Docket: LT93001
Order: LT94-08IN 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 and Margaret Fitzpatrick (the Appellants) of Franklin, MA, against a decision of the Minister of Finance (the Minister) with respect to the 1992 assessment of residential property (Provincial Property Number 612457-000) located in Stanley Bridge, P.E.I.
DATED the 19th day of December, 1994.
Linda Webber, Chairman
John L. Blakney, Vice Chairman
Debbie MacLellan, Commissioner
Interim Order
Submissions
As the appeal was conducted by way of written submissions pursuant to the provisions of Section 29.(3) of the Act, no parties appeared before the Commission.
Written submissions were presented by:
1. For the Appellants .Douglas and Margaret Fitzpatrick 2. For the Department James B. Ramsay, Manager, Provincial Revenue Kevin Dingwell, Chief Assessor
Residential and Farm Properties
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 wooded lot located on Point Road. The unit is connected to a central water and sewage disposal system, which are provided by the developer.
The lot is improved with a 1 1/2 storey structure and attached patio. The building was constructed in 1988 and contains 427 square feet of ground floor area.
The interior of the structure is finished, wired and insulated for electric heat. The plumbing is modern, with kitchen sink and two bathrooms.
The assessment history of the subject property is as follows:
1987 $ 5,000 1988 1988
$ 5,000 $27,500 Revised for new construction 25/10/88
1989 1989
1990
1991
1992
1992
$28,700 $33,600 Revised for new construction 14/06/89
$34,900
$35,900
$63,100
$56,400 Referral
By Notice of Appeal dated October 19, 1992, the Appellants appealed the 1992 assessment to The Island Regulatory and Appeals Commission.
The Commission heard the appeal by way of written submissions, pursuant to the provisions of Section 29.(3) of the Act.
II. EVIDENCE AND ARGUMENTS
A. Appellants
The principal arguments for the Appellants may be summarized as follows:
The Appellants argue the resale value of a dwelling is heavily influenced by its location, i.e. the same house on an ocean view lot is worth more than an identical house on a wooded interior lot. The Appellants contend the Department's comparison of properties to be unfair - their lot was compared to properties of which three lots are ocean front lots and two are water view lots.
In addition, the Appellants take exception with the large increase in property value from the 1991 level. On the Notice of Appeal the Appellants state: "I can not believe property values have increased to warrant our paying $22,000 more .. I know of no realistic sales that would substantiate this 2/5 increase".
The Appellants claim the inspection report of November 8, 1992 does not adequately reflect the serious structural defects and poor construction of their dwelling. The Appellants note a number of problems with the building, including the defective tie rods which hold the logs together - these have caused permanent damage from leaking and staining. The Appellants state they have been forced to install a costly air exchanger which necessitated interior reconstruction for duct work and exhaust. Although this has alleviated the mildew and fungus problem, they now must bear the added expense of operating and maintaining an air exchanger and dehumidifier. In addition, the water staining caused by the warped logs continues to occur.
The Appellants disagree with the Department's description of the structure, noting they do not have a cement floor, the roof is plastic and both bathrooms are three piece only. The bedroom downstairs is not large enough for a twin size bed and shares space with a water heater.
The final argument by the Appellants is with respect to the unstated amount added for the two attic dormers. The Appellants contend they can find no calculation of the dollar value attributed to the second floor bedrooms.
In conclusion, the Appellants believe they should be reassessed to allow for a 14% reduction for poor construction and 6% for structural defects. This amounts to $7,300. In addition, the cost of moving the unit at $15,000 to an ocean view lot to put the structure on an equal footing with the houses used by the Department for comparison purposes, should be deducted. This would change the assessment by $22,300.
B. The Minister
The principal arguments for the Minister may be summarized as follows:
The increase in assessment from 1991 to 1992 reflects three factors:
A. Lot values were increased significantly in the area, i.e. from $5,000 to $10,000 per lot.
B. All cottages in the province received a 5% adjustment multiplier for 1992.
C. The finished area on the second level was not being assessed previously.
The Department, in arriving at the 1992 assessed value used the cost approach with market factor adjustments applied on a yearly basis.
The value of the structure is derived by applying the 1979 base cost per square foot to the area of the structure. The value was then adjusted for the various forms of depreciation to account for factors such as quality and condition, deterioration, and obsolescence.
This depreciated value is then adjusted by the use of a multiplier to arrive at the assessed value.
Lots in the subject area are assessed on a per lot basis. The subject lot, being an interior lot, is assessed at $10,000. This assessment is uniform with all other interior lots in the subdivision.
The Department recommends that the 1992 revised assessment of $56,400 be confirmed.
III. DECISION
In deciding this matter the Commission focused on four primary issues: A) the lot valuation, B) property assessment increase, C) the structural depreciation, and D) the accuracy of the building description.
A). Lot Valuation
The lot valuation method employed by the Department involves determining an average lot value by reviewing the history of lot sales in the Seawood Estates subdivision. In the Seawood Estates' case, the only distinction made is between shore lots and inside lots. Shore lots are assessed at approximately $20,000 per lot (with exceptions of large lots in the Pickering Point area), and all interior lots are assessed at $10,000.
The Appellants argue that it is unfair for the Department to compare their lot to other lots on the ocean front or with a water view.
The Commission has previously examined this issue in the cases of Susan Goehring v. The Department (Order LT93004) and Rudolph Mann v. The Department (Order LT93003). In these cases it was determined that 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 the Commission believes the Department's approach is reasonable.
The analysis of sales appears to us to be accurate and the conclusions reached are reasonable when trying to determine an average base value for lots in this development.
With respect to the Department's failure 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 and reaffirmed in Goehring, supra, and Mann, supra. In Jaynes, 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 applicable 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.
The Commission confirms that it is acceptable for the Department to use its mass appraisal method to establish the general level of assessment for a particular area. However, the Department must be prepared at the time of referral to review and justify each assessment in light of the unique features of a particular property.
The Commission is aware that certain interior lots may be given equal or even greater value as shorefront lots if they have special characteristics such as height and/or aesthetic view. In a similar manner, other lots may have certain characteristics that would cause their market value to be far below the average value. The Commission is of the view that these factors must be considered when assessing lots and the Department must be prepared, at least at the time of a referral and after determining the "average" lot or base price, to assess each lot based on its characteristics.
Therefore, the Department must review the characteristics of the Appellants' 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 Appellants' 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 it 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 January 31st, 1995. At that time the Commission will issue a final Decision and Order.
B) Property Assessment Increase
In the Notice of Appeal, the Appellants questioned the significant increase in property assessment from the 1991 level to the 1992 level. This issue was addressed by the Commission in the case of In the Matter of an Appeal by Sleiman Wakim (Order LT93-4) dated August 11, 1993. In that case we agreed with the Appellant that the sudden increase in assessment (52%) was shocking. However, since the requirement under the Real Property Assessment Act is to assess at market value, and such value must be uniform with other provincial assessments, the suddenness of the increase cannot be used as a basis for challenging the legality of the assessment.
The Commission finds that the Act and Regulations do not require assessment changes to be made gradually, consequently the suddenness of the change cannot be used to invalidate the assessment.
In this case, if the new assessment is valid one can draw the conclusion that the property in question was undervalued for some years and one could view this as an advantage the Appellants received in the past.
C) Structural Depreciation
With respect to the structural depreciation, the argument between the Appellants and the Department is over the amount of depreciation caused by the structural defects. The Department views the defect as causing a "slight" condensation problem while the Appellants believe the damage to be of a more serious nature.
The Commission understands from the evidence presented the unit continues to suffer from water staining as a result of the warped logs. As a result, the Commission agrees with the Appellants that a further adjustment should be made to the assessment to account for the deteriorating condition of the unit caused by structural defects.
Therefore, the Commission orders the Department to further reduce the assessment of the unit in the following manner: apply a functional allowance of 75% to the dwelling. In the result, the assessed value of the building shall be reduced to $37,300. The calculations for this revised assessment are provided as Appendix A.
D) Inaccurate Building Description
With respect to the Appellants' claim that the description of the structure was not accurate, we believe the Department did err in its description of the structure regarding such items as the plastic roof, the three-piece baths and the size of the bedroom which is located in the basement. However, we agree with the Department that revising these items does not warrant an adjustment to the value of the structure.
As to the Appellants' claim that they can find no calculation to account for the second level dormers, the Commission understands that the Department accounts for this component when calculating the "unit cost", as stated on Exhibit C of the Department's submission.
Based on the evidence before the Commission, the unit cost is $49.18. This figure is derived by multiplying the basic rate ($33.92) by the storey height value (1.45). The basic rate of $33.92 is a standard value for cedar cottages having 400 square feet of ground floor area as described in the Real Property Records Division Assessment Manual. The storey height value of 1.45 accounts for the first floor and a portion of the second floor and is derived from the Storey Variation Schedule contained in the Real Property Records Division Assessment Manual.
From the information presented it would appear the Appellants have already benefited from the Department not assessing the structure as a storey and a half and the Department has now correctly accounted for the second floor level in the assessment.
E) Summary
In summary the Commission orders the Department to reduce the assessment of the structure to an assessed value of $37,300 and to undertake a review of the lot and report back to the Commission its recommendation in light of the guidelines presented-and the reasons for this recommendation-by January 31st, 1995.
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 and Margaret Fitzpatrick (the Appellants) of Franklin, MA, against a decision of the Minister of Finance (the Minister) with respect to the 1992 assessment of residential property (Provincial Property Number 612457-000) located in Stanley Bridge, P.E.I.
Interim Order
WHEREAS Douglas and Margaret Fitzpatrick (the Appellants) appealed to The Island Regulatory and Appeals Commission (the Commission), in written notice dated October 19, 1992, against a decision of the Minister of Finance;
AND WHEREAS with the consent of all parties the Commission heard the appeal by way of written submissions, pursuant to the provisions of Section 29.(3) of the Act;
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 reduce the assessment of the structure to $37,300 and undertake a review of the Appellants' 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 January 31st, 1995.
DATED at Charlottetown, Prince Edward Island this 19th day of December, 1994.
BY THE COMMISSION:
Linda Webber, Chairman
John L. Blakney, Vice Chairman
Debbie MacLellan, Commissioner
APPENDIX ALT93001Douglas and Margaret Fitzpatrick Improvement Calculations
COLUMN 1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
DEPARTMENT CALCULATION - ACTUAL DESC SQ.FT. RATE SELECTION GRADE YEAR BUILT BASIC RATE UNIT COST VALUE ADDED EXTENDED COSTS DEPRECIATION FUNCTIONAL NEI.LOC. MKT.FACTOR ADJ.MULT. COMPLETE VALUE DWELLING 3
427
400
GD
1988
$33.92
$49.18
21,000
0.94
1.85
36,519
PATIO 820
400
GD
1989
$2.64
$2.64
2,165
0.94
1.62
3,297
FOUNDATION 84
-
AV
1988
$32.00
$32.00
2,688
0.94
1.62
4,093
BASEMENT 325
-
AV
1988
$5.50
$5.50
$420.00
2,208
0.94
0.75
1.62
2,521
TOTAL 46,430
FUNCTIONAL ALLOWANCE ALLOWED DESC SQ.FT. RATE SELECTION GRADE YEAR BUILT BASIC RATE UNIT COST EXTENDED COSTS DEPRECIATION FUNCTIONAL NEI.LOC. MKT.FACTOR ADJ.MULT. COMPLETE VALUE DWELLING 3
427
400
GD
1988
$33.92
$49.18
21,000
0.94
0.75
1.85
27,389
PATIO 820
400
GD
1989
$2.64
$2.64
2,165
0.94
1.62
3,297
FOUNDATION 84
-
AV
1988
$32.00
$32.00
2,688
0.94
1.62
4,093
BASEMENT 325
-
AV
1988
$5.50
$5.50
$420.00
2,208
0.94
0.75
1.62
2,521
TOTAL 37,300