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Turner Drake & Partners Ltd.
6182 North Street
Halifax, N.S.
B3K 1P5
Canada

Tel.: (902) 429-1811
Toll Free: (800) 567-3033
Fax.: (902) 429-1891

Suite 221
12 Smythe Street
Saint John, N.B.
E2L 5G5
Canada
Tel.: (506) 634-1811

Suite 11
109 Richmond Street
Charlottetown, P.E.
C1A 1H7
Canada
Tel.: (902) 368-1811

35 York Street
St. John's, N.L.
A1C 5M3
Canada
Tel.: (709) 722-1811

4th Floor
111 Queen Street East
Toronto, ON.
M5C 1S2
Tel.: (416) 504-1811

E-Mail: tdp@turnerdrake.com
Internet: www.turnerdrake.com

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# Monday, December 21, 2015

You have just 10 days left to reduce your property tax burden for 2016.  The appeal period expires at midnight 31st December.  A successful appeal now is a gift that keeps on giving . . . since this is the first year of the tri-annual re-assessment cycle, the reduction in your assessment will continue through three full years.

 

Commercial property assessments increased by an average of 21.4% for next year in St. John’s.  This would not matter if municipalities exercised the same fiscal restraint as the private sector and held the line on spending.  They would then be able to drop the tax rate by a commensurate amount.  Unfortunately this does not happen:  the temptation is just too great.  Initially they tend to reduce the tax rate somewhat but then it rapidly regresses to its pre-assessment level.  Our research clearly shows that municipalities quickly expand their spending to take advantage of their “increased fiscal capacity”.  For most commercial properties, realty taxes are second in line only to debt service as a percentage of the rent.  Irrespective of whether you pay the taxes directly or recharge them to your tenants, property taxes have a direct impact on your bottom line since tenants will ultimately seek rent relief if their gross rent, including taxes, falls out of line with competing properties.  Be proactive, property taxes should be managed like any other expense.  Effective property tax management requires a solid understanding of the assessment process.

 

The basis for your Year 2016 assessed value, is your property’s Market Value on 1st January 2014 (the “base date”).  In practice the market value requirement is often cited by the City of St. John’s Assessment Division and other assessment authorities in defence of their assessed values, but in our experience property is often assessed at less than Market Value to discourage appeals.  Of course it would not matter if all property were under-assessed by the same percentage amount since the tax load would still be distributed equitably:  but such is not the case.  Fortunately the Assessment Act does provide protection against such shenanigans by including a requirement that all properties in each municipality be assessed in a uniform manner ... so like properties should carry similar assessments.  In practice it is not quite this simple:  you have to compare the sum of all commercial assessments in the municipality with their aggregate market value ... a herculean task unless you have access to the City of St. John’s Assessment Division database.  Since they are unlikely to be that generous we have compiled our own database to assist you.  We can also run a variety of analyses comparing your property’s assessment with others in its peer group.

 

The Bottom Line:  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 over-assessed.

 

Action Required:  None, if your property is enrolled in our PAMS® Property Tax Manager program.  If it is not and 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.  Praise the Lord and pass the ammunition.”  If you prefer we will file the appeal for you.  If you would like 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) and pick their brains.

Monday, December 21, 2015 10:20:52 AM (Atlantic Standard Time, UTC-04:00)  #    -
Newfoundland & Labrador | Property Tax
# Wednesday, December 2, 2015

 

The City of St. John’s Assessment Division recently mailed out its Year 2016 Assessment Notices dated 1st December 2015.  You have until 31st December 2015 to file your appeal.  This is the first year of the tri-annual assessment cycle, so a successful appeal now will continue to provide you with tax savings for a full three years.  (If your property is enrolled in our PAMS® Property Tax Manager program, you can relax:  our Newfoundland tax team is already reviewing your assessment and will file an appeal if the opportunity exists to reduce your tax load).

 

The legislated basis for your Year 2016 Assessment is your property’s market value on 1st January 2014 (the “Base Date”) having regard to its current physical condition.  This then is the first test you should apply.  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 31st December 2015.  Market value is the price the property would command if it were sold to an “arm’s length” purchaser (i.e. to a non-related 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.

 

The Bottom Line:  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 over-assessed.

 

Action Required:  None if your property is enrolled in our PAMS® Property Tax Manager program.  If it is not and 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.  If you would like 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).  If you prefer you can email them at apouliot@turnerdrake.com or markturner@turnerdrake.com.

 

 

Wednesday, December 2, 2015 3:42:09 PM (Atlantic Standard Time, UTC-04:00)  #    -
Newfoundland & Labrador | Property Tax
# Friday, October 30, 2015

On 14th October the Property Valuation Services Corporation (PVSC) published its proposed Year 2016 assessments for Nova Scotia (with the exception of apartments).  If your property is enrolled in our PAMS® Property Tax Manager program we are reviewing the assessment and will do our best to engage PVSC in negotiations to mitigate the increase.  Unfortunately PVSC’s customary tardiness may limit this opportunity:  the official Assessment Roll will be finalised on 1st December.  (If your property is not yet PAMS® protected you can check what PVSC has in store by accessing their web site www.pvsc.ca.)

The practice of publishing an Assessment Pre-roll began in 2000 as a well-intentioned initiative by the then Minister of Municipal Affairs to bring some stability to municipal budgets.  It followed a meeting between the Minister, Deputy Minister, our company president and senior members of our Property Tax Division.  At that time the Department of Municipal Affairs was responsible for calculating assessed values and the Minister reasoned that publishing a Pre-roll would give property owners the opportunity to informally challenge incorrect assessments, which could then be rectified before the official roll (on which municipal budgets were based) was published in January.  The “Pre-roll” was to be published in June, six months prior to the publication of the official Assessment Roll.  It was an idea of such startling common sense that we thought it unlikely to prevail.  But it did!  True to her word, the Minister implemented a policy of publishing the Pre-roll mid-year to provide ample time for negotiations.  The policy survived subsequent Ministers until the job of determining assessments was passed to PVSC, a “not for profit” corporation (paid for by property owners) created for that very purpose in April 2007 … but sadly no longer answerable to the Minister.  Despite the fact that PVSC inherited the Minister’s assessment staff the “Pre-roll” was an early casualty.  At first “transitional” computer cockups bore the brunt of the blame but as the years rolled by excuses were no longer deemed necessary as PVSC struggled to issue its Pre-roll at the eleventh hour.  Today we raise our eyes to the heavens and offer silent thanks if and when the Pre-roll materialises … or as is the case this year, a partial Pre-roll.  Still half a loaf is better than none at all even if it comes at a cost to taxpayers of $17 million annually.  (To be fair PVSC is the only assessment authority in Atlantic Canada that publishes a Pre-roll).

So, if your property is not yet in the PAMS® fold, how do you determine whether your commercial property is overassessed?  The basis for your 2016 Realty Assessment, as mandated by the provincial Assessment Act, is the market value of your property on 1st January 2014 (the “base date”), having regard to its physical state on 1st December 2015 (the “state date”) and the assessments of other commercial properties in the municipality (the “General Level of Assessment”).  Market value then is the first test:  if your realty assessment exceeds your property’s market value on 1st January 2014, it is over-assessed and you should so remonstrate with the assessor (or ask us to do it for you). 

The second test to apply is the General Level of Assessment (“GLA”), calculated by dividing the sum of the 2016 assessments of those properties that sold between 1st July 2013 and 30th June 2014, by the aggregate of their sale prices.  When PVSC divulge their General Level of Assessment they invariably claim it to be between 97% to 100%. Discerning readers will readily realise that 100% can be achieved if half the properties in the municipality are over-assessed by 50%, so long as the other half are under-assessed by 50% … so a property may be assessed at double its twin and still meet this test!  No matter, on the one occasion in which we were afforded the opportunity to review PVSC’s calculations, they proved to be a nonsense:  a point on which the court concurred.  A more realistic GLA for commercial property is 80% to 90%.

The Bottom Line:  If you do not challenge your assessment now you will have to wait until the Appeal Period in January 2016.

Action Required:  If you are in any doubt as to whether your property is over-assessed contact a member of our Nova Scotia tax team, Giselle Kakamousias, Greg Kerry or Mark Turner at 1-800-567-3033 (902-429-1811 in HRM).  They may not be able to help; but by golly, they are nice people.

Friday, October 30, 2015 1:58:13 PM (Atlantic Standard Time, UTC-04:00)  #    -
Property Tax | Nova Scotia
# Monday, October 26, 2015

You have just 9 days left to reduce your property tax burden for 2016.  The appeal period expires at midnight 4th November.  A successful appeal now is a gift that keeps on giving . . . since this is the first year of the tri-annual re-assessment cycle, the reduction in your assessment will continue through three full years.

If you own commercial, industrial or investment property, real estate taxes are undoubtedly your single biggest occupancy expense.  In just over a 20 year period most property owners will pay taxes equivalent to the entire value of their property.  Irrespective of whether you pay the taxes directly or recharge them to your tenants, property taxes have a direct impact on your bottom line since tenants will ultimately seek rent relief if their gross rent, including taxes, falls out of line with competing properties.  Be proactive.  Property taxes should be managed like any other expense and effective property tax management requires a solid understanding of the assessment process.

The basis for your Year 2016 assessed value, is your property’s Market Value on 1st January 2014 (the “base date”) but having regard to its physical state on 1st December 2015 (the “state date”).  In practice these criteria are often cited by the Municipal Assessment Agency and other assessment authorities in defence of their assessed values, but in our experience property is often assessed at less than Market Value to discourage appeals.  Of course it would not matter if all property were under-assessed by the same percentage amount since the tax load would still be distributed equitably:  but such is not the case.  Fortunately the Assessment Act does provide protection against such shenanigans by including a requirement that all properties in each municipality be assessed in a uniform manner ... so like properties should carry similar assessments.  In practice it is not quite this simple:  you have to compare the sum of all commercial assessments in the municipality with their aggregate market value ... a herculean task unless you have access to the Municipal Assessment Agency’s database.  Since they are unlikely to be that generous we have compiled our own database to assist you.  We can also run a variety of analyses comparing your property’s assessment with others in its peer group.

If you own a property, the design or layout of which, is constructed of special materials or in a manner which restricts its use, your real estate will have been designated as a “special purpose property”.  The 2016 assessment notices for this type of property were not mailed on 5th November 2015; the Municipal Assessment Agency is once again waiting for the Legislature to define “special purpose property”.  The latter’s previous attempt was struck down by the courts as being too vague, and their subsequent decision to instead identify them by address was rejected as being arbitrary.  Since the exercise is akin to the parable of the blind man and the elephant, an early resolution may be some time in coming.  However because the Assessment of a Special Purpose Property is based on its Reproduction Cost (less physical depreciation) rather than Market Value the charade lacks levity to property owners so blessed. 

The Bottom Line:  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 over-assessed.

Action Required:  None, if your property is enrolled in our PAMS® Property Tax Manager program.  If it is not and 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.  Praise the Lord and pass the ammunition.”  If you prefer we will file the appeal for you.  If you would like 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) and pick their brains.

Monday, October 26, 2015 2:34:51 PM (Atlantic Standard Time, UTC-04:00)  #    -
Newfoundland & Labrador | Property Tax
# Friday, October 23, 2015

Leading up to the birth of our second little one, I found myself going over the list of what to bring to the hospital to ensure we were fully prepared.  Some of the most important items included diapers, as our almost two year old daughter would say… Momma and Dadda’s clothing, and the ever so important, highly analysed, overly scrutinised… take-home outfit.  While I had originally second guessed my completed to-do list and fully packed, yet functional “go bag” (as I like to call it), the planning and comprehensive process paid off with a stress free stay at Hotel IWK.  Looking back at my eight years with Turner Drake & Partners Ltd.’s Valuation Division, I can recall multiple instances where a small detail had a big impact on the overall assignment.  If not for checking off my due-diligence list, these details may have gone overlooked. 

Below is a list of the areas I spend extra time on when valuing a property:

Zoning/Planning Information

Typically when valuing a property, a zoning map and accompanying Land Use By-Law can be found on the city or town’s website.  Once the existing use is deemed permitted under the current zoning by-law, the next step should not be to move on and consider this section of the report complete.  Instead, the next step is to be speak with the local planner to determine if the existing Planning Strategy is either currently, or will soon be, under review and if that could affect the property in the near future.  An example that I came across was a commercial building with a limited commercial zoning designation.   The property was located on a highly desirable corner; however its maximum height was limited and the redevelopment potential was restricted.  After speaking with the Town Planner, I not only uncovered the zoning designation was in the process of being changed to allow high density residential apartment buildings, but also that the maximum height would be increasing substantially as this street was designated for revitalising the immediate commercial area.  You can surely bet the property owner was pleasantly surprised.

Comparable Sales

I have come to realise that this old saying does hold true with any real estate transaction … “every sale has a story”.  While I would like to assume that all transactions satisfy the criteria of a fair sale, sadly I have been mistaken.  I consistently come across different situations that have impacted the sale price.  If not for speaking to one of the parties involved in the transaction, the sales information may have been misleading.  An example is selling a property to an existing tenant.  The tenant indicated they were willing to pay above market value as their business was established at its current location and this would save them the costs and hassle of moving.  Another example is a sale between two related parties.  While the Deed Transfer appeared to be between unrelated parties, an investigation on the Registry of Joint Stocks may determine otherwise.  I sometimes pat myself on the back, envisioning that Sherlock Holmes himself may not have uncovered this convoluted sale.  Unfortunately, this means another cup of coffee for me and further research for that ever desirable perfect comparable sale.

Easements and Right-Of-Ways

Sometimes reading a Legal Description is as complex as reading Shakespeare… “thence, North at a stone’s throw distance to the old birch tree…”.  While this description sounds like poetry, it proves troublesome when the property has since been fully improved with no birch tree for miles.  A nearby oak tree was noticed from the subject property; however is located within the sidewalk’s planter box so I assumed that was not the reference point.  Nevertheless, a Legal Description should always be read (sometimes deciphered) and the easement and right-of-way portion should be verified on every assignment.  I recently came a across a property owner looking to redevelop their property.  While the property looked good on paper (i.e. large level site with good access from the road and redevelopment occurring in the area), I discovered that a public sewer line bisected the middle of the property which restricted any development above this easement.  This had a large impact on the possible buildable area, overall design, and likelihood of the redevelopment occurring. 

Conclusion

While no two valuations are ever the same, by creating a standardised to-do list that covers some of the essential components of a valuation assignment, no small detail should ever go unnoticed (or take-home outfit left behind!).

Our Valuation Division never overlooks the details. For more information on our valuation services, feel free to contact Matthew Whittleton, the author of this blog post, a Consultant in our Valuation Division and Manager of our Saint John, NB operations, at (902) 429-1811 or MWhittleton@TurnerDrake.com.

Friday, October 23, 2015 11:53:03 AM (Atlantic Daylight Time, UTC-03:00)  #    -
Valuation
# Wednesday, October 7, 2015

The Municipal Assessment Agency recently mailed out its Year 2016 Assessment Notices dated 5th October for the entire province with the exception of the City of St. John’s.  You have until 4th November 2015 to file your appeal.  (The City of St. John’s will mail out its 2016 Assessment Notices on 1st January 2016 … no doubt hoping that you will be too full of Christmas turkey to notice).  This is the first year of the tri-annual assessment cycle, so a successful appeal now will continue to provide you with tax savings for a full three years.  (If your property is enrolled in our PAMS® Property Tax Manager program, you can relax:  our Newfoundland tax team is already reviewing your assessment and will file an appeal if the opportunity exists to reduce your tax load).

The legislated basis for your Year 2016 Assessment is your property’s market value on 1st January 2014 (the “Base Date”) having regard to its current physical condition.  This then is the first test you should apply.  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 4th November 2015.  Market value is the price the property would command if it were sold to an “arm’s length” purchaser (i.e. to a non-related 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 Municipal Assessment Agency from 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.

The Bottom Line:  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 over-assessed.

Action Required:  None, if your property is enrolled in our PAMS® Property Tax Manager program.  If it is not and 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.  If you would like 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).  If you prefer you can email them at apouliot@turnerdrake.com or markturner@turnerdrake.com

Wednesday, October 7, 2015 4:24:00 PM (Atlantic Daylight Time, UTC-03:00)  #    -
Property Tax
# Thursday, October 1, 2015

Property taxes, like all taxes, are mired in controversy.  We hear from hundreds of owners every year, and the refrain is often the same:  They’re too high”; “We don’t want to pay them”; “They don’t make sense”; “The services that I receive from the Municipality are declining, but my taxes keep going up”…

But still, we need to pay for our municipal services.  Halifax, for example, has historically relied on property taxes to fund approximately 80% of its budget.  Part of the controversy (and discontent!) with taxes stems from misunderstandings of how the property taxation system works.  This blog post will focus on a few of the central tenets of Nova Scotia’s property taxation system.  This primer will (hopefully) help you as a property owner/manager confront your issues with assessments and property taxes in the right place, and with the right people.

The first issue that needs to be clarified is the taxation process itself.  Your tax bill is the product of two numbers:  an assessed value and the tax rate (or mill rate).

 

Lesson 1:  Assessed values are the responsibility of the PVSC.

Assessed values are the responsibility of the Property Valuation Services Corporation, a not-for-profit corporation at arm’s-length from the government.  The PVSC’s has a CEO and a board of directors: these directors are in turn made up of representatives from individual municipalities.  We are experts in valuation, and as a consequence, our Property Tax Division specialises in – you guessed it – assessed values! Any issue with your assessed value is a matter to be taken up with the PVSC.

Assessment in Nova Scotia is done on an ad valorem basis (Latin for “according to value”) meaning property is assessed at its estimated market value.  The PVSC completes a revaluation of all the properties in Nova Scotia on an annual basis: some 612,000 properties.  The valuation of all the properties is compiled into what is called the assessment roll.  This roll is then forwarded to the Municipality, who use it to formulate tax rates.

Lesson 2:  Tax rates (and tax bills!) are the responsibility of the municipality.

Now, to move onto the next item in the equation:  tax rates.  Tax rates are set by municipalities. They are determined by setting a budget, calculating the total value of the assessment roll, and dividing those two numbers:

Now, there is a lot of fine print in this equation (especially regarding commercial versus residential tax rates), but what’s important to recognise is that the PVSC assesses the properties’ values, municipalities determine the tax rates (and what those taxes pay for).  Once the city has set its tax rate, they send out a tax bill to all property owners, and then in turn provide services to the community.  Your elected municipal representatives determine the services to provide and how they will be financed, this in turn creates a budget and voila! a tax rate is born.

Lesson 3:  Property taxes are based on the market value of property, not benefits received or services provided (or anything else!).

Another important takeaway from all of this is that ad valorem taxes are a tax on wealth. They are not a tax on income, and they are not a tax on services rendered. The idea behind the ad valorem tax is that wealth is a proxy for ability to pay: those with a greater ability to pay should pay more. Unlike income tax, property tax is not a tax on earnings: it is a tax on wealth. This is especially important for income producing properties, as income and property value are two very different things. Now that we’ve determined how a tax bill is calculated, let’s look at when:  the ‘base date’ of valuation for assessment is January 1st, two years prior to the current assessment year.  For instance:  the current assessment year is 2015. The ‘base date’ or ‘effective date of valuation’ is January 1st, 2013.  But what does this really mean in practice? It means that PVSC, who are estimating market value, are trying to determine the market value two years ago.

Why is this ‘base date’ issue important or even relevant at all? Because, as property owners, you feel market conditions as they happen.  If you have an apartment building and just can’t keep the units occupied, your vacancy and subsequent cash flow are hurting now.  What this two year ‘base date’ lag creates is disconnect between when vacancies happen and when you (may) feel some kind of assessment relief.  This isn’t to say that your current struggles can’t be considered, but for the most part, what’s happening to you now is going to show up in your assessment (and subsequently your tax bill) in two years.

This blog post is intended as a primer to help you as property manager/owner/operator understand the basic process behind your tax bill.  Property assessment and taxation are complex issues with a lot going on behind the scenes (and I mean a lot).  Turner Drake specialises in the assessment half of the equation: municipalities set tax rates, and there’s nothing we can do about that.  What we can do, however, is ensure that your assessment is fair.  My boss has told me time and time again:  we all have to pay our taxes, but that doesn’t mean you have to leave a tip."

Property assessment and taxation lessons provided by Greg Kerry, Manager of our Property Tax Division and Toronto Operations. If you have any questions about your property tax assessment, feel free to contact Greg at GKerry@TurnerDrake.com, (902) 429-1811 (Halifax) or 1 (800) 567-3033.

Thursday, October 1, 2015 4:16:51 PM (Atlantic Daylight Time, UTC-03:00)  #    -
Property Tax
# Thursday, August 20, 2015

With low fertility rates, an aging workforce, and an increasing dependency ratio, Canadian demographics are transitioning from a tailwind to a headwind on property values. In Atlantic Canada, this is doubly true. The Maritimes are the vanguard of the Canada’s aging population, but generally lack the simulative effect of immigration. This sets us on a collision course with important tipping points in real estate economics.

While much has been said about the effect of a stagnant and aging population on economic growth and social services, we find little consideration has been given to its impact on real estate.  This is an enormous oversight; not only is real estate generally the largest single asset held by private citizens and often businesses, but it is by far the largest driver of both revenues and expenses for local government.

On September 17th 2015, from 7:30 am until 9 am, we will host a breakfast seminar at the Halifax World Trade and Convention Centre on the demographic changes sweeping the region, and their impact on real estate values in Atlantic Canada. Experts from our Economic Intelligence Unit and Planning Division will outline the implications of Nova Scotia’s demographics for real estate, and discuss how the way we plan and develop our communities should adapt.

This breakfast seminar will be of interest to decision makers with property portfolios in Nova Scotia as well as municipal planners and professionals active or advising clients in real estate; lawyers, commercial loans officers, accountants, developers. To reserve your hot breakfast contact Gen Lecour at glecour@turnerdrake.com or (902) 429-1811 Ext. 345. There is no charge but we will accept donations to the Salvation Army and Oxfam at registration. 

Thursday, August 20, 2015 10:40:41 AM (Atlantic Daylight Time, UTC-03:00)  #    -
Economic Intelligence Unit | Planning
# Thursday, August 6, 2015

There is a common misconception that valuing unimproved parcels of land (i.e. not built on or cultivated land) is fairly straightforward.  Although there is no shortage of land sales to draw from … the sheer number of variables involved with value and mixed nature of the sales makes valuing unimproved property, which includes islands, one of the most challenging exercises in real estate valuation and appraisal. Over my career I have become familiar with the most important variables to consider when valuing land and briefly share them below. This is by no means a complete list but does demonstrate the complexity involved with valuing land.

It all begins with a conversation with a client regarding their unimproved property. A typical conversation will usually go something like this:

“I am looking to have a valuation completed on my property for sale purposes.  I have received an offer and I want to know if it’s reasonable.  They are offering me $375,000 for 250 acres which is $1,500/acre.  Does that sound reasonable to you?”

This is a difficult question to answer without knowing the details of the property.  In our profession the accepted method for valuing land is to determine an appropriate per unit rate, which is based on similar properties that have sold, and then applying that to the property being valued. However, this approach is often flawed due to the number of input variables involved with value.  For example, you could have two parcels of land that are the same size located adjacent to one another, with one of those parcels having extensive waterfrontage and the other having very little.  So does it make sense to value both of these parcels using an overall per acre rate? Let’s take a look at the most crucial variables …

Access

The type and amount of access can be a large contributory factor to value.  The property, for example, might have enough linear road frontage to be subdivided thus creating several lots.  However, if the road is only maintained and accessible for a portion of the year it can have a significant impact on value.  Alternatively, the property may be accessible by way of a right-of-way.  If that’s the case it would be necessary to review the right-of-way documents to understand what the restrictions are for use of the right-of-way.

Size, Shape and Topography

The overall size, shape and topography of the parcel are also variables which need to be considered.  The parcel may be very long and narrow, short and wide, or have steep terrain or be fairly level, which can have a significant impact on its use and value. 

Location

Location, location, location  If the parcel sits adjacent to a developing residential area it would likely attract a higher value than a property situated in a more rural setting with little development.  Location of the property is very important to consider.

Waterfrontage

Does the property have extensive waterfrontage to a river, a lake or the ocean?  If so, is it susceptible to flooding during certain times of the year?  Is the shoreline badly eroding or is it permanently in a state of wetland?  What is the depth of the adjacent water and does the water level drop significantly during the summer months?  All of these factors affect value and must be explored.   

Cover Type

Another critical variable is the type of land cover.  If the likely use of the property is for forestry harvesting than the cover type would be a critical input variable.  Often times we are asked to value property which contains unique cover types including old growth forests or hemlocks. 

Zoning and Other Restrictions

Even in rural areas where properties are not typically subject to the same level of land controls, there are often restrictions on the use of the property.  For example, the property may be located within a designated wilderness area or within an area designated as a watershed.  These types of restrictions can severely limit the use of the property and thus impact its value.    

Conclusion

Back to the original question; is this offer reasonable?  Well that all depends on a number of factors that need to be investigated before providing any input ... 

The morale of my blog post: Nothing is ever as straightforward as it seems, especially when it involves valuing land.  

If you have questions regarding the value of your property or are interested in learning more, feel free to contact Nigel Turner, Senior Manager of our Valuation Division, at (902) 429-1811 or NigelTurner@TurnerDrake.com.

Thursday, August 6, 2015 9:39:18 AM (Atlantic Daylight Time, UTC-03:00)  #    -
Valuation
# Monday, June 22, 2015

I joined Turner Drake in 1981, just about the same time the Space Shuttle successfully returned from its inaugural flight to usher in the use of manned reusable spacecraft to return to Earth. Upon landing, I believe astronaut John Young hyped on adrenaline, proclaimed “that was a ride of a lifetime”. While my time with my colleagues at Turner Drake has been more grounded, I also consider it a ride of a lifetime; ushering in new challenges, adventures and innovations along the way.

Operating throughout Atlantic Canada and beyond, we have valued a diversity of properties from airports to smelters; pulp mills to fish plants; convents to quarries and vast tracts of moose pasture … and just about everything in between.    Valuation of real estate is not a simple task or an exacting science: it has always been a combination of art and science.  With a predominance of the former in the years gone by,  giving way to the latter as a plethora of data and technology has,  and continues, to become available. As the saying goes … everyone has an opinion on value. However it is certainly more than just producing fluff and a leap of faith.  As valuers, we have to use the tools developed to capture, analyse and make sense of demographic, economic and market factors that drive real estate values. Clients of real estate practitioners expect and deserve accurate conclusions based on sound analysis and interpretation of the evidence available.

To meet this expectation, it is incumbent on valuers to be leading the wave, not just riding it.  As more and more real estate data becomes available, i.e. published sales data, online property zoning, assessment data, financial analytical tools, etc.,  the valuer’s  time is not so much spent working as an old time private investigator travelling the region and unearthing spotty evidence but more so assimilating the available data and recognising what is relevant and applying the correct analytical tools to interpret it to produce a creditable result.  The tools we use at Turner Drake include our Compuval® Database assembled over the past 35 years comprising over 200,000 detailed property records including sales, assessment, income and expense data on properties throughout Atlantic Canada and across the country; Geographic Information Systems (GIS) databases that focus on demographic trends, land use, spatial connectivity, development patterns and the physical aspects of property; and financial analysis and projection software.  These tools together with the knowledge and skill sets of my colleagues at Turner Drake make the challenge of valuing properties a rewarding experience and as I indicated at the onset … a ride of a lifetime.

 

Rick Escott, Vice President of our Valuation Division and Newfoundland Operations, reflects on his last 34 years at Turner Drake.  To find out more about Rick and his adventures, check out our Facebook page!

Monday, June 22, 2015 10:43:28 AM (Atlantic Daylight Time, UTC-03:00)  #    -
Valuation