Assessment of Strata Title Units, All Rented, in One Building #103

By Gerry Neely
B.A. LL.B.

How should the assessed value of residential strata title apartment units, all in one building and all rented, be determined? Is it to be done by valuing the strata lots on the basis of their market value as individual units, if sold? Or is it to be based upon valuing all of the strata lots as components of an entire rental building? This question came before a Judge of the Supreme Court as a result of an appeal by way of a stated case, from a decision of the Assessment Appeal Board.

The facts were that the taxpayers were two companies registered as the owners of two strata title complexes in the West End in Vancouver, contained in two buildings made up of 75 and 66 rental strata lots, respectively. The assessor used the comparable sales approach to compare the units with similar strata title units, some owner-occupied and some rented, that were sold near the valuation date.

The appraiser acting for the owners used an income approach by capitalizing the net rental income of all of the strata lots in a building. The capitalization rate was a rate derived from the sale of entire strata complexes sold en bloc where all of the strata lots were owned by one owner. The appraiser then allocated the total value among the strata lots within the building.

The Assessment Appeal Board acknowledged that there was no difference in physical characteristics between the strata units in the complex and the properties used as comparables by the assessor. The principal difference was between the strata title units in buildings predominantly occupied by owners of the units,and strata title units in buildings occupied solely by tenants. The Board concluded, on the evidence before it, that a lower price per strata lot resulted from the sale en bloc of rental strata title units within one building, owned by one owner,than if the strata title units were sold individually and were in a block owned by a number of owners who were the predominant occupiers.

The judge agreed that there was evidence before the Board to support a difference in price between two strata title units of comparable size and other physical characteristics, if one were in a rental building and the other in a building mainly occupied by homeowners. He therefore approved the assessment based upon a capitalization rate, which determined the total value of each building, and then the subsequent allocation of that value among each of the strata lots in the complex.

Counsel acting for the assessor has advised that this decision is to be appealed. The assessor's argument is that the Assessment Act requires that each separate legal parcel must be valued for taxation purposes separately by comparisons with selling prices of similar individual units traded in the market. The assessor's opinion is that if this decision is correct, it will have unintended results. Those results might include a circumstance where there is single ownership of several adjoining properties that but for this decision would be assessed separately at a residential rate. The properties, however, if consolidated and if apartment zoning were permitted, would be assessed more as an apartment site. The assessor says that, in that circumstance, with this decision, would he have an obligation to assess the separate individual properties at a higher value based upon their potential apartment use.

This decision, if upheld on appeal, will still depend upon there being evidence that strata title units in buildings occupied solely by tenants are worth less than those in buildings occupied predominantly by owners of the units. That evidence may not be available in smaller communities where there may not be the same mix of strata title apartment unit buildings.

1.

Queens Plate Development Ltd. and Hearthside Manor Ltd. v. Assessor of Area #09-Vancouver S.C.B.C., Vancouver Registry, No. A863176.

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