INFORMATIONANDDATASHARINGPOLICY
Industrial,CommercialandMulti-ResidentialProperties
May2017
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May9,2017
InaccordancewiththedirectionissuedbytheMinisterofFinanceonApril18,2015,pursuanttosubsection10(1)oftheMunicipalPropertyAssessmentCorporationAct,theMunicipalPropertyAssessmentCorporation(MPAC)haspublishedtheInformationandDataSharingPolicythatappliestoallindustrial,commercialandmulti-residentialproperties.
ThisPolicyisintendedtoprovideclarityandtransparencyastothetypeofinformationanddatathatassessedpersons,theirrepresentatives,municipalitiesandotherpartiesneedtoprovidetoMPACforanypurposerelatingtotheassessmentofland.
MPAC’sGuidelinesfortheReleaseofAssessmentDataPolicyforResidentialPropertiesisavailableonMPAC’swebsite.
CarmeloLipsi,B.A.,M.I.M.AVice-PresidentandChiefOperatingOfficer
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DocumentControl
Theelectronicversionofthisdocumentisrecognizedastheonlyvalidversion.
VersionNumber VersionDate SummaryofChanges Original June2015 01 May2017 UpdatesmadetoreflectMPAC’srevised
GuidelinesfortheReleaseofAssessmentData(GRAD)Policy
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Acknowledgements
AspartofthepreparationoftheInformationandDataSharingPolicy,MPACconsultedwithaffectedtaxpayers,municipalities,andrepresentatives.MPACengagedtheInternationalPropertyTaxInstituteasanindependentfacilitatortoundertakeconsultationsessionswhichincludedthefollowingindustries:
• Pulp&PaperMills;• SawMills;• Value-AddedWoodManufacturingPlants;• SteelManufacturingPlants;• AutomotiveAssemblyPlants;• AutomotivePartsManufacturingPlants;• Mining;• OilRefineries;• ChemicalManufacturing;• PharmaceuticalManufacturing;• FoodManufacturing;• Aerospace.
MPACwouldliketoacknowledgeandthankthefollowingpartieswhoparticipatedintheconsultationprocess(September2014–March2015).Questionsabouttheconsultationprocesscanbedirectedtoconsultation@mpac.ca.
CityofHamilton EssarSteelAlgomaInc. DuCharme,McMillen&CityofSaultSte.Marie ArcelorMittal Associates,Inc.HaldimandCounty MagnaInternationalInc. NixonFleet&PooleLLPCityofOttawa GeneralMotorsofCanadaLimited AltusGroupLimitedTheCorporationoftheCityofNorth HondaCanadaInc. EquitableValueInc.Bay CanadianVehicleManufacturers’ AECPropertyTaxSolutionsCityofBrampton Association PrestigePropertyTaxSpecialistsCityofSt.Catharines FordMotorCompanyofCanada MunicipalTaxEquity(MTE)CorporationoftheCityofSt.Thomas Limited ConsultantsInc.CityofGuelph FiatChryslerAutomobiles Cushman&WakefieldPropertyCityofOshawa ResoluteForestProducts TaxServicesCityofVaughan Domtar RyanTownshipofSouthwestOxford Tembec BorealAppraisalServicesCityofCambridge AVTerraceBayInc. MunicipalTaxAdvisoryGroupTownofIngersoll MohawkGarnetInc. WalkerWestLongoTownofMilton GoldcorpInc. JamesPetrinPropertyTownofOakville PrimeroMiningCorp. AssessmentServicesCityofGreaterSudbury ValeCanadaLimited CityofThunderBay GlencoreTownofEspanola LakeshoreGoldCorp.TownshipofDubreuilville SuncorCityofThorold ImperialCityofMississauga NOVAChemicalsCorp.
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TownshipofJames/ElkLake ShellCanadaCityofSarnia PurduePharmaCanadaCityofTorontoTownofWhitchurch-StouffvilleTownofWhitby
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Purpose
ThepurposeoftheInformationandDataSharingPolicyistoidentifyandclarifyinformationtheMunicipalPropertyAssessmentCorporation(MPAC)requiresfrompropertyownersandmunicipalitiesinordertodetermineaccurateCurrentValueAssessments(CVA)forindustrial,commercialandmulti-residentialproperties.Inaddition,thepolicywillexplainhowvaluatorsanalyzecollecteddataanddrawvaluationconclusionsfromthisanalysisaswellastesttheseconclusionsagainstappropriatemarketdata.
ThepolicywillalsoprovideinformationonhowMPACsafeguardsproprietaryinformation.
TimelydeliveryofpropertyinformationisnecessaryfortheanalysisandproductionofaccurateCVAs.
Introduction
MPACisresponsibleforadministeringauniformassessmentsystembasedonCurrentValueAssessment(CVA)inaccordancewiththelegislationsetbytheOntariogovernment.
TherearefourmaincomponentsinOntario'spropertyassessmentandtaxationsystem.Eachplaysanimportantrole.
1. TheProvincialGovernmentpasseslegislation,setspropertytaxpoliciesandsetseducationtaxrates.
2. MPACestablishesCurrentValueAssessmentsandclassificationsforallpropertiesinOntario.
3. Municipalitiesdeterminetheirrevenuerequirements,setmunicipaltaxratesandcollectpropertytaxes.
4. TheAssessmentReviewBoard,anindependenttribunalthatispartoftheEnvironmentandLandTribunalsOntariocluster,whichreportstotheOntarioMinistryoftheAttorneyGeneral,hearspropertyassessmentandtaxappeals.
ThemainlegislationgoverningtheassessmentofpropertiesinOntarioforpropertytaxpurposesiscontainedintheAssessmentAct1990(asamended).
TheActcontainsimportantdefinitions,includingwhatpropertyistaxableandhowitshouldbevalued.
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TheActstatesthatpropertymustbeassessedatits"currentvalue"whichmeans,inrelationtoland,
"…theamountofmoneythefeesimple,ifunencumbered,wouldrealizeifsoldatarm'slengthbyawillingsellertoawillingbuyer.”
Inthiscontext,CVAequatestothenotionof“marketvalue.”
OtherrelevantlegislationwillbereferredtoasnecessaryinthisGuide.
LegislativeAuthoritytoCollectPropertyData
Section19(1)oftheAssessmentActdirectsMPACtoassesslandbasedonitscurrentvalue.
Section10oftheAssessmentActprovidesMPACwiththerightofaccesstoalllandandbuildingsforthepurposeofmakingaproperassessment,providedthat:
• TheMPACpropertyinspectorproducesproperidentification.
• Theinspectionisconductedatareasonabletime.
• Theinspectionorrequestforinformationisforthepurposeofdeterminingtheassessmentoftheproperty.
Sections10and11oftheAssessmentAct(excerptsbelow)requireapropertyownertoprovideMPACwithallrequestedinformationrelatingtotheassessmentofthatproperty,eitheratthetimeoftheinspection,orbyrespondingtoaletter.Thisinformationisrequiredtobereturnedwithinareasonabletime.
AccuratedataisnecessarytoproduceaccurateCVAs.MPACpropertydataisupdatedregularlyusingavarietyofsources,including:
• landtitledocumentsregisteredatOntarioLandRegistryOffices
• digitalimagery
• buildingpermitsissuedbylocalmunicipalities
• discussionsandcorrespondencewithpropertyowners
• on-sitepropertyinspections
• questionnaires
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Rightofaccess
10.(1)Apersonauthorizedbytheassessmentcorporation,uponproducingproperidentification,shallatallreasonabletimesanduponreasonablerequestbegivenfreeaccesstoalllandandtoallpartsofeverybuilding,structure,machineryandfixtureerectedorplacedupon,in,over,underoraffixedtotheland,forthepurposeofmakingaproperassessmentthereof.R.S.O.1990,c.A.31,s.10(1);1997,c.5,s.6(1);2006,c.33,Sched.A,s.10.
Information
(2)Everyadultpersonpresentonlandwhenanypersonreferredtoinsubsection(1)visitsthelandintheperformanceofhisorherdutiesshalluponrequestgivetothepersonalltheinformationinhisorherknowledgethatwillassistthepersontomakeaproperassessmentofthelandandeverybuilding,structure,machineryandfixtureerectedorplacedupon,in,over,underoraffixedtothelandandtoobtaintheinformationheorsherequireswithrespecttoanypersonwhosenameheorsheisrequiredtoenterontheassessmentrollorconcerningwhomheorsheisrequiredtoobtainanyinformationforthepurposeoftheenumerationrequiredbysection15.R.S.O.1990,c.A.31,s.10(2);1997,c.5,s.6(2).
Requestforinformation
11.(1)Foranypurposerelatingtotheassessmentofland,theassessmentcorporationmay,bylettersentbymail,servedpersonallyordeliveredbycourier,requireapersonwhoisormaybeassessedinrespectofthelandtoprovideanyinformationorproduceanydocumentrelatingtotheassessmentoflandwithinsuchreasonabletimeasissetoutintheletter.1997,c.5,s.7;2006,c.33,Sched.A,s.11(1).
Returnofinformation
(2)Apersonwhoreceivesaletterundersubsection(1)shall,withinthetimesetoutintheletter,providetotheassessmentcorporationalltheinformationrequiredthatiswithintheperson’sknowledgeandproduceallthedocumentsrequiredthatarewithintheperson’spossessionorcontrol.1997,c.5,s.7;2006,c.33,Sched.A,s.11(2).
CompliancetoMPAC’sDataCollectionRequests
Pursuanttos.40(18)oftheAssessmentAct,incaseswherepropertyownersfailtorespondfullytoMPAC’srequests,theAssessmentReviewBoardhasauthoritytoorderthattheburden
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ofproofastothecorrectnessofthecurrentvalueofthelandtorestwiththeappellant,notMPAC,intheeventofanyappealsfiledwithrespecttotheassessment.
Same,non-co-operation
S.40(18)Despitesubsection(17),theburdenofproofastothecorrectnessofthecurrentvalueofthelandrestswiththeappellantwhereheorshefailsorrefuses,
(a)togivetheassessmentcorporationreasonableopportunitytoinspectthepropertyundersection10;or
(b)tocomplywitharequestforinformationanddocumentationundersection11.2008,c.7,Sched.A,s.11.
Additionally,MPACmaypursueapplicationoftheenforcementprovisionsfoundunders.13oftheAssessmentAct,forinstanceswhererequestsforinformationarenotsatisfied.
Offencefornotfurnishinginformation
13.(1)Everypersonwho,havingbeenrequiredtofurnishinformationundersection10or11makesdefaultindeliveringorfurnishingit,everypersonwhofailstoprovideinformationasrequiredundersection16.1or16.2andanycorporationthatmakesdefaultindeliveringthestatementornoticementionedinsection25or30,isguiltyofanoffenceandonconvictionisliabletoafineofnotmorethan$1,000andanadditionalfineof$100foreachdayduringwhichdefaultcontinues.R.S.O.1990,c.A.31,s.13(1);1997,c.5,s.8;2006,c.34,Sched.D,s.94(5).
Forfalsestatement
(2)Everypersonwhoknowinglystatesanythingfalseinanysuchstatementorinfurnishingtheinformationisguiltyofanoffenceandonconvictionisliabletoafineofnotmorethan$2,000.R.S.O.1990,c.A.31,s.13(2).
Idem
(3)Everypersonwhohasmade,orparticipatedin,assentedtooracquiescedinthemakingof,afalseordeceptivestatementinanyapplicationorsupportingdocumentrequiredtodetermineeligibilityforexemptionfromtaxationunderparagraph22ofsubsection3(1)isguiltyofanoffenceandonconvictionisliabletoafineoftheamount
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ofthetaxthat,hadthetruefactsbeenstated,wouldhavebeenpayable,plusanamountofnotmorethan$2,000.R.S.O.1990,c.A.31,s.13(3).
Forobstructingtheassessmentcorporation,etc.
(4)Everypersonwhowilfullyobstructsorinterfereswithanypersonreferredtoinsubsection10(1)intheperformanceofanyofhisorherdutiesortheexerciseofhisorherrights,powersandprivilegesunderthisActisguiltyofanoffenceandonconvictionisliabletoafineofnotmorethan$2,000.R.S.O.1990,c.A.31,s.13(4).
MPAC’sCommitmenttotheProtectionofPersonalPrivacy
MPACiscommittedtotheprotectionofprivacybymanagingthecollection,use,disclosure,retentionanddisposalofpersonalandnon-personalinformationinamannerthatcomplieswiththerequirementsoftheMunicipalFreedomofInformationandProtectionofPrivacyAct(MFIPPA),theAssessmentAct,theInformationandPrivacyCommissioner/Ontario(IPC)andallotherrelevantlegislation,regulationsandtribunal/judicialrulings.
“Personalinformation”asdefinedbytheMunicipalFreedomofInformationandProtectionofPrivacyActmeansrecordedinformationaboutanidentifiableindividualandincludes,butisnotlimitedto,aperson'sname,address,telephonenumber,religion,age,sex,maritalorfamilystatusorfinancialtransactionsinvolvingtheindividual.
MPACmay,fromtimetotime,releaseaggregateinformationintheformofdemographicstudiesorotherextractsconstructedfromtheanalysisofpersonalinformation.However,theseproductsneitheridentifyindividualsnorenableotherstoextrapolatetheiridentities.Suchrequestsforinformation,oranymattersthatrequireclarificationorlegislativeinterpretation,areinvestigatedbyMPAC’sManagerofFreedomofInformationandRecordsManagement,whowillensureMPACisincompliancewiththeapplicablelegislation.
Exceptaspermitted/requiredbylaw,MPACdoesnotreleaseincomeandexpenseinformation,personalinformation,oranyotherdatathatwouldenabletheidentificationofindividuals.
Ifafteranappealhasbeenfiled,MPACreceivesarequestforthereleaseofactualincomeandexpenseinformation,orothersensitivecommercialproprietaryinformation,theusualpracticeistorequirethepersonseekingtheinformationtobringamotionbeforetheAssessmentReviewBoard(ARB),withnoticetothethirdparties,requestingthattheARBorderproductionoftherequestedinformation.ThereleaseofsuchinformationisatthediscretionoftheARB.
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Exception
S.53(2)Thissectiondoesnotpreventdisclosureofthatinformation,
(a)totheassessmentcorporationoranyauthorizedemployeeofthecorporation;or
(b)byanypersonbeingexaminedasawitnessinanassessmentappealorinaproceedingincourtinvolvinganassessmentmatter.1996,c.4,s.43;1997,c.43,Sched.G,s.18(34).
AccesstoInformation
EverypropertyownerhastherighttoknowandaccesstheinformationMPAChasonfilefortheirpropertyaswellasreceiveinformationandassistancetohelpthemunderstandtheirassessment.PropertyownerscanaccessinformationabouttheirpropertyandotherpropertiesfreeofchargefromMPAC.
Thisinformationincludes:
• thephysicalcharacteristicsofaproperty
• itslocation
• classification
• assessedvalueandotherrelatedassessmentinformation
Propertyownerscanreviewthevalueoftheirpropertyandcomparablepropertiestohelpdeterminewhethertheirproperty’sassessedvalueisinlinewithcurrentmarketvaluesandiftheirassessedvalueisequitable.ThisinformationisusefulifapropertyownerfilesaRequestforReconsiderationandmayalsoserveasthebasisforanAssessmentReviewBoardappeal.
RequestingPropertyInformationfromMPAC
TheownerofapropertyorapersonwhohasreceivedorisentitledtoreceiveaPropertyAssessmentNoticemayrequestinformationabouttheirproperty.
PersonslicensedbytheLawSocietyofUpperCanadatopracticelaw(lawyers)orprovidelegalservices(paralegals)mayrequestfactualinformationonbehalfofapropertyowner.ARepresentativeAuthorizationFormsignedbythepropertyownerisnotrequired.
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AnindividualexemptfromlicensingbytheLawSocietyofUpperCanadamayrequestfactualinformationonbehalfofapropertyowner.Individualsexemptfromlicensinginclude:
• Anindividualactingforafamilymember,friendorneighbour.
• Anindividualactingforanon-profitorganization.
• Anindividualwhoisemployedbyasingleemployerandprovidesthelegalservicesonlyforthatemployerandtonopersonotherthantheemployer.
• Aconstituencyassistant.
ExemptindividualsactingonbehalfofthepropertyownermustsubmitaRepresentativeAuthorizationFormsignedbythepropertyownereverytaxationyear.
Inaddition,membersoftheHumanResourcesProfessionalsAssociationofOntariohavealimitedexemptionfromLawSocietylicensing,iftheyprovidelegalservicesonlyoccasionally,andancillarytothecarryingonoftheirprofessionoroccupation.Membersofthisorganizationarerequiredtoprovideamembershipnumberorsuitableidentifier.
AllrequestsforpropertyinformationfrompersonswhoarenotlicensedbytheLawSocietybutwishtorepresentapropertyownermust:
• Fullycomplete(everytaxationyear)MPAC’sstandardRepresentativeAuthorizationForm,or,
• ProvideMPACwithawrittenstatementsignedbytheowner,authorizedcompanysignatory,executorofanestate,personwithpowerofattorneyauthorization,etc.everytaxationyear.Ifthisisarequestfromacorporation,corporateletterheadmustbeused.
Allrequestsforpropertyinformationmustcontain:
• thepropertyassessmentrollnumber
• propertyaddress
• ownername(s)
• mailingaddress
• telephonenumber,faxnumber(ifapplicable),andemailaddress(ifapplicable)
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Iftherequestisfromapropertyowner’srepresentative,therepresentative’sname,companyname(ifany),mailingaddress,phonenumber,faxnumberandemailaddressmustbeincludedintherequestletter.
NotetoRepresentatives:MPAC’sprovisionofinformationtoauthorizedrepresentativesshouldnotbeconstruedasanacknowledgementofanyrighttoactonbehalfofanypersonintheprovisionoflegalservicesasdefinedbytheLawSocietyAct(section1(6)).MPACwillonlyengageindiscussionwithrespecttoaRequestforReconsiderationoranassessmentappealwithpersonswhoarelicensedbytheLawSocietyorindividualswhoarespecificallyexemptedbytheLawSocietyasoutlinedabove.
Formoreinformationonlicensingandexemptionsfromlicensing,pleasevisittheLawSocietyofUpperCanadawebsiteatwww.lsuc.on.ca.
ForanonlinecopyoftheRepresentativeAuthorizationForm,clickhere.
AvailableReportsandInformation
AboutMyProperty™
MPAC’sAboutMyProperty™isasecurewebsitethatprovidespropertyownerswithassessmentinformationfortheirpropertyandsimilarpropertiesintheirarea.Throughthisself-serveapplication,propertyownerscanaccessbasicinformationsuchasyearofconstruction,squarefootage,sitearea,legaldescriptionandCurrentValueAssessmentonupto100properties.Propertyownerscanalsorequestadetailedreportthatincludesassessmentinformation,siteinformation,recentsalesinformationandstructuralinformationontheirownpropertyandupto24otherpropertiesoftheirchoice.Thisinformationisfreeofchargethroughaboutmyproperty.ca.
ForinformationrequestedthroughAboutMyProperty™thefollowingreportsareprovidedfreeofchargetopropertyownersforeachtaxationyear:
• One(1)PropertyProfileReportforeachproperty.
• Upto100PropertySnapshots.
• AFavouritesReportonuptotwenty-four(24)propertiesselectedbythepropertyowner.
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Thefollowinginformationisalsoavailable:
• AMethodologyGuide–acomprehensiveguidethatexplainstheassessmentmethodologyusedtoassesstheproperty.
• AMarketValuationReport–Acomprehensivereportthatexplainshowassessmentmethodologywasappliedatasectorleveltovaluethepropertyforthe2016AssessmentUpdate.
IftherecordisnotdisplayedinAboutMyProperty™,propertyownersmayfollowtheoptionsbelowformakingawrittenrequesttoMPAC.
PropertyownerswithouthighspeedInternetaccessathomewishingtoaccessAboutMyProperty™mayvisitanyofMPAC’sfieldoffices,ServiceOntarioServiceCentresandparticipatingpubliclibraries.
WrittenRequestsforInformation
Thefollowinginformationisavailabletopropertytaxpayersfreeofchargeforeachtaxationyear:
• One(1)PropertyProfileReportfortheirproperty.
• AFavouritesReportonuptotwenty-four(24)propertiesofapropertytaxpayer’schoice.
AlsoavailablefreeofchargeuponrequestisaMethodologyGuideandaMarketValuationReport.Formoreinformationaboutthesereportsclickhere.
Informationfortenants
Uponrequest,atenantisentitledtoreceivetheinformationmaintainedbyMPACinrespectofaproperty,ortheportionofaproperty,leasedbythetenantandtoreceiveanyotherinformationabouttheproperty.
Tenantsofpropertiesvaluedontheincomeapproachcangainaccessto:
• Informationpertainingtothespacetheyoccupy.
• GrossLeasableAreaofthebuilding(commonareasandcorridorsarenotincluded).
• Totalassessedvalueoftheproperty.
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• VacancyandExpenseAllowance.
• CapitalizationRateorGrossIncomeMultiplier(GIM)usedtovaluetheproperty.
• FairMarketRent.Intheinstancewherefairmarketrentsandactualrentsarethesame,thisinformationcannotbereleasedwithoutproperauthorizationbytheowner.
Asoutlinedinsection53.(4.1)oftheAssessmentAct,tenantsarenotentitledtoanyactualincomeandexpenseinformationfortheproperty.
Propertiesvaluedontheincomeapproachincludeshoppingcenters,officebuildings,commercial/industrialmallsandapartments.
GovernmentBodies
MPACprovidesavarietyofproductsandservices(includingthoserequiredorpermittedbylegislationorregulation)tomunicipal,provincialandfederalgovernmentsandtheiragencies.Dependingontheproductorservice,MPACmayormaynotchargeafee.
MunicipalitiesandThirdParties
Municipalitiesarestatutorypartiestoallassessmentappeals.Inaddition,otherpersonsmayfileappealsorbeaddedaspartiestoappealsbytheAssessmentReviewBoard(ARB).Theseotherpersonsarereferredtoas“thirdparties.”WhenrespondingtoRequestsforInformationfrommunicipalitiesandthirdparties,MPACstaffmustcomplywiththerequirementsoftheAssessmentAct,theMunicipalFreedomofInformationandProtectionofPrivacyActandtheMunicipalPropertyAssessmentCorporationAct.
Municipalitiesrequestinginformationaboutapropertytheyownhavethesameentitlementsasanyotherpropertyownerunderthispolicy.Theymayreceive:
• One(1)PropertyProfilereportandupto24comparableproperties–freeofcharge.
Municipalitiesandthirdpartiesrequestinginformationaboutpropertiestheydonotown,areentitledtoreceivethesamenumberofreportslistedabove,freeofcharge,onlywhentheinformationisrequiredforpreparationrelatedtoanappealproperlyfiledwiththeARBbythemunicipalityorathirdparty.Copiesofallinformationprovidedtomunicipalitiesandthirdpartiesunderthisprocessarealsoforwardedtotherespectivepropertyowner.
Uponrequest,municipalitiesandthirdpartieswhochoosetoparticipateinthepreliminaryproceedings,settlementnegotiationsandhearingswithrespecttoanassessmentappealare
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providedallinformationlistedabove,freeofcharge,andonatimelybasis.Theexceptiontothisisanyactualincomeorexpensedata.
Whenarequestisnotrelatedtoanassessmentappeal,orwheretherequestexceedsthefreeentitlementslistedabove,afeewillbechargedfortheproducts.PleaserefertoMPAC’sProductCatalogueandPricing,forapplicablerates,atpropertyline.ca.Ifthepropertyisvaluedusingtheincomeapproach,andactualincomeandexpenseinformationisrequested,partiesmusteitherobtaintheconsentoftheowneroranorderfromtheARB.
IfyourequireanyadditionalinformationonhowtoaccesspropertyinformationfromMPAC,pleasecontactus.
GeneralValuationofProperty
Valuationsofpropertyarecarriedoutforavarietyofpurposes.ThelegislationgoverningtheassessmentofpropertiesforpropertytaxpurposesinOntarioissetoutabove.Itrequiresanassessmentofthe“currentvalue”ofallpropertiesasataspecificvaluationdate.
Thevaluationprocessfollowsanumberofsystematicstepsintendedtoensurethatallrelevantdataisobtainedandanalyzedbeforebeingusedintheprovisionofanestimateofthemarketvalueofthepropertyconcernedasattherelevantdate.
Inbroadterms,thevaluationprocessinvolvesthefollowingkeysteps:
• Ensuringaclearunderstandingofthepurposeforwhichthevaluationisbeingprovided.
• Researchingthelegalframeworkconcerningthevaluation.
• Identifyingthedateofthevaluation.
• Analyzingtherelevantmarket(international,regionaland/orlocaldependinguponthetypeofpropertytobevalued).
• Consideringthehighestandbestuseofthesubjectproperty.
• Obtainingpre-inspectiondataaboutthepropertytobevalued.
• Carryingoutasiteinspectionofthepropertytobevalued.
• Takingappropriatemeasurementsandrecordingdetailsofotherrelevantinformationwhileonsite.
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• Carryingoutaninspectionofanycomparablepropertiesthatmaybeofassistanceinascertainingthevalueofthesubjectproperty.
• Determiningtheappropriatemethod,ormethods,ofvaluationtobeused.
• Carryingoutthevaluation.
• Reviewingthevaluation.
• Finalizingandreportingthevaluation.
There are three common approaches to determining the current value of any property.
Approach How current value is determined Examples of property types
The income approach is normally used where the value of the property is de-pendent upon the income it can gen-erate. The income that is, or can be, generated from rents or other income in relation to the property being valued is converted into a capital sum (current value) by the use of a capitalization rate which is derived from analysis of actual sales in the market. MPAC use the “di-rect capitalization” method for the valua-tion of a variety of properties.
Hotel, Office Building, Shopping Centre, Golf Course
Cost Approach The cost approach is based upon the “principle of substitution,” which means that, if the direct sales comparison or income approaches are not appropriate, a prospective purchaser of a property would have regard to the cost of provid-ing a similar property to the one being valued in determining the current value of the property. The method is based upon estimating the cost of replacing the existing building, adjusting that cost to reflect any depreciation in the existing building, and adding the value of the land. MPAC’s experts have access to up to date, comprehensive building cost data to support this valuation approach.
Petro Chemical Manufacturing, Automotive Assembly Plants, Automotive Parts Manufacturing Mining, Aerospace Manufactur-ing, Food Manufacturing, Steel Manufacturing, Value Added Wood Products Manufacturing, Pharmaceutical Manufactur-ing, Paper Manufacturing, Pulp Manufacturing, Lumber Manufac-turing
Direct Sales Comparison Approach
This valuation method uses the sale prices of properties that have sold of a similar nature to develop market-driven price adjustments to value a subject property. MPAC experts analyze hun-dreds of sale prices within a given mar-ket area to develop price adjustments for physical and locational differences between properties to establish a current value estimate for all properties of a sim-ilar nature. Typically, adjustments to sale prices are required to recognize price differences due to building area, age, lot size, construction quality and location. Other adjustments are often required to recognize price differences due to other building and site related features.
Single family residence Condominium Vacant Land
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Collection of Data from Property Owners
The primary goal of a mass appraisal process is to value many properties in a consistent andefficient manner. Mass appraisal is the process of valuing a group of properties as of a fixedvaluation date using common data and methods and allowing for statistical testing todetermine the overall quality of the value estimates. One way to achieve this efficiency is todevelop an approach that can be applied to a group of similar properties. This enables thecomparison of value from one property to another, and the establishment of value for eachproperty based on the typical outlook of the marketplace. This approach ensures that:
• All properties forming part of the group are valued.
• All similar properties are valued using a similar, defined uniform process that takes into account the typical perspective of the marketplace.
• Properties with characteristics that are dissimilar to those within the group are identified and valued using different parameters.
Therefore, the mass appraisal process begins with a study of all properties to be valued so that they can be classified into appropriate groups.
MPAC may request property specific information from property owners in advance of legislated assessment update deadlines, and upon or near completion of a renovation or construction of a new building.
The collection of data necessary for producing accurate values will vary slightly depending on the valuation approach, with information generally collected through the following sources:
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IncomeApproachtoValuation
1. Existingassessmentrecords.
2. Completeaccesstothepropertyinordertoperformathoroughphysicalinspectionofboththeoutsideandinsideoftheproperty,inordertoobtainand/orverifytheaccuracyofthebuildingandsitecharacteristics,andtoidentifywhetherornotanychangeshavebeenmadesinceMPAC’slastvisit.
3. Rentroll.
4. Incomeandexpenseinformation.
5. Salesdata.
6. Industryrelatedpublications.
7. Corporatewebsite.
PropertyIncomeandExpenseReturnProgramResources
Theincomeapproachdeterminestheannualmarketrentalincomelessmarketvacancyandexpenseallowances.Thenacapitalizationrateisappliedtotheannualincometoarriveatacurrentvaluefortheproperty.
MPACusesaparticulartypeofincomeapproachknownasthedirectcapitalizationmethodofvaluation.Thismethodcapitalizes(converts)theexpectedlevelofcurrentfairmarketnetannualearningsintoanestimateofmarketvalueusingacapitalizationrate.
Fairmarketrentistherentthatthespacewouldmostprobablycommandifitwerevacantandavailableontheopenmarketasofaspecificdate.Estimatingmarketrentcanbedonebydirectcomparisontocurrentrentsnegotiatedforsimilarspaceortotheprevailingrentalrateinthemarketplaceforcomparablespaceleasedundersimilartermsandconditionsasofthevaluationdate.
Thecapitalizationrateisderivedfromanalysisofmarkettransactions-bothleasesandsales.
Aftercollectingthesalesdata,MPACgroupsthedataforanalysistoestablishthevariouscapitalizationratesandothermarketfactors.Thisdatawillbeusedtovaluecomparablepropertieswithinaspecificlocation.
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MPACassignsthedataintoappropriategroupssothatcomparisonscanbemadebetweendifferentpropertiesforthepurposeofrankingandvaluingproperties.
Valuation
TheIncomeApproachtothevaluationhasthefollowingcomponents:
• DeterminethePotentialGrossIncome(PGI)–basedonmarketrentsandotherincomeasoftheeffectivedateofvaluation.
• AdjustthePGIforvacancytoarriveattheEffectiveGrossIncome(EGI).
• AdjusttheEGIfornon-recoverableexpensestoarriveattheNetOperatingIncome(NOI).
• ApplythecapitalizationratetotheNOItoarriveatthecurrentvalueoftheincome-producingproperty.
• Addforanyexcesslandorotherpartofthepropertynotincludedintheincome-producingpartoftheproperty.
PotentialGrossIncome
MPACusestheinformationithascollectedaboutactualnetrentspaidinthemarkettodeterminethePotentialGrossIncomeofgrossrentablespace.Althoughtheactualnetrentpaidisimportant,thevalueofthepropertywillreflectitsmarketincomeratherthantheactualincome.
Thepropertymayalsocontainretail,parkingandstoragerevenuesthereforethepotentialincomefromthesesourceshastobedetermined.
EffectiveGrossIncome
ItisnecessarytoadjustthePotentialGrossIncometotakeaccountofvacancies;propertieswilloftenlosesomeincomeoverthelifeoftheinvestmentduetovacancy,e.g.,betweentenantsmovingoutandothersmovingin.
MPACestablishesthenormalvacancyratebasedontheanalysisofinformationprovidedbypropertyowners.
ThisvacancyallowanceisusedtoadjustthePotentialGrossIncometoderiveanEffectiveGrossIncome.
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NetOperatingIncome
ThenextstageinthevaluationprocessistoconverttheEffectiveGrossIncomeintoNetOperatingIncome(NOI).
MPACusestheinformationithasobtainedfrompropertyownerstoidentifynormalortypicaldeductionsthathavetobemadeformanagementandotheroperatingexpenses(e.g.,legalfees)thatcannotberecoveredfromtenantsbytheowner.
OncetheNOIhasbeenestablished,MPACproceedstothefinalvaluationstagebyapplyingtherelevantcapitalizationratetothatincome.
CapitalizationRate
MPAC'sanalysisofmarketsalesshowswhatcapitalizationratewasusedinthetransaction.
Thecapitalizationratewillvarydependinguponanumberoffactorsincludingthetypeandlocationanditsnetincome.
Theoverallcapitalizationrateofeachsaleisdeterminedbyusingthefollowingformula:
CapitalizationRate=NetOperatingIncomePropertyPurchasePrice
Capitalizationratesareadjustedfortimebyadjustingthesaleprice,i.e.,toreflectanydifferencebetweenthedateofsaleandthedateofvaluation.
Thecapitalizationrateappropriateforthepropertywilldependuponitsclassification/groupingandlocation.
CostApproachtoValuation
ThefollowingstepsaretakeninutilizingtheCostApproachtovaluation.
1. Aphysicalinspectionofthepropertytoobtainthecurrentphysicalstateandconditionoftheproperty.Theinspectionshouldconfirmandestablishallofthedetailsabouttheimprovements,theirconstruction,condition,anduse.Detailsshouldbeconfirmedandnotesmadeaboutthequalityandtypeofconstructionmaterialsusedforthefollowing:
• landscaping
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• sitepreparation
• foundations
• framing
• walls
• floor
• ceilingstructure
• roofcovering
• plumbing
• lighting/electrical
• heating,ventilation,airconditioning(HVAC)
• doors
• elevators
• stairs
• firesystemsandsprinklers
• finishes
• paving
• railsiding
• yardimprovements
• otherassessableitems
• availabilityofmunicipalservices
2. Corporatewebsite.
3. Architecturalbuildingplans/drawings.
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4. Interviewwithpropertyownerorfacilitymanager(whereappropriate)toevaluatewhetherornotexternalobsolescence,functionalobsolescence,fromexcesscapitalcosts,andfunctionalobsolescencefromexcessoperationcostsapply.Examplesofsomeoftheinformationthatwillberequestedduringtheinterviewinclude:
• Currentstaffingnumbers,i.e.,havetheyincreasedordecreased?
• Actualdesigncapacityvs.currentproduction(underoroverutilization).
• Arethereanyplansforfutureexpansion?
• Whodoyousupply/wheredoesyourproductgo?
• Maincompetitors.
• Howdoyoushipyourproduct?
• Howandwheredoyourrawmaterialscomefrom,i.e.,air,water,railorroad?
• Productioncapacityofsubjectproperty.
• Capacityutilizationofthepast12months.
• Totalrevenueforthepast12months.
• Anystructuraldeficienciesthataroseduringthepast12months.
• Outlookforthenext12months(i.e.,same,betterorworse)withabriefexplanation.
5. Breakdownofconstructioncosts.
ReplacementCost
MPACgenerallyusesthecostapproachtovaluelargeindustrialandspecialpurposeproperties.
Unlikemanyothertypesofproperty,largeindustrialandspecialpurposepropertiesarerarelysoldorleased.Theyareusuallybuiltbytheirownerstomeettheirparticularneeds.
Therefore,thereisofteninsufficientinformationtoapplythedirectsalescomparisonapproachortheincomeapproachtopredictvalue.
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Forthesereasons,thecostapproachisadoptedinvaluinglargeindustrialandspecialpurposeproperties.
Theobjectiveofthecostingexerciseistodeterminethedepreciatedreplacementcostoftheimprovements.Areplacementbuildingreflectswhatactuallywouldbebuiltifthebuildingandotherstructuresweretoberebuilt.
Replacementsarethereforedesignedtoreplacetheexistingfunctionsandcapacityoftheproperty.Thereplacementreflectsadvancesintechnologyandinthedesign,layout,andconstructionoftheimprovements.Replacementcostthereforetakesintoaccountmanyoftheelementsthatgiverisetothefunctionalobsolescenceinherentinaproperty.
DeterminingReplacementCost
Thecostnewofapropertyisnormallyarrivedatbymeasuringandquantifyingtheexistingimprovements,andthendeterminingthecostofreplicatingthequality,quantity,andlayoutofthesestructuresbasedoninformationcontainedinareputablestandardcostmanual.
MPAChasaccesstoavarietyofwidelyrecognizedcostmanualsalongwithotherbuildingcostdatacollectedduringthecourseoftheiractivities.
AutomatedCostSystem
MPAChasdevelopedasystemcalledtheAutomatedCostSystem(ACS)forusewhenapropertyisbeingvaluedbythecostapproach.
TheACSensuresthataconsistentapproachisusedbyMPACwhenvaluingpropertiesusingthecostapproach.
TheACScontainsdatawhichreflectsthecostoflabour,equipmentandmaterialsforeachstructuralelementofanimprovement;italsoreflectsdepreciationresultingfromtheeffectiveageofthebuildingsorstructures.
CostOptions
Whenconsideringreplacementcost,MPAChasthreechoices:
1. Replicationoftheexistingimprovementsincludingthelayout,quantityandmaterialsfoundattheactualproperty.
2. Replicationofexistingimprovementsincludingthelayoutandquantitybutreplacingthematerialsandconstructiontechniqueswithmoremodernsubstitutes.
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3. Replacingorsubstitutingtheexistingimprovementswithafacilityofmoderndesign,quantity,andlayout.
Depreciation
Thedifferencebetweenthecostofanewbuildingandtheamountthemarketwouldpayforanexistingpropertyisthedepreciationinherentintheproperty.
Depreciationcanbequitecomplexandadjustmentstoreplacementcosttoaccuratelyreflectdepreciationrequiresknowledge,analysisandjudgment.
MPAChasexpertswhohavemanyyearsofexperienceinmakingthesejudgments.MPAC'sACSsystemincorporatesadjustmentsforeffectiveage-relateddepreciation.
ApplyingtheCostApproach
Therearetwoprincipletasksinestimatingmarketvalueusingthecostapproach:
• valuingtheland
• valuingtheimprovements(i.e.,thebuildingsandstructures)
ValuingtheLand
Thelandisvaluedasifitwasvacant;itscurrentvalueisestablishedthroughanalysisofcomparablemarketsalesdata.
MPACcollectsinformationaboutthesaleoflandforallindustrialand/orspecialpurposepropertiesandanalyzesthisdatasoitcanbeusedforapplicationofvalue.
ValuingtheImprovements
MPACinspectsthepropertytocollectphysicalanddescriptivedataaboutthelandandbuildings(age,size,use,etc.).
MPACthencarriesoutacostingexercise(usingitsACS)todeterminethereplacementcostoftheassessablebuildingsandstructures.
MPACthendeductsfromthisreplacementcost"asifnew,"anappropriateage/conditionrelatedallowancebasedupontheeffectivechronologicalandconditionrelatedageofthestructureorbuildingasofthebaseyearassessment.
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MPACthenadjuststhedepreciatedreplacementcosttoreflectvariousformsoffunctional,aswellasexternalobsolescence.
Obsolescence
Adjustmentsmayhavetobemadeinthevaluationtoreflectdepreciationduetotheageorconditionofthebuilding.
However,furtheradjustmentsmayneedtobemadefor:
• Functionalobsolescence–thismaybeduetoareductionintheutilityoftheproperty;e.g.,theexistinglayoutofthebuildingmaynotbeasefficientasamodernreplacement.
• Externalobsolescence–thismaybeduetofactorsnotdirectlyrelatedtotheproperty;e.g.,changesinthemarket.
MPACusesamethodcalledallocationofmarket-extracteddepreciationtodeterminetheadjustmentthatmaybenecessaryforexternalobsolescence.
MPACexpertsanalyzeallsalestodeterminethefollowingatthetimeofsale:landvalue,costnew,physicaldeteriorationandfunctionalobsolescence.
Theoutcomeofthisanalysisiscomparedtothesaleprice(assessmenttosaleratio)toidentifyanyexternalobsolescence.UsingthismethodMPACexpertsareabletousemarketevidencetoadjustforanyexternalobsolescenceinpreparingtheirassessedvalues.
Havingmadeallappropriateadjustmentstothereplacementcostfordepreciationandobsolescence,theresultingvaluewillbeanestimateofthecontributionoftheimprovementstothemarketvalueofthesubject,depreciatedforallcauses.
AsummaryofthestepstakenbyMPACfollows:
1. Identifyallpropertiesthatsold.
2. ForeachofthesoldpropertiesMPACdetermines:
• thelandvalueattimeofsale
• thecostnewattimeofsale
• thephysicaldeteriorationattimeofsale
• the functional obsolescence at time of sale
3. Calculate the cost new, less physical deterioration and functional obsolescence, plus land value for each of the sold properties.
A ratio study is completed whereby the preliminary assessed values are compared to the sale amounts to varify the presence of external obsolescence.
If the resultant assessment to sale ratio (ASR) is greater than 1.00 it indicates that there is external obsolescence.
A factor is applied to the preliminary assessed values to bring the ASR closer to 1.00 causing the cost approach to indicate values that reflect the actions of market participants.
A very basic example for similarly improved properties follows:
Line No Formula Comp 1 Comp 2 Comp 3 Comp 4
1 Sale Price $1,000,000 $900,000 $1,400,000 $830,000
2 Cost New $1,600,000 $1,350,000 $2,000,000 $1,750,000
3 Physical Deteriora-tion
$350,000 $275,000 $425,000 $650,000
4 Functional Obsoles-cence
$100,000 $0 $225,000 $150,000
5 Land Value
$300,000 $150,000 $400,000 $175,000
6 Prelimi-nary Value
Line 2 - Line 3 - Line 4+ Line 5
$1,450,000 $1,225,000 $1,750,000 $1,125,000
7 ASR Line 6 / Line 1
1.45 1.36 1.25 1.35
A factor is required to adjust the preliminary values to values much closer to current value. Onthe assumption that the cost new, physical deterioration, functional obsolescence, and landvalue are correct the factor is entirely attributable to external obsolescence.
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Application of the factor to the example results in the following:
Line No Formula Comp 1 Comp 2 Comp 3 Comp 4
1 Sale Price $1,000,000 $900,000 $1,400,000 $830,000
2 Land Value
$300,000 $150,000 $400,000 $175,000
3 Market Improve-ment Resid-ual
Line 1 - Line 2 $700,000 $750,000 $1,000,000 $655,000
4 Depreciat-ed Improve-ment Value*
See footnote 1 $1,150,000 $1,075,000 $1,350,000 $950,000
5 Indicated External Obsoles-cence
Line 4 / Line 3 1.64 1.43 1.35 1.45
6 Median Indicated
1.44 1.44 1.44 1.44
*The depreciated improvement value is the result of subtracting the physical deterioration and functional obsolescence allotments from the cost new estimate. Reference should be made to preceding table.
The indicated median of 1.44 is converted into a factor to calculate the allotment for external obsolescence. The factor is the result of the following formula:
[1-(1.00/1.44)]=.305
The factor of .305 is applied to the depreciated improvement value only; the land value is not adjusted.
Final ValueThe sum of the land value plus the depreciated improvement value becomes the assessed value.
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DirectSalesComparisonApproachtoValuation
1. Aphysicalinspectionofthepropertytoobtainthecurrentphysicalstateandconditionoftheproperty.
2. Buildingpermits.
3. Architecturalbuildingplans/drawings.
4. Salesdata.
MPACusesthedirectsalescomparisonapproachasitsmethodofvaluingmostpropertiesinOntario.Althoughthisapproachismostlyappliedtoresidentialproperties,wherethereisahigherfrequencyofopenmarketsalestransactions,smallcommercialandindustrialpropertiesarealsovaluedusingthesalescomparisonapproach.Thisapproachtovalueisbasedonthetheorythatthecurrentvalueofapropertyisdirectlyrelatedtothesalepricesofsimilarproperties.
Thesalescomparisonapproachtovalueestimatesthecurrentvalueofasubjectpropertybyadjustingthesalepricesofcomparablepropertiesfordifferencesbetweenthecomparablepropertiesandthesubjectproperty.
MPACisabletodetermineaccuratevaluesforlargegroupsofpropertiesbasedoncommondataandmassappraisaltechniques.Inadditiontorecentsales,MPAClooksatthekeyfeaturesofeveryproperty.Thereare,however,fivemajorfactorsthataccountfor85%ofthevalue:
1. location
2. lotdimensions
3. livingarea
4. ageoftheproperty,adjustedforanymajorrenovationsoradditions
5. qualityofconstruction
MPACreceivesalllandtitledocumentsregisteredatthe54LandRegistryOfficesacrossOntario.
Thesedocumentscontaininformationsuchastheowner’sname,mailingaddress,legaldescription,saleamount,andsaledate,whichisenteredinMPAC’sdatabase.
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Notallsalestransactionsareconsideredtobearm’slengthtransactionsorrepresentativeofthemarket.OnlythosesalesthatareconsideredtorepresentvalidopenmarketsalesareincludedinMPAC’sanalysis.Thekeyelementsofavalidsaleare:
• Itisanarm’slengthtransactionintheopenmarket.
• Thepropertyhadareasonableperiodoftimeforexposuretothemarket.
• Thesaleamountisexpressedintermsofmoney.
Examplesofinvalidsalesare:
• Transactionsbetweenfamilymembersorbetweenaparentcompanyanditssubsidiary.
• Quitclaims(i.e.,adeedisregisteredtocorrectadiscrepancyontitle).
• Forcedsales(e.g.,bankruptcyofvendor).
• Speculativesales(e.g.,purchasedforananticipatingfutureuseoftheproperty).
• Salesbythegovernmentorsomeotherorganizationthatisexemptfrompayingpropertytaxes.
• Salesbasedonnon-typicalfinancing.
• Salesthatrepresentonlyapartialinterestintheproperty.
• Agreementsofpurchaseandsale,wherethesalepriceisnegotiatedandagreedto,muchearlierthanthecloseofthesale.
Todeterminewhetherasaleisvalid,MPACwillconductasalesreviewandcompleteoneormoreofthefollowingactivities:
• Apropertyinspection.
• Mailingordeliveringasalesquestionnairetothenewowner.
• Telephoningthevendor,thepurchaser,and/orrealestateagent.
• Areviewofotherrealestateinformationsources.
WhenMPACinspectsapropertyaspartofasalesreview,MPACstaffwillinspectthelandandallbuildings.Thepurposeoftheinspectionistoverifythatallofthelandandbuilding
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characteristicsrecordedonMPAC’sdatabaseareanaccuratereflectionofthepropertyat-time-of-sale.MPACstaffwillalsoidentifywhetheranychangeshavebeenmade,eitherbeforeorafterthesale,thatneedtobereflectedintheassessedvalueoftheproperty.
Inmassappraisal,thesalescomparisonapproachisappliedbydevelopingapropertyvaluationmodelthatdevelopsestimatesofvalue,basedonphysicalandlocationcharacteristicssuchasbuildingarea,age,lotdimensions,andimmediateneighbourhood.
Allvalueadjustmentsarederiveddirectlyfromthelocalmarketplace.Amass-appraisalprocessresultsinestimatesofvaluethatareaccurateincomparisontoactualsalesinthelocalmarket,anduniformincomparisontosimilarproperties.
Section19.2(1)oftheAssessmentActrequiresthatMPACproduceestimatesofvalueasofalegislatedvaluationdate.ThisrequiresMPACtoadjustsalepricestothelegislatedvaluationdatetoreflectanymarketchangeovertime.
PropertyValuationModelBuilding
EachpropertyinOntarioisassignedtoamarketarea,locationalneighbourhoodandsub-neighbourhoodforvaluationpurposes.
Marketareasaregeographicareassubjecttothesameeconomicinfluences.Propertiesinamarketareatendtomoveupordowntogetherinvalueandwillbeincompetitionwithoneanotherinthemarketplace.Theyareusually,butneednotbegeographicallycontiguous.Salesfromeachmarketareaareanalyzedtodevelopapropertyvaluationmodeltovalueallpropertieswithinthatmarketarea.
ModelSpecification
Modelspecificationisthefirststepinthevaluationworkinamassappraisalprocess.Itdeterminesthedatatoincludeinthepropertyvaluationmodel,andinwhatformat.Themodelshouldincludeallpropertycharacteristicsthatinfluencevalueinthelocalmarketplace.
Inmostcases,85percentofaproperty’svaluecanbeattributedtolocation,age,constructionquality,buildingarea,andlotdimensions.Theremaining15percentcanbeattributedtofeaturesthatmayaffectthevalueeitherpositivelyornegatively,e.g.,apropertylocatednexttoagolfcourseorapropertylocatedonamajorthoroughfare.
Onepropertyvaluationmodelisspecifiedforeachmarketarea.InComputerAssistedMassAppraisal,themostcommontypeofmodelusedtovaluepropertiesisanadditiveMultipleRegressionAnalysismodel.Withthistypeofmodel,abasevalueisdeveloped,andthe
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propertyvaluationmodelwilladdorsubtractvaluebasedontheadjustmentswithinthemodelandthepropertycharacteristicsonfileforyourproperty.
AsamplespecifiedadditiveMultipleRegressionAnalysismodelisasfollows:
CV=BaseValue+b1*BuildingArea–b2*Age+b3*LotSize+b4*NBHD2+b5*NBHD3.
ModelCalibration
Modelcalibrationisthedevelopmentoftheadjustmentsfromthesalescomparisonanalysisofthepropertycharacteristicstobeusedinthepropertyvaluationmodel.
AsamplecalibratedadditiveMultipleRegressionAnalysismodelusingthespecifiedmodelfromaboveis:
CV=$125,400+$48.00*BuildingArea-$1,600*Age+$1.00*LotSize-$4,800*NBHD2+$3,000*NBHD3.
Whilethegeneralvalueinfluencesareconsistentacrosseachmarkettypeandarea,theirrelativeimportancewillvarybetweenmarkets.
DirectSalesComparisonApproachModelTesting
Onceeachmodelisdeveloped,itistestedtoensureitproducesvaluesthatareaccurate,consistentandfair.Thesetestsarecompletedusingindustrystandardsalesratiostudies.
Forexample,valuesaretestedtoensureolderandnewerbuildingsareassessedatthesamelevelofassessment(i.e.,themodelisnotundervaluingnewerpropertiesandovervaluingolderproperties).Theratiostudyiscompletedforallmajorvaluecontributors(i.e.,buildingarea,constructionquality,age,lotdimensions,andlocation)priortotheapplicationofthemodeltoallpropertieswithinthemarketarea.Ifthemodelisfoundtoproduceinaccurateinitialestimatesofvalueforagivenpropertycharacteristicorneighbourhood,theproblemmaybecorrectedbyre-specifyingandre-calibratingthemodeloranadjustmentmaybedevelopedbasedontheresultsofthesalesratiostudy.
Fine-TuningofValues
Individualvaluesdevelopedusingthesalescomparisonapproacharereviewedforreasonablenessandconsistencywithrecentsales,eitherofthesubjectpropertyitself,orofsimilarpropertiesinthesamearea.
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Insituationswheretheestimateofcurrentvalueappearstobeunreasonableorinconsistent,thevaluesareadjusted.
Thepurposeofthisreviewistoreconciletheinitialestimatesofvaluetoensurethatafairandequitableassessmenthasbeenplacedoneachproperty.Uniquesituationswillexistwhereindividualpropertiesmayrequirefurtheradjustmentstoachievecurrentvalue.
Uponcompletionoftheindividualvaluereviewprocess,theestimatesofvalueproducedbythesalescomparisonapproachtovaluethroughthemassappraisalprocessareconsideredfitforuseasCurrentValueAssessments.
CollectionofDatafromMunicipalities
Municipalitiescollectintegralpropertyinformationfrompropertyowners,andcreatepolicythatcansignificantlyinfluenceCurrentValueAssessments(CVA).TheinformationnecessaryformunicipalitiestosharewithMPAC,forproducingaccurateCVAs,isasfollows:
• Allnewbuildingpermitsdetails,includingallstatusupdatesthroughouttheconstructionprocess.
• Approvedsetofarchitecturalbuildingplans/drawings.
• Currentzoning,includingsecondaryplaninformation,andallupdatesastheyoccur.
ThesedatarequirementsarebeingrequestedbyMPACinorderto:
• IdentifynewconstructionorrenovationsthatmaycontributetoCVAchanges.
• Workloadmanagementandprioritizationofbuildingpermitrelatedactivities.
• Enablesprocessefficienciesleadingtotimelierassessmentdelivery.
• AccuratelyreflectcurrentlandusepoliciesindeterminingCVAandclassificationofland;and,forestablishingtheexistenceandvalueofexcessland.
FormatforDeliveryofMunicipalData
• WebServices.
• Standardizeformat–electronic.
• GISParcelfabric.
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• Accessibilitytopaperdocuments,intheabsenceoftheabove.Itisworthnoting,however,thatpaperexchangerequiresgreaterprocessingeffort,leadingtodelaysinproductdeliverables.
MPACProductsandServicesLinkWebServices
WebservicesaresoftwaresystemsdesignedtoenabledirectelectronicdatatransferovertheInternetbetweentwocomputersusingXMLcoding.
Municipalitiesareabletousetheseservicestoefficientlysubmitandextractinformationsuchaspropertydetails,buildingpermits,inspections,andmuchmore.
AdditionaldetailsandinstructionsregardingtheinitiationofanyoneoftheaboveinformationexchangeinitiativescanbearrangedwithMPAC’sMunicipalandStakeholderRelationsdepartment.
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AppendixA–GlossaryofTerms
ThesedefinitionsarefromavarietyofsourcesincludingPropertyAppraisalandAssessmentAdministration,JosephEckert,ed.IAAOandTheAppraisalofRealEstate,AppraisalInstitute,12thEdition.
Accrueddepreciation
Theamountofdepreciationfromanyandallsourcesthataffectsthevalueofthepropertyinquestion.
ActualAge Sometimescalled“historicalage”or“chronologicalage”.Itisthenumberofyearsthathaselapsedsincebuildingconstructionwascompleted.
Age/lifemethod Amethodofestimatingaccrueddepreciationfoundedonthepremisethat,intheaggregate,aneatmathematicalfunctioncanbeusedtoinferaccrueddepreciationfromtheageofapropertyanditseconomiclife.
Approachestovalue
Oneormoreofthreeapproachestovalue,namely(a)cost(b)salescomparison(c)incomecapitalization.Theapproachesemployedwillallowtheassessortodeterminethevalueoftheproperty.
Assessmentequity Thedegreetowhichassessmentsbearaconsistentrelationshiptomarketvalue.
Assessedvalue Assessedvalueappliesinadvaloremtaxationandreferstothevalueofthepropertyaccordingtothetaxrolls.
Breakdownmethod
Amethodforestimatingtotaldepreciationbyspecifyingtheamountofeachkindofdepreciation,oftenforeachmajorbuildingcomponent,(includingphysical,functionalandexternal).
Chronologicalage Thenumberofyearselapsedsinceanoriginalstructurewasbuilt.Synonymousareactualageandhistoricalage.Contrastwitheffectiveage.
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Comparables,ComparableSales
Recentlysoldpropertiesthataresimilarinimportantrespectstoapropertybeingappraised.Thesalepriceandthephysical,functional,andlocationalcharacteristicsofeachofthepropertiesarecomparedtothepropertybeingappraisedinordertoarriveatanestimateofvalue.Byextension,thetermcomparablesissometimesusedtorefertopropertieswithrentorincomepatternscomparabletothepropertybeingappraised.
Cost Thetotaldollarexpenditureforanimprovement(structure).
CostApproach Valueasestimatedasthecurrentcostofreproducingorreplacingtheimprovements(includingtheappropriateentrepreneurialincentiveorprofit)minusthelossinvaluefromdepreciation,pluslandorsitevalue.
Currentvalueassessment(CVA)
AsdefinedintheAssessmentActSection1:Currentvaluemeans,inrelationtoland,theamountofmoneythefeesimple,ifunencumbered,wouldrealizeifsoldatarm’slengthbyawillingsellertoawillingbuyer.
Deferredmaintenance
Repairsandsimilarimprovementsthatnormallywouldhavebeenmadetoapropertybutwerenotmadetothepropertyinquestion,thusincreasingtheamountofitsdepreciation.
Depreciation Thelossinvalueofanobject,relativetoitsreplacementcost,reproductioncost,ororiginalcostwhateverthecauseofthelossinvalue.Depreciationissometimessubdividedintothreetypes:physicaldeterioration(wearandtear),functionalobsolescence(sub-optimaldesigninlightofcurrenttechnologiesortastes),andeconomicobsolescence(poorlocationorradicallydiminisheddemandfortheproduct).
Economiclife Theperiodoftimeduringwhichagivenbuildingorotherimprovementtoapropertyisexpectedtocontribute(positively)tothevalueofthetotalproperty.Thisperiodistypicallyshorterthantheperiodduringwhichtheimprovementcouldbeleftonthe
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property,thatis,itsphysicallife.
Economic/Externalobsolescence
Lossinvaluetotheimprovements(relativetothecostofreplacingtheimprovementswithoneofequalutility)thatstemsfromfactorsexternaltotheproperty.
Effectiveage Thetypicalageofastructureequivalenttotheoneinquestionwithrespecttoitsutilityandcondition.Knowingtheeffectiveageofanoldrehabilitatedstructureofabuildingwithsubstantialdeferredmaintenanceisgenerallymoreinformativethanknowingitschronologicalage.
Equity (1)Thedegreetowhichassessmentsbearaconstantrelationshiptomarketvalue.Measuresincludethecoefficientofdispersionandthecoefficientofvariation.(2)Thenetvalueofapropertyafterliensandotherchargeshavebeensubtracted.Seealsohorizontalinequityandverticalinequity.
Fixedcosts Costsoffixedresourcesusedbyafirmthatdonotvarywithproductionlevelsandcannotbechangedintheshortrun.
Functionalobsolescence
Aflawinthestructure,materialsordesignthatdiminishesthefunction,utilityandvalueoftheimprovement.
Functionalutility Theabilityofthepropertyorbuildingtobeusefulandtoperformthefunctionforwhichitisintendedaccordingtocurrentmarkettastesandstandards,theefficiencyofbuilding’suseintermsofarchitecturalstyle,designandlayout,trafficpatternsandsizeandtypeofbuildings.
HighestandBestUse
Thereasonablyprobableandlegaluseofvacantlandonimprovedpropertythatisphysicallypossible,appropriatelysupported,andfinanciallyfeasiblethatresultsinthehighestvalue.
Long-liveditems Buildingcomponentswithanexpectedremainingeconomiclifethatisthesameastheremainingeconomiclifeoftheentirestructure.
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Marginalutility Thechangeintotalutilitytoacustomerthatresultsfromaone-unitchangeintheconsumptionlevelofanitem.
Marketextractionmethod
Methodofestimatingdepreciationwhichreliesontheavailabilityofcomparablesalesfromwhichdepreciationcanbeextracted.
Marketvalue Themostprobablesalepriceofapropertyintermsofmoneyinacompetitiveandopenmarket,assumingthatthebuyerandsellerareactingprudentlyandknowledgeably,allowingsufficienttimeforthesale,andassumingthatthetransactionisnotaffectedbyunduepressures.SeeCurrentValueAssessment
Obsolescence Onecauseofdepreciation,animpairmentofdesirabilityandusefulnesscausedbynewinventions,changesindesign,improvedprocessesforproductionorexternalfactorsthatmakeapropertylessdesirableandvaluableforcontinuinguse.Itmaybeeitherfunctionalorexternal.
Remainingeconomiclife
Thenumberofyearsremainingintheeconomiclifeofabuildingorotherimprovementasofthedateoftheappraisal.Thisperiodisinfluencedbytheattitudesofmarketparticipantsandbymarketreactionstocompetitivepropertiesonthemarket.
Replacementcost Thecost,includingmaterial,labour,andoverhead,thatwouldbeincurredinconstructinganimprovementhavingthesameutilitytoitsownerastheimprovementinquestion,withoutnecessarilyreproducinganyparticularcharacteristicoftheproperty.
Reproductioncosts
Thecost,includingmaterial,labor,andoverhead,thatwouldbeincurredinconstructinganimprovementhavingexactlythesamecharacteristicsastheimprovementsinquestion.
Short-liveditems Abuildingcomponentwithanexpectedremainingeconomiclifethatisshorterthantheremainingeconomiclifeoftheentirestructure.
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Specialpurposeproperty
Alimitedmarketpropertywithauniquephysicaldesign,specialconstructionmaterials,oralayoutthatrestrictsitutilitytotheuseforwhichitwasbuilt,alsocalledspecialdesignproperty.