If you own property in New Brunswick your 2017 assessment notice is in the mail and is likely to hit your desk later this week. There will be some surprises this year. Apartment and camp ground owners… sorry! The number you are looking at isn’t a mistake… both were re-assessed this year... Before you call the Premier’s office, grab another cup of coffee and give me a call and I’ll share what I know so far!
We’ll be compiling some data over the next few days and will have some more insights on what has changed but until then there has been some talk of reforms to the New Brunswick property tax system of late and there is one important issue that hasn’t been brought up but should be.
Equity, Uniformity, Fairness – The Missing Link
Ignoring the process part of the system (which is largely a function of resources committed to it) and the “my tax bill is too high side of it” (which is a function of municipal spending), the assessment part of the system which is governed by the New Brunswick Assessment Act generally represents the gold standard in assessment. New Brunswick has a market value system, requires that values be updated annually, and has a current base date (January 1st of the current year) so taxes are allocated based on the most current economic conditions. There is however one glaring omission and that is a provision to allow owners to challenge their assessment on the grounds their assessment is higher than other properties.
How can this be? Certainly equity and fairness is something all stakeholders would want in a system of taxation. During question period on December 13th, the current government confirmed that they want a “system of taxes that is relevant, that is fair, that is progressive…” During the discussion the word “fair” was referenced six times along with the word “equitable”. Similarly in 2012 when reforms were last made to the Act, the White Paper that was published referenced fairness 25 times, and the word equitable 12 times.
If we go back further… much further… to 1963… The New Brunswick Royal Commission on Finance and Municipal Taxation chaired by Mr. Edward Byrne (Byrne Commission) set out its vision for an equitable system of property assessment:
“The accurate assessment of property is as difficult as any tax administration problem. And it is impossible to have equitable taxation without accurate assessment. A primary aim in levying any type of tax should be to treat similarly-situated taxpayers similarly … In order to accomplish this, all property must be valued on the same basis … The only satisfactory basis is market value. If there are variations among different properties in the ratio of the assessed value to the actual market value, the taxes imposed by applying a uniform rate will be inequitable. The owner of property with an assessment ratio that is higher than the ratio for another owner will bear an unjustly heavier burden.”*
Nonetheless, despite more than 50 years of consensus that a fair and uniform property tax system is in the public interest, New Brunswick is among the few jurisdictions in North America that doesn’t give tax payers the right to seek tax relief on the grounds that their assessment is not equitable with other properties.
How is this possible? This requires some speculation. Before the Province took over the assessment process from municipalities during the mid 1960s assessments were ad-hoc. Assessment Levels (the ratio of assessed value to market value) varied by municipality from 23% in York County to 102% in St Andrews and most municipalities had at least one piece of special legislation setting municipal taxes for its major tax payers. When the modern Act came into force, legislators intended to bring consistency to the process and required that:
“all real property shall be assessed at its real and true value as of January 1 of the year for which the assessment is made.”
It can be difficult to know the exact intent, but knowing that the legislature was seeking a fair system of taxation that would ensure that assessments were uniform within and across municipal units it stands to reason they were assuming that the Assessment Services Division would be able to consistently achieve an assessment level at 100% of market value across all municipal units. At the time, the Act also included a provision for owners to appeal other assessments in the municipality providing at least a partial remedy for owners assessed at levels higher than their neighbors.
Legislators may have felt these provisions would be sufficient to ensure an equitable assessment roll, however the task of assessing tens of thousands of properties isn’t an easy one particularly when it comes to commercial properties. It requires developing models for all the different types of properties and for all of the individual neighborhoods in the Province and it isn’t always easy to return an assessment roll where all of the properties are assessed at 100% of market value. In fact, looking at statistics contained in SNB’s annual report from 2006-2014, the commercial level of assessment provincially has ranged from a low of 89% in 2008 to a high of 93% in 2010. The practical implication of this is that a property owner assessed at 99% of market value has no remedy for a reduction despite all other properties being assessed on average, at 89% to 93% of market value. Even had the owner been willing to appeal all of the other commercial assessments in the municipal unit, that option was removed when the Act was amended in 2008.
In the past, the New Brunswick Court of the Queens Bench has ruled there is no remedy within the Act or at common law for owners to have their assessments reduced on the grounds their assessment is unfair relative to other properties. Rather than hoping the Court of Appeal will provide a remedy at some distant future date, lets ask the legislature to give assessors and the Assessment and Planning Appeal Board the tools to ensure tax payers truly have a fair and equitable property tax system when they review the Act this year.
* Excerpt taken from Report of the Auditor General - 2005
Written by Andre Pouliot, Vice President of our New Brunswick operations and Senior Manager of our Property Tax Division. For more information about our counselling services, feel free to contact Andre at (902) 429-1811 or email@example.com
Finding Answers in the Bottle
Recently our Brokerage Division closed a deal that will see a mid-century commercial building transition from a hair salon to Halifax’s first cidery – a business dedicated to the production and enjoyment of hard ciders. It is the city’s newest addition to the burgeoning craft beverage industry, and by my count, the fifth such business within short walking distance of our head office. Thanks to double digit year-over-year growth in the industry, such businesses have been setting up shop throughout our region, but I have good reason to believe we at Turner Drake are working in the very nexus of Beer Oriented Development.
The Broken Window Fallacy
The craft beverage industry is booming throughout the continent evidently. However, BOD is a specific variant distinguished by integrating the production element the brewery, with the social gathering element of a retail/food service business, wrapping it all in a locally authentic brand identity and plunking it in walking distance to residential neighbourhoods. The term itself was apparently coined in the weary rust-belt city of Buffalo where a pattern of revitalisation lead by the craft brewing industry has been observed in neighbourhoods otherwise dogged by the Midwest’s manufacturing decline and hard hit by the Great Financial Crisis.
Back in our corner of North America, we can certainly attest to the healthy “third place” function of Beer Oriented Development. That is to say, in addition to the production itself, many businesses serve as a nexus for community development outside of the home and workplace. They are small enough operations to revitalise defunct or underused properties without the timeline and complexity of projects requiring land assembly. The size and design of the retail operation typically creates an enjoyable atmosphere and promotes interaction between customers (who are often neighbours). Where the sale and service activities are able to spill outside onto a patio or sidewalk café, they further add to the vitality and liveliness of the entire street. With seemingly endless groups of engineering school buddies (it’s always those engineers) keen to start their own sudsy venture, why do some areas see a flourish of BOD while others simply get an increase in breweries?
There’s a classic economic parable that goes something like this: A baker’s shop window is broken and he hires a glazer to repair it. Passersby observe the glazer at work and remark on the economic activity stimulated by the broken window. Meanwhile, the baker having spent his money on the window now postpones his plan to purchase a larger oven to increase his production. In this way, the passersby are mistaken about the benefit of a broken window because they consider only what they see, and not what they can’t see. That is, they do not consider the opportunity cost; the lost benefits that would have been generated by things that were prevented, often without conscious purpose, from ever happening in the first place.
Six of One Ain’t Always a Half Dozen
We don’t often think about opportunity cost in planning. We like to have the initiative; there are no problems that can’t be fixed through the application of more regulation or better policy. In this mindset, it is sometimes easy to lose sight of the fact that many (perhaps even most) good things tend to happen on their own if we leave the space for it. Nevertheless, Halifax, like many Atlantic Canadian cities, does benefit from not having gone too far off the deep end when it comes to land use regulation… at least compared to standard practices west of our region. Consider the present (if outgoing) land use bylaw for the Halifax Peninsula area where residential land use is governed by 6 zones. Contrast that with London Ontario, a city of comparable population and municipal budget, where no less than 17 zones are needed just to regulate single detached housing! Clearly one approach provides more “regulatory space” than the other.
London, like Halifax, is a university town with no shortage of thirsty students or courageous engineering buddies. Like Halifax, it has its own litany of recently launched microbreweries. And finally, like Halifax, London did not, and does, not specifically target or promote Beer Oriented Development. What London does have is its hyper specific approach to coding land use which classifies microbreweries as “Food, Tobacco, and Beverage Processing Industries” and among the 20+ flavours of commercial zoning, relegates such uses to the “General Industrial” areas of the city. In Halifax, some microbrewers also set up shop in the industrial areas, depending on their business model. However, Beer Oriented Development is mostly occurring under the General Business zone which allows – to paraphrase – basically any business that doesn’t create problems in the area.
The Future is Delicious
The shocking result? All of London’s new microbreweries are segregated into soulless industrial parks. Sure, they’ve got a quality product, backed by the same witty, self-aware marketing, and most even have attached tasting rooms and offer brewery tours, but to access any of it you’ve got to drive out past electrical suppliers and find their docking bay among the other distributers and warehousers. So while both city economies are benefiting from growth in the craft beverage industry, only Halifax is gaining the additional benefits to neighbourhood revitalisation and contributions to a lively pedestrian atmosphere. These are not just intangible perks for urban hipsters. There is a hard dollar cost to London in terms of lost economics spinoffs and unrealised gains in property value, but that cost is the new oven, hidden behind a broken window.
Beer Oriented Development is just a microcosm of a larger dynamic. No one was anticipating an explosion of craft brewing or the potential of BOD when the zoning codes were written twenty years ago, just as the codes we write today do not address a futuristic possibilities like the rise of distributed manufacturing, or an explosion of artificial intelligence. In truth, it’d be foolish if they did. In dealing with an ultimately unknowable future, it is basic human nature to play it safe; control what is knowable, and regulate the unexpected out of existence. The costs of this approach are easy to ignore because we are never fully aware of paying them. Yet, as Beer Oriented Development clearly demonstrates, there is a benefit, indeed a competitive advantage, to the city that sets itself up to embrace the unknowable future and capitalise on the unexpected.
What can you build on your property? The answer to this is determined by interpreting the local planning policy and regulation. However these are living documents, and project timelines are often measured in years. Thus, it is essential to not only look at the present-day context, but peer into the future for additional opportunities. This is precisely why all our Planning Policy and Regulatory Review reports contain a Long-term Outlook section.
For a recent client, this feature paid dividends. For their property, the desired outcome would have required multiple amendments and the negotiation of a Development Agreement under present requirements; an expensive and risky process overall. However, by casting a wider gaze in our investigation, we identified an opportunity to pursue the same goals through a larger policy update the municipality was preparing to make. While this didn’t save our client any time, it lowered the risk, and greatly reduced the cost.
We’re finding our Planning Division lends vital assistance to our other areas of operation, improving the detail and delivery time of Valuation, Counselling, Economic Intelligence, Property Tax and Brokerage assignments. More importantly, it creates value for our clients, aiding with development projects big and small.
Whether you’re musing about options or working towards a clear goal, ask Neil Lovitt, our Planning Division Manager, how we can help: 1 (902) 429-1811 (HRM), 1 (800) 567-3033 (toll free), or firstname.lastname@example.org
On the 1st of this month, Bill 52, an amendment to the Halifax Regional Municipality Charter allowing HRM Council to set separate commercial tax rates in areas it designates, received its First Reading in the Nova Scotia Legislature.
The Bill (as tabled) provides that Council may:
(a) Set different commercial tax rates for commercial property located in areas of the Municipality designated by Council, based on the assessment of commercial property under the Assessment Act;
(b) Set different commercial tax rates for commercial property located in areas of the Municipality designated by Council, based on the length or proportion of frontage of a property on a street, including a private road;
(c) Set additional tiered or escalating commercial tax rates based on the factors set out in clauses (a) and (b) that are in excess of the rates set in clauses (a) and (b); and
(d) Set additional or different commercial tax rates using any combination of clauses (a) to (c).
The infusion of flexibility into the taxation regime is laudable, and while the tools could allow Council to, for example, provide assistance to owners affected by construction in the Downtown, or to reduce the tax rate in areas in the City that have been impacted by rapidly rising assessments, the potential changes allowed by the Bill won’t be the panacea for all commercial tax woes.
The potential for inequitable tax loads where “street frontage” is used, in whole or part, to calculate the tax rate is alarming (and puzzling) especially for properties located on corner lots or developed less intensively than neighbouring properties. It appears to be a way of circumventing the current ad valorem methodology for distributing the tax load. There have been many attempts worldwide to eliminate or “improve” the ad valorem (market based) method of allocating property taxes: none have yet been successful… some, such as the late Mrs. Thatcher’s infamous poll tax in the United Kingdom, resulted in riots.
There would be winners and losers for each amendment being proposed; any change to tax rates in one area, or upon one class of property, will shift the burden onto another, because there is nothing in the Bill that would reduce the overall contribution of the commercial sector to the City’s tax base. The true elixir would be a change that would make all commercial owners better off.
It’s unclear how Council will utilize their new tools, but it’s not anticipated that the Bill will result in any widespread changes to commercial taxation in the short term. We are monitoring the situation closely, and will provide updates as changes occur. Stay tuned.
The City of St. John’s Assessment Division recently mailed out its Year 2017 Assessment Notices dated 20th September 2016. You have until 1st November 2016 to
file your appeal. This is the second year of the tri-annual assessment cycle: a successful
appeal will continue for the remaining two years of the cycle.
The legislated basis for your Year 2017 Assessment is your property’s market value on 1st
January 2014 (the “Base Date”) having regard to its current physical condition. If you filed
an appeal last year and it has been resolved, you have nothing to fear for the remainder of
the re-assessment cycle (assuming your new notice reflects the reduction you secured for
2016). If you did not appeal last year, or your appeal from last year has not yet been
resolved, the time to act is now.
If your property’s market value is less than its assessed value, it is over assessed and you
should file an appeal on or before 1st November 2016. Market value is the price the
property would command if it were sold to an “arm’s length” purchaser (i.e. to a nonrelated
buyer) for cash or subject to conventional financing. It is not necessarily the price
that would persuade you to part with the property but rather the price you could expect if
you decided voluntarily to dispose of the real estate. The best evidence of market value is
the sale prices of similar properties that were sold within six months of 1st January 2014.
If your property is assessed at less than its 1st January 2014 market value, you may still
be over-assessed because the Assessment Act mandates that your property has to be
assessed in a uniform manner. This provision attempts to ensure that the tax load is
spread across the municipality’s property inventory in an equitable manner. It also
discourages the City of St. John’s Assessment Division from deliberately under-assessing
property to thwart appeals. So, if for example, commercial properties are assessed on
average throughout the municipality at 70% of their market value, you will have grounds
for appeal if your property’s assessment exceeds this percentage. If similar properties to
your own are assessed at lower unitised rates (e.g. per square foot for office, industrial
and retail property; per room for hotels, apartments and seniors’ housing), that is also a
sign that you may not be equitably assessed, and may be grounds for appeal.
The Bottom Line: If you did not appeal last year, or your appeal from last year has not
yet been resolved, you get another kick at the can. You should appeal if your property is
assessed at more than, (1) its market value on 1st January 2014, or (2) the assessment of
other, comparable properties… or if you harbour any doubt that your property is overassessed.
A successful appeal will continue for the remaining two years of the reassessment
Action Required: If you file an appeal, be careful not to restrict your grounds of appeal.
We recommend that you use the following wording: “The assessment is excessive, unfair,
not uniform with other assessments, and any other grounds that may appear.” If you
prefer, we will file the appeal for you. For advice on whether to appeal, call our
Newfoundland Tax Team, André Pouliot or Mark Turner at (709) 722-1811 (St. John’s) or
1-800-567-3033 (toll free), or email them at email@example.com or
Purchasing a service is risky. You do not know what you will get until you get it. Products are tangible: you can see, feel, and sometimes taste or hear them to judge their quality. Unfortunately, you cannot do that with a service. Quality can only be determined after the service has been delivered. But there is a better way…
Turner Drake is the first, and currently the only real estate consulting company in Atlantic Canada to be registered to the ISO 9001:2008 quality standard. We are also registered as a firm regulated by the Royal Institution of Chartered Surveyors (RICS) for the 2015-2016 year. We are one of only two real estate firms in Atlantic Canada to be RICS registered.
What is the RICS Regulation?
RICS is leading the initiative for a worldwide standard of professional conduct in the land, property and construction sectors. Registered members are required to adhere to three major regulatory components:
1. RICS Rules of Conduct
2. Continuing Professional Development
3. RICS Ethical Standards
These standards are upheld by a risk-based monitoring system to ensure quality services are provided by registered firms. For more information about the program, visit the RICS website.
How is registration achieved?
To satisfy the RICS standards, we had to establish that we had the following programs in place:
• A complaints handling procedure.
• A training program for all employees (we have a 7-year training program that includes 27 in-house training modules [500 hours], completion of the University of British Columbia’s Diploma in Urban Land Economics (DULE) and Bachelor of Business in Real Estate (BBRE) degree, and mentored “on the job” training.
• Professional Indemnity Insurance to ensure that if a claim is received, a designated insurer will respond (not the insurer in place when the negligent act occurred).
What does this mean for me?
We follow the RICS fundamental principles in every aspect of our business:
1. Ethics: You can feel confident that you are dealing with an ethically sound firm.
2. Protection: Independent Professional Indemnity Insurance.
3. Security: We have a clear and transparent procedure in place to resolve complaints as fairly and efficiently as possible.
4. Client Care: Our staff regularly update their skills and knowledge through training and education to give you the best service possible.
We follow the values of the RICS regulation in each and every assignment we undertake. Purchasing real estate services can be a risky business, but we have substantially reduced that risk.
Builders of multiple-unit residential apartment buildings will be all-too familiar with the GST/HST self-supply rules administered by Canada Revenue Agency (CRA) under the Excise Tax Act. Engaging with CRA at any level is a knee-trembling experience that is best avoided if at all possible, so spare a thought for apartment builders, who have no choice but to engage every time they finish a new project. The self-supply rules require that builders volunteer the value of their completed asset, remit the GST/HST due and then wait to be told if they got it right. Welcome to the unnerving world of self-supply.
Based on the number of calls we have been getting of late, CRA is growing increasingly suspicious of the values being declared by builders in this new age of ultra-low discount rates and ultra-high property values. They smell profit and want a bigger piece of it. If you’ve been targeted for scrutiny, it’s time to call for reinforcements.
How it works
For those who are unfamiliar with the process and want to follow along, this is how it works. Generally speaking, “used” residential property is exempt from GST/HST and no liability arises when it is sold in the marketplace. But new residential property is taxable upon completion, and for rental property the liability usually arises when the first unit is occupied, at which time GST/HST becomes payable based on the “Fair Market Value” of the asset. The most common situation, of course, is newly constructed rental apartment buildings, but the self-supply rules apply to other types of residential property, including condominiums if the builder chooses to rent them rather than sell them, an increasingly likely scenario in markets where the demand for condominiums has dried up. So on that happy day when the first unit is rented, the builder is deemed to have sold and repurchased the property at its declared (i.e. self-assessed) “Fair Market Value,” and gets to celebrate the occasion by remitting the required GST/HST.
The purpose of the GST/HST self-supply rules is to ensure the builder does not escape paying tax on value-added components of the project, such as the value of employed labour, financing costs and profit, the value of which would have been taxable had the asset been sold rather than rented upon completion. According to the official CRA publication (GST/HST Memoranda series 19.2.3, paragraph 5), the stated purpose of the self-supply rules is to create a “level playing field” and remove the potential tax advantage a builder would otherwise have in constructing a residential complex for rent.
So what is “Fair Market Value” and what does the Tax Court say?
CRA’s Policy P-165R gives some guidance and basically interprets it as the highest price that can be achieved in an unrestricted market – much the same as the industry-standard definition of Market Value. It also recognises the three traditional methods for determining Market Value, colloquially known as the “three approaches to value,” being the Cost, Income and Direct Comparison approaches. While the CRA Policy statement does say that no particular method should be excluded categorically, the Tax Court of Canada has tended to favour the Cost Approach in its rulings on GST/HST self-assessment cases. The most recent Tax Court ruling to cross our desk (Beaudet v. The Queen, 2014 TCC 52) adopted the Cost Approach method in favour of the other methods to establish the Fair Market Value of a residential apartment complex, but only after giving careful consideration to each of the other methods. So don’t be fooled into thinking the other valuation methods have no relevance: on the contrary, CRA will expect all the relevant valuation approaches to be examined and reconciled. They are deeply suspicious that reliance solely on the Cost Approach method conceals genuine profit, whereas the Income Approach method uncovers it. They might be right, but buildings which sell in the marketplace and generate those ultra-low discount rates are cash flow vehicles, delivering stable revenues backed up by full occupancy and a track record of success. New-builds have neither full occupancy nor a track record and must be valued accordingly for self-supply purposes.
Whether or not the final result matches other market valuations done on the same property for other purposes – typically mortgage financing – does not appear to distract the Court, which remains firmly focused on the specific issue at hand. That was perhaps most clearly expressed in an earlier Tax Court decision (Sira Enterprises v. The Queen 98-2463-GST-G) when it said “[t]he Court’s duty is to determine the fair market value of the properties for the purpose of the GST. The Court is not interested in the fair market value of these properties for the purpose of sale, and indeed there might be many factors which might have to be considered if the court were required to determine the fair market value for the purpose of sale, which may not be relevant for GST purposes.”
So protect yourself and sleep well
Our advice to builders is to be pre-emptive: have an independent assessment of the Fair Market Value done upon – or even in advance of – completion to support the self-assessed value being reported for GST/HST purposes. That puts you in the best possible position to defend a future challenge, and will undoubtedly help you sleep at night.
So if you, or someone close to you, is losing sleep at the prospect of engaging with CRA, give our Counselling Division a call.
Written by Lee Weatherby, Vice President of our Counselling Division. For more information about our counselling services, feel free to contact Lee at (902) 429-1811 or firstname.lastname@example.org
When you think of the ideal office space, what are your must-haves? An environmentally friendly building? Open work spaces? Proximity to your home or city amenities? These are considered some of the most commonly desired traits in office space by HRM tenants. Office space that fit this bill is becoming more available in the downtown core. Does this mean that the recent trend of moving into office space in the suburbs will come to an end?
HRM comprises eight urban and suburban sub-markets: Central Halifax, Central Dartmouth, Downtown Peripheral Halifax, Suburban Halifax, Peripheral Dartmouth, Burnside/City of Lakes, Bedford and Sackville. Notable changes to these submarkets since 2011 include 950,000ft.2 of new office space added to the rental market in Central Halifax, Bedford, Burnside/City of Lakes and Suburban Halifax.
With the current lagging economy, it is not surprising to learn that vacancy has almost doubled in the last five years, especially considering the plethora of new office space brought on stream throughout HRM. Vacancy increased in every submarket, but the changes in vacancy rates indicate a shift in where demand for office space is flowing – to suburban business parks. For example, Burnside/City of Lakes and Suburban Halifax experienced among the lowest increases in vacancy. The chart below reflects how the distribution of total rentable area by sub-market has changed in the last five years.
It’s not all bad news for the CBD, though… vacancy in downtown Halifax saw a below average increase in vacancy. This begs the question: because suburban space was highly available, are tenants moving there because they wanted to, or because of its availability? With more space coming on stream in the downtown core consistent with commonly desirable office traits, does this mean tenants will start to shift back toward the downtown core?
In the last year, vacancy increased in the downtown core, not because of tenants vacating the area, but because there is more inventory available. Urban space is competing against new, modern office developments in suburban business parks (previously the only option for new office space in the city) and the population is concentrating in the urban core. With rental rates stagnating as vacancy rises, this is the prime opportunity for tenants to move into new space… and perhaps that space will be in the downtown area.
Click here to read more, including a map showing the spatial distribution of vacancy rate changes since 2011. This topic was covered in detail in this month’s TDP Trends, a free service provided to decision makers with property portfolios in Atlantic Canada. Each month, it provides information on demographic, psychographic, migratory, income and wealth distribution, investment, technological, space utilisation, and other trends influencing property values now or in the future. TDP Trends are archived on the public area of our website.
Linear projects such as transmission line rights of way (RoW) are fertile ground for seeds of suspicion, mistrust and hostility. The scale of the project which may involve dozens, if not hundreds of property owners ensures that the acquiring authority is required to deal with a similar number of individuals. The very nature of the scheme, the forcible taking of property from people who individually stand to gain little from its outcome, often fans the flame of opposition… an experience that pits the “little guy” against corporate Canada. This is worsened if the acquiring authority deploys agents who rely on bluff, bluster and bonhomie rather than real estate expertise, and consider it their mandate to minimize the compensation payable.
Few acquiring authorities assess compensation on a property-specific basis before opening negotiations, or follow the leadership of the Nova Scotia Department of Transportation and Infrastructure Renewal and agree to the owner retaining professional advice at the acquiring authority’s expense. Most regard the property owner as a hindrance. They wait until negotiations founder before preparing an accurate estimate of the compensation properly payable under the Expropriation Act presumably on the assumption that, since they have not expropriated the property, anything goes. Even when a formal estimate of loss is prepared by an independent appraiser, it may not address the entire compensation… little wonder then that property owners distrust authority.
As part of our Counselling Division, which has completed the valuation and negotiation of compensation for several large infrastructure projects, I have seen tension between the acquiring authority and landowners unfold. Based on those experiences, here are the Top 5 reasons property owners use to warn the acquiring authority to “Stay off my land!”
5. The Grudge
One of the most difficult obstacles to overcome is a landowner who simply does not trust the acquiring authority. Often this is because they have been forced to part with their land in the past to make way for an already established RoW, and their previous experience was not a good one. Landowners that are approached yet again may view the current acquisition as a way to “settle the score” for an acquisition they feel was handled poorly in the past. A landowner that has a longstanding negative view of the acquiring authority may be difficult to deal with from Day 1.
4. Uninvited Guests
Much like the stress caused by termites, cockroaches or your in-laws, many landowners worry about the uninvited guests that a new RoW across their land may bring: hunters, recreational vehicles or people looking for a quiet place to dump their garbage. These concerns generally involve worries about damage to the land, liability issues and environmental impact.
3. Au Naturel
Appearances can be deceiving, and sometimes scrub land that appears to have little value may offer far more than meets the eye. Land can harbour an abundance of natural resources from which its owners can profit, such as cultivated crops, gravel deposits, minerals and harvestable timber. Often overlooked is the cost to extract these valuable resources and the fact that market values in many areas already incorporate resource values. Remember to be conscious of over-counting and double-counting when it comes to compensation payments.
2. Nothing Will Ever Be the Same
The general impact of the new RoW is something that almost every landowner contemplates. Some consider the impact to be minimal and will be happy to support the project in exchange for fair compensation payment, but others view the impact as harmful and often have many legitimate concerns that should be addressed. Common concerns include changes to view planes, interference with access, increased noise levels, loss of windbreaks, parcel severance and health concerns.
1. The Greatest Subdivision that Never Was
If I had a nickel for every time I was told that a new RoW was impacting a future subdivision … well, I’d have at least a couple bucks! Impact on future development potential is hands down the most common theme that I have encountered. Sometimes legitimate subdivisions or lands ripe for development are disrupted by RoW projects, and in those instances landowners should be compensated accordingly. However, in my experience many of the “subdivisions” that RoWs just can’t seem to avoid are more of a dream than a reality.
Overall, I would say that the concerns expressed by landowners are often a blend of rational and irrational thought. The world is becoming a more sophisticated place, and landowners are better educated and have access to more information than ever before. In the past, liaison with landowners may have simply included a couple of phone calls and a pat on the back from an employee of the acquiring authority. Nowadays the representative of the acquiring authority should have an increasing number of abilities including exceptional interpersonal skills, above-average organizational skills, patience and training in real estate valuation techniques.
The representative of the acquiring authority should give all landowners the benefit of the doubt and listen carefully to all of their concerns without judgement. Listening to the concerns of a landowner and working with them to mitigate as many of these items as possible is a great way to gain a landowner’s trust. However it is important to be aware that some landowners will go to extreme lengths in order to disrupt the project or increase the compensation payable to them. Good record keeping and a genuine understanding of the burdens that a RoW may bring to a landowner are key.
In the end, you’ll rarely win over every landowner involved in a RoW acquisition, but by keeping these five points in mind, hopefully you can minimize the number of times you hear the phrase “STAY OFF MY LAND!”
Written by Matthew Smith, Manager of our Counselling Division. For more information about our counselling services, feel free to contact him at (902) 429-1811 or MSmith@TurnerDrake.com.
As a recent addition to the Turner Drake team, one of the first major jobs I worked on was collecting data for our December 2015 Market Survey of leasable office and warehouse space in St. John’s, Newfoundland. Given my experience of Newfoundland was limited to a couple trips to visit my girlfriend’s family, being tasked with getting a handle on an entire city’s office and warehouse market seemed a daunting task. However, it has proven to be one of the best learning experiences during my first year at Turner Drake. As a newcomer to the real estate industry, speaking with building owners and managers gave me insight into the issues they were facing, and a more intimate understanding of the market in Newfoundland than I expected to develop in such a short period of time. After such a positive experience, I was excited to be tasked with collecting data on the St. John’s market again for our June 2016 survey.
The June survey is smaller than the December survey: we only gather data on the office markets, with the exception of HRM, where we surveyed both the office and warehouse markets. Don’t think that this means it was an easy job: at Turner Drake, “smaller” rarely means small.
To ensure our data collection met the rigorous standards of our ISO 9001:2008 quality standard certification, our surveyors undertook a month-long data gathering process. We began by compiling an inventory of every new office or industrial space with a minimum rentable area of 5,000 ft.2 in our five target markets (St. John’s, Moncton, Fredericton, Saint John and Halifax). As the number of cranes on our cities’ skylines attest, this was no mean feat. However, this was just the beginning.
The meat and potatoes of the data gathering process is distributing and following up on more than 550 surveys for our June report (and more than 900 for the December version). We begin by sending every one of our contacts an Inventory Form for each of the buildings they are responsible for. This year, we took a bold step forward and sent the survey forms by… email! If we’re lucky, the respondents complete the form with information on the size of their buildings, the current vacancies, the rental rates they are realizing, and a few other pertinent details. Then they check the little box saying “Please send me a copy of the final report” and we’re done. However, things are rarely that easy, and Turner Drake surveyors won’t rest until the job is done! If we don’t receive a response, we send a follow-up email, and if that isn’t returned, we call, and if our calls aren’t returned, we call again… and again… and again… until we get the data we need.
After all of the data has been gathered, it is entered into our CompuVal™ system. CompuVal™ allows us to track vacancy and rental rates over time for both individual buildings and entire markets, as well as analyze the data to predict future trends. To ensure no errors are made, our surveyors review each other’s work, “cleaning up” typos or other mistakes.
All told, the data gathering process can take several hundred hours to complete. For our June surveys, our four surveyors spent more than 330 hours gathering data. This is the point where we turn things over to our Economic Intelligence Unit, who work their magic by taking the raw data and turning it into a vibrant picture of the local market.
If you’re interested in learning more about our Market Surveys or purchasing a copy, give our Economic Intelligence Unit a call at (902)-429-1811 or visit our website.
Written by Colin Walsh, Consultant in our Lasercad® and Valuation Divisions. To learn more about Colin, visit our Facebook page to see his Featured Consultant article.
For the past 20 years, Turner Drake has affirmed the importance of certified space measurement by providing Lasercad® services throughout the Atlantic Provinces and onwards to Ontario. Lasercad® is an essential tool in creating a more intimate understanding between building owners and managers and their buildings’ space inventory.
Lasercad® is a property measurement service which provides precise measurement and calculation of all building areas in accordance with the various industry Standard Methods of Measurement, including the Building Owners and Managers Association (BOMA). Whether you own or manage a small retail strip plaza, an industrial warehouse and fabrication facility or a large multi-level office building, BOMA has a standard for you. We comply with the rules and regulations set by these standards together with our own standard operating procedures to produce measurements with an accuracy of 1 cm, and a closing error of no more than 2%. Furthermore, Turner Drake is the only space measurement company in Atlantic Canada governed by a system certified to the international ISO 9001:2008 quality standard. When it comes to space measurement, we provide precise results in a timely manner: exercising regular calibration of laser equipment and ensuring on-site measurement within 1-2 days of your request.
Measuring an excess of 1.7 million square feet of space in the past year, we have been able to collaborate with a wide variety of clients; from small independent building owners to large commercial REIT’s, working in unison to help our clients properly allocate their space inventory and improve the efficiency of their buildings. With staggering vacancy rates it has become paramount for building owners and managers to not only allocate their space inventory properly, but to optimize the use of this space. Tenants have also become increasingly familiar with the BOMA Standard, requesting certified space measurements prior to accepting lease agreements. Our space certificates therefore provide accurate representation of each tenant space, creating piece of mind to prospective tenants while also creating value as key marketing material for building owners and managers.
In a recent audit of office buildings in Atlantic Canada, we discovered the average area represented in a lease was misstated by 10.1%. Such large discrepancies are typically a result of inaccurate measurements, space modifications on lease renewal that are not corrected in the new lease and the use of a non-standard or inappropriate method of measurement.
Let me tell you about a key aspect of the BOMA 2010 Office Standard Method of Measurement: using this standard requires careful consideration of the “dominant portion” when certifying the subject space. The dominant portion refers to the inside finished surface of a vertical exterior enclosure i.e. window glazing, painted gyproc, etc. To classify as a dominant portion, the finished surface must constitute 50% or more of the vertical dimension between the finished surface of the floor and the finished surface of the ceiling.
Here, you can see an area boundary using the BOMA 2010 Office Standard Method of Measurement. The blue area highlights the use of the dominant portion, a key aspect of this standard.
And here is an area boundary using a non-standard or inappropriate method of measurement.
Now, consider an older office building with 300 deep inset windows comprising roughly two ft2 of space along each windowsill. If these windows were indeed classified as the dominant portion, this would warrant an additional 600 ft2 of rentable space in which the building owner benefits! Your space inventory just increased by 600 ft2 without lifting a hammer!
Educating oneself with the appropriate Standard Methods of Measurement is vital to ensuring proper allocation of space inventory. Knowing your inventory and allocating it appropriately has proven to increase building efficiency and more importantly, increase earnings potential amongst building owners and managers alike.
Although certified space measurement is our specialty, our highly skilled and creative Lasercad® team also provide advice for space planning. We have worked with local developers, measuring portions of and/or entire buildings to provide As-built Plans for proposed renovations, including the virtual placement of demising walls to optimize tenant areas as required by the client. We also provide fire evacuation plans, site parking and layout plans and building mechanical and HVAC systems plans.
Your space is our primary concern, let our Lasercad® team quickly and accurately allocate your space inventory so you can get back to leasing that additional 600 ft2 you just gained. For additional information about these services please visit our website.
Written by Patrick Mitchell, Consultant in our Lasercad® Division. To learn more about Patrick, visit our Facebook page to see his Featured Consultant article.