Tribunals Ontario

Tribunaux décisionnels Ontario

Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE: July 25, 2024

FILE NO.: WR 186559

Assessed Person(s): 2379879 Ontario Inc.

Appellant(s): 2379879 Ontario Inc.

Respondent(s): Municipal Property Assessment Corporation Region 15

Respondent(s): City of Mississauga

Property Location(s): 3356 Elmbank Road

Municipality(ies): City of Mississauga

Roll Number(s): 2105-050-100-05900-0000

Appeal Number(s): 3504099, 3512977 and 3525647

Taxation Year(s): 2022, 2023 and 2024

Hearing Event No.: 783705

Legislative Authority: Section 40 of the Assessment Act, R.S.O. 1990, c. A.312

APPEARANCES:

Parties	Representative
2379879 Ontario Inc.	Jonas Perov and Jill Bender
Municipal Property Assessment Corporation	Joseph Fantetti
City of Mississauga	No one appeared

HEARD: June 3, 2024 by video conference call

ADJUDICATOR(S): Christopher Voutsinas, Vice-Chair, Anita Lovrich, Member

DECISION

OVERVIEW

Background

12379879 Ontario Inc. (“Appellant”) is the owner of 3356 Elmbank Road in the City of Mississauga (the “Subject Property”). The Appellant appealed the assessment of the Subject Property for the 2022 taxation year, and further appeals were deemed for the 2023 and 2024 taxation years pursuant to s. 40(26) of the Assessment Act, R.S.O. 1990, c. A.31 (“Act”).

2The Appellant takes the position that the assessed value of $1,676,000 for the 2022 and 2023 taxation years, and $1,824,000 for the 2024 taxation year are incorrect and are too high. The Appellant submits that the current value of the Subject Property, including an equity adjustment, is $1,007,000, representing land value only, as the Appellant takes the position that the improvements on the property have a value of $0.

3The Municipal Property Assessment Corporation (“MPAC”) is responding to these appeals. MPAC takes the position that the correct current value of the Subject Property, adjusted for equity, is $2,067,000 for the 2022 taxation year and $2,205,000 for the 2023 and 2024 taxation years. MPAC is seeking a higher current value than the returned current value.

4The City of Mississauga is a statutory party to the appeals. Its representative attended the hearing as an observer only.

Description of the Subject Property

5The Subject Property is a detached industrial warehouse used primarily for car rental operations and as a car parking facility. It consists of 14,151 square feet of total floor area, with 1,123 square feet comprising an attached office, on 1.26 acres of land. The structures were built in 1964 and 1969 with an effective year built of 1965 per MPAC. The property is located proximate to three highways and is approximately 2.5 km from Toronto Pearson Airport. It is zoned as E2-8 Employment.

6The Subject Property sold on August 13, 2013 for $1,625,000 in an open market transaction.

7The roof of the Subject Property was replaced in 2022 and there were renovations to the office that were completed in 2014 and 2023.

Issues for the Hearing

8At issue in this proceeding are:

1. What is the current value of the Subject Property for the years under appeal?
2. Is an equity reduction of the current value required, and if so, how much?

Result

9The Board finds that the current value of the Subject Property is $2,127,927 for the 2022 taxation year and $2,276,308 for the 2023 and 2024 taxation years.

10The Board also finds that a reduction in the current value to make the current value equitable with the assessments of similar lands in the vicinity is necessary. The Board therefore finds that the current value adjusted for equity is $1,978,000 (rounded) for the 2022 taxation year and $2,116,000 (rounded) for the 2023 and 2024 taxation years.

ANALYSIS

Issue 1 - What is the current value of the Subject Property for the years under appeal?

Applicable Law

11In accordance with s. 44(3)(a) of the Assessment Act R.S.O. 1990, c. A.31 (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.” Section 19.2(1) of the Act states that the valuation day for the taxation years under appeal is January 1, 2016.

MPAC’s Evidence

12MPAC states the highest and best use of the Subject Property, as vacant land, is the development of a warehouse with an attached office. MPAC concludes that the current use of the property as an industrial warehouse represents the highest and best use of the Subject Property.

(a) Cost Approach

13MPAC valued the Subject Property using the cost approach and the direct comparison approach. In addition, MPAC time-adjusted the Subject Property’s August 13, 2013 sale price.

14MPAC’s cost approach includes the two customary components: 1. the cost to acquire a site as though vacant and of similar utility to the Subject Property, and 2. the replacement cost new to construct the building, structures and other improvements on the site, less total depreciation (physical deterioration, functional obsolescence, and external obsolescence).

15MPAC asserts that the Subject Property’s overall building condition is ‘average’ with several identified deferred maintenance items such as replacement of broken windows, plumbing fixtures in the office, acoustic tiling, and exterior walls. To estimate the Cost New for all improvements at the Subject Property MPAC applied its Automated Costing System (“ACS”), a component-based cost system. MPAC’s expert made several changes in ACS on the basis of the original Appraisal Cost Card, an inspection carried out on April 13, 2023, and digital imagery.

16MPAC’s expert testified and provided photographic evidence from her inspection of the Subject Property on April 13, 2023. MPAC expert’s evidence was that at the time of the inspection, the office was fully functional with staff working in it, customers were present in the lobby waiting to rent cars, the warehouse fully occupied, and the Subject Property was being used at its full capacity. The warehouse was being used for indoor car parking and cars were being stored, washed, and detailed during the inspection. The Subject Property was lit and had running water at the time of the inspection.

17MPAC submits that the Cost New of the improvements for the 2022 taxation year is $1,169,567 and the Cost New of the improvements for the 2023 and 2024 taxation years is $1,177,153. Then, MPAC calculated and subtracted depreciation from the Cost New to reflect the age and condition of the Subject Property. There was no functional obsolescence taken into account because the functional design of the Subject Property is within market norms. MPAC concluded a net value of improvements on the Subject Property and yardwork, being Cost New less total depreciation of $416,456 for the 2022 tax year and $564,837 for the 2023 (and 2024) taxation years.

18To determine a land value for the Subject Property, MPAC reviewed vacant land sales of comparable properties to the Subject Property in the City of Mississauga from January 1, 2015, to December 31, 2017. MPAC selected three land sales for comparison based on lot size, land use, and location. At the time of these sales, the properties were vacant and unimproved. The sales for all three properties occurred within the shoulder years of the statutory valuation day of January 1, 2016.

Property Address	6464 Northam Drive	6479 Columbus Road	7055 Torbram Road
Sale Date	October 31, 2016	September 15, 2015	November 2, 2016
Sale Price	$1,936,000	$1,650,000	$2,600,000
Time-Adjusted Sale Price per acre	$1,456,265	$1,585,428	$1,260,356
Effective Site Area (acres)	1.21	1.08	1.86
Zoning	E3 (Employment	E3 (Employment),	E2 (Employment),
Distance from Subject Property (km)	1.52	5.85	3.86
Location	Mississauga	Mississauga	Mississauga
Official Plan	Business employment	Industrial	Business employment

19MPAC’s expert witness testified that 6464 Northam Drive is slightly superior to the Subject Property, 6479 Columbus Road is similar to the Subject Property, and 7055 Torbram Road is inferior to the Subject Property.

20MPAC calculated the average time-adjusted sale price per acre for each of the property sales – these ranged from $1,260,356 to $1,585,428 with an average of $1,434,016 per acre. MPAC applied the average of $1,434,016 to the Subject Property’s land area of 1.26 acres and determined a land value of the Subject Property at $1,806,860.

21Taking into account the net value of the improvements, per MPAC’s cost analysis, and adding them to MPAC’s determined land value of $1,806,860, MPAC’s expert testified that this results in a total value for the Subject Property of $2,223,000 (rounded) for 2022 and $2,371,000 (rounded) for 2023 and 2024.

(b) Direct Comparison Approach

22MPAC also conducted a valuation analysis using the direct comparison approach. MPAC reviewed the sales of comparable industrial warehouse properties with attached offices in the City of Mississauga from January 1, 2014, to December 31, 2017. MPAC selected three property sales for valuation comparison purposes based on use, zoning, lot size, building area, year built, official plan designation, physical characteristics, building height, and location: 7650 Bath Road, Mississauga, 2775 Slough Street, Mississauga, and 1885 Sharlyn Road, Mississauga.

Property Address	3356 Elmbank Road, Mississauga (Subject Property)	7650 Bath Road, Mississauga	2775 Slough Street, Mississauga	1885 Sharlyn Road, Mississauga
Sale Date		2014-Jul-31	2014-Apr-21	2016-Oct-14
Sale Price		$2,100,000	$1,700,000	$2,645,000
Time Adjusted Sale Amount per square foot		$182.69	$134.93	$169.31
Building Area (sq. ft.)	14,151	13,292	23,004	22,349
Lot size (acres)	1.26	1.28	1.39	1.03
Distance from Subject Property (km)		4.9	4.6	7.6
Building description	Industrial warehouse with attached office	Industrial warehouse with attached office	Industrial warehouse with attached office	Industrial warehouse with attached office
Official Plan	Business Employment	Business Employment	Business Employment	Business Employment
Zoning	E2-8	E2	E2	E2-132

23MPAC calculated the time-adjusted sale price per building square foot. These ranged from $134.93 to $182.69 with an average of $162.31 which when applied to the Subject Property’s total building area of 14,150 square feet results in a value of $2,296,000 (rounded).

(c) Subject Sale

24MPAC also time-adjusted the August 2013 sale of the Subject Property to the statutory valuation day of January 1, 2016, and this resulted in a sale amount of $2,308,574, which MPAC concluded falls within the range of values of the cost approach and the direct comparison approach.

Appellant’s Evidence

25The Appellant’s expert considered the highest and best use of the Subject Property and concluded that the highest and best use of the Subject Property, as if vacant, is redevelopment, while the existing improvements represent the highest and best use of the Subject Property, as improved (i.e. continuation of existing use until redevelopment occurs). The Appellant’s expert testified that the surrounding properties do not include improvements as they are being used as open-air parking near Pearson Airport.

26The Appellant’s expert states that “the building has reached a stage that it is not reparable, and the prudent next steps will be to demolish the building and rebuild” and that “the building provides no increase to the market value of the property”.

27The Appellant’s expert takes the view that the building is “100% obsolete” and is a detriment or impairment to the Subject Property’s market value. The Appellant’s expert states that the Subject Property is just a parking lot and a buyer purchasing it would be purchasing it solely for land value.

28The Appellant’s expert derived a value of the Subject Property based on land value only.

29The Appellant submits that the current value of the Subject Property is $1,259,000. The Appellant's expert took this land value from the property record profile that MPAC provided with the returned assessment.

30The Appellant’s expert states that the building receives no maintenance or repair as it is used to park cars; and that it has no working HVAC system; holes and cracks in the walls; no lighting; many missing or broken windowpanes; wires hanging from the warehouse ceiling, and rusted steel beams. The Appellant submitted photographic evidence of the building showing broken windows, cracked bricks and some holes in the brickwork.

MPAC’s Submissions

31MPAC submits that its cost approach valuation, direct comparison valuation, and the time-adjusted sale price of the Subject Property produce very similar current values within a range of $2,223,000 to $2,371,000.

32MPAC argues that the Subject Property is not boarded up, is structurally sound, and is in use, even though the owner has chosen not to repair certain items.

33MPAC submits that the Appellant has failed to conduct its own appraisal or valuation of the Subject Property.

Appellant’s Submissions

34The Appellant does not agree with MPAC’s characterization of the building being in average condition.

35The Appellant submits that some deferred maintenance items were not taken into account by MPAC through adjustments and a number of serious issues like exposed HVAC wiring, damaged loading docks, rusted structural beams, lack of lighting, damaged walls and broken windows were not taken into account in MPAC’s cost analysis.

36Further, the Appellant objects to the property sales used by MPAC for valuation comparison purposes. The Appellant’s expert asserts that three property sales are too few for valuation comparison purposes and that the properties selected by MPAC are not similar to the Subject Property as they are superior and in far better condition and are not used for car parking.

Findings on Issue 1

37The Board does not accept the Appellant’s submission that the value of the improvements on the Subject Property amount to $0 as the Appellant did not provide evidence to demonstrate that the improvements have no value. Further, the Appellant did not provide its own property sales for valuation comparison purposes or provide evidence as to why MPAC’s returned value for land, which is what the Appellant based its opinion of current value on, is correct and should reflect the total value of the Subject Property.

38With respect to MPAC’s direct comparison analysis, its proposed sale comparables 1 and 2 occurred in 2014. These proposed sale comparables sold outside the shoulder years of the statutory valuation day of January 1, 2016. In this case, the Board finds that these sales occurred too far from the valuation date to be reliable indicators of market value as of January 1, 2016. For this reason, the Board does not accept this evidence to determine the current value of the Subject Property.

39Eliminating those sales leaves the Board with only one proposed comparable property – 1885 Sharlyn Road, Mississauga which MPAC deemed slightly inferior to the Subject Property. It is located 7.60 km south of the Subject Property in the City of Mississauga and was the proposed comparable property furthest from the Subject Property. The property is located in a slightly inferior location and, although it is similar in terms of Official Plan designation, MPAC considered it slightly inferior in terms of zoning as it has an additional exception in regard to maximum parking spaces, required loading spaces, and minimum setback of a building and landscape buffer to lands that abut a development zone and Greenlands.

40The Board finds that using a single comparable sale that is quite far from the Subject Property and deemed slightly inferior does not allow the Board a range of values or sufficient market data to determine a current value using the direct comparison approach. For this reason, the Board does not accept MPAC’s evidence of current value using the Direct Comparison Approach.

41The Board finds that the best evidence of current value is MPAC’s cost approach analysis. The Board does not accept the Appellant’s submission that MPAC failed to make proper adjustments in its cost approach, as the Appellant did not conduct its own cost analysis or provide evidence to prove how the alleged omissions affect the current value and what the quantum of the adjustments should be. For this reason, the Board accepts and prefers MPAC’s evidence on the cost of improvements at the Subject Property.

42With respect to the proposed comparable property sales relating to land value, the Board finds that sale 2, 6479 Columbus Road, is too far from the Subject Property at 5.85 km away and is an outlier in terms of lot size and adjusted sale price per acre, having a value per acre substantially higher than any of the others. The Board will therefore not rely on property sale 2. The Board accepts and relies on the other two property sales used by MPAC’s expert, finding these properties are sufficiently comparable in terms of proximity, lot size, use, zoning, and similarity of location. Using the adjusted sale price per acre of the remaining two properties, 6464 Northam Drive and 7055 Torbram Road, results in an average land rate per acre of $1,358,310. Using the average land rate, the value of the Subject Property site is $1,711,471 ($1,358,310 per acre x 1.26 acres).

43The Board has held that the time-adjusted sale price of a subject property is the best evidence of its current value, if that sale occurs close to the valuation day of January 1, 2016. The time-adjusted sale price of $2,308,574 for the Subject Property’s August 2013 sale, while being outside the shoulder years of the valuation date, nevertheless provides a benchmark to confirm the reasonableness of the current value resulting from the cost approach.

44Based on the above analysis and evidence submitted, the Board finds that the Subject Property’s current value is $2,127,927 for the 2022 taxation year and $2,276,308 for the 2023 and 2024 taxation years.

Issue 2 - Is an equity reduction of the current value required, and if so, how much?

Applicable Law

45Section 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

46MPAC identified 14 industrial and warehouse properties similar to the Subject Property with sale dates between January 1, 2014 and December 31, 2017, within 13.5 kilometres of the Subject Property, between 10,000 square feet to 50,000 square feet, having a weighted average year built between 1955 and 1975, and a lot sized of 1 acre to 5 acres.

47MPAC provided an equity analysis report reflecting an Assessment to Sales Ratio (“ASR”) analysis. The ASR of a sample of sold properties is a tool often used to determine if a property in the vicinity is assessed below its current value. If sold properties are being assessed below their current value, as demonstrated in an ASR less than 1.0, a reduction in the Subject Property’s assessment below the correct current value may be required to make the subject assessment 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.

48MPAC states that its ASR of 0.93 indicates that similar properties in the vicinity are generally assessed 7% below current value and therefore, an equity adjustment in the form of a 7% reduction to the current value is required to establish equity. As a result, MPAC takes the position that the correct current value of the Subject Property, adjusted for equity, is $2,067,000 (rounded) for the 2022 taxation year and $2,205,000 (rounded) for the 2023 and 2024 taxation years.

49The Appellant’s expert conducted an equity study using a subset of the properties used by MPAC in its equity analysis. The Appellant submits that only sales in the shoulder years (occurring one year on either side of the statutory valuation date) may be considered (i.e., requiring no time adjustment). Further, the Appellant’s expert asserts that only vacant land sales should be considered (since it takes the view that the property should be valued as vacant land) and applying those parameters to filter the sales used by MPAC in its equity analysis results in an ASR of 0.80 (a 20% equity reduction).

50The Appellant submits that if the Subject Property is considered vacant land, then the correct equity-adjusted value is $1,259,000 multiplied by 0.80 or $1,007,000.

Findings on Issue 2

51The Board prefers MPAC’s sample set of 14 properties to the Appellant’s three and finds that the sales on which MPAC relies represent similar lands in the vicinity as the Subject Property is not vacant land.

52The Board considered the fact that MPAC’s sample set of properties included properties that sold outside the shoulder years. Excluding the eight properties with sales that occurred in 2014 results in an ASR of 0.92 which is close to the ASR provided by MPAC and results in only six properties for the equity analysis.

53Accordingly, the Board finds MPAC’s evidence is the best evidence on equitable adjustment and accepts that an adjustment for an ASR of 0.93 is appropriate.

54The Board finds an equity reduction is necessary to make the current value equitable with the assessments of similar lands in the vicinity.

55The Board finds that a 7% reduction in the current value of the Subject Property is required to establish equity. This results in a current value adjusted for equity of $1,978,000 rounded for the 2022 taxation year and $2,116,000 rounded for the 2023 and 2024 taxation years.

CONCLUSION

56The Board finds that the current value of the Subject Property is $2,127,927 for the 2022 taxation year and $2,276,308 for the 2023 and 2024 taxation years.

57The Board also finds that there is evidence to support a reduction in the current value to make the current value equitable with the assessments of similar lands in the vicinity. The Board therefore orders that the current value adjusted for equity is $1,978,000 (rounded) for the 2022 taxation year and $2,116,000 (rounded) for the 2023 and 2024 taxation years.

ORDER

58The Board orders that the current value assessment of the Subject Property be increased to $1,978,000 for the 2022 taxation year and $2,116,000 for the 2023 and 2024 taxation years.