Landry v. Municipal Property Assessment Corporation Region 30, 2022 CanLII 75946

Tribunals Ontario

Tribunaux décisionnels Ontario

Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE:

August 19, 2022

FILE NO.:

WR 180893

Assessed Persons:

Joel-Philippe Landry; Melanie Blais

Appellants:

Joel-Philippe Landry; Melanie Blais

Respondent:

Municipal Property Assessment Corporation Region 30

Respondent:

City of Greater Sudbury

Property Location:

209 Linden Drive

Municipality:

City of Greater Sudbury

Roll Number:

5307-170-025-07610-0000

Appeal Numbers:

3469656 and 3490650

Taxation Years:

2021 and 2022

Hearing Event No.:

768864

Legislative Authority:

Sections 34 and 40 of the Assessment Act, R.S.O. 1990, c. A.31

APPEARANCES:

Parties

Representative

Joel-Philippe Landry and Melanie Blais

Joel-Philippe Landry

Municipal Property Assessment Corporation

Maria Gianfrancesco

City of Greater Sudbury

No one appeared

HEARD:

August 9, 2022 by telephone conference call

ADJUDICATOR:

Jean-Paul Pilon, Member

DECISION

OVERVIEW

1Joel-Phillipe Landry and Melanie Blais (the “Appellants”) are the owners of a property at 209 Linden Drive in the City of Greater Sudbury (the “Subject Property”).

2In 2021, the Municipal Property Assessment Corporation (“MPAC”) returned a supplementary assessment of the Subject Property at $493,000 on account of a new house built by the Appellants in 2020. The Appellants appealed that assessment on the basis that it was incorrect as in too high, and a further appeal was deemed pursuant to section 40(26) of the Assessment Act, R.S.O. 1990, c. A.31 (the “Act”) of an assessment returned at $598,000 for the 2022 taxation year.

Background

3The only written evidence before the Assessment Review Board (the “Board”) at this hearing was from MPAC in the form of its valuation and equity reports.

4MPAC’s position was that the assessment of the Subject Property should be reduced from $598,000 to $556,000. This was based on the per square foot (“sq. ft.”) value of the interior space of a single property that MPAC argued was substantially similar to the Subject Property. MPAC’s further position was that no adjustment in equity was required.

5Joel-Philippe Landry represented both Appellants at the hearing and did not take issue with any of MPAC’s evidence. Instead, he argued that the assessment of the entirety of the Subject Property should be reduced to $481,000. This submission was based on the assumption that the value of the land was $100,000 (which was in fact returned at $105,000 in an earlier 2021 assessment that was not appealed), to which he added the cost of the material to build the house of $381,000.

6In essence, the Appellants’ argument was that the cost approach was the correct means of determining the current value of the Subject Property, not the direct comparison approach used by MPAC.

7The Appellants raised two additional issues at the hearing that are addressed at this point in this decision.

8First, Mr. Landry argued that MPAC was attempting to assess the house he built on the Subject Property retroactively to 2016, where the valuation date in these appeals was January 1, 2016. This was not the case, and the earliest assessment of the Subject Property under appeal was the supplementary assessment for the 2021 taxation year when its state and condition included the new house. Apart from this supplementary assessment in the 2021 taxation year, the assessments for the 2017 to 2021 taxation years remain undisturbed because they were not appealed.

9Second, Mr. Landry raised a novel argument that the Board could not presume what a willing seller would want for the Subject Property and what a willing buyer would pay for it because neither of them exist. Section 19(1) of the Act, however, provides that “the assessment of land shall be based on its current value” where “current value” is defined in section 1(1) of the Act as “the amount of money in fee simple, if unencumbered, (the land) would realize if sold at arm’s length by willing seller to a willing buyer.” Mr. Landry was correct that there was no evidence before the Board that anyone was willing to buy the Subject Property, and he testified that he was not willing to sell it. Nevertheless, the Act requires the Board to determine what the land would sell for if there was a willing seller and a willing buyer. The Board has no discretion to alter that aspect of the valuation exercise.

Subject Property

10The Subject Property is a residential dwelling on a 22.41 acre parcel of land. MPAC’s evidence was that the Appellants’ house includes interior space of 2,754 sq. ft., that it has a quality class using MPAC’s measure of 6.5, and that it includes 2.5 bathrooms and an attached garage.

Issues for the Hearing

11The remaining issues in this proceeding were:

1. The correct approach to determining the current value of the Subject Property;

2. The current value of the Subject Property; and

3. Equity.

Results

12The direct comparison approach is the correct approach to determine the current value of the Subject Property.

13The current value of the Subject Property is $542,000.

14No adjustment in equity is required.

ANALYSIS

Issue 1 – Approaches to Determining Value

15Mr. Landry argued that the Board should use the cost approach to determine the current value of the Subject Property and not the direct comparison approach used by MPAC. His position was that the Board’s determination of current value should be based on the cost of the material used to build the house of $381,000.

16It would be unusual for the Board to use a methodology other than the direct comparison approach to determine the current value of the Subject Property, a single-family home. That said, the Divisional Court wrote in Municipal Property Assessment Corp. v. Inmet Mining Corp., 2002 CanLII 7325 at para. 14 that “there are no legislated guidelines setting out specific valuation concepts” and that “the Board’s choice of appraisal method is question of fact.”

17MPAC’s valuation report acknowledged that the cost approach could be useful for newly built residential properties. It noted however that “buyers and sellers of residential properties seldom have reference to the cost of acquiring and building on land when making value judgments.”

18On the cost approach, Walker and Grad wrote in their “Ontario Property Tax Assessment Handbook”, 2nd edition at page 12-8 that “the premise of the cost approach to value is the assumption that a potential purchaser would pay no more for the cost of replacing such a property.” That assumption by a potential purchaser would most likely have been the paramount if the Subject Property had been an industrial property where the cost approach is often used. The cost to replace the Subject Property, on the other hand, would less likely have been a consideration for a potential purchaser of a residential property like this one.

19The direct comparison approach is generally more appropriate for residential property if sufficient evidence of the value of comparable properties exists because it is more indicative of the actual market than in the cost approach. Moreover, the Board determined in Land v Municipal Property Assessment Corporation, Region 32, 2020 CanLII 24879 (ON ARB) at para. 19 that the cost approach “is normally the approach of last resort when attempting to establish the market value of a property,” where “the Board normally prefers market driven approaches to establish the current value.”

20The Board finds that MPAC presented sufficient evidence to determine the current value of the Subject Property using the direct comparison approach. In any event, beyond the oral evidence of the value of the materials to build the house on the Subject Property (and not the potential cost of labour), Mr. Landry presented no supporting evidence of his costs that would have been necessary for the Board to proceed using the cost approach.

Finding on Issue 1

21As a result, the Board finds that the correct approach to determine the current value of the Subject Property is the direct comparison approach.

Issue 2 – Current Value

22Mr. Landry did not take issue with MPAC’s evidence using the direct comparison approach to determining value. Nevertheless, the Board’s obligation is to “determine the current value of the land” pursuant to section 44(3)(a) of the Act, therefore its analysis of MPAC’s evidence follows.

23MPAC’s valuation report listed five properties that sold between 2014 and 2016. However, it relied on a single property at 1242 Main Street which sold on August 29, 2014 at a time adjusted sale price of $579,711, or $202.20 per sq. ft., to arrive at its position of value of the Subject Property at $556,000.

24MPAC’s representative at the hearing argued that 1242 Main Street was the most comparable of its properties to the Subject Property but the Board does not agree. This is because 1242 Main Street included 10.28 acres of land while the Subject Property has 22.41 acres of land, had a quality rating of 7 compared to the Subject Property’s 6.5, and had three bathrooms to the Subject Property’s 2.5 bathrooms. Given these differences and especially the significant difference in acreage, the Board finds instead that 1242 Main Street was inferior to the Subject Property. In addition, while the Appellants did not raise any issue as to MPAC’s time adjustments, the sale of 1242 Main Street took place more than one year from the valuation date, making the accuracy of MPAC’s time adjustments debatable.

25More comparable to the Subject Property in the Board’s view is 107 Gravel Drive which sold on November 20, 2015 for $542,500 without time adjustment, or $225.38 per sq. ft. This property had similar acreage to the Subject Property (23.03 acres to the Subject Property’s 22.41 acres), had the same quality of construction, the same number of bathrooms, and included only 347 sq. ft. less interior space. The only other difference was that it was built in 2004 where the house on the Subject Property was built in 2020. Unlike 1242 Main Street, this property sold very close to the valuation date and therefore required no time adjustment.

26MPAC’s remaining properties were not comparable to the Subject Property. These included 341 Bodson Drive West, with substantially less land than the Subject Property, 2178 Kenneth Drive, with even less land and which sold in 2014, and 1950 Theriault Road, which included a substantially smaller house than that at the Subject Property.

27There were still differences between the Subject Property and 107 Gravel Drive in acreage, where the latter had slightly more land, a smaller house and a larger garage. Using a per sq. ft. measure to determine value would not have taken any of those differences into account. It would also have resulted in a current value of $620,000, exceeding the current value of 1242 Main Street which would be unjustified when considering the superior aspects of that property. However, since 107 Gravel Drive was by far the most comparable of the properties in evidence at the hearing, the Board finds that the value of the Subject Property should mirror that of 107 Gravel Drive at $542,000 rounded.

Findings on Issue 2

28The Board finds that the current value of the Subject Property is $542,000.

Issue 3 - Equity

29The Appellants did not raise any issue with MPAC’s findings in its equity study. That study determined that no equitable adjustment was required because it determined an assessment to sale ratio (“ASR”) of 0.96 from time adjusted sales of 30 single-family dwellings within 10 kilometres of the Subject Property that sold from 2012 to 2016. MPAC’s standard position on equity is that no adjustment is warranted if its ASR lands between 0.95 to 1.05, which this one did.

30The significant issue with MPAC’s study was its use of property sales from 2012 to 2014 where the valuation date was January 1, 2016. Sales from shoulder years would likely have produced a more accurate result and, to that end, the Board extracted all properties that had not sold in those shoulder years, 2015 and 2016. That analysis yielded a sufficiently-sized sample of 13 properties which, without any time adjustments, yielded an ASR of 0.98. This also suggested that no adjustment in equity would be warranted.

Findings on Issue 3

31No equitable adjustment is required pursuant to section 44(3)(b) of the Act.

CONCLUSION

32The current value of the Subject Property is $542,000 for the 2021 and 2022 taxation years.

33For the 2021 taxation year, MPAC returned an assessment of $105,000 for the land portion of the Subject Property which was not appealed. Its supplementary assessment of $493,000 for that taxation year increased the total assessment for the Subject Property to $598,000. As the current value of the Subject Property is $542,000, the Board finds that the supplementary assessment should be reduced from $493,000 to $437,000.

34The deemed appeal for the 2022 taxation year returned at $598,000 is reduced to $542,000.

ORDER

35The supplementary assessment of the Subject Property for the 2021 taxation year is reduced from $493,000 to $437,000 and shall remain in the Residential Property Class.

36The assessment of the Subject Property for the 2022 taxation year is reduced from $598,000 to $542,000 and shall remain the Residential Property Class.