Tribunals Ontario

Assessment Review Board

ISSUE DATE: January 05, 2023 FILE NO.: WR 182193

Assessed Person(s): Michael McKean Davidson; Pamela Jean Davidson; Summer’s Gold Honey Company Appellant(s): Michael Davidson; Pamela Davidson Respondent(s): Municipal Property Assessment Corporation Region 26 Respondent(s): Municipality of Chatham-Kent

Property Location(s): 101 William Street Municipality(ies): Municipality of Chatham-Kent Roll Number(s): 3650-060-003-63800-0000 Appeal Number(s): 3394870, 3410485, 3448671 and 3490394 Taxation Year(s): 2019, 2020, 2021 and 2022 Hearing Event No.: 777484

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

APPEARANCES:

Parties	Representative
Michael Davidson; Pamela Davidson; Summer’s Gold Honey Company	Self-represented
Municipal Property Assessment Corporation	Tony Pileggi
Municipality of Chatham-Kent	No one appeared

HEARD: November 9, 2022 by video conference

ADJUDICATOR(S): Subuola Awoleri, Member

DECISION

OVERVIEW

1Michael and Pamela Davidson (the “Appellants”), owners of 101 William Street (the “Subject Property”), appealed the 2019 classification 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 classification is incorrect. The Appellants argue that the Subject Property should have been classified in the farm property class, and not in the commercial property class, because they believe the Subject Property is farm land used only for farm purposes. The Appellants are deemed to have brought the same appeal in respect of the 2020, 2021 and 2022 taxation years, pursuant to s. 40(26) of the Act.

2The Municipal Property Assessment Corporation (“MPAC”) argues that the activities carried out on the Subject Property disqualify it from being farm land used only for farm purposes. Therefore, MPAC submits that the correct classification of the Subject Property as returned is in the commercial property class. MPAC requests the Board confirm the returned classification in the commercial property class.

3For the 2019 to the 2022 taxation years, the returned assessment for the Subject Property was $55,000.

4Jurisdiction to adjudicate whether land should be classified in the farm property class is divided between the Board and the Agriculture, Food and Rural Affairs Appeal Tribunal (“AFRAAT”). The Board’s role is limited to determining whether the land is farm land used only for farm purposes under s. 19(5) of the Act. After the Board makes that determination, any further issue as to whether the land should be classified in the farm property class is referred to AFRAAT.

Areas of Agreement

5The parties agree that the Current Value Assessment (“CVA”) of the Subject Property for the 2019, 2020, 2021 and 2022 taxation years is $55,000.

Issue

6Should the Subject Property be considered as farm land used only for farm purposes pursuant to s. 19(5) of the Act?

Result

7The Board finds that for the 2019, 2020, 2021 and 2022 taxation years, the Subject Property was not farm land used only for farm purposes under s. 19(5) of the Act.

ANALYSIS

Description of the Subject Property

8The Subject Property is a 2,084 square foot (“sq. ft.”) building on a 3,008 sq. ft. lot. The Appellants described the Subject Property as an extraction facility (“Honey House”), used for the production of honey. For the 2019 to 2022 taxation years, there was no fixed (permanent) beehive on the Subject Property. There is a retail portion on the Subject Property used by the Appellants to sell some of their products.

Issue: Should the Subject Property be considered as farm land used only for farm purposes pursuant to s. 19(5) of the Act?

Jurisdiction of the Board

9The requirements for classification in the farm property class are set out in ss. 8 and 8.1 of the General Regulation under the Act, O. Reg. 282/98 (the “Regulation”). One of those requirements set out in s. 8(2)2 of the Regulation is that s. 19(5) of the Act applies to the land. Subsection 19(5) of the Act provides special rules for valuing farm lands used only for farming purposes, and states as follows:

19.(5) Farm lands and buildings. -- 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".

10Pursuant to paragraph 1 of s. 31 of the Regulation, if the application of s. 19(5) of the Act to the land is in issue on an appeal, the Board must determine the issue and if necessary, as a result of this determination, redetermine the current value of the land. This section further states that “the application of subsection 19(5) of the Act shall be deemed to be in issue if the current value of the land was not determined in accordance with that subsection”.

11For the 2019 to 2022 taxation years, MPAC did not assess the Subject Property in accordance with s. 19(5) of the Act as MPAC submits that the activities on the Subject Property do not qualify it as farm land used only for farm purposes. Therefore, the application of s. 19(5) of the Act is deemed to be in issue in this appeal and the Board is required to determine it.

12Paragraph 2 of s. 31 of the Regulation does not provide the Board with jurisdiction to make a determination on whether land should be classified in the farm property class. If after the Board makes a determination under s. 19(5) of the Act and there is still an issue of whether the land should be classified as land in the farm property class, the Board must refer the issue to AFRAAT.

13AFRAAT will then determine whether the remainder of the requirements in s. 8 and 8.1 for classification in the farm property class are met. Section 8(1) of the Regulation provides in part:

8. (1) The farm property class consists of land determined in accordance with this section and section 8.1 to be farmland.

(2) Land used for farming, including outbuildings is farmland for a taxation year if the following requirements are satisfied:

1. A farming business, within the meaning of the Farm Registration and Farm Organizations Funding Act, 1993, is carried out on the land.

2. Subsection 19 (5) of the Act applies to the land for the taxation year but the land is not land to which section 44 applies.

3. The land is owned by,

i. an individual who is a Canadian citizen or has been lawfully admitted to Canada for permanent residence,

14The Appellants consent to the assessed value of the Subject Property as returned on the roll for the 2019 to 2022 taxation years at $55,000. Therefore, the Board only has to determine if the Subject Property was farm land used only for farm purposes in accordance with s. 19(5) of the Act.

The Requirements of s. 19(5) of the Act

15There are several decisions from the Board that have addressed the requirements in s.19(5) of the Act: Delta Bingo Inc. v. Municipal Property Assessment Corporation, Region No. 18, 2013 CanLII 104841 at paragraph 36 (ON ARB) (“Delta Bingo”); Lortie v. Municipal Property Assessment Corporation, Region 01, 2022 CanLII 25778 at paragraph 39 (ON ARB) (“Lortie”).

16Subsection 19(5) of the Act applies to “farm lands used only for farm purposes”, which this Board has determined includes two separate elements. The lands must be both “farm lands” and “used only for farm purposes”

17In McArthur v. Municipal Property Assessment Corporation, Region 28, 2021 CanLII 26724 (ON ARB) (“McArthur “) the Board determined at paragraphs 25 and 26 that:

The Act does not define farm land. For a land to be determined as farm land, there are several factors that the Board considers as determined in Delta Bingo, at paragraph 36:

...the law as it currently stands holds that there are two elements to the determination of whether lands can qualify as "farm lands used only for farm purposes." The Court of Appeal has approved the proposition that while the use of the lands for farming remains a predominant determinant, other factors such as those listed must be considered in order to characterize lands as farm lands in the first instance.

The other factors referred to in Delta Bingo are: whether the land has physical characteristics of a farm, if it is carried out by a bona fide farmer, the surrounding uses and history of uses. In this present appeal, the farming activity of beekeeping differs from the farming activity in Delta Bingo of cultivating crops, therefore the evidence did not address all the factors identified in Delta Bingo. [emphasis added]

18In Lortie at paragraph 42, the Board states:

In determining whether a farming activity takes place on a property, the Decision, at paragraph 27 refers to a non-exhaustive list of factors which can be considered, these factors being identified in Delta Bingo based on its review of Slough. The Board paraphrases these factors as follows:

(a) Physical characteristics of the land, including soil capability, 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 the use of the property, to the extent that a past history of farming activity suggests that a farming activity is taking place as of the applicable valuation day;

(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.

In addition to these factors, it may also be necessary to consider the scale of the farming activity, i.e. whether the activity is too limited to indicate that farming is taking place (for an example of this factor, see McArthur v Municipal Property Assessment Corporation, Region 28, 2021 CanLII 26724 (ON ARB) ), where the issue was the number of beehives required in order that the activity of producing honey could be considered a farming activity).

19In this appeal, the farming activity is also beekeeping. Most of the factors listed in Delta Bingo and Lortie do not apply to beekeeping and the evidence also does not address all the factors listed in Lortie.

20The Board has to determine whether the Subject Property is farm land and if it was used only for farm purposes based on the activities carried out on the Subject Property.

Was the Subject Property Farm Land?

21In order to make a determination whether the Subject Property was farm land, the Board has to first address the scale of the farming operation, that is, the requirement of having 50 beehives on the Subject Property, which has been used in prior Board decisions to determine if the property is farm land.

Scale of Farming Operation – Requirement of 50 Beehives on Subject Property.

22During the taxation years under appeal, the Subject Property did not have a fixed (permanent) beehive situated on it.

23In McArthur, the Board determined at paragraph 24 that “The Board finds that the Subject Property was not farm land because it did not have at least 50 beehives situated on it in the 2019 taxation year”. The appellant in McArthur only had 20 beehives on his property in the 2019 taxation year.

24In McArthur, the Board referred to the decision in Fury v. Municipal Property Assessment Corporation, Region 22, 2020 CanLII 21745 (ON ARB) ("Fury"). In Fury, the farming activity was also beekeeping, in which the appellant only had two beehives situated on the property. The Board determined that it was not farm land and the appellant’s farming activity was only recreational or hobby farming.

25In McArthur and Fury, the Board determined that the scale of the farming operation on the properties was not sufficient to qualify the subject properties as farm land since the appellants did not meet the minimum required threshold of having 50 beehives situated on their properties.

26In the present appeal, during cross-examination, Brian Rath, MPAC’s expert witness, who was also MPAC’s expert witness in Fury, admitted that when he met the Appellants at the Subject Property, he advised them that the number of beehives or the location of beehives on the Subject Property is not a determinative factor on whether it qualifies as farm land. Although he clarified to them that a beekeeper should have at least 50 beehives in aggregate, but not necessarily in one location. Furthermore, he admitted that the Board misunderstood the evidence in Fury, in reference to the location of all the 50 beehives being on the subject property. When asked by the Appellants why MPAC did not make an effort to correct this misunderstanding in McArthur, MPAC objected to the question stating that Mr. Rath was not the witness in McArthur.

27The Appellants testified that in 2019, they had 60 colonies, in 2020 - 117 colonies, in 2021 - 250 colonies, all spread around different locations.

28The Appellants further testified of the dangers of having 50 beehives on the Subject Property. They added that honeybees are susceptible to a number of diseases such as American Foulbrood, and the remedy for this infection would involve burning the entire colony. They further added that since the honey from many colonies comes to the Honey House for extraction, it is advisable not to maintain beehives in the area around the Honey House as that would present a heightened risk of infection.

29The Appellants’ testimony was corroborated by their witness, Bernie Wiehle, president of the Ontario Beekeepers Association (“OBA”). Mr. Wiehle testified that keeping bees in the same location as the Honey House is not considered a good biosecurity plan and that bees should be spread out for biosecurity reasons, due to the potential diseases honeybees can spread amongst themselves. He added that the bees can get into the Honey House since they get attracted to the smell of honey, which can be a potential risk to the Appellants.

30During cross-examination, MPAC did not disagree with the Appellants and Mr. Wiehle’s testimony regarding the dangers of keeping beehives in or close to the Honey House. Mr. Wiehle admitted that he does not have any expertise in the valuation of properties and that his duty at the hearing was to educate the Board on the business operation of beekeeping.

31The evidence of the danger and risk of having beehives in the same location as the Honey House was not available at the McArthur hearing. The Board finds that based on the evidence adduced at this hearing, it would be unreasonable and dangerous to have 50 beehives on the Subject Property, due to the danger it poses to the Appellants and the size of the Subject Property which is a 2,084 sq. ft. building on a 3,008 sq. ft. lot. Therefore, the scale of the farming operation will not be the determinative factor as to whether the Subject Property is farm land. Each case must be determined on its own facts.

32In McArthur the Board referred to the Federal Court decision in Paradis Honey Ltd. v. Canada, 2017 FC 199, [2018] 1 FCR 275, at paragraph 59:

[59] MPAC also cited the Federal Court decision in Paradis Honey Ltd. v. Canada, 2017 FC 199, [2018] 1 HCR 275 (“Paradis”). In Paradis, the plaintiffs were seeking damages for losses that resulted from a ban on the importation of honeybees from U.S.A. since 1987. In line with this, a motion was filed to certify the underlying action as a class action on behalf of Canadian beekeepers. The plaintiffs sought to amend the class definition to “all persons in Canada who keep or have kept more than 50 bee colonies at a time for commercial purposes since December 31, 2006”. Specifically, paragraphs 40 and 41 of the decision states:

On their website, the Honey Council states that commercial beekeepers in Eastern Canada and British Columbia operate small to medium sized operations of 50-50 000 colonies. Mr. Gibeau, one of the proposed representative plaintiffs, testified that a person needs to have at least 50 colonies to significantly augment their income, and to qualify for most federal or provincial government agricultural safety net programs. Mr. Gibeau explained that, in setting the minimum number, the Beekeepers were trying to ensure that hobbyists were excluded from the Class, because they have different interests from commercial beekeepers. Therefore, the Beekeepers assert that the minimum of 50 colonies is logical, and is neither over- nor under-inclusive. [emphasis added]

I find the Federal Crown's argument that the number of colonies is an arbitrary cut-off unpersuasive. As the Beekeepers show, the number 50 is tied to both representations made by the Honey Council about the size of commercial beekeeping operations in the Eastern Provinces and British Columbia, and government assistance programs that require a beekeeper to have at least 50 colonies to qualify. The Beekeepers acknowledge that requiring beekeepers to have 50 or more colonies may prevent some commercial beekeepers from taking part in the Action. However, as Madam Justice Martine St-Louis said recently, in Rae v. Canada (National Revenue), 2015 FC 707, [2015] 6 C.T.C. 135, at paragraph 56, "[o]ver-inclusion and under-inclusion are not fatal to the certification as long as they are not illogical or arbitrary". In this case, I find that setting the cut-off for the Class at 50 colonies is both logical and non-arbitrary. [emphasis added]

33The Board still finds that 50 is not an arbitrary number. As the requirement of having 50 beehives to be a commercial beekeeper is necessary, to distinguish between hobby farming and commercial beekeeping.

34In Lortie the Board notes in paragraph 36 that in line with the decision in Slough Estates Canada Limited v. Regional Assessment Commissioner, Region No. 15, 2000 CanLII 5705 (ON CA) (“Slough”):

…s. 19(5) is to be restricted to only those lands that are farm lands used only for farmed purposes. Therefore, the wording of s. 19(5) is to be narrowly construed in order to exclude lands that are not being used for farming.

35The Board now has to determine if the Subject Property was farm land during the taxation years in question.

Farm Land

36The term farm land is not defined in the Act. The application and interpretation of this term will be based on the facts of each case.

37There is no dispute between the parties that the Appellants were bona fide farmers during the taxation years under appeal. Mr. Rath testified that the Appellants are commercial beekeepers with more than 50 beehives located elsewhere.

38MPAC submits that a peripheral farm use or a proportional farm use will not qualify the Subject Property as farm land used only for farm purposes.

39In Lortie at paragraphs 41 and 48 the Board determined that:

… on plain reading of s. 19(5), there is general consensus in prior Board decisions that 'farm lands' are lands used for farming. Farming is not an inherent feature of the land, i.e. the earth located within the boundaries of the land. Instead, it is an activity which occurs on the land and, therefore, it is a use of the land…

… Furthermore, as previously noted, s. 19(5) addresses the determination of current value, which, under the scheme of the Act, is assessed as of a fixed valuation day. Therefore, it is clear that the determination of whether land qualifies as farm lands, is based only on the land's use as of the applicable valuation day…

40MPAC also argued that the Subject Property is zoned urban commercial and farming is not a permitted use. In Slough the issue was whether a land that is zoned industrial but used as a farm is to be assessed as farm land, since farm use is not permitted. The Ontario Court of Appeal upheld the Ontario Municipal Board’s decision that it should be assessed as farm land. The Court held that “the focus of s.19(3) is on the use of the land, a factual issue, not its zoning, a legal issue”. The court further indicated that zoning is not completely irrelevant and may be considered.

41In the present appeal, in order to determine whether the Subject Property is farm land depends on whether there were only farming activities carried out on the Subject Property. The Board will focus on the actual use of the land, whether the activities carried out on the Subject Property qualifies it as farm land.

Activities on the Subject Property

42The Appellants testified that the Subject Property is used solely for harvesting, cleaning and packaging honey and beeswax. They also testified that 100% pure, hand poured beeswax candles are also made in the Subject Property. However, they added that the amount of beeswax candles made is insignificant to disqualify the Subject Property from being farm land. They submit that if the candles are the issue for the Subject Property’s disqualification from being farm land, they are more than willing to stop making and selling the candles. Mr. Wiehle also acknowledged that “the processing into other products is a very small part of Mr. Davidson’s business and should not be considered as industrial”.

43The Appellants further suggested that the retail portion of the Subject Property which, according to them and confirmed by Mr. Rath, is just 8% of the floor space and should be apportioned as commercial, while the balance of the floor space used for storage and production of other products such as honey and beeswax, should be farm land. The Board notes that the Appellants denied MPAC an inspection of the interior of the Subject Property.

44During cross-examination, the Appellants admitted that the Subject Property’s website shows that soap was advertised online and that it sold soap as of May 25, 2021, when the pictures were taken from the Subject Property’s website by MPAC. However, the Appellants testified that the soap and beauty products are produced by Aeto’s Apothecary, a Health Canada-approved laboratory located in the Township of North Dumfries. The Appellants added that the soap and beauty products are produced at that location and offered for sale on the Subject Property’s website and retail store.

45MPAC argued that the Appellants had crossed the line from farm land to commercial, since retail is out of bounds for a property to be farm land used only for farm purposes. Furthermore, MPAC submits that given the multi-use of the building, it is clearly not a farm building to qualify as farm land used only for farm purposes under s. 19(5) of the Act.

46The Appellants do not dispute that there is a retail outlet on the Subject Property. They also admit that they make beeswax candles. MPAC directed the Board to photographs of various products advertised on the Subject Property’s website. The Appellants testified that the soaps were not made on the Subject Property but advertised on its website and sold in the retail store on the Subject Property. The photographs also include various candles made from beeswax, which the Appellants have admitted are being produced in the Subject Property. The Appellants admit that the “vast majority” of the Subject Property is used for production of honey and beeswax.

47The Board finds that the entire Subject Property is not used for the production of honey and beeswax. These other activities such as retail and the production of candles are not primarily dealing with the production of the product from the livestock (beehives). As determined by case law, s.19(5) has to be narrowly construed. It is restricted only to land that is being farmed and in this appeal the activities on the Subject Property are not only for the production of honey and beeswax.

Used only for Farm Purposes

48In accordance with s.19(5) of the Act, the Subject Property has to be farm land used only for farm purposes

49In Lortie at paragraph 38 and 52, the Board determined that:

…"farm lands" are lands that are used for farming. The second criteria, "used only for farm purposes", based on the natural and ordinary meaning of these words, simply requires that the lands cannot also be used for any other purpose. The Board further notes that this requirement, in itself, reinforces that s. 19(5) of the Act is, be narrowly interpreted. [emphasis added]

…if a parcel of land is not actually used for farm purposes, and only for farm purposes, it cannot qualify as farm lands used only for farm purposes, even it is accepted that a farming activity can take place on the land

50In accordance with the admission of the Appellants, although some farming activity was carried out on the Subject Property, it was not “only” used for farm purposes, it is also used for retail and the production of candles. This does not make it qualify as farm land used only for farm purposes.

CONCLUSION

51The Board finds that in the 2019 to 2022 taxation years, the Subject Property was not farm land used only for farm purposes pursuant to s. 19(5) of the Act, due to the activities carried out on the Subject Property which were not all primarily related to the production of honey.

ORDER

52The Board orders as follows:

a. for the 2019, 2020, 2021 and 2022 taxation years, the assessment of the Subject Property is confirmed as returned in the commercial property class; and

b. on consent of the parties, for the 2019, 2020, 2021 and 2022 taxation years, the assessment of the Subject Property is confirmed as returned at $55,000.

“Subuola Awoleri”

SUBUOLA AWOLERI MEMBER Assessment Review Board Website: www.tribunalsontario.ca/arb