"How does one properly assess, for taxation purposes, the
value of a brownfield property?" The British Columbia Supreme
Court posed and answered this question in a recent decision in Victory Motors (Abbotsford) Ltd. v. British
Columbia (Assessor of Area No. 15 – Fraser Valley), 2015
BCSC 1230. In the Court's view, when considering the market
value of a brownfield (i.e., contaminated) property, assessors and
the British Columbia Assessment Board (the
"Board") should take into account the
unique circumstances of the owner, and the effects of the
contamination on a prospective buyer.
The case dealt with a contaminated property historically used as
a gas station and automobile dealership – the Victory Motors
Property. Contamination from the Victory Motors Property had
migrated to an adjacent property owned by Jansen Industries Ltd.,
which sued the owner of the Victory Motors Property (Mrs. Webber)
and various gasoline suppliers for damages resulting from the
contamination. Mrs. Webber had tried to sell the Victory Motors
Property for $1,200,000, but was not successful.
Concerned that Mrs. Webber was not aggressively participating in
the litigation, principal of Jansen Industries (Mr. Jansen) bought
the Victory Motors Property for $42,363.24. After acquiring the
property, Mr. Jansen initiated a new lawsuit against the gasoline
companies involved in the contamination. He also renovated the
building on the property and leased portions of it.
The Assessor of Area #15 (and, on review, the Board) assessed
the market value of the Victory Motors Property as $1,080,000,
based on the income that the property could generate (as a single
storey multi-tenant building), and the fact that there were no
remediation orders against the property.
Mr. Jansen appealed, and the Court sent the matter for
reconsideration by the Board. In the Court's view, the Board
failed to produce an assessment that reflected the market value of
the Victory Motors Property. In particular, the Board should have
considered the uniqueness of the property to Mr. Jansen, the
evidence of sale by Mrs. Webber to Mr. Jansen, and the exposure to
potential liability for any prospective owner of the property. To
quote the Court:
The Board assessed the value in a manner that
gave no meaningful recognition to the property's brownfield
status, particularly in light of the provisions of the
[Environmental Management Act], which any potential buyer would
have in mind as a potential economic risk. Moreover, it ignored the
fact that the current owner acquired the property under
circumstances which made the potential economic risk uniquely
acceptable to that owner. ... [para. 31]
That, having acquired the property, the
applicant should use it to produce income, as opposed to leaving it
in its near-derelict state, is not evidence of market value ... .
The question in each case is for what amount the owner could have
sold the property to an informed and willing purchaser. That
question was not answered in this case. A person who purchases a
brownfield property for $42,000 and who benefits from it
strategically is in quite a different position, in his approach to
the contamination, from that of a person who would have to spend
$1,000,000 to acquire the property for the purpose of producing
income. [para. 43]
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