Decision and Order
IN THE MATTER OF AN APPEAL PURSUANT TO S. 50 OF THE ASSESSMENT ACT
CONCERNING:
John L Boyd
AND
Assessor Of Area #09 - Vancouver Sea To Sky Region
|
Appeal No.: |
|
|
|
|
|
Refer to as: |
Boyd et. al. v. Area 09 (2009 PAABBC 20091905) |
|
|
|
|
Date of Decision: |
December 11, 2009 |
|
|
|
|
Property: |
3790 Pine Crescent, City of Vancouver |
|
|
|
|
Heard: |
By Written Submissions, closing September 30, 2009 with further submissions on November 19, 2009 |
|
|
|
|
Submissions: |
From the Appellant received September 18, September 30, and November 19, 2009 |
|
From the Respondent received September 18, September 30, and November 19, 2009 |
|
|
|
|
|
Board Panel: |
Cheryl Vickers, Panel Chair |
INTRODUCTION
[1] The property that is the subject of this appeal is a large, heritage, single family home located in the prestigious Shaughnessy neighbourhood of Vancouver. It sold in June 2007 for $5,900,000 and is assessed on the 2009 roll at $5,284,900. Both parties provide a professional appraisal estimating the property’s market value as of July 1, 2007 and providing an equity analysis. On an initial read of both reports, however, one might conclude that the appraisers were appraising two different homes as each takes a different view of the quality and condition of the home, the extent of renovations and their effect on market value. On an analysis of what the Appellant considers comparable sales, and the assessment of comparable properties, the Appellant submits that the assessed value is too high, both from an actual value perspective and an equitable perspective. The Appellant suggests actual value of the property is $4,000,000 and equitable value $3,205,000, and that the assessment should consequently be reduced to $3,205,000. Relying principally on the sale of the subject, the Assessor submits actual value is $5,700,000 and that the assessed value is equitable and should be confirmed.
ISSUES
[2] The issues are to determine if the assessed value reflects market value and is equitable. For the 2009 roll, actual value is the lower of a property’s market value as of July 1, 2007 or July 1, 2008 in its condition at October 31, 2008. The parties agree July 1, 2007 is the relevant valuation date.
FACTS
[3] The property is located at 3790 Pine Crescent in the First Shaughnessy District of Vancouver. The neighbourhood contains many “mansion” type homes on large lots and is known as one of Vancouver’s most affluent neighbourhoods. The neighbourhood also includes a significant number of homes built during or before the Second World War that are “heritage” in nature.
[4] The property is a 17,688 square foot lot improved with a 6,684 square foot, 3 storey plus basement single family residence originally constructed in 1917 and a two car detached garage. The property is included in the First Shaughnessy Heritage Inventory. It was renovated in 1990 and 2004 – the extent and quality of these renovations is in dispute. The basement contains a one-bedroom suite.
[5] The property sold on June 14, 2007 for $5,900,000. Prior to sale, it was listed on the Real Estate Board Multiple Listing Service. It sold seven days after its listing for the full list price.
[6] The property sold previously on November 19, 2003 for $2,400,000.
EVIDENCE AND ANALYSIS
ACTUAL VALUE
[7] Both parties provide professional appraisal reports estimating actual value as of July 1, 2007 by the direct comparison approach.
[8] Mr. Lozinsky, on behalf of the Appellant, analyzes six sales of homes on the First Shaughnessy Heritage Inventory occurring between February 2007 and January 2008. Mr. Sun, on behalf of the Assessor analyzes four sales occurring between June 2007 and January 2008, including the sale of the subject, and the sales of two homes not included in the First Shaughnessy Heritage Inventory. Both appraisers adjust the sale prices for time of sale and for differences in size, quality, condition, and location in comparison to the subject. The sale of 3590 Cypress Street in January 2008 is common to both analyses. The analysis of this sale and the adjustments for differences with the subject, however, are quite different highlighting the appraiser’s divergent views as to the nature and quality of the subject in comparison to this and other properties.
[9] 3590 Cypress sold on January 22, 2008 for $5,282,000. It is an 8,270 square foot, two storey plus basement single family residence originally constructed in 1921 on a 21,202 square foot lot. It has five bedrooms, three full bathrooms and four part-bathrooms. The basement is fully finished. Both Mr. Lozinsky and Mr. Sun adjust the sale price downward for time, -$313,951 by Mr. Lozinsky and -$300,000 by Mr. Sun. Both appraisers make a substantial negative adjustment for the size of the lot, -$1,258,888 by Mr. Lozinsky and -$850,000 by Mr. Sun. That is the extent, however, of the similarities in their respective analyses of this sale. Mr. Lozinsky makes a negative adjustment of $364,500 for the larger size of the house and a negative adjustment of $206,750 for what he describes as superior interior finishes. He makes no adjustments for location or exterior finish, describing them as similar, and no adjustment for parking. Mr. Sun makes a negative $170,000 for location. He makes positive adjustments totaling $1,440,000 for interior features and the age of the home, describing these to be of inferior quality compared to the subject, and for the lack of a garage and the patio. Mr. Lozinsky’s adjusted sale price for this property is $3,138,000 and Mr. Sun’s adjusted sale price is $5,402,000.
[10] Throughout Mr. Sun’s evidence he refers to the subject as having been “extensively renovated” or “substantially renovated”. In Mr. Sun’s view, the quality of the improvements and the level of craftsmanship as a result of the renovations surpass the level of updating typically seen in other heritage character homes in the neighbourhood. While acknowledging that 3590 Cypress was also “extensively renovated” in 2002, it is Mr. Sun’s opinion that the subject has superior attributes as a result of its renovations. On the other hand, Mr. Lozinsky describes the interior alterations in the subject as “cosmetic upgrades” and more recent renovations to the kitchen and bathrooms being to a “modest standard”. He provides copies of Building Permits from the City of Vancouver in 1990 and 2004 for renovations to the subject totaling $254,020. He submits the building permits confirm that the dollar value in renovations is not as significant as the Assessor suggests and that the renovations are consistent with other renovations to other properties of similar vintage. The listing information from the two most recent sales of the subject suggest the renovations that occurred between November 2003 and June 2007 included finishing of an additional 1,000 square feet of living space to create an additional seven rooms including an additional bedroom and an additional bathroom. The 2007 listing photograph of the living room shows the extent of the renovations in that room with the addition of the coffered ceiling not present in the 2003 listing photograph.
[11] The difference in opinion between the two appraisers as to the quality and extent of the subject’s renovations is a difficult one to resolve on the basis of written submissions and photographs. Given that these types of opinions are very subjective, it would likely to be difficult to resolve even if the appraisers made themselves available for cross-examination. Looking at the photographs and applying my own subjective opinion, the subject home appears to have been extremely well kept and updated. I would not describe it as modest in comparison to the photographs of the other homes. Looking at the evidence more objectively, whether or not the cost of the renovation equaled the amount of the building permit, the addition of such a significant amount of living area between 2003 and 2007 amounts, in my view, to a pretty substantial renovation. I note further that many of the renovations to the other heritage comparables are not as recent as those in the subject, some having been completed as long ago as the 1980’s. I am inclined, therefore, to accept the opinion of Mr. Sun as to the extent of the subject’s renovations and their relative comparability to other properties.
[12] While I am not necessarily convinced that the best comparables are the one’s selected by Mr. Sun of substantially newer homes, including a home of concrete construction designed by renowned architect Arthur Erickson, neither am I convinced that Mr. Lozinsky has not “downplayed” the effect of the renovations in the subject and misjudged the relative comparability of the subject to other homes, even other updated homes, on the First Shaughnessy Heritage Inventory list.
[13] I also find it difficult to accept, as submitted by Mr. Lozinsky, that the Appellant paid $1.9 million dollars more for the property than it was worth, or a premium of almost 50% over its market value. While it is certainly possible that the Appellant paid too much for the property, the reality is that he did pay that amount in an open market transaction very close to the valuation date. I have no evidence to suggest that the Appellant was unusually motivated or that there were any circumstances around the purchase of this property to suggest the price paid should not be expected to be within a reasonable range of the property’s market value. The actual sale of a property in an open market transaction is the best evidence of its market value at that point in time. I find that the market value of the subject as of July 1, 2007 is $5,900,000.
EQUITY
[14] Mr. Lozinsky presents three equity analyses. The first is to compare the assessed value of the subject with the assessed values of the six sale properties used in his direct comparison approach on a value per square foot of land and a value per square foot of improvements basis. He determines the land portion of the assessment is equitable but that the value apportioned to the improvements is far in excess of any of the comparable sales and is, therefore, inequitable. The assessed value per square foot of the subject improvements based on the total assessed value is $807 per square foot compared to $414 to $589 per square foot for the sales. Likewise, based on the assessed value apportioned to the improvements only, the subject’s assessed value per square foot of improvements is $397 per square foot compared to $21 to $134 per square foot for the sales.
[15] Mr. Lozinsky then adjusts the assessed values of the sale properties for differences with the subject to determine an equitable assessed value, as is done in a direct comparison approach to estimate market value. Based on this analysis, he suggests an equitable value for the subject would be $4,000,000. In doing this analysis, Mr. Lozinsky makes similar assumptions about the relative quality of the comparables to the subject as he does in his direct comparison approach. In that I have found Mr. Lozinsky has understated the quality of the subject in relation to his chosen comparables, and am unable to rely on his estimate of market value by this approach, I similarly find it difficult to put much weight on this equity analysis.
[16] Next Mr. Lozinsky does an analysis comparing the assessed value per square foot of the subject improvements to that of the four other homes in the same block. The assessed value per square foot of the other four homes on the block, range from $9 to $64 per square foot. He suggests an equitable value for the subject improvements based on this analysis would be $70 per square foot also resulting in an equitable total assessed value of $4,000,000. This approach assumes that the subject is similar to the other four properties on the block. Two of the properties were constructed in 1966 and are not Heritage Inventory properties. One of those properties was renovated in the early 1990’s and one has not been renovated. The other two properties are Heritage List properties constructed in 1918 and 1912, one of which was renovated in the late 1970’s and one of which has not been renovated. The evidence includes exterior photographs of three of these properties, none of which appear comparable in style or quality to the subject. None would appear to have been modernized to the extent of the subject. I am not satisfied the subject is sufficiently comparable to the other four homes in the same block to compare their assessed values in this manner.
[17] Mr. Lozinsky’s third equity analysis compares the increase in the assessed value of the subject between 2007 and 2008 with the increase in the assessments of the other four properties on the block. The subject assessment increased 98%, while each of the other four properties increased between 25% to 28%. Based on this analysis, Mr. Lozinsky submits the equitable value of the subject would be $3,205,000.
[18] The increase in an assessment from one year to another is not a relevant concern for the Board. Such an analysis assumes that properties were all assessed at the same level of actual value in earlier years, which may not be the case, and ignores that there may be reasons why the assessed value of one property would increase relative to another property. For example, if a property was under assessed in an earlier year, it might be expected that in order to bring its assessment closer to actual value in a subsequent year, its assessment may be increased to a higher degree than another property’s assessment, which might only reflect general market movement. Given that the subject sold in November of 2003 for $2,400,000, and being aware that there has been considerable upward movement in the Vancouver residential market since that time and knowing that the subject was renovated in 2004, I have doubts that the 2007 assessment of the subject at $2,725,000, indicating an increase in value of only 13.5% from the November 2003 sale, was an accurate reflection of the subject’s market value as of July 1, 2006.
[19] Further, this evidence does not say anything about the relative relationship of the assessments of the block properties to their estimated market value. If they are similar to the subject and could be expected to sell in the same value range as the subject, then their assessments are inequitably low in comparison to the subject. But without an estimate of the market value of these other properties in the block as of July 1, 2007, simply comparing their assessed values does not demonstrate an inequity.
[20] The requirement that assessments be equitable does not mean that assessments must be the same, but that they reflect a consistent relationship to market value, not being unduly above or below market value in relation to other similar properties, and that differences can be explained with reference to the market. This property’s assessment at $5,284,000 reflects 89.5% of its market value indicated by the June 2007 sale. The six sales used by Mr. Lozinsky, adjusted for time of sale, reflect assessment to sales ratios (ASRs) of 90.6% to 101.8%. Compared with these six Heritage List properties in the First Shaughnessy neighbourhood, therefore, the assessment of the subject is not out of line. Mr. Sun’s evidence is that between May 2007 and August 2007 there were 1,631 improved residential sales in the City of Vancouver with a median ASR of 97%. In the same period, there were 37 improved residential sales in the First Shaughnessy neighbourhood with a median ASR of 96%. Compared to the other properties that sold in the City of Vancouver and in the First Shaughnessy neighbourhood between May 2007 and August 2007, therefore, the assessment of the subject is not inequitable, but is, rather, comparatively low.
[21] I agree with Mr. Lozinsky that an ASR analysis such as that presented by Mr. Sun is a somewhat self serving measure of accuracy as it only compares the assessments of properties that have sold to their sale prices and says nothing about the relationship between assessed value and market value of all of the other single family residential properties in the City or neighbourhood. It is no wonder the ASR’s so closely reflect market value when the assessment of these properties can be based on the actual sale of the property! Nevertheless, despite the inherent weaknesses in such an analysis, it does provide a measure of the relationship of a property’s assessed value to its market value which can be compared with other similar properties. While the analyses provided by Mr. Lozinsky produce numbers that, at face value, suggest an inequitably high assessment for the subject compared to either the six sales comparables or the four properties on the same block, the analyses do not properly consider the differences between either the sales comparables or block comparables that would reflect a higher value for the subject in the market place compared to these other properties. Consequently, I am not satisfied that the subject assessment is inequitable in relation to other similar properties.
CONCLUSION
[22] I find the market value of the property as of July 1, 2007 to be $5,900,000. I find the assessment of $5,284,000 to reflect a value relative to market value that is not inequitable compared to other similar properties.
ORDER
[23] The Board confirms the decision of the 2009 Property Assessment Review Panel as follows:
Roll No. 09-39-200-008-120-698-74-0000:
|
Land: |
$ |
||
|
Improvements: |
$ |
||
|
Total Assessed Value: |
|
$ |