Decision and Order
IN THE MATTER OF AN APPEAL PURSUANT TO S. 50 OF THE ASSESSMENT ACT
CONCERNING:
AND
Assessor Of Area #23 - Kamloops
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Appeal No.: |
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Refer to as: |
Hatheume Lake Resorts v. Area 23 (2010 PAABBC 20100032) |
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Date of Decision: |
May 4, 2010 |
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Property: |
Hatheume Lake, Merritt Rural |
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Heard: |
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Submissions: |
From the Appellant, received February 19 & March 19, 2010 |
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From the Respondent, received March 5, 2010 |
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Board Panel: |
Jeffrey Hand, Panel Chair |
INTRODUCTION
[1] This appeal concerns the Hatheume Lake Resort which is a property located on the shores of Hatheume Lake near Merritt, British Columbia (the “Property”). The Property is a 15 acre site improved with 22 cabins, a main lodge including a caretaker’s residence, various outbuildings, and a paddock. Of the 22 cabins on the property, 10 are placed into a rental pool and 12 are used exclusively by the owners for personal use. In 2009 the property was assessed with a split classification; 56.16% in Class 1-Residential, and 43.84% in Class 6-Business and Other, under the Prescribed Classes of Property Regulation, B.C. Reg. 438-81 (the “Regulation”). The Appellant contends that the Property should be classified entirely as Class 1-Residential.
ISSUE
[2] The issue is the proper classification of the Property, specifically:
(b) Was the Property being used for residential purposes as that term is used in Section 1(a) of the Regulation as of October 31, 2008 and;
(c) If so, was the Property otherwise exempt from Class 1 Residential under the Regulation.
FACTS
[3] I have been provided with the following documents:
(a) Statement of Agreed Issues and Facts dated December 4, 2009
(b) Submissions of the Appellant dated February 19, 2010
(c) Submissions of the Respondent dated March 5, 2010
(d) Reply Submissions of the Appellant dated March 19, 2010
[4] The Property is a 15 acre site located on the shores of Hatheume Lake near Merritt, British Columbia. The Property contains 22 cabins, a main lodge including a caretaker’s residence, various outbuildings and a paddock.
[5] There is a Co-ownership Agreement that governs the rights and obligations as between the various owners of the Property. There is a management company, 665060 B.C. Ltd. that is responsible for managing the lodge, the lands, and the rental of the cabins in the rental pool.
[6] The Co-ownership Agreement gives exclusive right to the use, enjoyment, and occupancy of individual cabins to the owner assigned to each cabin. Twelve of the 22 cabins on the Property are in fact used exclusively by individual owners for personal use. The remaining 10 cabins, however, are placed into a rental pool.
[7] The Co-ownership Agreement provides that no owner is permitted to occupy a lot in such a manner as to be domiciled on the lot or to make the lot a fixed and permanent home but rather the lot may be used only as a temporary recreational residence (Co-ownership Agreement Clause 4.1(1)).
[8] A caretaker for the property resides in a portion of the main lodge, which otherwise includes a recreational room containing a pool table, satellite television, and seating area, all of which are available for use by any of the owners as common property or by guests who have rented a cabin at the Property. There is a store on the Property which sells sundry supplies and fishing equipment as well as providing boat rentals.
[9] In 2008 the first date of occupancy for the rental pool cabins was May 11, 2008 and the last date of occupancy for the rental pool was October 19, 2008. During the remainder of the year, no rentals are offered but all the cabins remain available for use by individual owners.
[10] The management company operates the rental pool on behalf of the owners of the 10 cabins who wish to rent their cabins. Revenue derived from cabin rentals is divided between the owners and the management company in accordance with an agreed formula.
[11] The management company takes reservations for the rental cabins and collects fixed rental rates. Cleaning fees, depending on the number of persons using the cabin, are charged in addition to the nightly rental fee. There is a 2 night minimum stay for rental cabins.
[12] A website promotes the Property as Hatheume Lake Resort and shows its availability for cabin rentals between May and October of each year. The parties agree that this was the case in 2008. A central reservation phone number and the rentals rates are displayed on the website.
[13] For 2009 the Property was split classified between Class 1 and Class 6 under the Regulation. The main lodge, which contains the caretaker’s residence, was split classified 50% Class 1 and 50% Class 6. The Respondent does not challenge the split classification for the main lodge, but the Appellant submits all of the lodge should be Class 1 Residential.
[14] The remainder of the Property was also split classified to apportion the classification between Class 1 residential use by the owners of the 12 cabins not in the rental pool and Class 6 Business or Other for the 10 cabins within the rental pool. The Appellant asks that the entire Property receive Class 1 Residential classification.
ANALYSIS
[15] The issue is what is the proper classification of the Property as at the permitted use and physical condition date of October 31, 2008.
Regulation
[16] 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 or motels, other than the portion occupied by the owners as a residence.
Was the Property used for Residential Use?
[17] The Property clearly has two uses. It can effectively be divided into that portion used exclusively by owners for personal use and that portion that is made available for rental purposes between mid-May and Mid-October.
[18] The British Columbia Supreme Court in Legends Owners Association v. Assessor of Area 08, (2006 B.C.S.C. 177) endorsed a broad definition of residential use as encompassing any property used for sleeping and other domestic activities, including cooking, living and other residential purposes. In my view, there can be little doubt that the Property as a whole, whether it be those cabins used by their owners exclusively, or those placed into the rental pool, is being used for residential purposes as that term is used in the Regulation.
[19] The Legends Decision goes further and is also authority for the proposition that hotels and motels, absent a specific exclusion, are indeed properties used for residential purposes as well. 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 7 days or less from the provision.
[20] I find that the Property is being used for residential purposes and accordingly comes within the ambit of Class 1 of the Regulation.
Is the Property Otherwise Excluded from Class 1?
[21] The Respondent takes the position that the 10 cabins within the rental pool effectively operate as a motel and are specifically excluded from Class 1 Residential under the Regulation. The Appellant contends that the 10 cabins cannot be considered a motel but also adds that as of October 31, 2008, the Properties were not available for rent and, therefore, they were not a motel on that date. I will deal with each of these arguments below.
Do the Cabins Within the Rental Pool Constitute a Motel?
[22] The term motel 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 Travelers Inn Motel v. Assessor Area 01 Capital (2006) PAABBC 20060505 the Board said:
“I find 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 a determination made on the facts 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 cases identify some common factors, which were considered in finding a property be operated as a hotel or motel. They include:
No room is specifically set aside exclusively per month paying a 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 residency tenancy rights) that guests must accept
A central phone system
[23] In Khizanah Enterprises v. Assessor Area No. 9 - Vancouver (1997 PAABBC 1997-09-0016) it was decided that the most significant factor to weigh in considering whether a property was operating as a motel is the fact that rooms are offered for nightly or weekly rental to the public. The presence of other services such as maid service was less significant as a determinative factor for motel use.
[24] I have also considered a decision in Werbik v. Assessor Area #01-Capital (2003 PAABBC 20028320) which considered the classification of a bed and breakfast property. In that case the Board split classified the home on the basis of Class 6 Business and Other for all bedrooms not occupied by the owner as their principle residence. I take from this decision that by offering overnight accommodation to the public, the operation became “akin to” a hotel, motel or inn.
[25] Finally, the British Columbia Court of Appeal has offered some additional guidance in Hennessy v. Assessor of Area 01 - Capital (1996, Stated Case 367) where it was said again that a bed and breakfast operation could be considered a hotel, especially where additional services were offered to guests such as kayak rentals and nature seminars.
[26] Considering these authorities I find that the term “motels and hotels”, as used in the Regulation, must be given a broad interpretation so as to capture properties that offer short term rental accommodation to the public and are operated in a manner that is consistent with a motel.
[27] The cabins within the rental pool are clearly marketed as rental accommodation to the public for short term stays. The website provides a central reservation number, and posts nightly rental rates. At least some maid services are provided and, all of these services are managed and under the control of a single manager. In addition, the Property contains a store to sell supplies to guests and to provide boat rentals. These services are, in my view, consistent with a motel in the normal sense of that term.
[28] The Appellant argues that actual rental occupancy in 2008 was low, being only 14.73% for the rental units, and 6.14% for the Property as a whole. However, it is not actual rental use that is determinative but rather whether the cabins were made available for rental. It is clear on the evidence that the cabins were available for rent to the public for the whole of the five months between May and October of 2008.
[29] Accordingly, I find that the cabins within the rental pool collectively operate as a motel for the purposes of the Regulation and are therefore, excluded from Class 1 Residential and should be classified as Class 6 Business and Other.
[30] As a result of finding the rental cabins are a motel, it is not necessary to deal with the Appellant’s submission that the list of exclusions from Class 1 is an exhaustive of the list of uses. That submission is premised on a finding that the rental cabins are not operated as a motel, but rather as some other use not enumerated in the list of exclusions. Nor is it necessary to deal with the Respondent’s submission that if the Property is not a motel then it is captured by another category of use which he has called “commercial accommodation property”.
Was the Property a Motel on October 31, 2008?
[31] The Appellant submits that even if the cabins within the rental pool are found to be a motel, it is said that they were not a motel on October 31, 2008. This is so, it is submitted, because rentals in 2008 ceased for the winter season on October 19, 2008, and none of the cabins on the Property were “offered or available for rent” as of October 31, 2008.
[32] In effect, I am asked to disregard any evidence of what use was made of the Property before October 31, 2008 and instead consider the use on one specific day being the permitted use and physical condition date of October 31, 2008.
[33] The Appellant relies on a number of previous Board decisions that have interpreted section 1(c) of the Regulation in support of its position on how the motel exclusion must be interpreted. Section 1(c) of the Regulation says that Class 1 Residential Property includes property having “no present use”. One of those cases relied on, Jericho Tennis Club v. Assessor of Area 09 – Vancouver 1999 Can L11 6756 (B.C.S.C.) found that in applying Sec. 1(c), it was appropriate to consider the use of the property only on October 31, being the physical condition date, in determining whether the property indeed had “no present use”.
[34] I must consider whether that same reasoning must necessarily apply to interpreting the motel exclusion found in the Regulation. I find the cases that have interpreted Section 1(c) of the Regulation are distinguishable because, in my view, the interpretive requirements of the phrase “present use” must necessarily require a consideration of use at a particular point in time in order for the word “present” to have any meaning. In the Jericho Tennis Club decision, for instance, the issue before the Board was whether vacant land had no present use on the physical condition date. The same analysis cannot apply in the case before me which involves determining whether the rental cabins constitute a motel. In this case the Property was operating as a motel between May 14 and October 19, 2008. It did not cease to be a motel simply because the cabins were not available for rent on October 31, 2008. To so hold would lead, in my view, to a nonsensical result on this reasoning. A hotel could operate for an entire year and simply close for a single day in order to obtain a different classification.
[35] I find as of October 31, 2008, the rental cabins did indeed operate as a motel notwithstanding that they were not available for rent on that specific day.
[36] At paragraph 49 of the Appellant’s submission it is submitted that even if the cabins in the rental pool are a motel there is an exemption founded in the Regulation for “that portion of the hotel or motel building occupied by the owner or manager as his or her residence”. Implicit in this submission is the notion that since the rental cabins are only available for owner use between mid October and mid May each year, this portion of the year should be considered an exception to the exclusion for motels.
[37] For this exception to apply there must be evidence that the owners actually reside in the cabins. The Ownership Agreement specifically prohibits owners from taking up permanent residence in the cabins. There is no evidence of permanent residence, and such use would be prohibited under the Ownership Agreement.
[38] I do not think the residency requirement found in the exemption to the exclusion with the Regulation can mean anything other than permanent residence. While there is certainly authority for the proposition that the term “residential use” can include temporary habitation in a structure, the same cannot be said for the word residence as used in the Regulation.
Classification of the Lodge
[39] The only evidence before me concerning the lodge found on the Property is that it is used in part as a permanent residence for the caretaker of the Property and the balance is used as a common area available to owners and those who rent cabins.
[40] The 2009 assessment apportioned 50% of the lodge as Class 1 Residential, presumably on account of the use as a personal residence for the caretaker, and Class 6 Business or Other because it was available for use by those who rented cabins on the Property. The Respondent does not seek to challenge that apportionment, however, the Appellant maintains that since the whole of the Property should be classified as Class 1 then there should be a similar result for the treatment of the lodge.
[41] Absent additional evidence on this point, the 50% apportionment between Class 1 and Class 6 seems appropriate. In light of my finding that the rental cabins constitute a motel and are therefore excluded from Class 1, it is appropriate that a portion of the lodge should be Class 6 Business or Other.
Conclusion
[42] Section 10 of the Regulation permits a split classification where property falls into two or more prescribed classes. That is appropriate in this case. The 12 cabins used exclusively by the owners and 50% of the main lodge, being used as a residence for the caretaker, are properly classified as Class 1 Residential and should remain so.
[43] The portion of the property composing the 10 cabins in the rental pool should be classified as Class 6 Business and Other.
ORDER
[44] The Board confirms the decision of the 2009 Property Assessment Review Panel as follows:
Roll No. 23-58-731-07665.000:
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Land: |
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Class 6 - Business and Other |
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1,320,000 |
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Improvements: |
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Class 6 - Business and Other |
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1,042,000 |
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Total Assessed Value: |
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$ |
SCHEDULE A
Prescribed Classes of Property Regulation, BC Reg. 438/81
Class 1 – Residential
1. Class 1 Property shall include only:
(a) 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