Docket: LT93002
Order: LT94-04IN 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 Rudolf A. Mann (the Appellant) of Charlottetown, Prince Edward Island, against a decision of the Minister of Finance (the Minister) with respect to the 1992 assessment of residential property (Provincial Property Number 561027) located in Stanley Bridge, P.E.I.
DATED the 9th day of June, 1994.
Linda Webber, Chairman
John L. Blakney, Vice Chairman
Debbie MacLellan, Commissioner
Interim Order
Appearances
1. For the Appellant
Rudolf A. Mann The Appellant
R.H. Wygant Developer2. For the Minister
Kevin Dingwell Manager, Residential and Farm Properties
Eugene Power Regional Supervisor
Reasons for Order
I. BACKGROUND
The subject property is located in the Seawood Estates Subdivision, Stanley Bridge, Prince Edward Island.
The property is an interior lot and is improved with shrubs, flowers, lawn, etc. A water supply and disposal system are provided by the developer. The site is standard for the area, and the size and slope of the lot conform with neighboring lots.
The structure was constructed in 1978 and consists of a one-storey, red cedar, log home containing 936 square feet. A 144-square foot deck is located at the rear of the structure and a 304-square foot sunroom, built in 1991, is located at the front of the structure.
The structure is built on a pressure-treated wood foundation and contains a partially finished basement.
The assessment history of the subject property is as follows:
1988 $42,000 1989 $45,500 1990 $49,100 1991 $51,200 REVISED $58,000 effective Oct. 15/91 new construction 1992 $69,700 REVISED $64,200 The Appellant appealed the 1992 assessment on August 24, 1992 to The Island Regulatory and Appeals Commission.
The Commission heard the appeal on October 15, 1993 in Charlottetown.
II. EVIDENCE AND ARGUMENTS
A. Appellant
The principal arguments for the Appellant can be summarized as follows:
The Appellant stated that the assessment of his lot increased by 100% (from $5,000 to $10,000). Although this increase was consistent for all interior lots within the subdivision, the Department gave no consideration for any factors which may differentiate the lots, such as size, location, etc. As well, the real estate market has been stagnant and this increase is unjustified.
The Appellant questioned the depreciation value associated with the installation of the garden room which was added to the structure in 1991. He believes a blended factor should be utilized to account for the mixing of a new component onto the main structure, which would have the effect of further depreciating the garden room.
The Appellant also pointed out several errors in the description of his property, e.g. that vinyl windows had been installed in the kitchen and bathroom. He also argued that he had been incorrectly assessed in a variety of other ways.
In a submission attached to his Notice of Appeal, Mr. Mann estimated that the assessment on his property should be reduced from $64,200 to $31,100.
B. Minister
The principal arguments for the Minister can be summarized as follows:
The assessment of the structure was based on an appraisal which was completed in October 1991, during the reinspection program. The Department relied on the Cost Approach with market factor adjustments to determine the assessed value of the structure.
In the valuation of the lot, each lot in the area was assessed on a per lot basis. As the subject lot is an interior lot, it was assessed at $10,000 which is uniform with other interior lots in the subdivision.
The assessed value of the structure was determined by applying the 1979 base cost per square foot to the area of the structure. The building analysis indicated that the subject building was assessed at $57.90 per square foot while the range of comparable assessments was $54.05 to $59.91 per square foot.
The Department contends that the subject property is not over-assessed and is uniform with other assessments.
III. DECISION
The Appellant disagrees in a fundamental way with many of the principles of property taxation based upon market value assessment. For example, he doesn't feel that improvements made by himself or the developer should result in increased taxes. He feels that once a property is appraised that appraisal should not be changed. We cannot assist him in these areas. Appraisals can increase value over time and improvements to property will be taxed-that is how market value assessment taxation works.
We agree with the Appellant that several unacceptable errors were made in the description of his property. However, these did not affect the overall assessment because the individual items were not individually adding value. At best they assist in justifying a reappraisal or altering the category into which the building should be classified. The errors were not significant enough to result in such a change. They were acknowledged by the Department and hopefully will not reoccur.
The recent history of this property shows an addition (garden room/sunporch) in 1991 that caused a change in the assessment for part of 1991 and resulted in a reappraisal of the entire property effective January 1, 1992. We cannot agree with the Appellant's interpretation of the Act to require all properties on P.E.I. to be similarly reappraised at the same time. The annual assessments required by the Act are completed through the use of adjustment multipliers. There is a requirement for reappraisals of all properties every five years. To our knowledge the Department attempts to do this.
A review of the calculations made by the Department indicates that they fairly applied the standard values to the building assessment. Although the Appellant would not use the same values, this is a decision that in general-unless shown to be extremely in error-should be left to the Department in terms of the establishment of its Policy Manual. We have found no basis for considering the application of the standard calculations to be invalid in this case. The Appellant's arguments that the difficulty of accessing the lot at certain times of the year should decrease its value is not accepted because the assessment is based upon seasonal residence factors and, by definition, such residences are not expected to be occupied year-round. Therefore, the building valuation is confirmed.
As for the lot value, the Appellant argued that the Department failed to make comparisons with lots outside of Seawood Estates and that it failed to take into account the unique features of each lot.
The method used by the Department to arrive at an average lot value was to review the history of lot sales in the development in question and to determine an average value from this. The only distinction made was between shore lots and inside lots.
The Appellant argues that a comparison of only lots within the development is unfair. The benefits provided within that development have been, and continue to be, paid for by the owners and should not be used to evaluate the property, he suggests.
While in principle the Department should be careful not to limit its market value analysis too much-since this is likely to affect its ability to meet the uniformity test-in a case such as this we believe the Department's approach is reasonable.
The specific services the developer has provided directly affect the value of these parcels and to ignore them would be to ignore a factor of obvious importance in marketing these lots. We accept the Department's evidence that there are no comparable developments in the area with which to make an external comparison.
As well, the analysis of sales appears to us to be fair and the conclusions drawn are reasonable when trying to determine an average base value for lots in this development.
As for failing to consider the unique features of each property, this issue was addressed in the case of In the Matter of Robert B. Jaynes and Mildred L. Jaynes (Order LT93-2) dated August 12, 1993. In that case the assessment of the lot in question was on the basis of site acreage and its location on the shore; no adjustment was made for the amount of shore frontage, accessibility to the shore, the likelihood of erosion, etc. After reviewing the law and principles of assessment, the Commission concluded that the failure to take into account the unique features of the land resulted in an inequitable assessment.
As in that case, we reaffirm that it is acceptable for the Department to use its mass appraisal method to establish the general level of assessment for a particular area. But it must also be prepared to justify each assessment on an individual basis in light of the unique features of a particular property and to make adjustments for these unique features.
The Commission is aware that any subdivision contains lots differing in quality and character as a result of subdivision design, available services, lot size and shape, location and other softer amenities such as view. The value placed on each lot largely depends on the desires of the purchaser and the purpose it will serve. Market demand for lots in coastal subdivisions are generally based on such factors as proximity and accessibility to the shore. Normally, as one moves away from those lots with greatest accessibility the value decreases. That is, the value given to 1st tier, or shorefront lots, 2nd tier, 3rd and 4th tier lots decreases as one moves towards the interior of the subdivision. Certain interior lots may be given equal or even greater value as shorefront lots if they have special characteristics such as height and a panoramic view. In a similar manner, other lots may have certain characteristics that would cause their market value to be far below the average value. Consequently, these factors must be considered when assessing lots and the Department must be prepared, upon referral, after determining the "average" lot or base price, to assess each lot based on its characteristics.
For this reason the Department must review the characteristics of the Appellant's lot, compare these to the average lot from which the $10,000 average assessment base was derived, and make adjustments to reflect how, if at all, the Appellant's lot differs from the "average". When all factors are considered the average may still justifiably apply, but the onus is on the Department to show how such meets the uniformity test.
We therefore order the Department to undertake this review and report back to the Commission its recommendation in light of these guidelines-and the reasons for this recommendation-by July 15, 1994. At that time the Commission will issue a final Decision and Order.
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 Rudolf A. Mann (the Appellant) of Charlottetown, Prince Edward Island, against a decision of the Minister of Finance (the Minister) with respect to the 1992 assessment of residential property (Provincial Property Number 561027-000) located in Stanley Bridge, P.E.I.
Interim Order
WHEREAS Rudolf A. Mann (the Appellant) appealed to The Island Regulatory and Appeals Commission (the Commission), in written notice dated August 24, 1992, 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 October 15, 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 Department undertake a review of the Appellant's lot, in accordance with the guidelines set out in the Decision herein, and report back to the Commission its recommendation and the reasons for this recommendation by July 15, 1994.
DATED at Charlottetown, Prince Edward Island this 9th day of June, 1994.
BY THE COMMISSION:
Linda Webber, Chairman
John L. Blakney, Vice Chairman
Debbie MacLellan, Commissioner