Decision and Order
IN THE MATTER OF AN APPEAL PURSUANT TO S. 50 OF THE ASSESSMENT ACT
CONCERNING:
GARIBALDI SPRINGS RESORT HOTEL LTD
AND
Assessor Of Area #08 – VANCOUVER SEA TO SKY REGION
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Appeal No.: |
2008-08-00078 |
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Refer to as: |
Garibaldi Springs Resort Hotel Ltd. v. Area 08 (2010 PAABBC 20100023) |
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Date of Decision: |
April 152010 |
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Property: |
40900 Tantalus Road, District of Squamish |
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Heard: |
By Written Submissions, closing February 10, 2010 |
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Appearances: |
From the Appellant, received January 6, February 10, 2010 |
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From the Respondent, received January 29, 2010 |
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Board Panel: |
Jeffrey Hand, Panel Chair |
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INTRODUCTION
[1] This appeal concerns the Executive Hotel and Suites at Garibaldi Springs Golf Resort under construction on property located in Squamish, British Columbia (the “Property”). The 2008 Property Assessment Review Panel classified the Property as entirely Class 6 – Business and Other, under the Prescribed Classes of Property Regulation, BC Reg. 438-81 (the “Regulation”). The Appellant contends that the Property, save and except the portion designated to be a lobby strata lot, a restaurant strata lot, and a pro shop, should be classified as Class 1 – Residential.
ISSUE
[2] The issue is the proper classification of the Property, specifically:
· Was the Property being used for residential purposes as that term is used in Section 1(a) of the Regulation as of October 31, 2007 and;
· If so, was the Property otherwise exempt from Class 1 Residential under the Regulation.
FACTS
[3] I have been provided with the following documents:
· Agreed Statement of Facts dated December 4, 2009
· Submissions of the Appellant dated January 6, 2010
· Submissions of the Respondent dated January 29, 2010
· Reply Submissions of the Appellant dated February 10, 2010
[4] Garibaldi Springs Hotel Ltd. (“Appellant”) prepared a Disclosure Statement dated September 15, 2005 identifying them as the developer of a hotel to be constructed on the Property, which would bear the name Executive Hotel and Suites at Garibaldi Springs Golf Resort.
[5] The Disclosure Statement described the offering in the following terms:
· The strata lots offered for sale pursuant to this Disclosure Statement comprise 111 strata lots which are intended to be used for hotel accommodation (the “Hotel Units”).
· The development will consist of a total of 113 strata lots of which the 111 Hotel Units are intended to be occupied by the purchasers and the general public as hotel suites, one strata lot for the lobby (the “Lobby Strata Lot”) and one strata lot for the restaurant (the “Restaurant Strata Lot”) all comprised in a four storey wood frame building constructed on concrete foundations and a concrete parking structure.
[6] Each of the hotel units would be placed into a rental pool for rental to the general public in connection with the operation of the Hotel (Disclosure Statement Clause 4.1(k)).
[7] The management and operation of the hotel will be carried on through a Manager and the income generated from the operation of the Hotel will be pooled and allocated among the owners of the strata lots in accordance with each owner’s pooled unit share ratio (Disclosure Statement Clause 4.3).
[8] The owner of a Hotel Unit may use the Hotel Unit for not more than 70 days in a given year and for each night that the Hotel Unit is used by an owner, the owner will pay a fee for his Hotel Unit. (Disclosure Statement Clause 4.4(b).
[9] A Development Permit for the Project was granted by the District of Squamish on July 27, 2004 and a Building Permit was issued on May 8, 2006. (Agreed Statement of Facts, paragraphs 5 and 7).
[10] The property is zoned Comprehensive Development Zone 12 and is designated for tourist accommodation. The zoning provided for the following uses, densities and no others:
(a) resort uses, including the following:
· hotels;
· motels; motor hotels;
· restaurants, coffee shops, lounges;
· golf clubhouse, restaurant, lounges, pro shop, driving range, golf school and meeting rooms;
· swimming pools;
· exercise rooms, health centre and gymnasium;
· daycare;
· indoor and outdoor racquet sports facilities;
· games and recreation facilities, including bowling, billiards, and other similar uses;
· offices, administration service uses ancillary to the above;
· uses customarily associated with the aforementioned uses; and
· accessory buildings and structures.
[11] Presales of the units commenced in September, 2005. 79 units out of a total of 111 units had been presold by October 31, 2007 (Agreed Statement of Facts at paragraph 11).
[12] As at October 31, 2007, construction of the Project had started and was 75% complete (Agreed Statement of Facts, paragraph 12).
[13] As at October 31, 2007, a Strata Plan had not been deposited with the Land Titles Office. The Strata Plan for the Property was not registered until March 11, 2008 (Agreed Statement of Facts, paragraph 15).
[14] The Property was classified entirely in Class 6 – Business or other, for the 2008 assessment roll (Agreed Statement of Facts, paragraph 3).
[15] The parties agree that the portion of the Property designated to be for a Lobby Strata Lot, a Restaurant Strata Lot, and a Pro Shop should be classified as Class 6 – Business and Other. The Appellant maintains that the remainder of the property should be classified as Class 1 – Residential.
[16] The parties further agree that if the Appellant is successful on this appeal and the Property (excluding the Restaurant, Lobby and Pro Shop) is classified as Class 1 – Residential, then the split classification for the assessment for Roll No. 08-48-338-001103.001 for the 2008 tax year should be as follows:
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Land |
Improvements |
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Class 06 |
$ 802,000 |
$ 1,777,000 |
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Class 01 |
$ 2,530,000 |
$12,223,000 |
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Total: |
$ 3,332,000 |
$14,000,000 |
ANALYSIS
[17] The issue is what is the proper classification of the Property as at the permitted use and physical condition date of October 31, 2007.
Regulation
[18] The Property must be classified according to the Regulation. The relevant portions of the Regulation (reproduced in full at Schedule A) provide that Class 1 property shall include land or improvements or both used for residential purposes, but not including hotels, other than the portion occupied by the owners as a residence, and not including strata accommodation properties except where certain conditions with respect to their use are met. Strata accommodation property (SAP) is a strata lot in a strata plan of 20 or more strata lots and the strata plan is offered for overnight accommodation for periods of less than 28 days for a prescribed percentage of time in the 12 month period ending June 30 of the year prior to the taxation year (see Assessment Act, section 19 reproduced at Schedule A). The Appellant argues, essentially, that because the improvement was still under construction and not yet operating as a hotel or strata accommodation property, that it is “used for residential purposes” within the meaning of the Regulation and not excluded from Class 1 by either the “hotel” or SAP exclusion.
Was the Property used for Residential Purposes?
[19] The parties agree that the leading decision on determining residential use for a Project under construction is Assessor of Area No. 10 – Burnaby/New Westminster v. Intercorp Developments Ltd., 2000 B.C.J. No. 368 (BCCA). As stated by Mr. Justice Donald in Intercorp:
Once it is clear that the Project has entered the construction phase then the facts should be examined in each instance to determine whether the development has reached the stage where the owner is committed to one use rather than another.
[20] He goes on to identify a number of factors from which the degree of commitment may be inferred, including the various legal instruments applicable to the land or proposed buildings, relevant features of actual construction, and any substantial indication is using the land for a non-residential purpose or is reneging on the stated intention to develop for residential use.
[21] In the case before us, the Appellant has filed a Disclosure Statement with the Superintendent of Real Estate and been granted both a Development and Building Permit for the construction of a hotel. Construction has in fact commenced and was 75% complete as of October 31, 2007.
[22] Moreover, pre-sales of the individual strata units had reached just over 71% which is consistent with the stated intention of stratifying the hotel at some point after the condition date of October 31, 2007.
[23] The term hotel is not defined in the Regulation. However, the Board has, in previous decisions, considered factors that can be consistent with the Property being operated as a hotel or motel. In Travellers Inn Motel v. Assessor Area 01- Capital (2006 PAABBC 20060505) the Board said:
I find that there is no single test to determine whether property is a hotel or a motel in this regard. Rather, all of the evidence must be considered and determination made on the facts as to whether the business operating on the specific property in question is a hotel or motel.
The Board and the Court have provided some assistance in this regard. The case identified some common factors, which were considered in finding a property be operated as a hotel or a motel. They include:
No rooms specifically set aside exclusively for monthly or long term rental
Rooms available on a daily or weekly basis
24 hour front desk for guest services
Availability of maid or housekeeping services
Hotel rules (as distinct from residential tenancy rights) that guests must accept
A central phone system
[24] With these factors in mind, I have reviewed some of the specific facts established in the Disclosure Statement and related documents filed as part of the Agreed Statement of Facts:
· The hotel will use a “hotel booking system” for all reservations, including those made by individual strata owners.
· The Licensing and Marketing Agreement with Executive Hotels and Resorts states that the Appellant will “open the hotel as a minimum 100 room 4-star full service hotel”. (emphasis added)
· The Licensing and Marketing Agreement goes on to provide that the Appellant will “operate and maintain the facility continuously after the opening date on a year round basis and offer transient guest lodging and other related services at the facility to the public in compliance with the law”.
· Executive Hotels and Resorts will market the hotel on their directory and website and the Appellant is required to “comply with our rules and standards for participation, and will honor reservations and commitments to guests and travel industry participants”.
· The Agreement goes on to provide that the Appellant must “operate the facility to the standards as set by Us [Executive Hotels and Resorts] which are consistent with the operation of a 4-star designated facility as set out in our suggested Standards Manual.
[25] Based on the principles set out in the Intercorp decision, and considering the agreed facts, I have little doubt that the intention is to operate a full service hotel. I find that the Appellant, as of October 31, 2007, had committed itself to the construction of a hotel, to be stratified at a future point in time.
Is a Hotel a Residential Use?
[26] Legends Owners Association v. Assessor of Area 8, 2006 BCSC 177, and Terminal City Club Tower v. Assessor of Area 9, 2004 Stated Case 467 (BCCA) are authorities for the proposition that hotels and motels, absent a specific exclusion, are indeed properties used for residential purposes. As Madam Justice Brown observed in Legends, “ ‘residential purposes’ must include hotel or motel occupancy and short term occupancy, otherwise it would not be necessary to explicitly exclude hotels, motels, and certain stays of seven days or less from the provision.”
[27] A similar sentiment was expressed in Terminal City Club, supra, and thus it is beyond controversy that a hotel is indeed a residential purpose within the meaning of the Regulation.
[28] In commencing construction and undertaking pre-sales pursuant to the Disclosure Statement, the Appellant has demonstrated a commitment to developing an improvement that is used for residential purposes.
Is the Property Otherwise Excluded from Class 1?
[29] The analysis, however, does not end there where the commitment of the Appellant, confirmed by the evidence, is to develop an improvement that is specifically excluded from Class 1 – Residential classification.
[30] There are two relevant exclusions from Class 1 – Residential found in the Regulation; hotels and strata accommodation property (“SAP”). Both the Appellant and the Respondent agree that consideration must be given to applicability of the exclusions if a residential use is found.
(a) Hotel Exclusion
[31] The Appellant contends that the Board must find that as of October 31, 2007, the property was a hotel. The Respondent submits that a hotel cannot be a residential use. For reasons set out below the Board does not agree with either of these positions.
[32] The Appellant refers to Happy Valley Resorts Ltd. v. Area 19, (2007 PAABBC 20071360) as a previous Board decision where the Board considered a partially constructed strata resort property. There the Board found that the property under construction was intended to be used for residential purposes, as that term was used in the predecessor legislation of the Regulation. The Board did not apply the exclusion from Class 1 – Residential for certain strata properties. The exclusion at that time captured properties that:
· Contained 20 or more strata lots, on one contiguous parcel.
· Were used or available for overnight accommodation.
· Controlled or managed by persons or a person who control or manage 85% of the strata lots.
· Were offered for rent for periods of less than seven days for at least 50% of the year.
[33] It was said in Happy Valley that because the property was under construction there was no factual evidence to determine if the foregoing rental statistics had been met. Of course, that rental information would not be available until the future.
[34] Since the previous Regulation required specific evidence of usage for rental accommodation, the decision in Happy Valley makes perfect sense. The Board could not give effect to an exclusion in the absence of the necessary evidence. However, Happy Valley did not deal with the hotel exclusion.
[35] Implicit in the Appellant’s Submissions is the suggestion that it is improper to apply the hotel exclusion from Class 1 – Residential classification for properties that are under construction. The Board disagrees. Where, as here, the Appellant has demonstrated a clear intention by the terms of the Disclosure Statement to construct a hotel, albeit a hotel that may well be stratified at a future date, that intention was clearly manifest as of October 31, 2007. It is not necessary, as the Appellant contends, for the hotel to be actually completed and in operation as of October 31, 2007.
[36] The Appellant also contends that the distinction between “use” of property and “type” of property also supports their view that the property must be a hotel as of October 31, 2007. I agree that the Regulations refer to both uses and types of property. The Appellant says that the exemption for hotels and motels is based on the “type” of property and not its “use”. That may be so, but I fail to see why this distinction is relevant in the context of the Appellant’s Submissions. At paragraph 12 of the Appellant’s Reply Submissions the Appellant states:
“As a result, the test for the hotels and motels exemption is not whether the land is being developed for a future “use” as a hotel nor is the test based on whether the property is being “used for hotel purposes”. As at October 31, 2007 the property must be a hotel to be exempt. It was not.
[37] Even accepting that the exemption for hotels and motels refers to the “type” of property, it is clear from the Disclosure Statement that the type of property being developed is a hotel, not only in name, but in the manner in which it is to be operated. Referring to the hotel as a “type” of use rather than a “use” does not, in the Board’s view, assist the Appellant’s argument.
[38] The Appellant relies on British Columbia Assessor Area No. 01 – Saanich/Capital v. Hardt (1992) (88 DLR 4th 183) (BCCA) (stated case 302). In Hardt, the Court referred to the distinction between “use” and “type” in the context of a stratified property. The Court noted:
“What is specifically excluded is “hotels or motels”. The Regulation does not exclude land and improvements “used for the purposes of hotels or motels” and so here the focus of the exclusion is on the type of property in question, not its use…
In my opinion the Appellant has misconceived the true import of the Board’s finding, each of the subject properties, being an individual strata title, as a separate number on the assessment roll and must be separately assessed. The Board’s findings are that the “subject group of condominiums is being used for the purposes of operating a hotel”, not that each individual condominium constitutes a hotel. By no stretch of the imagination could each of the individual condominiums be described as a “hotel”, or as the same type of property as a hotel, and the Board did not so find.
[39] With respect, the Hardt decision is of no assistance to the Appellant. In the case before me we are not dealing with a number of individual strata units because as at October 31, 2007, no strata registration had been filed. We have before us a single owner of a single property and as at October 31, 2007, that type of property was clearly going to be a hotel.
[40] Before leaving this point, I must also comment on the Submission made by counsel for the Respondent who took the position at paragraph 31 of its Submission that “a hotel for the purposes of the Regulation is not residential use”. As noted above, the British Columbia Supreme Court has made it clear in Legends, supra, that a hotel is indeed a residential use.
[41] The Respondent also relies on T231 Enterprises Ltd. v. Area 19 (2009 PAABBC 20091656) in support of its submission that the improvement need not be a hotel on October 31, 2007. This case is not determinative of the issue, as it considers only the correct valuation approach for a partially constructed hotel and makes no findings concerning classification.
[42] In summary, I find that as at October 31, 2007, the Appellant had clearly evinced an intention to construct an improvement to be used for residential purposes, but that the improvement, being a not yet stratified hotel, is excluded from Class 1 – Residential.
(b) Strata Accommodation Property
[43] Both the Appellant and the Respondent also address the applicability of what we will refer to as the “strata accommodation property exclusion” found in Section 1(a)(iii) of the Regulation.
[44] The short answer to the applicability of this exclusion is the simple fact that as at October 31, 2007, the Property was not stratified and, therefore, it cannot come within the definition of a strata accommodation property.
[45] Moreover, in my view it cannot even be said that the exemption to the exclusion for some strata properties might apply in the future since the Regulation clearly requires specific data on usage by the owner in the 12 month period prior to June 30, 2007. Clearly, no such data is available and it cannot be said with any certainty what might happen in the future and how that usage might impact on the future classification of the individual strata units.
[46] In light of my finding that the Property should be classified as Class 6 – Business or other, it is not necessary to deal with the Respondent’s alternative submission that the Property should be split classified.
ORDER
[47] The Board confirms the decision of the 2008 Property Assessment Review Panel as follows:
Roll No. 08-48-338-300-0011103.001:
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Land: |
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Improvements: |
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Total Assessed Value: |
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Prescribed Classes of Property Regulation, BC Reg. 438/81
Class 1 – Residential
1. Class 1 Property shall include only:
· Land or improvements, or both, used for residential purposes, including single family residences, duplexes, multi-family residences, apartments, condominiums, manufactured homes, nursing homes, rest homes, summer and seasonal dwellings, bunk houses, cook houses and ancillary improvements compatible with and used in conjunction with any of the above, but not including:
(i) Hotels or motels other than the portion of the hotel or motel building occupied by the owners as his residence
…
(iii) A strata accommodation property except, subject to subparagraph (iii.1), if
A. The owner of the strata accommodation property has the right to use the property for seven or more days in the 12 month period ending June 30th of the year previous to the taxation year for which the assessment roll is completed,
B Either
(I) The owner exercises the owner’s right to use that property, or
(II) In respect of more than 50% of the strata accommodation properties in the strata plan or contiguous plans, the owners exercise their right to use their property
for 7 or more days in the 12 month period ending June 30th of the year previous to the taxation year for the Assessment Roll is completed, and
C. The owner of that property supplies the information as required under Section 11 in respect of the property, the property is included in Class 1 but not in respect of that part of the year equal to the number of days, if any, by which the number of days reported under Section 11(a) for the property exceeds 36 days.
Assessment Act, section 19
Strata accommodation property means a strata lot in respect to which the following requirements are met:
(b) The strata lot is in a strata plan that, with or without contiguous strata plans, includes 20 or more strata lots;
The strata plan is rented or offered for rent as overnight accommodation for periods of less than 28 days for at least the prescribed percentage of the 12 month period ending June 30th of the year previous to the taxation year for which the Assessment Roll is completed.