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| FALL 2001 |
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| Inside: |
• Mould Standards — A Moving Target?
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APPEAL BOARD DECISION STATES ENVIRONMENTAL ISSUES REDUCE ASSESSMENT AND PROPERTY TAXES
By Paul SullivanThis article has been prepared by Paul Sullivan and Peter Austin of Burgess Austin Sullivan Property Consultants Ltd., a subsidiary of Burgess, Austin, Cawley & Associates, one of the largest commercial appraisal companies in Vancouver. The company specialises in the review of property tax assessments, preparation of material for the Assessor and appearances at the Assessment Appeal Board.
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| Possible contamination |
British Columbia Assessment utilises the Mass Appraisal System (MAS), which is intended to produce high quality property valuations quickly, accurately, with uniformity and a low cost. Environmentally challenged sites are relatively unique and do not reflect the typical market values. The traditional techniques for evaluating a property in the MAS are thus not as appropriate for contaminated properties. A large number of similarly contaminated properties would be required in order that an accurate value could be derived by this approach. Alternate forms of assessment are required for sites to which traditional methods can not effectively apply. The cost to cure has evolved as a reasonably well accepted allowance in the assessment process.
A contaminated site is land in which the soil or water contains particularly hazardous substances known as special waste or a concentration of other substances that exceed the detailed standards in the regulations. This definition comes from Bill 26. Contamination can result from surrounding properties, hence, if an owner is adjacent to a gas station or an industrial site where activities with contaminants are prevalent, there may be grounds for appeal if potential contamination exists. Contamination may exist that an owner is unaware of due to the fact that his current use does not concern contaminants, however, a check into the historical background may reveal potential problems.
Under the MAS method of valuation, B.C. Assessment will attempt to value your property based upon a selection of comparable properties similar to the subject. Locational, physical and economical considerations are applied to the comparable sales in deriving an appropriate value. In considering the cost to cure to make an adjustment for contaminated sites, B.C. Assessment is not in the environmental business and do not proclaim to be experts on the topics.
In order to obtain a reduction, it will be necessary to obtain a professional third party opinion as to the cost of remediating any environmental concerns. Without a report with a professional estimate, reductions could be difficult to attain. There does not appear to be a clear policy at B.C. Assessment in terms of allowing for a reduction based upon the cost to remediate.
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| Bio-waste pile Contaminated soil |
Decision from Assessment Appeal Board
Appeal No. 2000-09-00117 is an appeal of Chinatown Plaza, a mixed use commercial development with retail, office, restaurant and parking. This site had been used as a coal gasification plant and quantities of waste were spilled or disposed of at this site. The remediation of the site through removal of contaminants was considered to be either too costly or not feasible and an assessment/management approach was implemented. The Board found that there is an additional risk for an investor in Chinatown Plaza compared to uncontaminated real estate in the Chinatown neighbourhood. The Board added 1.5% to the capitalization rate to reflect the risk.
The decision is significant as B.C. Assessment has not generally recognized stigma as it relates to properties with environmental issues. The decision from the Board left some question as to whether stigma affects the value for industrial properties to the same extent it may for a residential or commercial property. We have reviewed sales transaction which support that there is significant consideration, given for industrial style properties, as indicated by a recent transaction in the Vancouver South industrial area. In this instance, the remediation costs were not known to the vendor or the purchaser, and a price adjustment of 25% was accepted by the vendor. At the end of the day, the actual costs were only 10% of the 25% negotiated between vendor and purchaser. In essence, it appears that purchasers are not willing to accept the risk without a significant lift in the yield to reflect the potential environmental concerns.
How Does One Reduce the Assessed Value?
In order to request a reduction in your assessed value, the following steps must be undertaken:
- A third party report should be available, detailing the cost to cure the contamination issues and the time for total remediation.
- A qualified appraisal valuation from an appraiser familiar with the assessment process would be required to determine whether the Assessoršs base value is reasonable.
- A report prepared for B.C. Assessment prior to December 10th.
If you miss this "pre-roll" deadline, the same process can be adopted in January when the Assessment Notice is received — Filing deadline: January 31st.
Conclusion
In conclusion, there are no firm rules relating to contaminated sites and assessed values. Reliable third party documentation, an understanding of the assessment system and how their values are derived are essential in order to be successful in an appeal of this nature.
At the beginning of January each year, the owner of the property is sent a Property Tax Notice. In many cases, tenants do not receive this notice and are often, therefore, unaware of the assessed value upon which their taxes will be based. Tenants are recommended to contact their landlord in January in order to obtain a copy of the notice or, alternatively, they can obtain assessed values from the local B.C. Assessment Office. In the event that an owner of a property feels that his value is reduced due to the presence of any form of contamination, he must appeal to the Property Assessment Review Panel by January 31st of any year. For more information contact Paul Sullivan on 604-689-1233 or on gen@bcaoppr.com
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