Docket: LT92004
Order: LT93-1IN THE MATTER of the Real Property Assessment Act, R.S.P.E.I. 1988 Cap. R-4;
and
IN THE MATTER of an appeal to The Island Regulatory and Appeals Commission (the Commission), under Section 22 of the Real Property Assessment Act (Act), by Douglas C. Lockhart (the Appellant) of Amherst, Nova Scotia, against a decision of the Minister of Finance (the Minister) with respect to the 1991 assessment of residential property. The property (Provincial Property Number 235192-000) is located in Millvale, P.E.I. DATED at Charlottetown, Prince Edward Island this 24th day of March, 1993.Linda Webber, Chairman
John L. Blakney, Vice Chairman
Mike Ryan, Commissioner
Order
Appearances
1. For the Appellant
Douglas C. Lockhart the appellant
2. For the Minister
Kevin Dingwell Manager, Residential and Farm Assessments
Eugene Power Regional Supervisor
Reasons for Order
I. BACKGROUND
The property in question is located in Millvale, P.E.I. approximately five miles north of Hunter River and one mile south of St. Ann. The property is located on the south side of Route 229, and consists of 50 acres of land with a clearing 1500 feet in the woods, amidst a backdrop of mixed woods. A house is located in the clearing, accessible from the main road, down a deep switch-back two-rut clay road (15% average grade).
The house is 496 sq.ft. two-storey, 387 sq.ft. one-storey, built in 1982 with a standard 8" concrete foundation with an 8' depth and 3" concrete floor under the two-storey section. The dwelling is plumbed with kitchen sink and three piece bath but there is no well on the site. The electrical service stops 1000 (+ or -) feet closer to the highway at the multi-use storage building on the lot.
The multi-use storage building is located approximately 400 feet from the highway and consists of approximately 864 sq.ft. (24'x36'). It was built in 1978.
The assessment history of the property is as follows:
1984 $13,200 1985 24,600 1986 25,600 1987 26,400 1988 27,800 1989 29,000 1990 31,400 1991 54,800 1991 Revised 44,200 By Notice of Appeal dated September 13, 1991 Douglas C. Lockhart appealed the real property assessment for property No. 235192-000. The Appellant consented to the jurisdiction of the Commission and a hearing was held on December 7, 1992.
The reason for the appeal are summarized on Form 3 as:
- excessive assessment
- excessive year-to-year increase
II. EVIDENCE AND ARGUMENTS
A. Appellant
Arguments for the Appellant can be summarized as follows:
1. the north west corner of the property adjacent to Route 229 is a former shale pit and garbage dump;
2. the dwelling is inaccessible by vehicle during winter and early spring because of a 120-foot vertical drop from the road to the dwelling;
3. there is no electrical service to the house and no potable water to the house or the garage (multi-use building);
4. there were no improvements to the property subsequent to the 1990 assessment;
5. marketability is negatively affected because of lack of accessibility, electricity, or water;
6. the double taxation places a further downward movement on the market value for non-residents;
7. contrary to statements by the Department, the property is not completely wired for 100 amp. service. "While 120V. wiring was installed prior to drywalling, no entrance mast, conduit, distribution panel, 240V. circuits, interior or exterior fixtures exist." (Ex.17, p.6) The cost of installing these would be $11,200;
8. the basement walls have cracked; the north wall has buckled inward ten inches and as it is the bearing wall for the back of the building, it will require replacement or extensive repair;
9. this property can't be "compared" to dwellings that are accessible and serviced;
10. the downturn in the economy should result in a decrease in property values.
The Appellant's argument that there had never been an on-site inspection of the premises was set aside when he was advised that a neighbor, with whom he had left a key, provided access to an inspector. The Appellant had never been advised of this, even though he had visited the Charlottetown offices twice to ask for reasons for the increase in assessment.
B. The Minister
Arguments for the Minister can be summarized as follows:
The Department's explanation is summarized on p.7 of Ex. 1:
The increase in assessment from 1984 to 1985 was due to a reinspection with the structure being assessed for the first time. Please note that the value was based on an exterior inspection.
The increase from 1985 to 1990 represent incremental increases due to an increase in land values or the application of an adjustment multiplier, or both.
The increase in assessment from $31,400 in 1990 to the 1991 adjusted level was due in large part to the change in the grade of the structure based on the interior inspection. Previous assessed values were the result of an exterior inspection and the grade was not a true reflection of the actual components present in the structure.
The Department also admitted that the assessment of $54,800 for 1991 was established upon an assumption by the inspector that the dwelling had potable water and electricity. The revised assessment downward to $44,200 was said to recognize this lack of services as well as to recognize the inaccessibility of the property.
The supervisor (Eugene Power) admitted at the hearing that his inspector did not report the buckling of the basement wall so no adjustment was made for it. Kevin Dingwell admitted "we are a bit on the conservative side" when it comes to the adjustments allowed for the cost of providing electrical and water service. Their absence decreases the "functional" value of the property, he stated.
III. DECISION
Having considered the evidence presented during the hearing the Commission decided to allow the appeal. The reasons for this decision are as follows:
The basic premise upon which the increase in assessment was based -- an appraisal of the interior of the dwelling -- is sound. While the Appellant argued that there were no changes "since 1987", this did not suggest that there had not been changes to the dwelling since the appraisal in 1984-85 and the Department pointed out that at that time the inspection was of the exterior only.
We do have some concerns, however, with the way this situation was handled.
In the first place, we question the inspection of the premises without the owner being present. While we are aware that practicality will require this in many instances, the dangers are clear from this case. Some essential facts -- like lack of water and electricity -- may be missed. Either the type of inspection done should be improved or this type of inspection should be followed up with contact of the owner to determine if there are any unique factors to be considered.
While Mr. Lockhart appealed and so brought these errors in the assessment to the attention of the Department, we can't help but feel that these procedures make other such situations likely to exist.
We also note that part of the reassessment allowed by the Department in this case was based on "allowances for accessibility and location" and a land value adjustment showing four rather than 14 clear acres of land (Ex.1,p.7). There is no justification for errors of this type to have been made in the first place. The description of the property in question makes it clear that no one could miss the long, steep, switch-back road that must be traversed before you reach the dwelling. The contour of the land -- its inaccessibility -- is evident.
The focus of our concern is our belief that the public should be able to have confidence in the work of the Department. Here we have two inspections with only the one that followed the appeal apparently noting the special characteristics of the property.
As for the "comparable assessments," we find them of little value. There is no way of determining, from the information provided, the real similarities and differences in the properties -- except for absolute basics like square footage and acreage.
One could view these comparables as a list of those properties the Department feels best support its assessment of the subject property. Of what value is a review of such choices? It would appear more relevant to look at all properties in the geographical area -- or all cottages in the province or county. That is, a broader base of comparison, with greater objectivity in the selection process, is required if this exercise is to be meaningful.
A similar problem exists with the "comparable sales" information. We don't know why those four were selected and we haven't enough information to determine how they can actually compare with the subject property. It may be that there are no really comparable sales. The process used by the Department in Ex. 2 suggests "comparability" between a residential home that sold for $91,500 in 1989 with the Appellant's cottage that lacks electricity and potable water and is inaccessible for part of the year. To suggest that "adjustments" make it comparable appears to suggest that any property is comparable with any other property anywhere -- just factor in a few adjustments.
In our view, such an approach renders meaningless the concept of a "comparable".
One method of determining market value is to itemize the elements involved in a property and, using factors judged to be appropriate, calculate the value of the property. That involves an exercise of judgment. However, done properly it should provide a reasonable result.
Using the sale price of comparable properties is also acceptable -- but true comparables, not any property in the area that happens to be sold, which is then dramatically adjusted to "make it" comparable.
Obviously, comparables will rarely, if ever be identical to the subject property. That is why they are one consideration only. To a certain extent one must make allowances -- adjust the comparable -- when trying to compare one property with another. We are of the opinion, however, that the Department has taken this to such extremes as to render the concept of comparables almost meaningless.
The witnesses for the Department were forthright and helpful. We hope they take these criticisms constructively and that these comments will help the Department to carry out its mandate in the future.
With respect to the case before us, we agree with the Appellant that a further adjustment should be made to the assessment to recognize the deteriorating condition of the basement wall and the cost of installing electrical service and potable water. The 25% adjustment already allowed by the Department, on the evidence before us, only recognizes the inaccessibility of the lot and the substantial affect this will have on the sales value.
Pursuant to s.30(b) of the Real Property Assessment Act the appeal is allowed and the Minister is directed to establish a reasonable adjustment for the decrease in functional value created by the lack of potable water and the expense/difficulty of installing full electrical service at the dwelling, and for the decrease in the value of the property as a result of the deterioration of the basement wall.
IN THE MATTER
of the Real Property Assessment Act, R.S.P.E.I. 1988 Cap. R-4;and
IN THE MATTER
of an appeal to The Island Regulatory and Appeals Commission (the Commission), under Section 22 of the Real Property Assessment Act (Act), by Douglas C. Lockhart (the Appellant) of Amherst, Nova Scotia, against a decision of the Minister of Finance (the Minister) with respect to the 1991 assessment of residential property. The property (Provincial Property Number 235192-000) is located in Millvale, P.E.I.Order
WHEREAS Douglas C. Lockhart (the Appellant) appealed to The Island Regulatory and Appeals Commission (the Commission), in written notice dated September 13, 1991, against a decision of the Minister of Finance;AND WHEREAS the Commission heard the appeal at a public hearing conducted in Charlottetown, P.E.I. on December 7, 1992;
AND WHEREAS the Commission has made a decision in accordance with the stated reasons;
NOW THEREFORE, pursuant to the Real Property Assessment Act;
IT IS ORDERED THAT the appeal is hereby allowed.
DATED at Charlottetown, Prince Edward Island this 24th day of March, 1993.BY THE COMMISSION:
Linda Webber, Chairman
John L. Blakney, Vice Chairman
Mike Ryan, Commissioner
