Docket LT92005
Order LT93-2IN THE MATTER of the Real Property Assessment Act, R.S.P.E.I. 1988, Cap. R-4,
and
IN THE MATTER of an appeal, under Section 22 of the Real Property Assessment Act, by Robert B. Jaynes and Mildred L. Jaynes (the Appellants) against a Decision of the Minister of Finance (the Minister) with respect to the 1991 assessment of residential property in Southport, P.E.I.
on Thursday, August 12, 1993
Linda Webber, Chairman
John L. Blakney, Vice-Chairman
James Nicholson, Commissioner
Order
Appearances
By Written Submission:
1. For the Appellants
Mildred Jaynes
2. For the Minister
Kevin Dingwell
Manager, Residential and Farm Assessments
Reasons for Order
1 Background
The subject property is located on the south shore in the community of Keppoch-Kinlock, approximately five miles from Charlottetown. It consists of roughly one acre of land and is located on the Hillsboro Bay. The lot is accessible from the main highway by a clay right-of-way, is treed with approximately 125 feet of frontage (steep embankment; no stairs) and extends northward some 435 to 470 feet. There is a well and septic system on the property along with a 1 1/2 storey cottage which, according to the Minister's appraisal, was built in the 1850s and hauled to the site across the ice from the old Armories at the Queen Elizabeth Park in Charlottetown. Two additions of one-storey ells give a total usable area of over 1,500 square feet.
The history of assessments is as follows:
1984
$16,600
1985
20,700
1986
21,200
1987
21,900
1988
22,900
1989
23,800
1990
24,600
1991
42,100
By Notice of Appeal dated August 19, 1991, Robert B. Jaynes and Mildred L. Jaynes appealed the 1991 assessment on Parcel Number 329557-000 located at Southport, P.E.I. The Appellants consented to the jurisdiction of The Island Regulatory and Appeals Commission (the Commission) by letter dated June 27, 1992. At the request of the Appellants, and with the consent of the Department of Finance (the Department), the Commission conducted a paper hearing into this matter. A total of 21 Exhibits were entered.
The reason given for the appeal was stated as:
"Insufficient justification for almost double assessment.
Awaiting further explanation and investigation."2 Evidence & Arguments
2.1 The Appellants
Arguments for the Appellants can be summarized as follows:
- There is no justification for doubling the assessed value of their property;
- There are water quality problems that must be dealt with;
- Access to the shore is particularly difficult from their lot; and
- There have been no improvements to the property to justify the change in assessment.
2.2 The Minister
Arguments for the Minister can be summarized as follows:
- The increase from 1984 to 1985 was due to a re-inspection of the property for the year 1985;
- The increases from 1985 to 1990 were incremental based upon the application of an adjustment multiplier to the structure; and
- A re-inspection in 1990 resulted in the increased assessment for 1991.
It is the Minister's evidence that: "The increase was due mainly to an increase in land rates in this particular area." (Ex.1, p.7) The particulars of the differences from 1990 to 1991 are:
1990: Land $14,800 Building $ 9,800 = $24,600 1991: Land $31,800 Building $10,300 = $42,100 The 1991 "land" assessment is further broken down into the following components:
Lot $30,000 Improvement to Lot
(Well/Septic/Landscaping)
$ 1,800$31,800 The Department argues that the direct sales comparison test supports the 1991 assessed value.
3 Decision
The Commission has reviewed the submissions of both parties, viewed the site in question and lots in the surrounding area, obtained and reviewed assessment information for over 20 lots in the general area, reviewed the policy manual used by the province, as well as text material-provided by the province-describing real property assessment practices and procedures.
Building
The assessment of the building itself was not complained about by the Appellants and so will be affirmed.
Improvements
The Appellants' concern about finding an allocation for "improvements" to the land stemmed from a belief that since the last appraisal they had made no improvements so there must be a mistake.
A review of the Minister's appraisal shows that the "improvements" referred to are not improvements since the last appraisal. Rather, they are items that the Minister classifies as adding value to a completely undeveloped lot. As a result, the base lot value is increased depending upon the number and quality of improvements. Into this category fall such items as wells, septic tanks and landscaping.
We have reviewed the values used by the Minister and they are consistent with normal policy and will be affirmed.
Lot
The calculation of the base value of the lot is the focus of the dispute here. In 1990, the assessment valued the lot at $14,800. In 1991, the assessment valued the lot at $31,800 (inclusive of $1,800 worth of improvements). Naturally enough, the Appellants question why such an increase is justified.
Our review of the material filed in this matter strongly suggests that the primary reason for the change in assessed value of the lot was the price paid by the Appellants for the property in 1987:
The direct sales comparison approach has indicated that the subject is not over-assessed in terms of what it could reasonably be expected to command in the open market. The best indicator is the subject property itself which sold in May, 1987 for $50,000. While the increase in assessment from 1990 to 1991 may seem dramatic, the current value of $42,100 only represents 80% of the 1987 market value of the subject.
(Ex. 1 - Department of Finance Submission)
In response to this, the Appellants state as follows:
The adjoining property, "Bayfield", has been occupied by the Jaynes family for over three quarters of a century. Only a matter of feet separate the two dwellings. When the property was offered for sale some years ago, it was unable to find a buyer over a period of years at $40,000. It was subsequently withdrawn from the market. At the time, we were not in a position to buy the property.
When it was again offered for sale some time later, we were able to accomplish the sale, even though it was our feeling that the price was too high. We did not wish to risk a change of use of the property which might adversely affect "Bayfield".
In the summary of page 15, par. 2, the conclusion reached that the selling price was realistic is invalid. It was the personal connection that determined our decision.
(Ex. 11 - Letter, September 10, 1992)
On this matter we find ourselves in agreement with the Appellants. We note, for example, the comments made at p. 3-15 in the Real Property Assessment 1992/93 Course Manual from the Urban Land Economics Diploma Programme, the University of British Columbia (UBC Manual):
5. Value to the Owner
It is generally inappropriate for the assessor to add special value to a particular owner. For example, the premium paid for a property formerly in the family is not reflective of market value, but contains a special value to a particular owner, which should not be included as part of the assessment. Therefore, the sale of a parcel having special value to one owner should not be used as a basis for valuing other lands. See Genstar Limited v. District of Mission (1981) 29 B.C.L.R. 81 (B.C.S.C.) and (1981) 32 B.C.L.R. 158 (B.C.C.A.).
The comments made by the Appellants appear to fall within the circumstances derived above. Thus, what the Appellants paid for the property in 1987 cannot be used to justify the value increase attributed to the land. Therefore, we must review the options left to the Minister and the evidence provided in support of the assessment.
First, we believe it is worthwhile to review some of the textual and legal material on the issue of the purpose of these assessments:
In the final analysis, and regardless of the method of mass appraisal, the purpose of all assessment "appraisals" is the equitable distribution of the tax burden. For this reason, equity is achieved by an apportionment of the values of all properties which conform with certain universal and jurisdictional principles and up-to-date methods which are capable of ensuring the equal tax treatment of all groups of properties, industrial, commercial, residential or resource.
(p.22, St. Francis Xavier Course Manual)
The focus of equitable distribution of the tax appears to be the rationale behind numerous court decisions which emphasize, over and over again, that the most important feature of real property assessments is uniformity. That is, no matter what other principles are to be applied, if the end result cannot be said to assess Property A at an equivalent level to all other similar/comparable properties, then the assessment will found to be invalid.
The importance of the principle of uniformity is seen in this province's legislation:
s.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.
(Real Property Assessment Act, R.S.P.E.I. 1988, Cap. R-4.
This places the onus upon the Minister to prove that the assessment on appeal meets the test of uniformity.
How far the courts have taken this principle is shown from the following excerpt from
Mersey Paper Co. Ltd. v. County of Queens (1959), 18 D.L.R. (2d) 19 (N.S.S.C.-A.D.):Rule 2 of s.18 of the Assessment Act, R.S.N.S. 1954, c.15 provides that "all property liable to taxation shall be assessed at its actual cash value, such value being the amount which in the opinion of the assessor it would realize in cash if offered at auction after reasonable notice but in forming such opinion the assessor shall have regard to the assessment of other properties in the town or municipality as to ensure that taxation shall fall in a uniform manner upon all personal property in the town or municipality". Held, on appeal from an assessment, while the assessor is not entitled to assess property at less than its actual cash value (e.g. by discounting the value by 25% as in this case), yet the history of the rule shows that the dominant and controlling factor in determining an assessment is not actual cash value but uniformity. The words "in forming such opinion" must be construed to mean "in assessing any property". It follows that if an assessor has assessed other property at 75% of its actual cash value, it is his duty (even though this involves a violation of the first part of R.2) to assess a subsequent taxpayer's property at the same percentage.
[(1959), 18 D.L.R. 19 (N.S.C.A.) (headnote)]
Some guidance on how this principle is to be applied can be found in
Morash v. Municipality of Chester (1961), 28 D.L.R. (2d) 428 (N.S.S.C. en banco) at p.429:As will be seen, I do not think that the mere fact that the assessor assessed certain other individual properties lower in relation to their actual cash value than he assessed the appellant's property is ground for allowing the appellant's appeal. It [sic] may be that the other assessments are out of line rather than his. I think a comparison between the assessment of the appellant's property and those of others would be relevant only if it were shown that the general level of assessment of properties in the municipality was lower in relation to the actual cash value, as defined in the Assessment Act, R.S.N.S. 1954, c.15, than the assessment of the appellant's property.
At p.430:
In assessing the appellant's property, therefore, it was the assessor's duty to determine its actual cash value, but if, because of the failure of the assessor to discharge his duty with regard to the assessment of other properties in the municipality a general level of assessment had been established which was below actual cash values by a fairly definite percentage thereof, it would have been the duty of the assessor to discount for purposes of assessment the actual cash value of the appellant's property to a level which was of the same percentage below its actual cash value.
In Re Empire Realty Co. Ltd. and Assessment Commissioner for Metropolitan Toronto et al. (1968), 2 O.R. 388 (Ont. C.A.) the Court made "some remarks of general application to assessment procedure in Ontario that may be usefully restated", some of which follow:
A prime objective of municipal taxation is the equitable distribution of the burden according to the value of the property possessed by each ratepayer; in the system prevailing in Ontario, the tax levied on the ratepayer is determined by the application of a uniform mill rate upon the assessed value of the ratepayer's taxable property set down in the assessment roll. If equity 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.
(p.390)The test for uniformity set out in the Empire case was as follows:
The Assessment Act, s.86(2), gives to each of the tribunals exercising appellate jurisdiction under the Act (save the Court of Revision), power to consider the value at which similar lands in the vicinity are assessed. The testing of the fairness to the ratepayer of the assessment of his property by looking at what has been done with comparable property is too well established to need any defence; even an assessment made at the actual value of lands and buildings in compliance with the provisions of s.35(1) would be an unequitable assessment if all similar lands in the vicinity were assessed at some percentage of actual value substantially less than one hundred; where, as here, there has been no attempt to assess at actual value, the relationship of any particular assessment to the assessed value of similar lands becomes the only standard by which fairness to the ratepayer may be established.
Even the Supreme Court of Canada made similar comments, in
Ontario Steel Products Co. Ltd. v. Regional Assessment Commissioner Region No. 2 et al. (1975), 5 N.R. 491 (S.C.C.) at pp.502-503:... a taxpayer was entitled to be assessed on an equitable basis with other taxpayers owning land in the vicinity; and the fact that an assessment was at actual or market value would not preclude a successful appeal where it could be shown that similar lands in the vicinity were assessed at substantially less than actual or market value.
The issue here, then, is whether or not the Minister has proven that the lot has been assessed equitably.
The material provided in this matter indicates that the lot was assessed on the basis of acreage and on the basis of its location, i.e. on the shore. All lots, states the Minister's evidence, are assessed this way-with no adjustment for the amount of shore frontage, accessibility to the shore, the likelihood of erosion, or anything else (except for lot "improvements", as described earlier in this decision).
In response to the initial appeal the Minister's reply was:
The lots have been assessed on a per lot basis rather than a front foot basis as the market will not support the front foot valuation method.
(Ex. 17 - Letter, April 10, 1992)The Appellants' comments on this matter were:
On page 2 of Mr. Kevin Dingwell's letter, par. D, the front foot basis of valuation was discounted. To my knowledge in other localities, shore properties are assessed on a front foot basis. The lot is shaped so that there is very little shore frontage as adjoining properties make it very narrow. It is a precipitous cliff which each year suffers substantial erosion, making steps impractical. Therefore, beach access is gained through properties on either side, neither of which are deeded for our trespass. Permission could be denied at any time.
(Ex. 11 - Letter, September 10, 1992)The Minister's response was:
Very few recreational subdivisions on Prince Edward Island establish the sale price of lots on a front foot basis. The value of most recreational lots is determined by (A) the location of the lot in terms of distance from the shore and (B) the overall lot size.
The subject property as delineated on the attached property map is shown as having 120 feet of water frontage.
Both properties adjoining the subject have stairs built from the top of the bank to the beach. There is no reason to believe this option is not available to the Jaynes should their current access be denied.
(Ex. 5 - Letter, November 17, 1992)The Appellants' response to this was as follows:
In regard to recreational properties on sub-divisions on P.E.I. not being assessed on a front foot basis, I would point out that this is not a sub-division situation. Take, for example, two one-acre parcels. One has 100 feet of shore frontage and the other, although equal in size, has 20 feet of shore frontage. Which would you choose?
As far as access to the shore is concerned, it is presumptuous to state that because adjoining properties have stairs to the beach, we have that option. As a matter of fact, Julian Jaynes' property has no steps as they were eroded many years ago. Our access is much steeper and precipitous. Of course, in this day and age, it is possible from an engineering point of view, but at what cost?
(Ex. 3 - Letter, January 8, 1993)A view of the property shows that the bank on the Appellants' property is extraordinarily steep and precipitous and that there are no stairs on or access from the Jaynes' property. There are stairs (very high) on the other adjacent property, at the side furthest from the Appellants' land.
We find that the Appellants' views are valid and that the Minister failed to assess the lot in an equitable manner when he failed to take into account such features as accessibility to the shore, erosion potential and shore frontage.
As was stated in the B.C. Manual:
2. The Issue of Comparability
Comparability is a measure of similarity between a sale and a subject. Sale and subject should be similar with respect to date of sale, economic conditions, physical attributes, and competitiveness in the same market.
(p. 18-2, emphasis added.)In any case, land values must reflect market value in each neighbourhood or area; they should also account adequately for differences in size, topography and so forth among individual parcels within each area.
(p.15-12)The same manual notes that land appraisals may be done either by the comparative unit method or the base lot method. However, "when values have been established in either method, they can be adjusted for depth, irregularity, corner influence, and other locational differences between the subject land and comparables." (p.15-11)
While mass appraisal techniques allow for general principles to be developed and applied, there must be adjustments made when necessary to account for the differences between parcels: "Assessors should have prepared for informal and formal appeals. Although processing appeals consumes much staff time, it provides an opportunity to review individual values in detail and make necessary corrections." (B.C. Manual, p.6-7)
In addition, we note that the Minister provided only four comparables for the lot value-two in the vicinity and two in Keppoch Estates. Of the two in the vicinity, one had three times the shore frontage of the Appellants' lot and 2 1/2 times the acreage, yet its total lot value for 1991 was $36,000 (Memo of June 2, 1993 from Kevin Dingwell to Chris Jones-property number 329565). The other nearby property has close to double the shore frontage and approximately the same acreage (1.008 acres as opposed to the Appellants' one acre) and its value is the same $30,000. Both these comparables have similar access problems, each possessing a steep, high bank.
The Keppoch Estates' properties both have considerably greater shore frontage than the Appellants', and their land is easily accessible to the water. In addition, to our knowledge this area is part of a planned community wherein access and development are restricted to that of which the members approve. This provides those properties with a protection unavailable to the Appellants and could well affect the land values there. As such, they appear to be poor choices for comparables.
Given the limited shore frontage of the Appellants' lot and a review of the two reasonable comparables in the vicinity provided by the Minister, the base value of the Appellants' lot is determined to require a variation down to $15,000. (The 2.5 aces for number 329565 at a value of $36,000 is $14,400 per acre. The 1.008-acre parcel, property number 518050, has a value of $30,000 but almost twice the shore frontage as the Appellants' lot.) Should the Minister develop a new methodology to account for such distinctions as shore frontage, access to the shore and probable erosion, the new methodology will apply to future assessments of this property.
Accordingly,
1. The appeal is allowed; and
2. The 1991 assessment for property number 329557-000 is varied as follows:
Lot $15,000 Improvements 1,800 16,800 Building 10,300 Total Assessment $27,100
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, under Section 22 of the Real Property Assessment Act, by Robert B. Jaynes and Mildred L. Jaynes (the Appellants) against a Decision of the Minister of Finance (the Minister) with respect to the 1991 assessment of residential property in Southport, P.E.I.Order
WHEREAS
Robert B. Jaynes and Mildred L. Jaynes (the Appellants) appealed to The Island Regulatory and Appeals Commission (the Commission), in written notice dated August 19, 1991, against a Decision of the Minister of Finance;AND WHEREAS
the Commission heard the appeal by way of submissions, as agreed to by the parties;NOW THEREFORE
, for the reasons given in the annexed Reasons for Order;IT IS ORDERED THAT
1. The appeal is allowed; and
2. The 1991 assessment for property number 329557-000 is varied as follows:
Lot $15,000 Improvements 1,800 16,800 Building 10,300 Total Assessment $27,100 DATED
at Charlottetown, Prince Edward Island, this 12th day of August, 1993.BY THE COMMISSION:
Linda Webber, Chairman
John Blakney, Vice-Chairman
James Nicholson, Commissioner
