B.C. Assessment is a Crown Corporation which has the reputation of providing one of the most quality assessment rolls in all of Canada, if not, the world. In British Columbia, we base our property taxes on an “Ad Valorem” system which means a “market value” system.
Every year, the market value of each property is determined as of July 1st preceding the tax year. This value is based upon the physical condition of the property as at October 31st and the legal title as at November 30th.
On December 31st of each year, the assessment notices are placed in the mail for review by property owners. The deadline to appeal your assessed value in British Columbia is January 31st.
Between February 1st and March 15th is the Property Assessment Review Panel (PARP). The Review Panel is an opportunity for owners and tenants to appeal their properties and discuss any valuation concerns with B.C. Assessment prior to March 15th. As at March 31st, the Review Panel Decisions are concluded and the roll values for the taxation year are authenticated.
Assessed value conforms to the basic appraisal principle of highest and best use. What this means is the value of the existing use of the property may be significantly less than the highest and best use. For example, a one‑storey retail building located on a high‑rise development site will have a value based upon the high‑rise development potential rather than the income potential from a one‑storey retail building.
There are three main approaches to value:
The Income Approach is essentially square feet times rent divided by the rate of return equals value.
The Market Comparison Approach is the price per sq.ft. of land or building that a property sells at, which is used as a unit of comparison in determining the values of other properties.
Cost Approach, which is effectively the underlying land value plus the cost of constructing the existing building on the property. The Cost Approach is not necessarily the market value but may be used in special circumstances.
The value determined by the approaches discussed above is then separated between land value and improvement value, and the assessed value is replaced on the roll.
Value is separated into two components – Land and Improvements. Value is distinct from classification. As discussed above, value is based upon highest and best use, however, classification is based upon actual use. In practical terms, what this means is that the value of a small retail property could be based upon a high‑rise residential redevelopment value. However, to this residential value, commercial tax rates are applied because the only actual use on the property is commercial. This results in a double whammy where significantly higher residential values are taxed at commercial tax rates (Hot Spots).
There are eight classifications of properties in British Columbia. The vast majority of properties in Vancouver are Residential 92%. The only other significant class of property is Business & Other which is primarily the office, retail and industrial properties throughout the City. A mere 7.3% of the properties in Vancouver are Commercial.