"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]

And further:

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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