Order LT05-02 - Docket LT05007 - Real Property Appeal - Fairlie McKnight v. Provincial Treasurer (June 23, 2005)

Docket: LT05007
Order LT05-02

IN THE MATTER of an appeal by Fairlie McKnight of a decision by the Provincial Treasurer regarding the 2004 assessment of Provincial Property Number 864538 located in Summerside.

BEFORE THE COMMISSION

on Thursday, the 23rd day of June, 2005.

Maurice Rodgerson, Chair
Weston Rose, Commissioner
Norman Gallant, Commissioner

Order

Contents

Appearances & Witnesses

Reasons for Order

1.    Introduction

2.    Discussion & Findings

3.    Disposition

Order

Appearances & Witnesses

1.    For the Appellant

Counsel:
Stephen D. G. McKnight

2.   For the Provincial Treasurer

Counsel:
Robert MacNevin

Witness:
Paul Olscamp

Reasons for Order

1.  Introduction

[1] This is an appeal under the Real Property Assessment Act, R.S.P.E.I. 1988, Cap. R-4 (the Act), by Fairlie McKnight (hereinafter referred to as the Appellant) of the decision by the Provincial Treasurer (the Respondent) with respect to the 2004 assessment of Provincial Property Number 864538 located in Summerside (the subject property).

[2]   According to the Respondent's Assessment Valuation Summary (Exhibit R1) the assessment history for the subject property is as follows:

1998 to 2002 $65,000 Building Lot Only

Revised 2002 $304,800 Effective October 15th, New Construction

2003 $319,000

2004 $341,500

Revised 2004 $319,000 Varied, Reference of Assessment

[3]   On January 25, 2005 the Commission received a Notice of Appeal (Exhibit A2) from the Appellant appealing the Revised 2004 assessment of $319,000. After suitable scheduling for the parties, the Commission heard the appeal on May 18, 2005.

2.  Discussion & Findings

Appellants' Position

[4]   The Appellant filed detailed grounds for appeal with the Notice of Appeal. In addition, the Appellant presented to the Commission information concerning the assessment of numerous properties believed by the Appellant to be comparable to the subject property. Highlights of the Appellant's oral submissions include:

Assessment is to be based on market value and it is submitted that market value is dictated by the price agreed to between a willing buyer and a willing seller.

The home on the subject property was assessed on the basis of 2852 square feet not including the attached garage which was calculated by the Respondent as being 792 square feet. The Appellant's calculations suggest that the home is actually 2588 square feet based on interior measurements, with the garage totaling 644 square feet of which 86.5 square feet is used for the mechanical room. The home does not have a basement and the space above the garage was only partly finished and serves as a storage room.

The Appellant submits that the residential housing market is not priced as high as, for example, the City of Halifax. It is submitted that the “ceiling” for residential housing in Summerside is $299,000 and the market for $300,000 homes in Summerside is either non-existent or extremely rare.

The Appellant submits that other properties in their neighbourhood are also over assessed compared to similar neighbourhoods in Summerside such as the Lefurgey subdivision.

The Appellant submits that a reasonable tax assessment for the subject property would be $241,500.

[5]   The Appellant submits that the subject property is over assessed and requests that the Commission reduce the assessed value.

Respondent's Position

[6]   The Respondent filed an Assessment Valuation Summary (AVS) (Exhibit R1) and a Sales Valuation Summary (SVS) (Exhibit R2). Highlights of the Respondent's oral submissions include:

Assessment of a property is performed by qualified assessors using the Real Property Assessment Manual. The actual purchase price of a lot or a lot with a home on it is obtained from affidavits filed at the time of purchase by the new owner. Homes are assessed based on size, quality, type of construction etc. The calculation of the square footage of all residential properties for assessment purposes is made based on exterior dimensions. A base value is factored to a current value using adjustment multipliers. Depreciation is applied depending on the age of the structure. No depreciation is applied to recently constructed homes.

The lot for the subject property was initially assessed at $65,000 for the period 1998 to 2002. The lot sold for $75,000 in 1998. The current lot value is assessed at $78,700.

In determining the Revised 2004 assessment, land improvements were added to the lot value on a standard basis of $864 for paving and $1000 for landscaping. The main structure was assessed at $220,100 and the attached garage at $18,300 for a rounded total of $319,000 for the land and buildings.

On referral, the original assessment for the main structure and attached garage was reduced following a site inspection of the property where the Appellant pointed out that the area over the living room was open (cathedral ceiling) thus reducing the living area square footage by 330 square feet and that the area over the garage was not fully finished as it was used for storage, rather than living space.

While assessed lot values in the Lefurgey subdivision are significantly lower than in the neighbourhood containing the subject property, the Lefurgey neighbourhood has overhead utility lines, ditches and no curbing while the neighbourhood of the subject property has buried utility lines, storm sewers and curbing.

The Respondent submits that the subject property was properly assessed based on market value and a site inspection as part of the referral process. The Respondent also submits that the rates applied in assessing residential properties are uniform.

[7]   The Respondent requests that the Commission deny the appeal and confirm the Revised 2004 assessment of $319,000.

The Commission's Findings

[8]   After giving careful and full consideration to the evidence presented in this case, and upon a review of the applicable law, it is the decision of the Commission to allow this appeal and vary the 2004 assessment for the subject property to $299,000. The reasons for the Commission's decision follow.

[9]   The following definition paragraphs from section 1 of the Act are relevant to this appeal and read as follows:

(a ) "appraise" means to enter into and inspect a property and to determine its market value;

…

(c)    "assess" means to value a property for tax purposes, whether by an appraisal or by use of an adjustment multiplier;

            …

(f)   "market value" means the most probable sale price indicated by consideration of the cost of reproduction, the sale price of comparable properties and the value indicated by rentals or anticipated net income;

[10]   Subsection 3(2) of the Act reads as follows:

3(2)    All real property owned by the Crown or any person shall be assessed at its market value, either

a) as commercial realty; or

b) as non-commercial realty.

[emphasis added]

[11]   Subsection 28(1) of the Act reads as follows:

28.(1)    Subject to subsection (2), in any appeal to the Commission, the Minister shall demonstrate the uniformity of the assessment in relation to other assessments.

[12]   Upon a review of the evidence, the Commission finds that the Respondent accurately calculated the assessment for the dwelling with attached garage on the subject property. The Commission notes that the Appellant's legal counsel disclosed the actual cost to build the dwelling and attached garage and this figure exceeds the 2004 revised building assessment of $238,436. Thus, as there is no evidence before the Commission of a significant reduction in the cost of building materials over the last three years, the Commission is satisfied that the cost of reproduction would exceed the assessed value of the building and attached garage.

[13]   With respect to the most probable sale price, the Commission does acknowledge that the assessed value for the dwelling and attached garage does at first blush seem high compared to other executive type homes referred to by the Appellant. However, the Appellant's home is only three years old and as such depreciation has not yet been factored in its assessment. Further, the assessed grade of the Appellant's home is higher than many of the homes referred to by Provincial Treasury.

[14]   While the Respondent is required to demonstrate uniformity of the assessment in relation to other assessments, the Commission is satisfied that the assessment of the dwelling and attached garage is uniform compared to other similar properties when depreciation, grade and square footage factors are fully considered. The Commission notes in this regard that the square footage of all residential properties is calculated on the basis of their external dimensions.

[15]   However, the Commission finds that the assessment for the lot for the subject property, while perhaps fairly calculated on the basis of the most probable selling price, is not uniform in relation to other lot assessments outside the immediate neighbourhood. This is particularly apparent when comparing the assessed value of the lot for the subject property with the same size or larger waterfront lots in the Lefurgey subdivision. The Respondent's explanation at the hearing was that the difference was attributable due to the fact that the subject property was in a neighbourhood with underground utility lines, storm sewers and curbing whereas the Lefurgey neighbourhood had utility poles, ditches and no curbing. The Commission acknowledges that these more attractive features of the subject property and its neighbourhood would result in a higher market value for its lots. However, the Commission finds that these features could not account for such a large difference in the value of the lots in these two otherwise similar subdivisions.

[16]   While it may well be that the Lefurgey lots are significantly undervalued, only the assessment of the subject property is presently before the Commission. Accordingly, in the interests of a more uniform assessment of the lots and mindful of the attractive features of the lots in the neighbourhood of the subject property, the Commission finds that the assessed value of the lot for the subject property is to be reduced by $20,000 and accordingly the lot assessment of $78,700 shall be reduced to $58,700. The Commission hereby directs the Respondent to reduce the assessment of the subject property by $20,000 resulting in a reduction of the assessment of the subject property from $319,000 to $299,000. With this reduced figure, the Commission finds that the most probable selling price would meet or exceed that amount.

3. Disposition

[17] An Order will therefore be issued allowing Appeal #LT05007 and directing the Provincial Treasurer to vary the 2004 assessment of property number 864538 to $299,000.

Order

WHEREAS Fairlie McKnight has appealed a decision by the Provincial Treasurer pertaining to the revised 2004 assessment of provincial property number 864538;

AND WHEREAS the Commission heard the appeal at public hearings conducted in Charlottetown on May 18, 2005;

AND WHEREAS the Commission has issued its findings in this matter in accordance with the Reasons for Order issued with this Order;

NOW THEREFORE, pursuant to the Island Regulatory and Appeals Commission Act and the Real Property Assessment Act,

IT IS ORDERED THAT

1. The appeal is allowed.

2. The Provincial Treasurer is hereby directed to vary the 2004 assessment for provincial property number 864538 to $299,000.

DATED at Charlottetown, Prince Edward Island, this 23rd day of June, 2005.

BY THE COMMISSION:

Maurice Rodgerson, Chair

Weston Rose, Commissioner

Norman Gallant, Commissioner

NOTICE

Section 12 of the Island Regulatory and Appeals Commission Act reads as follows:

12. The Commission may, in its absolute discretion, review, rescind or vary any order or decision made by it or rehear any application before deciding it.

Parties to this proceeding seeking a review of the Commission's decision or order in this matter may do so by filing with the Commission, at the earliest date, a written Request for Review, which clearly states the reasons for the review and the nature of the relief sought.

Sections 33 and 34 of the Real Property Assessment Act provide as follows:

33. Notwithstanding anything in any public or private Act, an appeal lies to the Supreme Court of the province from any order, decision, or award of the Commission, if notice of the appeal is given the other parties within forty-five days after the making of the order, or decisions sought to be appealed from.

34. The rules and practices of the Supreme Court respecting appeals apply with the necessary changes to any appeal.