CITATION: Municipal Property Assessment Corporation v. Claireville Holdings Limited, 2022 ONSC 3293
DIVISIONAL COURT FILE NO.: DC-21-328-00
DATE: 2022-06-03
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
K. SWINTON, R.D. GORDON, W. MATHESON JJ.
BETWEEN:
Municipal Property Assessment Corporation
Appellant
– and –
Claireville Holdings Limited, 2477879 Ontario Inc., 1579661 Ontario Inc., Frances Danilyw and City of Toronto
Respondents
Melissa VanBerkum, Counsel for the Appellant
Iain A.C. MacKinnon/Stephen Longo, Counsel for Claireville Holdings Limited, 2477879 Ontario Inc., 1579661 Ontario Inc. and Frances Danilyw
No one appearing for the City of Toronto
HEARD in Toronto via Zoom:
May 18, 2022
DECISION ON APPEAL
R.D. GORDON, J.
Overview
[1] The Municipal Property Assessment Corporation (“MPAC”) appeals the decision of the Assessment Review Board (the “Board”) dated March 26, 2021 reducing the current value assessments for the 2014 to 2020 tax years of a group of properties owned by the Respondents Claireville Holdings Limited, 2477879 Ontario Inc., 1579661 Ontario Inc. and Frances Danilyw (collectively “Claireville”) by several million dollars.
Background Facts
[2] Claireville owns five contiguous parcels of land in Toronto’s entertainment district known municipally as 301 to 319 King Street West (the “Properties). Improvements on the Properties consist of two-storey and three-storey buildings with no setbacks between them. At all times for the tax years under appeal the Properties were used for income-generating purposes as commercial leased space.
[3] In May of 2012 Claireville entered into discussions with the Planning Department of the City of Toronto (the “City”) with respect to a proposed high-rise redevelopment of the four properties it then owned.
[4] In April of 2013 Claireville submitted to the City a development application for a 42-storey mixed-use building. The City opposed the application and advised Claireville that more land area was required for the proposed development. To address this issue, in August of 2015 Claireville purchased 301 King St. W. for $8,000,000 and subsequently amended its application to add this property and seek approval for a 48-storey building.
[5] Despite ongoing negotiations, the amended development application has not been approved although the City has supported, in principle, a proposed settlement for a 50-storey mixed-use development subject to certain conditions including re-zoning of the Properties, site plan approval and Heritage Easement Agreements. To date, the required zoning change to allow for the development of the Properties has not been formally approved. It is not known if or when that may occur.
[6] MPAC assessed the current values of the Properties for the taxation years of 2014 to 2020, using the 2012 and 2106 valuation dates, pursuant to the Assessment Act, R.S.O. 1990, c. A.31 (the “Act”). It assessed the current value of the Properties as a land assembly, with a highest and best use value reflecting its development potential as a high-rise development of 40 storeys or more. It assessed the current value of 305-319 King St. W. for the years 2014 to 2016 at $20,474,000 per year. It assessed the current value of 301-319 King St. W. for the years 2017 to 2020 at $29,854,000.
[7] Claireville appealed the assessments to the Board and was successful in having the Properties assessed at $7,775,000 for 2014 to 2016 and $14,314,000 for 2017 to 2020, based upon their current use as income-generating properties.
[8] The Board found that MPAC failed to meet its burden of proof in establishing the correctness of the current value of the Properties and had not rebutted the presumption that the current use of the property was its highest and best use (“HBU”). While it found that MPAC’s proposed HBU was legally permissible and physically possible, it concluded that MPAC had not discharged the onus of establishing financial feasibility. MPAC had not provided sufficient evidence, in particular, of forecasted supply and demand for condominium units and commercial space in the area. Further, MPAC had not followed the correct methodology, essentially providing market evidence as evidence of financial feasibility when it should have instead provided economic analyses.
[9] MPAC cites three legal errors made by the Board in rendering its decision: (i) it presumed that a property’s current use is its HBU; (ii) it interpreted s. 36(2) of the Act as requiring a property’s HBU to be determined as of the return of the assessment roll each year rather than as of the statutory valuation date in s. 19.2 of the Act; and (iii) it found that the Board in Loblaw Properties Limited v. Municipal Property Assessment Corporation, Region No. 9, 2015 72781 (ON ARB) erred in its HBU analysis by not following the appraisal methodology used by the Board in Enterprises Inc. v. Municipal Property Assessment Corporation, Region 14, 2014 104370 (ON ARB), commonly referred to as “Toronto Airways”.
Jurisdiction
[10] The court has jurisdiction to hear an appeal from the Board on a question of law provided leave is first granted [see s. 43.1(1) of the Act]. Leave to appeal was granted by Corbett J. on September 29, 2021.
Standard of Review
[11] On a statutory appeal of a question of law, including a question of law that can be extricated from a question of mixed fact and law, the standard of correctness applies [see Canada (Minister of Citizenship and Immigration) v. Vavilov, 2019 SCC 65].
The Statutory Framework
[12] Subject to limited defined exemptions, all real property in Ontario is subject to assessment and taxation. Property assessment is the responsibility of MPAC, subject to appeal rights to the Board.
[13] Section 19(1) of the Act requires that land be assessed on the basis of its current value. Current value is defined in s. 1 of the Act 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.
[14] Section 19.2 prescribes the valuation dates for the assessment of properties. For the taxation years 2014 to 2016 land is valued as of January 1, 2012. For taxation years 2017 to 2020, land is valued as of January 1, 2016. There is therefore a four-year cycle between valuation dates.
[15] Notwithstanding this four-year cycle, s. 36(1) of the Act requires MPAC to assess properties annually and s. 36(2) requires that the assessment roll be returned to each municipality not later than the second Tuesday following December 1 in the year in which the assessment is made.
[16] Section 40(1) of the Act provides that any person may appeal an assessment to the Board, including on the basis that “the current value of the person’s land…is incorrect”. In such instances, s. 40(17) provides that the burden of proof as to the correctness of a current value of the land rests with MPAC.
Establishing Current Value
[17] Although HBU is not identified or defined in the Act, it is the governing element in establishing value for assessment purposes [see Re Tyandaga Golf & Country Club v. Town of Burlington, 1970 251 (ONCA)]. That is, a property’s current value is to reflect its highest and best use.
[18] HBU is the reasonably probable and legal use of vacant or improved property that is: (i) physically possible; (ii) legally permissible; (iii) financially feasible; and (iv) maximally productive. An appraiser must determine the HBU of property as vacant and as improved. When considering property as vacant the focus is on the property’s development potential, but even where the property is improved the appraiser must determine whether those improvements should remain, be altered, or modified or whether they should be demolished, and the property redeveloped [see The Appraisal of Real Estate, 3^rd^ Cdn. Ed. at p. 203].
Analysis
The Presumption in Favour of Current Use
[19] In this case and others, the Board has expressed the view that the use to which a property is put at any given time is presumed to be its highest and best use, such that a party seeking to prove a different highest and best use will require compelling evidence of how another legally permissible, physically possible, and financially feasible use is more productive than its current use. The presumption is based on the reasonable assumption that the current use already meets the tests of being physically possible, legally permissible, and financially feasible. [See Toronto (City) Revenue Services and Municipal Property Assessment Corp., Region 09, 2017 80039 (ON ARB), Canadian Tire Corporation Limited v. Municipal Property Assessment Corporation, Region 09, 2021 105789 (ON ARB)].
[20] MPAC argues that the Board’s use of this presumption is an error of law as it conflicts with the direction in s. 19(1) of the Act that properties be assessed on the basis of their current value and not on their current use.
[21] In my view the Board made no error of law.
[22] The articulation of the presumption in favour of current use value must be considered in the context in which disputes such as this one come before the Board, namely: (i) that the assessed value of the property has, in the past, been based on its actual use, which has not changed; (ii) the current value of the property has been assessed anew based on a different use of the property; (iii) the owner contests the current value as assessed and takes the position before the Board that the property’s current or actual use should continue to be the basis for valuation; and (4) in accordance with s. 40(17) of the Act the burden of proof as to the correctness of the current value as assessed by MPAC rests with MPAC.
[23] In this context, the articulation of the presumption is little more than a re-statement of the burden of proof.
[24] In this case the Board made a factual determination that MPAC did not meet its burden of proof – that it did not establish a satisfactory evidentiary foundation for valuation based on a different use of the property. That left its current value to be determined based upon the current use of the property – the same use that had been the basis of the determination of its value in years past. The Board made no legal error in doing so.
Is the Highest and Best Use of the Property to be Determined Annually?
[25] MPAC submits that the Board made a legal error when it stated at paras. 20 and 21 of its decision that an assessor must determine the HBU of the land each year as of the state and condition date prescribed by s. 36(2) of the Act. It says that this interpretation of s. 36(2) effectively pre-empts the valuation standard in s. 19 and the statutory valuation dates in s. 19.2.
[26] Paragraph 21 of the Board’s decision, made in the context of its discussion of the state and condition date, is as follows:
[21] The assessor’s task is to determine, annually, at the state and condition date, the Highest and Best Use of the land assessed, then establish the correct value of such annual determination by reference to the valuation of land of similar Highest and Best Use on the legislated valuation day.
[27] Annual assessments are done so that changes in assessment can be made when there is a change in the state or condition of the property. If there is no change in the state or condition of the property, the assessed value would be expected to remain unchanged until current value is re-assessed for a new four-year cycle.
[28] Read in context, what the Board said was this: In determining the assessed value of a property when returning the assessment roll, the assessor must necessarily turn his or her mind to whether there has been a change to the state or condition of the property that affects its HBU. If there has been such a change, a new assessed value must be established for that HBU effective on the applicable valuation date prescribed in s.19.2.
[29] I see no legal error in the reasoning of the Board.
The Issue of Conflicting Decisions
[30] MPAC argues that the Board made a third legal error when it determined that the member in Loblaw Properties erred by not following Toronto Airways.
[31] In my view, this is not a question of law. As noted in Vavilov, administrative decision makers are not bound by their previous decisions in the same sense that courts are bound by stare decisis. The Board’s comments on the merits of the decision in Loblaw Properties were to explain why it preferred the methodology of arriving at a property’s current value as explained in Toronto Airways. It is not a legal error to have done so.
Conclusion
[32] As there has been no error of law, the appeal is dismissed. In accordance with the agreement reached by the parties, costs are payable by MPAC to Claireville in the amount of $15,000, all inclusive.
R.D. Gordon J.
I agree _______________________________
K. Swinton J.
I agree _______________________________
W. Matheson J.
Released: June 3, 2022
CITATION: Municipal Property Assessment Corporation v. Claireville Holdings Limited, 2022 ONSC 3293
DIVISIONAL COURT FILE NO.: DC-21-328-00
DATE: 2022-06-03
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
K. SWINTON, R.D. GORDON, W. MATHESON JJ.
BETWEEN:
Municipal Property Assessment Corporation
Applicant
– and –
Claireville Holdings Limited, 2477879 Ontario Inc., 1578661 Ontario Inc., Frances Danilyw and City of Toronto
Respondents
DECISION ON APPEAL
Released: June 3, 2022