Docket: LT93005
Order: LT94-1IN THE MATTER of the Real Property Assessment Act, R.S.P.E.I. 1988, Cap. R-4,
and
IN THE MATTER of an appeal, under Section 22 of the Real Property Assessment Act, by Erma MacArthur (the Appellant) against a Decision of the Minister of the Provincial Treasury (the Minister) with respect to the 1992 assessment of residential property (Provincial Property number 52498) located in Richmond, P.E.I.
DATED the 11th day of March, 1994.
Linda Webber, Chairman
John L. Blakney, Vice-Chairman
James Nicholson, Commissioner
Order
Appearances
1. For the Appellant:
Douglas MacArthur for the Appellant
2. For the Minister:
Kevin Dingwell Manager, Residential and Farm Assessments
Reasons for Decision
1. BACKGROUND
The subject property (Provincial Property Number 52498) is located in the community of Richmond, Prince Edward Island.
The two acre property is improved with a well, septic system and residence. The residence is recorded as being constructed in two sections. The first section is a 1 3/4 story structure and was build in 1875. The second section is a two story structure and was added to the original structure in 1922.
The house contains a kitchen and pantry area, dining room, living room, parlor and front porch on the first floor and six bedrooms and a four piece bath on the second floor. Renovations were carried out to modernize the unit, however much of the original finish has been retained.
According to the owner, the house had been insulated with urea formaldehyde foam insulation (herein referred to as U.F.F.I.).
The assessment history of the subject property is as follows:
1985 $11,300 1985 $10,500
REVISED1986 $10,800 1987 $11,000 1988 $14,800 1989 $14,900 1990 $15,400 1991 $15,800 1992 $17,300 By Notice of Appeal dated November 5, 1992, Erma MacArthur appealed the 1992 real property assessment.
The Commission heard the appeal on October 14, 1993, in Charlottetown.
Subsequent to the hearing, the Commission obtained additional information on the subject of U.F.F.I. and forwarded this information to the Appellant and the Department on January 27, 1994. The Commission received written comments from the Department on February 11, 1994. The Appellant notified the Commission on February 14, 1994 that she had no comments on this information.
II. EVIDENCE AND ARGUMENTS
A. Appellant
From the Notice of Appeal, Erma MacArthur presented the following reasons for appealing the decision of the Minister:
"The main reason is the house has urea formaldehyde insulation which had been approved by Government at time of insulation but was later found to be unsafe which has virtually killed any prospect of selling it on the reality[SIC] market (it's already been listed with no positive feedback). As well, it is no longer ideal for living in during the winter months due to reactions to the formaldehyde insulation. Because of this error and my trust in government judgement with respect to safety of this insulation, I believe the Government bears some responsibility and this responsibility should be no tax or minimal tax at best. This house has been in the family for over 100 years and none of my children are interested in living in it due to the fact of the adverse effects this insulation has on their health over an extended period of time. To remove this insulation costs in the neighborhood of $40,000 - $60,000. I have yet to find a program in Government which would adequately reimburse me for the costs of this clean-up.
(Exhibit 5)In closing, I hope you take these factors into consideration when making your decision. If you have any concerns or questions, please feel free to contact me."
Douglas MacArthur, son of the Appellant, stated that when the U.F.F.I. was installed in the residence his father received a $3,000 grant from the Canada Mortgage and Housing Corporation (C.M.H.C.). Subsequently the insulation was deemed to be unsafe and C.M.H.C. offered an $8,000 grant to homeowners to assist with the removal of the insulation. Mr. MacArthur believes the actual cost for removal of the insulation would be $40,000 to $60,000.
The house was listed on the real estate market 6 or 7 years ago for approximately 6 months at a price of $60,000 - there were no offers to purchase. It is the Appellant's contention that the presence of U.F.F.I. affected the potential sale of the house and continues to impact on market value. Mr. MacArthur also said his mother can no longer reside in the house because of her adverse reaction to U.F.F.I. and can only use the house as a bed and breakfast operation during part of the year.
Mr. MacArthur reiterated that the appeal is based on the argument that the assessed value of the property should be reduced to reflect the loss in value attributed to the presence of U.F.F.I.
There is no argument with the assessed value of the land.
B. Department
The principal arguments for the Department can be summarized as follows:
The grading and classification information used in arriving at the 1992 assessment value was based on a 1986 inspection.
With respect to the issue of U.F.F.I. and the impact on assessment, Mr. Dingwell stated that in the late 1970's the Department adopted a policy to apply a 25% allowance to all properties insulated with U.F.F.I. (this was based on an industry wide application). This policy continues to be applied. The Department's policy is contained in Section U, Instruction Number 10 of the Department's Policy and Procedure Manual:
A 25% allowance will be directly applied to the depreciated reproduction cost of the Residence and any attached or detached structures, so insulated.
In presenting its case, the Department provided a list of 21 properties within the province which were identified as being insulated with U.F.F.I. (Exhibit 1) Of these properties, a 25% allowance for U.F.F.I. has been applied to 19 properties. One property has received an allowance of 31% (revised to 25% for coming year) while the subject received an allowance of 50% (revised to 25%). The purpose of this analysis is to show the allowance for U.F.F.I. has been applied uniformly across the province.
Mr. Dingwell further stated that current information suggests that U.F.F.I. is no longer a problem and does not affect market selling price. Under separate cover the Department provided the Commission with a sample of three properties all containing U.F.F.I. which have been sold. (Exhibit 2) Of the three properties one was sold twice, the first in 1986 and again in 1990. The analysis outlines that the sale price was either slightly above or below the assessed value for the properties.
During the hearing Mr. Dingwell stated that the allowance for U.F.F.I. for the subject property was adjusted to 25% and in addition several changes were made in grading factors and the classification of the storey height of the unit. As a result, the Department recommended that the 1992 Non-Commercial assessment be revised from $17,300 to $27,300 effective January 1, 1992.
III. DECISION
Having heard the evidence, the Commission has decided to dismiss the appeal. The reason for this decision are as follows:
The assessment of the land and lot improvements was not contested by the Appellant. The Commission has reviewed the values used by the Minister and they are consistent with normal policy and will be affirmed.
The obligation on the Minister is to assess all real property at its market value and to ensure that each assessment is uniform in relation to other assessments.
In deciding this appeal, the Commission has considered the arguments put forth by both the Appellant and the Department and has examined several sources of technical information and other tribunal decisions related to U.F.F.I.
By way of background information on the subject of U.F.F.I., the Commission finds that the federal government through the auspices of the Canada Mortgage and Housing Corporation (C.M.H.C.), advocated the installation of U.F.F.I. as an alternative insulation product. Subsequently, because of perceived health concerns, government placed a ban on the use of the product, a decision that received a great deal of publicity in the media.1 The effect of this publicity was to create a real concern in the minds of the public about exposure to U.F.F.I. As a means of eradicating the problem C.M.H.C. offered a grant to assist with the product's removal.
As to the effects of U.F.F.I. on real property assessment, the Commission heard evidence from Mr. Dingwell that the Province in conjunction with other jurisdictions across Canada adopted a policy in the late 1970's providing an allowance of 25% to compensate those properties which contain U.F.F.I. The allowance reflected the diminished sale price of a residence which contained U.F.F.I. - that is, homes without U.F.F.I. were selling for approximately 25% higher than similar homes with U.F.F.I.
The Department states that the 25% allowance is applied uniformly throughout the province (See Exhibit 1). In regards to the assessment of the subject property, the Department argued that U.F.F.I has been accounted for and the assessment has been reduced accordingly.
The Commission has reviewed the Department's computation of the cost analysis contained in Exhibit 1 and finds this to be consistent with the general methodology used in assessing property through the cost of reproduction approach.
On the evidence presented, the Commission accepts that the Department has assessed the subject property at market value pursuant to the provisions of Section 3.(2) of the Act and the Minister has demonstrated that the assessment is uniform in relation to other assessments.
With respect to the Appellant's argument that the house was listed for a period of six months without any successful offers because it contained U.F.F.I., the Commission believes that this is not sufficient evidence to prove that U.F.F.I has "killed any prospect of selling" the property.22 On this issue the Department submitted that houses containing U.F.F.I. do trade on the local market and provided the Commission with a sample of three properties all containing U.F.F.I. which have been sold (Exhibit 2). Although the Commission does not view this analysis as having any statistical significance it is accepted as providing an indicator of U.F.F.I. property sales.
Overall, the Commission finds that the Department has accounted for the presence of U.F.F.I. in its assessment of the subject property. The Commission finds the evidence related to the Appellant's health problems is not directly related to the issue of market value or of the assessment of the property in question. This is not to suggest that the Appellant's health problems are not important or that there may not be some other remedy for the Appellant. This Commission, however, is only authorized to deal with the issue of the appropriate assessment of the property and the market in general no longer appears to devalue the property significantly. We have provided the Appellant with copies of information we have obtained which might help to relieve some of her concerns.
Although the Appellant has sought compensation for the removal of U.F.F.I., the Commission finds that it has no jurisdiction to award such costs.
For the reasons outlined, the appeal is dismissed.
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 Erma MacArthur (the Appellant) against a Decision of the Minister of the Provincial Treasury (the Minister) with respect to the 1992 assessment of residential property (Provincial Property number 52498) located in Richmond, P.E.I.
Order
WHEREAS Erma MacArthur (the Appellant) appealed to The Island Regulatory and Appeals Commission (the Commission), in written notice dated November 5, 1992, against a Decision of the Minister of the Provincial Treasury;
AND WHEREAS the Commission heard the appeal on October 14, 1993;
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 dismissed.
DATED at Charlottetown, Prince Edward Island, this 11th day of March, 1994.
BY THE COMMISSION:
Linda Webber, Chairman
John Blakney, Vice-Chairman
James Nicholson, Commissioner
1 Wirsing et. al v. Clark, 11 R.P.R. (2d) 251 (Ontario S.C.).
2
Erma MacArthur, Notice of Appeal, Exhibit 5.