EQUITY IN THE ASSESSMENT WORLD

Transcription

1 EQUITY IN THE ASSESSMENT WORLD Institute of Municipal Assessors 55 th Annual Conference Niagara Falls June 7, 2011 Jeff G. Cowan WeirFoulds LLP

2 I. Introduction Ad valorem system in principle Objective determination of value and equity necessary to reinforce confidence in a public assessment system All properties at correct value = fair distribution of tax base Equal treatment requires valuation on a consistent basis Legal obligation to ensure equity

3 II. Common Law Jonas v. Gilbert (1881), 5 S.C.R. 356 Unless the legislative authority otherwise ordains, everybody having property or doing business in the country is entitled to assume that taxation shall be fair and equal and that no one class of individual, or one species of property, shall be unequally or unduly assessed: we must assume in the absence of any provision clearly indicating the contrary, that the legislature intended the Act to be construed on the principle of uniformity and impartiality.

4 Common Law (cont d) Empire Realty Co. v. Metropolitan Toronto (1968), 69 D.L.R. (2d) 387 (Ont. C.A.) A prime objective of municipal taxation is the equitable distribution of the burden according to the value of the property possessed by each ratepayer If equity in taxation is to be achieved, it must result from equity in assessment. It is inherent in this process that the result of the assessor s work must satisfy him that equity will be thereby accomplished, but it is equally, if not more important, that it must also demonstrate to the ratepayer, objectively, that equity has been accomplished... Even an assessment made at actual value in compliance with [the Act] would be an inequitable assessment if all similar lands in the vicinity were assessed at some percentage of actual value substantially less than one hundred.

5 Common Law (cont d) Primacy of correct value = many cases where courts held that if property had correct value compared to others, the task was not to reduce the property s value, but to correct the others through reassessment. (eg. Ladies Hosiery v. West Middlesex Assessment Cttee [England 1932]; B.C.A.A. v. Simpsons-Sears Ltd. (1981) B.C.C.A.

6 Common Law (cont d) Bramalea Ltd. V. British Columbia (Ass t Area 9) (1990), 76 D.L.R. (4 th ) 53 (B.C.C.A.) Actual cap rate of 9.5% vs assessor s use of 12% for comparables. When range of actual value and equitable value do not overlap, preference given to principle of equity. Thus right to an assessment not in excess of an equitable one, and a right not to be assessed in excess of actual value.

7 III. Statutory Provisions (a) : Assessment Act, s.65 (and predecessors) The Freeze The ARB in determining the value at which any real property shall be assessed shall have reference to the value at which similar real property in the vicinity is assessed, and the amount of any assessment shall not be altered unless satisfied that the assessment is inequitable with respect to the assessment of similar real property in the vicinity, and in that event the assessment of the real property shall not be altered to any greater extent than is necessary to make the assessment equitable with the assessment of such similar real property.

8 Statutory Provisions (cont d) (b) Pre-1998 Section 63 Equalization of Assessment by Class By Minister s regulations for the purpose of equalizing and making equitable the assessment of all real property belonging to the same class. Essentially took a base year [eg. 1975] market value of properties and multiplied them by a prescribed factor for the class of property. Equalization shall not alter, as between classes the relative level of assessment at market value previously existing between such classes, or providing that the equalization shall alter such levels of assessment at market value no more than is reasonably necessary to provide equitability of assessment within each class.

9 Statutory Provisions (cont d) (c) Assessment Act The Thaw 44(1) Upon appeal ARB may reopen the whole question of the assessment so that errors maybe corrected and the amount for which the assessment should be made may be opened so as to make it correct. 44(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.

10 Statutory Provisions (cont d) (d) CVA 2009: Equity Prevails - New s. 44(3) For 2009 and subsequent taxation years 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.

11 IV. Caselaw R.A.C. v. Ontario Steel Products Co., [1976] 2 S.C.R. 721 Assessor admitted market value was not basis of assessment, but defended by assessment per square foot on other industrial facilities, none of which were of size or age of subject. In these circumstances, s.90 did not impose upon the respondent the onus of showing that the initial assessment, improperly made, was inequitable with respect to the assessment of similar real property in the vicinity. On the contrary, if the appellants sought to rely upon s.90, the onus rested on them to establish that the assessment, although not an assessment of market value, was not inequitable in relation to the assessment of similar real property in the vicinity. The evidence presented on behalf of the appellants did not meet that onus. That evidence did not relate to the market value of other industrial properties in Gananoque. It related to the assessment of other properties on a square foot and cubic foot basis.

12 Caselaw (cont d) R.A.C. Region No. 13 v. Downtown Oshawa Property Owners Association (1978), 88 D.L.R. (3d) 303 (S.C.C.) It was not the intention to permit during the years 1971 to 1974 the regular course of correction of the assessment rolls to permit a reflection of market value and, therefore, the lack of similarity between the market value and the assessed value could not be the subject of a successful assessment appeal. That matter stood to be corrected under the plan [to assess at market value]. What only was to be subject to an assessment appeal was this inequity between similar properties in the vicinity.

13 Caselaw (cont d) Campeau Developments Ltd. V. R.A.C. (Region No. 29) (1983), 41 O.R. (2d) 39 (C.A.) Even though an assessor may have used a wrong capitalization rate, no inequity with respect to the assessment of similar real property in the vicinity results if the assessor has used an equally wrong capitalization rate when calculating the value of the similar real property. The assessments would bear the same relationship to the true value, one with each other. It has long been recognized that it is not particularly important that an assessment be individually correct, provided that all properties are assessed at the same proportion of their true values, so that each bears its fair share of the tax burden. Notwithstanding that his capitalization rate may have been wrong, it has not been shown that it was out of proportion to that rate used in calculating the value of the other shopping centres, and therefore inequitable with respect to the assessment of similar real property in the vicinity.

14 Caselaw (cont d) Juper Holdings Ltd. V. R.A.C. (Region 30), Div. Ct We do not think all assessments are frozen for all time, in spite of whatever occurs in the market. The base remains the same, of course, but if events alter values, creating inequities among similar properties in the same vicinity, it is open to the Board to alter the assessments in order to reduce inequities.

15 Caselaw (cont d) R.A.C. (Region No. 19) v. Dofasco Inc. (1992), 10 O.R. (3d) 741 (C.A.) OMB reduced assessment overall by 10% because of costing issues, obsolescence allowance, etc., ie. market value was incorrect no evidence of similar properties. Divisional Court The finding of inequity need not always be based upon a difference between ratios of assessment to market value of comparable properties. Here the parties agreed that the proper method of assessment was replacement cost, and the only issue was the application of the manual to the buildings in question. All industrial buildings in Hamilton are assessed on the basis under the manual. By inference that have been properly assessed and if it can be shown that there was an error in applying the manual to the buildings under appeal there is sufficient comparison by reference.

16 Caselaw (cont d) Here the Board found on the evidence that the manual had been applied improperly by the assessment commissioner to the buildings in question. There was nothing to show that it had been similarly applied elsewhere, and the assessment commissioner has not shown that there was no inequity by reason of such failure. Court of Appeal: The making of errors is not in itself sufficient to demonstrate that the assessment is inequitable. The plain wording of s.65(1) requires reference to the value of similar real property, and a finding of inequity based on such reference. The onus is on the taxpayer to prove that the assessment is inequitable.

17 Caselaw (cont d) Bayview Summit Development Ltd. V. R.A.C. (Region No. 14), [1998] 107 O.A.C. 302 (Div.Crt.) No freeze where current market values showed inequity. Per square foot assessment of costed properties did not satisfy equity test for income properties, because it failed to account for relative values resulting from their income potential. Taxpayer not required to use same methodology as assessor to demonstrate inequity. Clarkson v. Ontario A.R.B. [2000] O.J (Div.Crt.) Under the Act, the Board must determine the market value under s.19 and then determine whether the assessment is equitable as compared to other properties in the vicinity.

18 Caselaw (cont d) Dawson Properties v. MPAC (Region 32) (2002), 46 O.M.B.R. 147 If, after the mandatory shall obligation in s.44(2) has been carried out, it appears that similar lands in the vicinity have a lower level of assessment, the taxpayer is entitled to have its assessment reduced to that lower level. But the converse is not true; the primary right is contained in s.19. While it is true that it may also be inequitable if the other similar lands in the vicinity are assessed higher than their current values the answer is that the Board cannot resolve an inequity unless an appeal is brought before it.

19 V. Similar Lands in the Vicinity You can t always get what you want but if you try somehow you might find you get what you need. (apologies to The Rolling Stones) Like obscenity, similar land in the vicinity is hard to define, but usually is recognized by the decision-maker when s/he sees it. (apologies to the U.S.S.C.)

20 VI. Similar Lands York Condo No. 26, 551 The West Mall, [1972] 1 O.R. 492 (County Court) Similar is not qualified by word physically. Highrise condominium more similar to residential freehold than highrise leasehold apartments units [legislation then changed, see new s.3(1)1ii of Ont. Reg. 282/98]. R.A.C. Region No. 13 v. Downtown Oshawa Property Owners Association (1978), 88 D.L.R. (3d) 303 (S.C.C.) Similar is not restricted to physical attributes but encompasses property having the same general nature, characteristic or function. Where tribunal has not restricted itself to a narrow interpretation of the test, its decision should not be altered. OMB had decided stores in central business district were not similar to enclosed, single ownership shopping centre.

21 Similar Lands (cont d) Mount Citadel Ltd.v. Regional Assessment Commissioner (No. 11) (1980), 13 OMBR 242 Not all apartment buildings are similar real property. Lowrise not similar to high rise. Similarity does not mean identical, but must be more than just the use to which the building is being put. Non-exhaustive comparison points were design, construction, age, and amenities of buildings. Hence, semi-detached homes not similar to detached [Fleet], single family homes not similar to highrise condos [Joshi], but bank branches are not just to be compared to bank branches, but to other retail units in a plaza, or amongst other stores on a main thoroughfare [Toronto Bank Branches 1995].

22 VII. Vicinity Re Fogh-Dohmsmidt v. R.A.C. (No. 32) (1981), 16 M.P.L.R. 199 (County Crt.) A flexible concept, main element of which is an area in which a sufficient number of similar real properties can be found so as to make a meaningful comparison. Rejects it is confined to a neighbourhood or even municipality, noting not immediate vicinity [regional shopping centre, telecommunications centre have been cited as examples]. If there is insufficient comparative similar real property within the immediate vicinity or neighbourhood it is incumbent to extend the vicinity and compare sufficient other similar real property so as to be able to form an opinion as to the equity or inequity of the assessment under review.

23 Vicinity (cont d) In doing so the comparables must be sufficiently close to the subject property that the fact of distance does not dilute or undermine the confidence that can be placed on such similar real property as a reliable comparison. R.A.C. Region No. 3 v. Graham (1993), 16 O.R. (3d) 83 (C.A.) Vicinity is a question of fact. For purposes of section 65(2) (assessment of condo units shall be based on same proportion of market value as owneroccupied single family residence in the vicinity) vicinity was not required to be the entire municipality.

24 Vicinity (cont d) Irber Holdings Ltd. (A.R.B. July 6,2010) 4 car dealerships in Toronto with ASR of.96 7 similar properties in York Region with ASR of.65 Vicinity may extend beyond municipal boundaries in determining current value, but not in determining equity given that purpose of assessment is the equitable distribution of tax burden within the municipality. In both municipalities both sets of properties were bearing their fair share of tax burden Leave to appeal to Divisional Court granted on consent North Bay Plaza Ltd (A.R.B. July 23,2010) cap rate of sole RSC in North Bay adjusted by MPAC to be equitable with other RSC