Junvir Investments Ltd. v. Municipal Property Assessment Corporation, 2014 ONSC 5471

Junvir Investments Ltd. v. Municipal Property Assessment Corporation

CITATION: Junvir Investments Ltd. v. Municipal Property Assessment Corporation, 2014 ONSC 5471

DIVISIONAL COURT FILE NO.: 204/14

(Assessment Review Board File Nos. 1994950, 1994951, 1994952, and 1994661)

DATE: 20140922

ONTARIO

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

BETWEEN:

JUNVIR INVESTMENTS LTD. Appellant

– and –

MUNICIPAL PROPERTY ASSESSMENT CORPORATION and THE CITY OF TORONTO Respondents

COUNSEL: Stanley M. Makuch and Matthew Schuman, for the Appellant Francis X. Shea and Marc McLaren-Caux, for the Municipal Property Assessment Corporation

Proceeding under s. 43.1 of the Assessment Act, R.S.O. 1990, c. A.31

HEARD: September 16, 2014

REASONS FOR DECISION

PERELL, J.

1Junvir Investments Ltd. owns 438, 442, 444, and 446 Summerhill Avenue in the City of Toronto, where it operates an independent grocery store known as “Summerhill Market”. The grocery store’s three-storey building is located at 446 Summerhill Avenue, and Junvir Investments’ other properties comprise the parking lot. Pursuant to the Assessment Act, R.S.O. 1990, c. A.31, in an Amending Decision dated August 26, 2014, the Assessment Review Board determined the current value of Junvir Investments’ four properties to be $4,288,000 for the taxation year 2008.

2Junvir Investments submits that the correct current value is $1,784,171 and that the Board erred in its current value assessment. It seeks leave to appeal to the Divisional Court to have the Board’s decision set aside.

3Pursuant to s. 43.1 of the Assessment Act, an appeal lies to the Divisional Court, with leave of the Divisional Court, on a question of law. The motion now before the Court is Junvir Investments’ motion for leave to appeal on a question of law.

4The test for leave to appeal a decision of the Board is that the Court must be satisfied that: (1) there is some reason to doubt the legal correctness of the Board’s decision; and (2) the appeal involves an important question of law; Canadian National Railway Company v. Municipal Property Assessment Corporation., 2013 ONSC 7802 (Div. Ct.) at paras. 3-4; Mullabrack Inc. v. Ontario Property Assessment Corporation, Region No. 16, [2000] O.J. No. 4855 (Div. Ct.).

5Junvir Investments submits that the Board erred in law in determining the current value of the property as required by s. 44(2) of the Assessment Act, which provides that (with emphasis added): “For taxation years before 2009, in determining the value at which any land shall be assessed, reference shall be had to the value at which similar lands in the vicinity are assessed.” Junvir Investments submits that the Board also erred in law by contravening s. 44(3) of the Act that requires that the value “be equitable having reference to similar real properties in the vicinity”.

6To be more precise, the Board’s alleged error concerned how it had reference to “similar lands in the vicinity.”

7At the hearing before the Board, the parties agreed that the current value for the Summerhill Market should be determined by applying a capitalization rate of 9.5% to a fair market rental (FMR) for the subject property to be determined by reference to comparable rented properties in the vicinity. At the hearing, the Municipal Property Assessment Corporation (“MPAC”) submitted nine allegedly comparable rented properties, one of which was a grocery store known as Pusateri’s. The other alleged comparables, all rented commercial premises, were six Shopper’s Drug Marts, a bank, and a restaurant. At the hearing, Junvir Investments submitted nine comparable rented properties, all of which were grocery stores, including an independent grocery store known as Sun Valley Market.

8Although it had ten grocery stores in the vicinity, in making its FMR assessment, the Board relied on just two grocery stores, Pusateri’s and Sun Valley Market. In its Reasons for Decision, the Board stated at paras. 81, 95, 97-99, with my emphasis added:

81. The parties agree that a crucial finding for the Board is the character of the real property. Having regard to the evidence and submissions of the parties, I agree with Junvir that the subject building is a purpose-built grocery store rather than a typical one-storey commercial retail property. Other than its split level operation, it has all of the physical attributes of a “typical” grocery store and functions as a grocery store. ….

82. None of MPAC’s comparables are purpose-built grocery stores other than the Lawrence Avenue Pusateri’s, located on an arterial road with parking, a GLA [gross leasable area] of 10,000 sq. ft. and a FMR of $25. ….

83. Junvir’s comparables are comprised of eight grocery chain stores and one independent grocery store, the Sun Valley Market. All are situated on arterial roads. Four of the comparables have much larger GLAs than the subject property and presumably have larger site areas. The Board examined the remaining comparables … and finds the last property, the Sun Valley Market to be the most similar to the subject property. Both Pusateri’s and the Sun Valley Market have the same economic issues (economies of scale) affecting the Summerhill Market as they are not chain stores, which will affect their FMR. They are both located in predominately single-family residential neighbourhoods, have reasonably similar GLA and a FMR of $25. I find all these factors more encompassing and persuasive than looking at the GLA and the line of “best fit” in isolation.

84. The range of FMR for the seven comparable grocery stores is $8.30 to $25. Given the economic differences between Pusateri’s and Sun Valley Market and the larger chain stores, and in the valuation methodology, the Board determines that the FMR of $25 derived from the two most comparable properties should be applied to the subject building for the 2006, 2007, and 2008 taxation years. ….

85. In finding these two properties to be the most similar, the Board is not stating that they are the same as Summerhill Market, but that they too are anomalies not captured by the GSM [“Grocery Store Model”]. The dilemma is that the subject property does not fit comfortably into either “box” proposed by the parties. … It is evident that a different approach is required for smaller free-standing grocery stores.

9Without deciding the matter, it appears to me to be arguable that what the Board did is decide the current value of the property by reference to the value at which the most similar lands in the vicinity are assessed. The result of limiting itself to only the most similar properties is that the Board assessed Summerhill Market, an independent grocery store, at a substantially higher amount than the grocery stores that were associated with food chains.

10This approach arguably would appear to be a legal error because s. 44(2) of the Assessment Act directs the Board to have regard to “similar lands” (lands being plural) and not just to the “most similar” lands. And s. 44(3) of the Act requires that the assessment be equitable having reference to “similar real properties” in the vicinity not just to the “most similar real properties” in the vicinity.

11If the above argument is correct, then there is good reason to doubt the correctness of the Board’s decision on a legal issue and, in my opinion, the matter is of sufficient importance to justify granting leave to appeal.

12Relying on Regal Stationery Co. Ltd. and Regional Assessment Commissioner, No. 11, (1984) 1984 1917 (ON SC), 48 O.R. (2d) 152 (Div. Ct.) and Re A. Merkur & Sons Ltd. and Regional Assessment Commissioner, Region No. 14 (1978), 1978 1530 (ON CA), 21 O.R. (2d) 797 (C.A.), the Respondent MPAC submits that the above argument is incorrect. It submits that it is a question of fact in each case what is similar real property in the vicinity of a subject property. In short, MPAC submits that the Board made no error in determining the comparable properties, which is a fact-based exercise.

13Under the established law, the Board is obliged to have regard to the general nature, character, and function of comparable properties to determine similarity. Similarity can relate to factors such as design, size, age, amenities, construction, and location. Similarities and differences have to be determined and balanced one against the other, and once considered, the Board makes a factual finding; see: Canadian National Railway Company v. Municipal Property Assessment Corporation, supra (Div. Ct.); Trizec Equities Ltd. v. Regional Assessment Commissioner, Region No. 27, [1988] O.J. No. 182 (Div. Ct.); 508306 N B Inc. v. OPAC, No. 13, [2001] O.A.R.B.D. No. 540, leave to appeal refused unreported, (28 June 2002), Court File No. 59841/01, (Div. Ct.).

14Notwithstanding the argument of MPAC, and again without deciding the matter, which will be decided by a panel of the Divisional Court, I am not persuaded that there is not good reason to doubt the decision of the Board.

15The point is subtle, but the outcome profound, and, in my opinion, it is arguable that what the Board did is to change the calculus of s. 44 of the Assessment Act, from comparing the subject property to similar properties to comparing the subject property to properties approaching the identical (near equivalency), which is a methodological change, a difference in kind, not a factual matter of degree, and arguably an error of law.

16For the above reasons, I grant leave to appeal with costs reserved to the panel hearing the appeal.

Perell, J.

Released: September 22, 2014

CITATION: Junvir Investments Ltd. v. Municipal Property Assessment Corporation, 2014 ONSC 5471

DIVISIONAL COURT FILE NO.: 204/14

(Assessment Review Board File Nos. 1994950, 1994951, 1994952, and 1994661)