Docket LT95002
Order LT96-01IN THE MATTER of an appeal by Bob and Fay Gavin against a decision of the Provincial Treasurer with respect to the 1995 assessment of Provincial Property Number 712430 located at Summerside, P.E.I.
BEFORE THE COMMISSION
on Thursday, the 27th day of June, 1996.
Linda Webber, Chair
James Nicholson, Commissioner
Anne McPhee, Commissioner
Order
Contents
Appearances & Witnesses
Reasons for Order
1. Introduction
2. Discussion
3. Findings
4. Disposition
Order
Appearances & Witnesses
1. For the Appellant
Witnesses:
Bob Gavin, the Appellant
J. Ulric Gallant, Real Estate Appraiser2. For The Minister
Counsel:
Roger LangilleWitnesses:
Kevin Dingwell - Manager, Residential and Farm Properties
Paul Olscamp - Supervisor, Prince County
Reasons for Order
1. Introduction
This is an appeal under Section 22.(1) of the Real Property Assessment Act, R.S.P.E.I. 1988, Cap. R-4, by Bob and Fay Gavin (the Appellants) against a decision by the Provincial Treasurer (the Minister) with respect to the 1995 assessment of Provincial Property Number 712430.
The municipal address of the subject property is 11 Harris Court, Summerside. The property consists of .58 acres and is comprised of subdivision lots #10 and #11. The site is improved with a 2 story residence with a ground floor area of 1,854 square feet.
The assessment history of the property is as follows:
1992 $147,300 1993 $231,800 Revised 1993 $200,000 1994 $213,900 1995 $270,500 The Appellants filed a Notice of Appeal in connection with the 1995 assessment of the subject property on August 17, 1995 with the Island Regulatory and Appeals Commission (the Commission).
The Commission heard the appeal on April 3, 1996 in Charlottetown.
During the hearing the Commission requested the Minister file additional information pertaining to this matter. This information was received by the Commission on April 15, 1996 and was circulated (with the exception of comparable sales information) to the Appellants for their review. The Appellants filed no comment on the additional material.
2. Discussion
A. The Appellants
The principal arguments for the Appellants may be summarized as follows:
The Appellants take the position that the Minister has assessed the property beyond market value. The Appellants state there were no improvements to the property in 1995 to warrant an increase in the assessment from the 1994 level of $213,900. The Minister has increased the assessment of the property significantly from the 1992 level of $147,300 to the 1995 level of $270,500.
Upon review of the Minister's evidence, identified as Exhibit D1, the Appellants contend the Minister's construction costs are unreasonable. Although the house was originally built for $157,000 Mr. Gavin believes he could now build the unit for approximately $45 per square foot, which is far below the Minister's cost of reconstruction.
In support of the Appellant's arguments, J. Ulric Gallant, Real Estate Appraiser, stated that, in his opinion, the assessed value of the property, as determined by the Minister, is in excess of market value. Mr. Gallant contends that homes in this price range are not selling in the Summerside area and in fact the value of such higher priced homes may actually be going down.
Mr. Gallant conducted an independent appraisal of the property in early 1995 and based on an inspection of the property and an assessment of market sales of similar type properties, determined the fair market value of the subject property as of January 1, 1995 to be $225,000 (submitted as Exhibits A2 and A3).
The Appellants request the Commission adjust the assessed value to more accurately reflect market conditions.
B. The Minister
The position of the Minister may be summarized as follows:
The Minister states the 1995 assessment of $270,500 was established based on the information recorded during the 1993 appraisal, 1993 construction, the application of the current year adjustment multiplier, and removal of allowances applied for 1993 and 1994.
The method of valuation used by the Minister to determine the 1995 assessed value of the subject property is the Cost Approach with market factor adjustments.
The Minister contends the Cost Approach is a uniform method of assessment and is determined by applying the 1979 base cost per square foot to the area of the structure. This value is then adjusted for such things as depreciation so that items such as quality and condition, deterioration and obsolescence are considered. An adjustment multiplier is then applied to arrive at the current year assessed value.
Using the cost approach, the Minister determined the value of the subject property as follows:
Lot and improvements $ 31,300 Structure $205,800 Garage $ 15,400 Open porches / veranda $15,800 Storage building $2,200 The Minister also conducted an analysis of the subject property using the Direct Sales Comparison Approach. Based on comparable sales information, the Minister believes the subject property is not over-assessed in terms of what it could command on the open market. The Minister presented an analysis (Exhibit D2) of comparable lot sales and property sales to support this contention.
The Minister argues the subject property is not over-assessed and is uniform with other assessments.
The Minister recommends the Commission confirm the 1995 non-commercial assessment of $270,500.
3. Findings
A. Component Grade
Using the Cost Approach to determine the assessed value of a unit, the Minister applies a component grade factor to account for the quantity and quality of building components in individual units.
Prior to re-inspection in 1993 the property was graded at 4.5. Upon re-inspection the Minister determined that this grade did not accurately reflect the quality of the building components and therefore revised the grade to 4.9. The Minister estimates that the increase in grade has the effect of increasing the assessment by approximately 20%.
In support of the application of the component grade of 4.9 the Minister presented in Exhibit D2, at page 10, an analysis of comparable building assessments and states all of the comparables are inferior as related to component grade in relation to the subject property with the exception of comparable #5.
In addition, the Minister states they carried out a review of over 100 properties in the Summerside area which were in excess of $125,000 to determine the uniformity of assessments. Based on the results of this review, the Minister is confident that the revised component grade for the subject property more accurately reflects the quality and quantity of components.
In his independent appraisal of the property, Mr. Gallant, states: "the comparable assessments as presented by the Department do not support any market value. The statement of "all comparables are inferior except # 5", this is only an opinion, the assessment component grade were not completed by the same assessor, there could be some difference of opinion, which could affect the overall assessment" (Exhibit A2).
With respect to the Minister's analysis of 105 properties valued over $125,000 - Mr. Gallant contends this has very little relevance to the value of the subject property.
On this matter the Commission has considered the arguments presented by the parties and finds the Minister has demonstrated the component grade of the subject was derived in a manner consistent with the procedures and factors contained in the Department's Assessment Manual. The Appellants have presented no substantive evidence that the grade is not correct or that the procedure is unreasonable.
Therefore, the Commission affirms the increase in assessment attributed to the revised component grade.
B. New Construction
In the matter of new construction, the Commission understands the Appellants made renovations to the house prior to 1995 which included, among other things: the addition of vinyl siding, the addition of a porch and patio, renovations to the room over the garage, and a small addition to the rear of the house. The Minister states these additions and renovations and the application of the appropriate cost factors in accordance with the Department's Assessment Manual account for part of the increase in the assessed value of the property.
The Appellants agree that additions and renovations were made to the property, however, they argue the Minister's factors used to arrive at the cost for each component are unreasonable and not consistent with current construction costs.
Mr. Gallant, in his independent appraisal of the unit (Exhibit A2), states: The subject is an executive type property which is considered an over improvement for the area. The cost of the dwelling and improvements are in excess of its market value. The cost is considered to be irrelevant to the actual market value. Therefore this approach (Cost Approach) is not applicable at this time.
The Commission has reviewed the Minister's submission (Exhibit D1) and the Improvement Calculation Table (identified as Exhibit C-3 in the Minister's Exhibit D1) and accepts that the new construction and renovations are valid reasons for a portion of the increase in the 1995 assessment.
Our review of the calculations made by the Minister indicates the standard values were fairly applied to the building components to arrive at the overall assessment. Although the Appellant would not use the same cost values, this is a decision that in general - unless shown to be extremely in error - should be left to the Minister in terms of the establishment of the Assessment Manual. The Appellants have provided no substantive evidence to support their argument that the application of the standard calculations would be invalid in this case.
Therefore, the Commission affirms the increase in the assessed value of the property attributed to the new construction and renovations, subject to certain revisions to adjustment calculations as described below.
C. Adjustment Multiplier
The Minister also states that the 1995 assessment was based, in part, on the application of an adjustment multiplier.
During the hearing the Minister stated that the Summerside area is divided into 17 work units - with each work unit consisting of similar type properties. The Minister described the procedure used in developing adjustment multipliers for the mass appraisal process: all sales in a given work unit are considered when arriving at a multiplier; and, through an averaging and weighing process the high and low sales are removed to arrive at the adjustment multiplier for a particular work unit.
The Minister submits that when a sufficient number of sales in a particular unit may not be available to determine the adjustment multiplier for that work unit, similar work units and similar properties may be examined to determine a representative adjustment multiplier.
In determining the 1995 adjustment multiplier for the Summerside area the Minister reviewed all sales information for 1993 and 1994. The Minister contends this data supports the application of an 11% adjustment multiplier which was applied to all work units in the Summerside area, including work unit 1288 which encompasses the subject property.
In support of the application of an 11% adjustment multiplier to the subject property, the Minister filed as evidence a list of sales for properties which are similar to that of the subject in terms of amenities and type of housing.
In considering this matter, the Commission understands the adjustment multiplier is intended to reflect different rates at which market value is increasing in specific areas of the province and is based on a compilation of previous year sales information.
An adjustment multiplier may vary according to the location of the property, sometimes from one area of the province to another, and sometimes from one neighbourhood to another. As we have noted in a previous decision involving the application of adjustment multipliers (Commission Order LT93-05) the application of an adjustment multiplier is accepted as part of the mass appraisal process.1
The Appellants contend, however, that units of similar value to the subject are not selling in the local market and the value may actually be declining. Therefore, the Appellants object to the application of the adjustment multiplier to their particular case. The Appellants argue there is no data available to support the application of the multiplier to higher priced homes.
The Commission understands it is necessary in the mass appraisal process to establish the general level of assessment for a given area which may include the application of such factors as a standardized adjustment multiplier. However, the Minister must be prepared, upon referral, to assess each property within a particular work unit based on its characteristics and determine whether the application of the standard adjustment multiplier which is applied to the entire work unit, is appropriate for a given property. This issue was previously canvassed in Commission Order LT94-04 where it was determined the Minister must be prepared to support any assessment which is appealed.2
In this case, the Commission has reviewed the Minister's submission which includes sales information for 1993 and 1994 and finds the average assessment to sales ratio is 77% for 1993 and 89% for 1994 (Schedule I attached). For 1993 the average assessment is approximately $102,047 while the average sale price is $132,658. For 1994 the average assessment is $112,479 while the average sale price is $126,480.
Based on the Minister's evidence, the Commission acknowledges this information may support the application of an 11% adjustment multiplier to those units which may be comparable to the "average" assessed value (as identified above). However, the Commission is of the opinion that the data does not support the application of an 11% adjustment multiplier for units which may be significantly higher in assessed value, relative to the average.
Upon examination of the sales information as presented by the Minister, we find the subject property, which is assessed at $270,500, is more than twice the average of the assessed values for those sales listed for 1993 and 1994. In further analyzing the Minister's submission, the Commission finds that of the 17 properties listed for 1993 only three (3) sold for more than $150,000, while in 1994 of the 14 properties referred to only one (1) sold for more that $150,000.
The Commission believes in this case the Minister's own evidence supports that the subject property, because of its size, grade and associated cost is not in the same market as the properties listed above and therefore does not face similar supply and demand market forces. The Commission finds the Minister has presented no substantive evidence to support that an 11% adjustment multiplier should be applied to the subject property.
The Commission is of the opinion that the 11% adjustment multiplier should not be applied to the subject property for 1995 and believes the composite adjustment multiplier should remain at the 1994 level.
D. Over Improvement
The Commission has also considered the arguments presented by the Appellants that the property is an over-improvement for the area and that neighbouring properties, which have a lower assessed value, have a negative impact on the market value of the subject property.
The Minister argued the subject property is not an over-improvement for the area, considering the high quality of homes in the area. The Minister also argued the subject unit is not overbuilt, as the components in the unit are what would be expected in a unit of this class.
During the hearing the Commission asked the Minister to explain what effect, if any, would there be on the assessed value of a property which was significantly higher in value than other properties in the immediate area. The Minister explained that quantifying the impact would be difficult, however, if appropriate sales information was available one could examine the sale of a similar property in a "higher end" area and compare it to a sale of a similar property in an inferior area - the difference in sale price could be attributed, in part, to the influence of the inferior properties. The Minister stated that the assessment differential between a property and the neighbouring properties must be significant in order to have any negative impact.
In this case, the Minister considered the value of homes in the area and determined the subject property was not an over improvement and the assessed value of the subject property is not negatively impacted by neighbouring properties.
In reviewing the Minister's submission which included the 1995 assessed value of properties in the work unit and in the neighbourhood of the subject property, the Commission concludes that the subject unit is assessed significantly higher than most other units located in this area (Schedule II attached). In analyzing the Minister's submission, we find only two properties (including the subject) assessed over $200,000 while the properties range in value from $97,700 to $228,300 (excluding the subject) and the average assessment is approximately $148,600 (including the subject) and $140,400 (excluding the subject).
In considering the Minister's submission, the Commission believes that based on the average assessed value of the other properties in the neighbourhood it is reasonable to conclude that the market value of the subject property is negatively impacted and this impact should be accounted for by an adjustment factor.
Based upon this analysis, the Commission's judgment is that an adjustment factor of 7% is reasonable and therefore directs the Minister to vary the assessment by applying an adjustment factor of 7% to account for this situation.
E. Lot Value
The Minister contends the approach used to assess the lot and improvements is based on a standardized methodology and the cost components are consistent with the Department's Assessment Manual. The lot value has been determined based on the application of $19,000 per lot and multiplied by a factor of 1.5 to account for the double lot. Value is then added for paving and landscaping.
On this matter, the Appellants have not presented any substantive evidence that the assessment of the lot and improvements are not uniform in relation to other assessments.
Therefore the Commission affirms the assessed value of the lot and improvements at $31,300.
F. Conclusion
In conclusion, and for the above reasons the appeal is therefore allowed.
4. Disposition
An Order directing the Minister to vary the assessment will therefore be issued. The lot value with improvements is confirmed at $31,300.
IN THE MATTER of an appeal by Bob and Fay Gavin against a decision of the Provincial Treasurer with respect to the 1995 assessment of Provincial Property Number 712430 located at Summerside, P.E.I.
Order
WHEREAS the Appellants, Bob and Fay Gavin have appealed the 1995 assessment of Provincial Property Number 712430;
AND WHEREAS the Commission heard the appeal at a public hearing conducted in Charlottetown on April 3, 1996, and received further submission on April 15, 1996;
AND WHEREAS the Commission has issued its findings in this matter in accordance with the Reasons for Order issued with this Order;
NOW THEREFORE, pursuant to the Island Regulatory and Appeals Commission Act and the Real Property Assessment Act
IT IS ORDERED THAT
1. The appeal of the 1995 assessment of Provincial Property Number 712430 is allowed in part;
2. The lot value with improvements is confirmed at $31,300;
3. The Minister is directed to vary the assessment:
a. by removing the 1995 adjustment multiplier of 11%; and
b. by applying an adjustment factor of 0.93 to the total value of the home.
The Commission, through the application of the above ordering clauses, calculates the revised assessment at $233,100.
DATED at Charlottetown, Prince Edward Island, this 27th day of June, 1996.
BY THE COMMISSION:
Linda Webber, Chair
James Nicholson, Commissioner
Anne McPhee, 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 13.(1) and 13(2) of the Act provide as follows:
13.(1) An appeal lies from a decision or order of the Commission to the Appeal Division of the Supreme Court upon a question of law or jurisdiction.
(2) The appeal shall be made by filing a notice of appeal in the Supreme Court within twenty days after the decision or order appealed from and the Civil Procedure Rules respecting appeals apply with the necessary changes.
1 Commission Order LT93-05 - Douglas C. Lockhart v. The Minister of Finance. An appeal with respect to the 1991 assessment of Provincial Property Number 235192.
2
Commission Order LT94-04 - Rudolf A. Mann v. The Minister of Finance. An appeal with respect to the 1992 assessment of Provincial Property Number 561027.Schedule 1
Assessment to Sales Ratios Used in Determining the 1995 Adjustment Multiplier
(based on information as submitted by the Department)
|
ASSESSMENT |
1993 SALES PRICE |
ASSESS/SALES |
|
ASSESSMENT |
1994 SALES PRICE |
ASSESS/SALES |
|
|
|
RATIO |
|
|
|
RATIO |
|
|
|
|
|
|
|
|
|
$83,000 |
$126,900 |
65% |
|
$101,100 |
$127,900 |
79% |
|
$92,400 |
$135,000 |
68% |
|
$121,200 |
$152,000 |
80% |
|
$90,600 |
$131,000 |
69% |
|
$100,700 |
$126,000 |
80% |
|
$90,000 |
$127,000 |
71% |
|
$106,900 |
$132,000 |
81% |
|
$154,100 |
$215,000 |
72% |
|
$100,800 |
$115,000 |
88% |
|
$86,900 |
$119,626 |
73% |
|
$94,700 |
$115,000 |
82% |
|
$91,300 |
$122,500 |
75% |
|
$96,500 |
$109,000 |
89% |
|
$149,600 |
$192,000 |
78% |
|
$106,400 |
$117,820 |
90% |
|
$103,100 |
$131,500 |
78% |
|
$96,000 |
$105,000 |
91% |
|
$82,800 |
$105,000 |
79% |
|
$107,800 |
$118,000 |
91% |
|
$93,600 |
$117,000 |
80% |
|
$125,900 |
$135,000 |
93% |
|
$84,300 |
$106,000 |
80% |
|
$119,700 |
$125,000 |
96% |
|
$93,600 |
$116,000 |
81% |
|
$144,900 |
$148,000 |
98% |
|
$135,000 |
$164,000 |
82% |
|
$152,100 |
$145,000 |
105% |
|
$101,400 |
$119,158 |
85% |
|
|
|
|
|
$98,500 |
$112,500 |
88% |
|
|
|
|
|
$104,600 |
$115,000 |
91% |
|
|
|
|
|
|
|
|
|
|
|
|
|
$102,047 |
$132,658 |
77% |
AVERAGE |
$112,479 |
$126,480 |
89% |
Schedule II
1995 Assessment for properties in the 1288 work unit and in the neighbourhood
of parcel
#712430 located on Harris Court and Victoria Lane
(based on information as submitted by the Department)
|
|
PROPERTY NUMBER |
ASSESSMENT |
|
|
|
|
|
|
|
|
730390 |
$97,700 |
|
|
|
815282 |
$106,900 |
|
|
|
805770 |
$117,000 |
|
|
|
809756 |
$120,600 |
|
|
|
739896 |
$121,500 |
|
|
|
712414 |
$124,600 |
|
|
|
809160 |
$129,000 |
|
|
|
722496 |
$129,900 |
|
|
|
740167 |
$133,700 |
|
|
|
728659 |
$140,200 |
|
|
|
721431 |
$140,500 |
|
|
|
737908 |
$160,800 |
|
|
|
807636 |
$177,600 |
|
|
|
805812 |
$178,300 |
|
|
|
805788 |
$228,300 |
|
|
|
712430 |
$270,500 |
Subject |
|
|
|
|
|
|
|
Average Assessment including subject |
$148,569 |
|
|
|
|
$140,440 |
Average Assessment not including subject |