Order LT95-04 - LT93029 - Property - Reqeust by Provincial Treasurer for a Review of Order LT95-2

Docket LT93029
Order LT95-04

IN THE MATTER of an application on behalf of the Provincial Treasurer for review of Commission Order LT95-2.

BEFORE THE COMMISSION

on Wednesday, the 28th day of June, 1995.

Linda Webber, Chair
John L. Blakney, Vice-Chair
Debbie MacLellan, Commissioner

Order

Contents

Reasons for Order

1. Introduction

2. Discussion & Findings

Order

Reasons for Order

1. Introduction

By letter dated March 31, 1995, the Commission received a request on behalf of the Provincial Treasurer to reconsider its decision of March 16, 1995. The Minister alleged that the Commission had erred in its decision. This request and its supporting documentation were sent to the Appellant for comment; comments on his behalf were received on May 4, 1995.

2. Discussion & Findings

The Minister argued against the classification of owner-occupied space of 14,136 sq. ft. on the second floor as "essentially vacant space". The Minister submitted that at least the actual income received from that rental - being the rent the owner charged himself - must be included in the calculation of income. The Minister suggested that since the approach of the Commission resulted in a calculation which attributed less than actual income to the building - once the bad debt/vacancy rate was applied - the Commission's approach must be in error.

The Commission has reviewed the standard approach to valuation of commercial properties. In its decision the Commission accepted the Minister's proposition that an economic rent figure would be more appropriate than an actual rent figure. In some cases the actual rent could be considerably higher than the economic rent figure - perhaps because of an arrangement with a relative who wished to use the high rent as a tax write-off. In some cases it could be lower. In neither case would it be appropriate to argue that the actual income must be the basis for - or the minimum basis for - an evaluation of the building. The reason for using an economic rent figure is so that a realistic rent income may be determined.

This figure was then adjusted by the Minister in his original submission, using 20% as a bad debt/vacancy adjustment without indicating the rationale for his decision to use that figure. In its review the Commission determined that the low rent being charged by the owner to himself for furniture was an indication, in this particular case, of the true level of vacancy in the building and calculated the vacancy level accordingly.

The principle being used by the Commission appears to be no different from the principle used by the Minister. The difference is that the Commission has identified the rationale for its adjustment. Therefore, no error occurred and there is no basis for review of this portion of the Decision.

However, the Commission agrees that an error was made in the calculation of expenses by not readjusting the Management Fee calculation after the Effective Gross Income was altered. The new calculations result in a Management Fee of $9,365 and a net income of $65,420. The Indicated Value by Income is therefore varied to $411,964.

The review is therefore allowed in part and a further variation of the 1993 assessment, as explained above, will be ordered.

IN THE MATTER of an application on behalf of the Provincial Treasurer for review of Commission Order LT95-2

Order

WHEREAS Reliance Investments Inc. appealed to the Commission on March 1, 1994 against a decision of the Minister of Finance with respect to the 1993 assessment of property (Provincial Property Number 309542) located in Summerside, PEI;

AND WHEREAS a decision on this matter was rendered by the Commission on March 16, 1995;

AND WHEREAS a request for review of this Decision & Order was made on behalf of the Provincial Treasurer by letter dated March 31, 1995;

AND WHEREAS the Commission has determined that a review of its decision was appropriate; an error was made in the calculation of expenses in Decision and Order LD95-2;

IT IS ORDERED THAT

the 1993 assessment be further varied to $411,964.

DATED at Charlottetown, Prince Edward Island, this 28th day of June, 1995.

BY THE COMMISSION:

Linda Webber, Chair

John L. Blakney, Vice-Chair

Debbie MacLellan, Commissioner

NOTICE

Section 12 of the Island Regulatory and Appeals Commission Act reads as follows:

12. The Commission may, in its absolute discretion, review, rescind or vary any order or decision made by it or rehear any application before deciding it.

Parties to this proceeding seeking a review of the Commission's decision or order in this matter may do so by filing with the Commission, at the earliest date, a written Request for Review, which clearly states the reasons for the review and the nature of the relief sought.

Sections 33 and 34 of the Real Property Assessment Act provide as follows:

33. Notwithstanding anything in any public or private Act, an appeal lies to the Supreme Court of the province from any order, decision, or award of the Commission, if notice of the appeal is given the other parties within forty-five days after the making of the order, or decisions sought to be appealed from.

34. The rules and practices of the Supreme Court respecting appeals apply with the necessary changes to any appeal.