Appraisals and Land Valuation

Appraisals and Land Value

Kumagai v Campbell 2018 BCCA 24 discussed the appraisal and valuation of First Nations Lands and held that the highest and best use analysis of the land requires the identification of “the most profitable, competitive use to which a property can be put”.

It is the reasonable expectation of the market potential for the property, taking into account such factors as:
1) whether the neighborhood is in a state of transition;

2) what can legally be built on the property

3) what is the supply and demand for various uses

4) what is the capacity of available services

5) and what alternatives are financially viable

In Gemex Developments Corp. v British Columbia (1998) 62 BCLR (3d) the court stated:

“in most of the definitions of actual or market value that have been advanced by courts and learned authors in recent years, British Columbia courts on many occasions have held that provided a possible future uses not speculative, it may be considered in determining the value and that it and that an owner’s present uses not consonant with a use that would affect the market price, the latter will govern” Petro Canada Inc v Assessor of Area 12-Coquitlam ( 1991) 61 BCLR (2d) BCCA.

With respect to First Nations land, the majority in Musqueam Indian Band v. Glass 2000 SCC 52 accepting guidance from the Appraisal of Real Estate text, Canadian addition noted:

“Legal restrictions on land use, as opposed to restrictions found in the lease, may affect the market value of freehold property to determine land value, whether as vacant or as improved, the appraiser unless otherwise instructed by the lease, considers the highest and best use that is legally permissible, physically possible, financially feasible, and maximally productive. Legal impediments include private restrictions, zoning, building codes, historic the district, or other non-zoning land use controls, and environmental regulations.”

“The legal restrictions on land use imposed by a band on this land are analogous to land laws imposed by municipal government the legal environment on a reserve should therefore be taken into account when appraising the lands value. Of course, like municipal zoning, band restrictions could either increase or decrease land value. Depending on how the market response to them.”

The court distinguished legal restrictions on the use of land, which are relevant to determining highest and best use, from contractual restrictions imposed in a lease, which generally are not.

In short legal impediments are legal restrictions on the use of the land. They do not include an owner’s intentions or desires, which are irrelevant, or in this case an executrix’s inability to facilitate the highest and best use of the land, which may be rectified.

In family law matters, section 87(a) of the Family Law act provides that the value of family property must be based on its fair market value.

Section 81 of the Family Law Act provides that(a) regardless of their respective user contribution, (b) on separation, each spouse has a right to an undivided half interest in all family property as a tenant in common, and is equally responsible for family debt. This provides for a presumptive equal division what is found to be net family property under section 84 of the family law act.

Section 85 defines excluded property as property acquired by a spouse before the relationship between the spouses began.

Section 84 establishes the date of separation is the event when property is determined to be a family property or excluded property. This is comparable to the defined triggering event under the former Family Relations act. The purpose of section 84 is to set out the date upon which the property is characterized as family property, not the date upon which it is valued, which is expressly addressed in section 87.

Section 87 of the Family Law act requires that:

a) family property must be valued based on its fair market value, and

b) the value of family property and family debt must be determined as of the date of either an agreement dividing the net property, or the date of the hearing with respect to the division of family property and family debt.