Decision and Order
IN THE MATTER OF AN APPEAL PURSUANT TO S. 50 OF THE ASSESSMENT ACT
CONCERNING:
AND
Assessor Of Area #01 - Capital
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Appeal No.: |
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Refer to as: |
Denford v. Area 01 (2010 PAABBC 20091799) |
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Date of Decision: |
March 9, 2010 |
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Property: |
617 Senanus Drive, District of Central Saanich |
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Heard: |
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Submissions: |
From the Appellant received January 8, January 11 & February 5, 2010 |
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From the Respondent received January 22 & February 11, 2010 |
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Board Panel: |
Kenneth Wm. Thornicroft, Panel Chair |
INTRODUCTION
[1] Gordon A. Denford (the “Appellant”) appeals a decision issued by the 2009 Property Assessment Review Panel (the “Review Panel”) concerning his property situated at 617 Senanus Drive in the District of Central Saanich (the “property”). The Review Panel confirmed the Assessor’s original valuation and “split-classification” decision and thus, as matters now stand, the property’s assessment is as follows:
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Land: |
Class 1 – Residential |
$ |
1,209,000 |
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Class 9 – Farm |
$ |
3,537 |
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Improvements: |
Class 1 – Residential |
$ |
2,713,000 |
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TOTAL |
$ |
3,925,537 |
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[2] Although there are many contentious issues in this appeal, the fundamental disputes between the parties concern, first, the correct classification of the property, second, whether the property has been “equitably” classified and, third, whether the property has been correctly valued. As will be seen, the Assessor says that the Review Panel’s decision should be confirmed whereas the Appellant says that the entire land component should be classified as “farm” land and, failing a favourable reclassification decision, that the total assessed value for the property is too high.
[3] In accordance with the Board’s August 20th, 2009 order, I am adjudicating this appeal based solely on the parties’ written submissions. I have before me the Appellant’s initial and reply submissions as well as the Assessor’s submission. The Assessor, in addition, filed a “surrebuttal” to which the Appellant has taken objection. I shall first address this objection before turning to the substantive issues raised by this appeal.
PRELIMINARY OBJECTION REGARDING THE ASSESSOR’S “SURREBUTTAL”
[4] The Board’s August 20th, 2009 order set out a submission cycle (with fixed dates) whereby the Appellant would file an initial submission to be followed by the Assessor’s submission and then, finally, the Appellant’s reply submission. By order dated October 22nd, 2009, the Board, at the behest of the parties, modified the submission filing dates but did not alter the submission cycle format, namely, Appellant – Assessor – Appellant. The Board’s October 22nd order included the following notice (in boldface): “The Board member(s) deciding the appeal may refuse to admit the submissions if they are not produced by the dates in this Order.”
[5] Notwithstanding the above notice – and in the absence of having obtained leave to do so – on February 10th, 2010 the Assessor filed (by e-mail) what she described as a “surrebuttal”. This document was filed on the principal basis that several points raised in the Appellant’s reply submission constituted new evidence or arguments that, presumably, the Assessor believes should have been set out in the Appellant’s initial submission. As previously noted, the Appellant says that the Board should not consider the Assessor’s “surrebuttal” since it represents a contravention of the Board’s October 22nd order. I agree.
[6] The Assessor filed the “surrebuttal” without the benefit of an enabling Board order and in the face of clear notice that late submissions may not be admissible. The Assessor’s position is that, at least in part, the Appellant’s reply submission contains “new evidence”. However, to the extent that the reply does contain material that was not contained in the Appellant’s initial submission, or is otherwise not evidence that simply responds to the evidence and argument contained in the Assessor’s submission, those portions of the Appellant’s reply will simply be disregarded. Both the Board’s August 20th and October 22nd, 2009 orders put the Appellant on notice that the reply submission is “NOT an opportunity for the Appellant to present more submissions to expand on [his] case” and that such submissions “should have been produced earlier in accordance with the Order above” (CAPITALIZATION and underlining in original text).
[7] Accordingly, the Assessor’s “surrebuttal” dated and filed February 10th, 2009 is not admissible in these appeal proceedings and thus does not form part of the record before me.
[8] In his February 11th, 2009 letter objecting to the “surrebuttal”, counsel for the Appellant submitted “that our client should be compensated for its costs in dealing with the failure of the BC Assessment Authority to comply with the October 22, 2009 Board Order”. Although the Board has the authority to award costs (Assessment Act, section 60), this power is “subject to the regulations”. Section 74(2)(u) of the Assessment Act provides for Board rules of practice and procedure to be promulgated by regulation. The Board’s “Rules of Practice and Procedure” authorize the Board to order one party to pay another party’s costs (Rule 18(4)(n)) and Rule 21 specifically deals with cost orders where a party has engaged in conduct that is frivolous, vexatious, egregious or otherwise an abuse of process. In this instance, I do not find that the Assessor’s conduct can be so characterized.
[9] Clearly, the preferable course of action would have been for the Assessor to seek the Board’s leave to file a further submission rather than simply proceeding unilaterally. In the face of such unilateral action, I do not doubt that the Appellant’s counsel felt compelled to respond in some fashion. However, the Appellant’s reply was rather cursory and does not strike me as being the fruit of an extended labour. The Board did not invite the Assessor to reply to the Appellant’s application for costs. All in all, I think it best to simply admonish the Assessor, remind the Assessor that unsolicited submissions are not welcome and point out that, in a future case, the Board may well decide that a costs order should be made in similar circumstances.
[10] I now turn to the substantive issues raised by this appeal.
THE PROPERTY
[11] The property consists of either a 3.87-acre (Appellant) or 3.79-acre (Assessor; although in some sections of her submissions the Assessor also describes the property as being 3.87 acres) oceanfront land parcel that is improved by a home that was originally built in 1987 and was renovated during that last five years. The Assessor says that the home is 6,000 square feet while the Appellant says the home is 4,500 square feet. There home has an attached garage and there is a boathouse at the foreshore. The property is wholly outside the provincial Agricultural Land Reserve (“ALR”) and is zoned as a “Rural Estate” (R-3). The property cannot be subdivided under the present zoning designation.
[12] The property is very heavily treed and slopes south from Senanus Road to a 30-foot oceanfront bank above Saanich Inlet. The home is sited at the southern boundary of the property near the bank. The lot is essentially a rectangle at the northern portion of the property that is adjoined by a “pie-shaped” segment (the widest portion at the ocean cliff) that lies at the southern end of the property to the west of the northern rectangle.
[13] In addition to its use as a residential oceanfront acreage property, it is the site of a small nursery operation. In his original application to secure “farm” status (see Assessment Act, section 23) filed January 4th, 2006, the Appellant estimated that he would achieve $3,000 to $4,000 for the production year ending October 31st, 2006. The Appellant’s Income Statement filed November 28th, 2007 reported $5,862.50 in gross sales for the 12-month period ending October 31st, 2007. Although I do not have any information regarding the total gross sales for the 12-month period ending October 31st, 2008, the “farm production year” for purposes of this appeal, in the absence of any evidence regarding significant expansion of the farm operation from 2007 to 2008 (the evidence appears to be that there was no such expansion over this period), I am assuming that the total gross sales for the 2008 production year were in the same neighbourhood as in 2007.
[14] The property improvements are currently assessed at $2.713 million and the Appellant states in his submission, and notwithstanding section 57(1)(b) of the Assessment Act that mandates the Board to consider the combined value of both land and improvements in any valuation appeal, that he “is not appealing the value ascribed to the buildings and improvements” (underlining in original text). Thus, it seems clear that the Appellant’s farm operation is what might be called a “hobby farm” rather than a commercial farming operation.
[15] There is, of course, nothing inappropriate about property owners conducting small farming operations in order to secure the very favourable property tax status that flows from “farm” classification (see Van Kerkoerle v. Area 04, 2001 PAABBC 20015336), however, in order to obtain farm status, the property must meet all of the applicable provisions of the Standards for the Classification of Land as a Farm regulation (B.C. Reg. 411/95 – the “Farm Classification Regulation”). The issue in this appeal is whether the Appellant’s land wholly qualifies for “farm” status (the Appellant’s position) or, as is asserted by the Assessor, only about 53% of the land parcel so qualifies.
[16] The Appellant’s argument regarding the farm classification issue is essentially twofold. First, the Appellant says that as a matter of evidence and regulatory interpretation, 60% of the entire land component of his property should be classified as a “farm”. Second, the Appellant says that regardless of what the correct “split classification” as between “farm” (currently 53%) and “residential” (currently 47%) land might be, the entire land parcel should be classified as a “farm” – at least for the 2009 roll year – in order to create an “equitable” result as between the Appellant and several of his near neighbours. I now turn to these two issues.
WHAT PORTION OF THE LAND QUALIFIES FOR “FARM” STATUS?
[17] Although the property is a single lot (known as “Lot A”), the Appellant has notionally divided the property into two sections identified in his material as “Area A” and “Area B” – the latter area is a rectangular shaped section at the northernmost portion of the property; the former is an irregularly shaped portion that constitutes the balance of the property and includes the residence and ocean cliff perimeter.
[18] The Appellant says that Area A is predominantly used for farming activity and that “the area subject to primary farming activity and including the dwelling totals 101,162 square feet in size and comprises approximately 60% of the total area” (Appellant’s January 8th, 2010 submission, p. 3). Area B is heavily wooded and is bisected by an access road about in the middle of the land area and running north to south (Senanus Road runs east-west at the property’s northern boundary). The Appellant concedes “Area B on Lot A is not used for farming purposes except for the road access bisecting Area B which is used to access the nursery operations and dwelling” (Appellant’s January 8th, 2010 submission, p. 3). The Appellant says that the access road covers about 5,000 square feet and that the remainder of Area B constitutes about 34% of the property’s total land area.
[19] The Prescribed Classes of Property Regulation (B.C. Reg. 438/81; the “Property Classification Regulation”) currently establishes eight separate property classifications including “residential” (Class 1) and “farm” (Class 9). The “farm” classification is typically very beneficial to a property owner since “farm” land is not valued at its fair market value for property taxation purposes but, rather, is valued in accordance with schedules appended to the Land Values for Farm Land Regulation (B.C. Reg. 276/84). The difference between market values and scheduled values can be dramatic – for example, in this case, and using the Assessor’s area estimate simply for purposes of illustration, the 47% land area classified as “residential” is valued at $1,209,000 whereas the 53% “farm” land portion is valued at only $3,537 (or less than 3/10ths of 1% of the “residential” land value).
[20] Given the nature of the property valuation and taxation regime, it is perhaps not surprising that section 23 of the Assessment Act places the burden on farmers to apply for “farm” status. By section 23(2) “the assessor must classify as a farm any land, or any part of a parcel of land, that meets the [prescribed standards]”. The prescribed standards are set out in the Farm Classification Regulation. Subsections 4(1) and (2) of this regulation states:
4. (1) Unless this regulation provides otherwise, the assessor must classify as farm all or part of a parcel of land used for
(a) primary agricultural production,
(b) a farmer’s dwelling, or
(c) the training and boarding of horses when operated in conjunction with horse rearing.
(2) Land will only be classed as farm where part of a parcel or parcels of land are
(a) necessary to the farm, and
(b) predominantly used for primary agricultural production.
[21] The Appellant says that if the land is to be split as between “farm” and “residential” classifications (see Property Classification Regulation, section 10), the “farm” component should be 60% rather than, as matters now stand, 53% of the total land area (Appellant’s January 8th, 2010 submission, paras. 15 – 17). In his reply submission filed February 5th, 2010, the Appellant says that 62.5% of the total land area should be classified as “farm” land (para. 5).
[22] The Assessor conducted a site inspection on July 14th, 2009 and both the Appellant and the Assessor agree that not all of the land was being used for farm purposes during the 12-month period ending October 31st, 2008 (the relevant period for the 2009 assessment roll). However, the Assessor says that the Appellant’s farm area calculation includes bedding areas that were not prepared and/or planted as of October 31st, 2008 and thus can only be taken into account for the 2010 roll year.
[23] Unfortunately, the material before me does not allow me to make an affirmative finding regarding the precise area that qualifies for “farm” status. Both the Appellant and the Assessor simply assert that a particular proportion of the land should be given farm status but neither party has provided any detailed survey evidence that would permit me to determine what proportion of the land area actually qualifies for farm status. Since this conflict in the evidence cannot be resolved without hearing further evidence, I am not, at this point, making any affirmative finding regarding this issue. As will be seen, at least for this roll year, the point is moot in light of my conclusion regarding the Appellant’s “equity” argument.
HAS THE APPELLANT’S LAND BEEN “EQUITABLY” ASSESSED?
[24] The Appellant says that even though the entire land area is not being farmed, it should nonetheless be wholly classified as “farm” land since a split classification for the 2009 roll year is “inequitable”. The Appellant identified four nearby properties, all located on Senanus Drive, where the entire land area has been classified as “farm” land for the 2009 roll year. The Appellant notes that only his property and another nearby Senanus Drive property were given “split classifications” on the 2009 assessment roll. The Appellant’s argument on this point is set out, below:
The [Assessor] has elected not to impose a split classification upon [four Senanus Drive properties] for the 2009 assessment year. The Appellant has established evidence that only a minimal area on each property is in use for agricultural production purposes. These properties are in the same neighbourhood, same municipality and subject to similar use for farming activity as [the Appellant’s property]. It is fundamentally inequitable that a split classification be imposed on [the Appellant’s property] when it is not imposed on [the four other Senanus Drive properties].
(January 8th, 2010 submission, para. 22)
[25] The Assessor, for her part, agrees that only six properties on Senanus Drive were classified, either in whole or part, as “farm” land on the 2009 assessment roll. She acknowledges that only two properties (including the Appellant’s property) were given a “split classification” as between “farm” and “residential” and that the four other properties were wholly classified as farms. The Appellant, in his affidavit sworn on January 3rd and filed on January 11th, 2010, avers that since July 1st, 2008 there has only been limited chicken farming operations on each of the four farms with the chickens being penned in coops and not ranging free in order to protect them from racoons and other predators. The Assessor has not challenged the Appellant’s evidence on this point. Since only a limited portion of the entire land area of these four farms is truly dedicated to farm production, it seemingly follows that the land classification for these properties should have been split as between “farm” and “residential” (and perhaps with a much greater share of the land being classified as “residential” rather than “farm”).
[26] The Assessor apparently agrees that at least three of these four “farm” properties were incorrectly classified for the 2009 roll year but says that this error will be corrected on the 2010 assessment roll:
Of the six properties on Senanus Dr. affected by farm class for the 2009 Assessment Roll, 4 properties are wholly in farm class and 2 properties are split class between farm and residential, one of which is the Subject property. After each of the properties was reviewed, it was found that the two split classed properties were correctly valued and classified and 3 of the 4 properties, which were wholly in farm, needed further review. Subsequent to information received by the Assessor, it was found that income was insufficient to maintain farm class for 2010. Three of the wholly classified as farm properties have been declassified for 2010. The remaining one property which is wholly in farm for 2009 was found to be correctly classified for 2010. It is the Assessor’s opinion that the Appellant’s concerns regarding the equity of farm class on Senanus Dr. has [sic] been resolved by the 2010 Assessment Roll.
[27] With respect to the last point made by the Assessor in the above-quoted extract, the Appellant says that even if it could be said that the Appellant’s concerns about equity will be addressed in 2010 through a series of declassification decisions, the inequity remains in place for the 2009 assessment year.
[28] As I previously observed, the impact of “farm” classification on value determination for taxation purposes is significant since “farm” land is valued at scheduled rates rather than at fair market value. The Appellant has provided evidence – and the Assessor has not affirmatively contradicted this evidence – that four of his nearby neighbours have had their lands wholly classified as “farm” land even though, in each case, farming activity (chickens held in chicken coops) only occupies a comparatively small portion of the total land area.
[29] The Board is mandated by section 57(1)(a) to assess whether a particular property’s assessment is accurate and derived from a consistent methodology utilized within the relevant municipality or rural area. This is the source of the Board’s so-called “equity” jurisdiction. A property may be “inequitably” assessed if its value or classification is “inequitable” when compared to similar properties within the same municipality or rural area. With respect to the question of equity in classification decisions, the Board made the following observations in Area 19 v. Stewart (PAAB Decision No. 20002887) (at page 5):
…the [Assessment] Act [through the classification system] specifically authorizes discrimination between properties having different actual uses [and] authorizes municipalities and rural areas to assign different rates of taxation to each different class of property. That is, those Acts specifically authorize discrimination in the treatment of taxpayers based on classification. If the Assessor had no duty to be equitable in the assignment of properties to classes, properties having like uses could be placed in different classes. In that event, properties having like uses would be taxed at different rates. That is, owners of properties having the same actual use would be treated unequally; there would be discrimination between taxpayers within the same class of use. Therefore, the direct effect of a failure to apply a consistent set of criteria to classification, is discrimination in taxation. A power to discriminate must be expressly authorized. The Board was not directed to any provision of the Assessment Act that expressly, or even impliedly, authorizes discrimination between taxpayers within the same class of actual use.
The Board finds that assessors are obliged to ensure that properties are classified on a consistent basis within each municipality or rural area.
(see also, Pugh et al. v. Area 01, 2009 PAABBC 20090216, at para. 54, stated case appeal dismissed: Lowan v. British Columbia (Assessor of Area #01 – Capital) 2010 BCSC 194)
[30] Similarly, in C & C Holdings Inc. v. Assessor of Area #04 (Nanaimo-Cowichan), 2003 BCSC 230, Justice Pitfield of the B.C. Supreme Court stated (at para. 27): “Since classification affects the determination of actual value and, therefore, the amount of the assessment which is defined as the valuation of property for taxation purposes, s. 57 [of the Assessment Act] must be construed to require the Board to ensure consistency of classification within a municipality or rural area.”
[31] This is not a case, such as Nicholls v. Area 15 (2006 PAABBC 20061685), where a property owner whose property clearly did not qualify for even partial farm status, nonetheless asserted an equitable right to farm status since other allegedly non-qualifying properties had been erroneously granted farm status. The Assessor concedes the Appellant is a bona fide farmer but also argues that not all of his land is being used for farm purposes. The Appellant does not dispute this latter assertion (although he does say that he is farming more land than he has been given credit for). However, the Appellant also says that his similarly situated neighbours are receiving farm status for all of their lands. The Appellant says this state of affairs is inequitable.
[32] The relative impact of obtaining “farm” status for all, rather than simply for a portion, of the land is highlighted in the following table (these data are taken from the Assessor’s “Property Record Cards” appended as Exhibit “E” to the Appellant’s affidavit):
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Property Address |
Percentage of Land in Farm Class (2009) |
Land Area (Acres) |
2009 Assessed Value (Land) |
Assessed value/Acre |
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617 Senanus Drive (Appellant’s Property) |
53% |
3.87 |
$1,212,537 |
$313,317 |
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629 Senanus Drive |
100% |
2.00 |
$3,520 |
$1,760 |
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630 Senanus Drive |
100% |
4.00 |
$2,010 |
$502 |
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651 Senanus Drive |
100% |
2.90 |
$5,104 |
$1,760 |
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675 Senanus Drive |
100% |
3.70 |
$6,512 |
$1,760 |
[33] The net effect of the Assessor’s decision to leave several of the Appellant’s neighbours within farm class for the 2009 roll year, is to impose a much greater property tax burden on the Appellant for 2009 than is being imposed on those neighbours. It may be fair to say, as the Board observed in Pugh, supra (at paras. 55 – 56), that granting “farm” status to a property that does not fully qualify for “farm” status creates an element of unfairness within the property taxation scheme since the differential tax burden is shifted to the fully residential property owners within the municipality. On the other hand, “equity” is determined within a class of comparable properties and, in this case, the parties have defined the appropriate class to be the six hobby farms along Senanus Drive. In my judgment, the Assessor has not acted consistently in the classification of these properties. As Justice Pitfield stated in C & C Holdings Inc. v. Assessor Area #04-Nanaimo-Cowichan, 2003 BCSC 230 (at para. 17): “It is an accepted principle of property taxation that taxing authorities must deal even-handedly with all taxpayers in a municipality or rural area and that all taxpayers within a class be treated in the same way.”
[34] The Assessor has known, for quite some time, about the Appellant’s concerns vis-à-vis his neighbours’ farm classifications. The Assessor could have issued a supplementary roll for the 2009 assessment year correcting the erroneous classifications for the neighbouring hobby farms that were, apparently in error, wholly classified as “farms” (see Assessment Act, section 12). However, the Assessor chose not to do so; instead, the Assessor decided to let the error stand for 2009 and correct it on the 2010 assessment roll. In order to be consistent, the Appellant, it seems to me, should have also received the benefit of this dispensation. I propose to make the enabling order in favour of the Appellant for the 2009 roll year.
[35] I suppose, in order to achieve maximum consistency, the sixth property that was given a “split classification” should also be reclassified to full “farm” status on the 2009 assessment roll, however, that owner did not appeal their assessment and the proper classification of that property is not before me in this appeal. I adopt the comments of my colleague, Board Member Bridal, in Broadway Properties et al. v. Area 09 (2009 PAABBC 20090187) (at para. 67): “I agree with Bramalea and Apex Self Storage that where a decision will lead to inequity in any alternative, then it is preferable to pursue equity for the property under appeal rather than the properties not under appeal. In doing so, Bramalea states that ‘the Board will have done what it can, in the light of its limited powers; it will have enforced the rights of the taxpayer before it’”.
THE FAIR MARKET VALUE ISSUE
[36] The Appellant’s principal position was that the entire land component of the property should be classified as “farm” land. Solely on equitable grounds, and only for the purposes of the 2009 assessment roll, I agree that the entire land component should be classified as “farm” land. That being the case, the parties’ dispute regarding the appropriate “split” as between “residential” and “farm” class is moot for this roll year.
[37] The Appellant accepts that the current valuation of the property improvements, namely, $2,713,000, is accurate. However, in the event that he was unsuccessful in having the land classified wholly with the “farm” classification, the Appellant advanced an alternative argument regarding the correct value (and proper valuation methodology) of the “residential” portion of the total land area.
[38] The “residential” land component is currently assessed at $1,209,000 whereas the Appellant says that this component should have been valued at the much lower figure of $385,000. However, the entire land component valuation issue is now moot since all of the land will be valued in accordance with the scheduled rates set out in the Land Values for Farm Land Regulation. Therefore, I see no reason to explore this issue further. Any comments that I might make regarding the valuation of the “residential” component would be obiter dicta and, equally importantly, would not necessarily have any probative value regarding the value to be ascribed to any residential land component for purposes of the 2010 roll year. The courts generally do not render legal judgments when there is no longer a live issue to be adjudicated. I believe that is a sensible policy to adopt in the administrative decision-making context.
ORDER
[39] The Board varies the decision of the 2009 Property Assessment Review Panel in this matter so that the Appellant’s land is wholly classified as “farm” land (Class 9) and its value for assessment and property taxation purposes shall be determined in accordance with the provisions of the Land Values for Farm Land Regulation. The value attributed to property improvements remains unchanged at $2,713,000. If the parties are unable, within 30 days after the publication of this decision, to agree on land value, the Board will retain jurisdiction to determine that matter.