Court File and Parties

CITATION: Municipal Property Assessment Corporation v. Loblaw Properties Limited, 2016 ONSC 4684

DIVISIONAL COURT FILE NO.: 633/15

DATE: 20160722

SUPERIOR COURT OF JUSTICE – ONTARIO

DIVISIONAL COURT

RE: MUNICIPAL PROPERTY ASSESSMENT CORPORATION, Moving Party

AND:

LOBLAW PROPERTIES LIMITED and THE CITY OF TORONTO, Respondents

BEFORE: Stewart J.

COUNSEL: Frank Shea and Marc McLaren-Caux, for the Moving Party Municipal Property Assessment Corporation

Jack Walker Q.C. and K. West, for the Respondent Loblaw Properties Limited

Christopher J. Henderson, for the Respondent The City of Toronto

HEARD at Toronto: April 12, 2016

ENDORSEMENT

Nature of the Motion

[1] The Municipal Property Assessment Corporation (“MPAC”) has brought this motion pursuant to section 43.1 of the Assessment Act, R.S.O. 1990, c.A. 31 for an order granting leave to appeal to the Divisional Court the decision of the Assessment Review Board (the “Board”) dated November 6, 2015 (the “Decision”).

[2] The Respondent The City of Toronto (“Toronto”) supports the motion.

[3] The Respondent Loblaw Properties Limited (“Loblaws”) takes the position that the test for leave to appeal has not been met and leave should not be granted.

Test for Leave to Appeal

[4] The test for leave to appeal a decision of the Assessment Review Board is whether it has been shown that there is some reason to doubt the legal correctness of the decision and whether the appeal involves an important question of law meriting the attention of the Divisional Court (see: Via Rail Canada Inc. v. Municipal Property Assessment Corporation et al., 2015 ONSC 7459 (Div.Ct); Junrir Investments Ltd. v. Municipal Property Assessment Corporation et al., 2014 ONSC 5471 (Div.Ct.)).

Analysis

[5] The Decision concerns the property tax assessments of 720 Broadview Avenue in Toronto (the “Property”) for the 2006 through 2012 taxation years. The Property is described by MPAC as a “unique piece of prime real estate” which is owned and currently used by Loblaws as a grocery store. MPAC assessed the values for assessment purposes at $5.359 million for 2006 – 2008, and for $8.217 million for 2009-2012.

[6] Loblaws appealed these property tax assessments to the Board pursuant to the Assessment Act.

[7] Section 44 of the Assessment Act sets out the approach to be taken by the Board on an appeal, as follows:

(1) Upon an appeal on any ground against an assessment, the Assessment Review Board or court, as the case may be, may reopen the whole question of the assessment so that omissions from, or errors in the assessment roll may be corrected, and the amount for which the assessment should be made, and the person or persons who should be assessed therefor may be placed upon the roll, and if necessary the assessment roll, even if returned as finally revised, may be opened so as to make it correct in accordance with the findings made on appeal.

Reference to similar lands in vicinity

(2) 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. 2008, c.7, Sched. A. s. 13.

Same, 2009 and subsequent years

(3) For 2009 and subsequent taxation years, in determining the value at which any land shall be assessed, the Board shall,

a. determine the current value of the land; and

b. 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.

[8] Following a hearing lasting 7 days, the Board issued the Decision. For reasons set out therein, the Board dramatically reduced the assessments.

[9] The parties agree on the basic principles of assessment for property tax purposes. Assessment of land is to be based on its current value. Under the Assessment Act, “current value” means 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. There is no statutory exemption to this principle for properties that happen to be used as grocery stores.

[10] Regarding the current value of the Property, the Board found that the Property would “transact” in the market based on its as-of-right development potential. By this measure, the Board found that the property’s current values for the 2005 and 2008 valuation dates (applicable to the 2006 – 2008 and 2009 - 2012 taxation years, respectively) were $8,400,000 and $10,920,000.

[11] The Board found that these current values were, “if anything, conservative”. MPAC and Toronto do not dispute the Board’s findings of current values.

[12] It is also common ground that these current values typically may be adjusted with reference to the value at which similar lands in the vicinity are assessed. Such an “equitable” adjustment of the assessment of the Property is to be an assessment not exceeding 100% of its actual current value as at the date of valuation.

[13] More simply put, if similar properties in the vicinity of the Property are assessed at current values lower than their actual current values, then the Property is entitled to a reduction in order that its level of assessment is the same as the level of assessment of these similar properties.

[14] Notwithstanding its position at the hearing that it agreed with this meaning of equity for the purpose of applying any adjustment, Loblaws did not adduce at the hearing any level of assessment study comparing the assessed values and actual current values of similar properties in the vicinity of the Property.

[15] MPAC tendered a level of assessment study for development lands in the vicinity. Its position was that the Property would be regarded by the market as development land and assessed accordingly. MPAC also produced two other level of assessment studies – one concerning grocery stores, and another concerning commercial properties.

[16] The evidence before the Board was that development sites, grocery stores, and commercial/retail properties in the vicinity of the Property were being assessed at values that were, on average, roughly equal to or relatively close to their current values. The lowest ratio of assessed values to current values, in any year and on any definition of “similar lands” (including only grocery stores), was 84% of current value.

[17] Nevertheless, in its Decision the Board held that equity could only be achieved in this case by the application of MPAC’s more general grocery store valuation model to the property.

[18] In its Decision, the Board did find that the lands “similar” to the Property were grocery stores. However, instead of examining the level of assessment of grocery stores in the actual vicinity of the Property for which there was evidence before it and which the parties had agreed was the correct measure of equity, the Board applied MPAC’s general grocery store model to derive what it considered to be an equitable value for the Property. The Board did so on the rationale that, because the current value of the Property is exponentially higher than those of other grocery stores, it would be inequitable for the Property to be valued at, or even close to, its actual current value.

[19] As a result, the Board purported to arrive at what it regarded as equitable values for the Property of $1,635,000 and $3,042,000 for the 2005 and 2008 valuation dates, respectively. The Board therefore assessed the Property at only 19% and 28% of its actual current values as found.

[20] MPAC and Toronto’s position is that the proposed appeal concerns a question of law which is of sufficient importance to merit the attention of the Divisional Court. In particular, the Board’s decision involves the interpretation and application of the equity provisions in s.44(2) and (3) of the Assessment Act when fulfilling its statutory mandate of determining valuation for property taxation purposes. The application of these sections is mandatory in virtually every assessment appeal that comes before the Board.

[21] MPAC and Toronto submit that there is reason to doubt the correctness of the Board’s application of the equity provisions in s.44(2) and (3) of the Assessment Act to the case before it, for the following reasons:

(a) The Board made an inconsistent finding on the same central question before it. It concluded that normal GSM and LIRA valuation models used to value grocery stores were inapplicable to arrive at a current value of the Property, but then directly applied these models to reduce the valuation of the Property to achieve what the Board determined to be equity;

(b) The Board applied and considered similar properties in the vicinity which were assessed at levels very close to their current values. However, the manner in which the Board reduced the Property’s valuation results in it being valued at only a very small percentage of its current value and, for some years, as little as approximately 20% of its current value. This is an inequitable outcome;

(c) The Board’s interpretation and application of the equity provision largely conflated or made redundant the two-step inquiry it is directed to adopt when deciding valuation issues before it. It is to first determine current value, and then consider whether the current value is to be adjusted to make the valuation equitable. When the Board simply imported the values of similar properties into that of the Property, and then reduced the Property’s valuation to those levels, it made the first step of its inquiry largely superfluous and unnecessary; and

(d) The Board failed to properly interpret and apply the requirement in s.44(3) in the Assessment Act that it is to ‘adjust’ the current value to make the assessment equitable. The Board’s application of the equity provision is not an ‘adjustment’ because the result of its equity analysis has no relationship to the valuation arrived at as a result of its current value analysis, and because the scale or magnitude of the change in valuation (approximately 80%) is so large it ceases to be an ‘adjustment’.

[22] Loblaws takes the position that the Decision involves only questions of fact from which an appeal does not lie. It also points out that the Board is entitled to deference in deciding questions of law under the Assessment Act, its home statute.

[23] In my view, the Decision raises an issue of statutory interpretation which is a question of law that is of sufficient importance to merit the attention of the Divisional Court.

[24] The interpretation of the law and application to the evidence before it by the Board in these circumstances give rise to doubt as to the legal correctness of the Decision. This is not to say that the Decision is certainly wrong, but only that a doubt has been raised sufficient to meet the first branch of the test for leave to appeal.

[25] Further, the issues raised by MPAC are ones which are deserving of attention by the Divisional Court. They engage matters of general interest to the public and litigants before the Board and go beyond the narrow immediate concerns of the parties.

[26] I am therefore of the opinion that the test for leave has been met in this case.

Conclusion

[27] For these reasons, leave to appeal is granted on the following questions:

(a) Did the Assessment Review Board err in its interpretation of subsection 44(2) and paragraph 44(3)(b) of the Assessment Act by failing to identify or apply the correct test or measure of equity, which is the relationship between the assessed values and current values of similar lands in the vicinity?; and

(b) Did the Assessment Review Board err in its interpretation of the term “similar lands” found in subsection 44(2) and paragraph 44(3)(b) by having regard to only the current use of the land?

Costs

[28] A court attendance was required to argue this motion, and detailed written materials were provided by the parties for use on the motion. Costs of the motion, which I would fix at $7500.00 payable to the ultimately successful party or parties on the appeal, are left to the discretion of the panel hearing the appeal.

Stewart J.

Date: July 22, 2016