s evidence to be the best evidence in this instance.

42Following adjustments for lot size, proximity to a commercial property, medium traffic and having a detached garage, the range of value of the comparable properties is $256,166 to $304,342. The Board finds that this provides a range of reasonable values. The Board finds that the Subject Property is most similar to 381 The Queensway S, which is at the top of that range. Accordingly, the Board finds the correct current value of the Subject Property to be in line with the value of 381 The Queensway S as adjusted, being $304,342.

Issue 2 - Is the current value equitable with the assessments of similar lands in the vicinity?

Applicable Law

43Section 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 on Equity

44The 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.

45MPAC provided an equity analysis report detailing the sales of 30 detached residential properties located within three kilometres of the Subject Property, occurring between January 1, 2015, and December 31, 2016. The analysis reflected a range of assessment to sale ratios (“ASR”) from 0.810 to 1.056 with a median ASR of 0.961.

46The ASR of a sample of similar sold properties in the vicinity is a tool often used to determine the level of appraisal, including if a property in the vicinity is assessed below its current value. If sold properties are assessed below their current value, a reduction in the assessment of the Subject Property is required to make it equitable with the assessments of similar lands in the vicinity. The ASR is determined by comparing the assessment as returned to the time adjusted sale price, expressed as a mathematical ratio.

47MPAC provided evidence that the International Association of Assessing Officers standards state that the level of appraisal for this type of property should fall between 0.90 and 1.10. MPAC’s position is that equitable assessment is achieved if the median ASR falls between 0.95 and 1.05. In this case, the median ASR of 0.961 falls within that range which, MPAC testified, shows there is equity and no reduction to the current value is required.

Findings on Issue 2

48In the absence of evidence from the Appellant, the Board finds that the best evidence on equitable assessment is the equity analysis report presented by MPAC. The Board has analyzed MPAC’s evidence and is satisfied that the properties submitted by MPAC are within the vicinity of the Subject Property and are sufficiently similar to the Subject Property.

49MPAC’s median ASR is 0.961. The Board accepts MPAC’s evidence that the International Association of Assessing Officers standards state that the level of appraisal for this type of property should fall between 0.90 and 1.10. Since MPAC’s median ASR is 0.961 and falls within that range, the Board is satisfied that no reduction to the current value is required for the purposes of achieving equitable assessment.

CONCLUSION

50The correct current value of the Subject Property is $304,342. The Board finds that there is no evidence to support a reduction in this amount for the purposes of equitable assessment, resulting in an assessment of $304,342, or $304,000 rounded.

ORDER

51The Board orders that the returned assessments for the 2020, 2021, and 2022 taxation years be increased from $238,000 to $304,000 rounded, apportioned as $293,026 in the residential property class and $10,974 in the commercial property class.