Portage Plaza Ltd v Strathcona (County), 2023 ABKB 231

Court of King’s Bench of Alberta Citation: Portage Plaza Ltd v Strathcona (County), 2023 ABKB 231 Date: 20230419 Docket: 2203 00884, 2203 00885 Registry: Edmonton Between: 2203 00884 Portage Plaza Ltd., Provincial Place Ltd. (each as represented by its designated agent, Altus Group Limited) Applicants -and- Strathcona County, Assessment and Taxation Department, Strathcona County Composite Assessment Review Board Respondents 2203 00885 KS Broadmoor Place A & B Inc., KS Broadmoor Place II Inc., KS Broadmoor Place III & IV Inc., KS Broadmoor Place V & VI Inc., KS Broadmoor Place VII Inc., KS Broadmoor Place VIII Inc. (each as represented by its designated agent, Altus Group Limited) Applicants - and - Strathcona County, Assessment and Taxation Department, and Strathcona County Composite Assessment Review Board Respondents

_______________________________________________________ Reasons for Decision of the Honourable Justice R. Paul Belzil _______________________________________________________ The Applications for Judicial Review [ 1 ] The applicants Portage Plaza Ltd. And Provincial Place Ltd. (Portage) and KS Broadmoor Place et al (Broadmoor) by Originating Notices, seek Judicial Review of two decisions made by the Strathcona County (County), Assessment Review Board (Board) pertaining to municipal tax assessments on properties located in Sherwood Park, which is a community in the County.

The properties are income producing multi tenant commercial properties located in the Millennium Business Park. [ 2 ] Altus Group Limited (Altus) was the designated agent for the applicants at the hearings. [ 3 ] In these Judicial Reviews, the Board appeared by counsel, but took no position on them.

Standard of Review [ 4 ] The parties agree that the Standard of Review in these applications for Judicial Review is reasonableness. [ 5 ] In Altus Group Limited v Alberta (City of Edmonton Composite Assessment Review Board), 2023 ABCA 35 , the Alberta Court of Appeal dealt with appeals from Judicial Review decisions arising from property tax assessments in which the standard of review was reasonableness. [ 6 ] At paras 9 and 10 the Court succinctly summarized the decision of the Supreme court of Canada in Canada (Minister of Citizenship and Immigration) v Vavilov, 2019 SCC 65 which defined the standard of review of reasonableness: [9] It is common ground that the standard of review of the Board’s decisions is reasonableness, as described in Vavilov .

A reasonable decision is one that is based on an internally coherent and rational chain of analysis, and that is justified in relation to the facts and law that constrain the decision maker, and exhibits the requisite degree of justification, intelligibility and transparency: Vavilov at paras. 85, 99-107 . To be reasonable, the analysis must be rational and logical, and demonstrate a line of reasoning that leads to the ultimate conclusion. The outcome must also be reasonable.

It must be justified in relation to the constellation of law and facts that are relevant to the decision: Vavilov at para. 105 . [10] This is a process of “review”, marked by judicial restraint and respect for the mandate and specialized expertise of decision makers: Vavilov at para. 75 . The court is not to start by re-making the decision de novo , or deciding what decision it would have made, or deciding what decision would have been “correct”: Vavilov at paras. 83, 116, 124 . [ 7 ] The standard of review of reasonableness is deferential.

At para 13 in Vavilov , reviewing courts were directed to intervene in administrative matters only where it is truly necessary. [ 8 ] At para 97 it was held that the written reasons of the decision maker must be read holistically and contextually. Evidence and Submissions before the Board [ 9 ] The context in these applications is established by the Record before the Board, which included evidence and submissions.

Hearings were conducted on October 25 th and 26 th of 2021 and although there were two separate hearings, there was significant overlap between them. [ 10 ] In argument before me, it was agreed that the Board was entitled to weigh the evidence and submissions presented to it. [ 11 ] The County called the Municipal Assessor who gave evidence about how the assessment for each property was prepared using the income methodology.

As well, evidence was presented on the subject of vacancy allowance and why a rate of 25% was utilized by the County. [ 12 ] In his presentation, the Municipal Assessor noted that a vacancy allowance is not simply the actual vacancy rate of a building as of the valuation date or an average of the vacancy rate over a period of time prior to the valuation date, rather it is intended to be a

measure over the investment term. [ 13 ] He noted that a vacancy allowance would be applied even if the building in question were fully leased or completely vacant. [ 14 ] He quoted from a textbook, The Appraisal of Real Estate 12 th Edition in support of his submissions. [ 15 ] In addition, he presented evidence of comparable sales of warehouse flex properties within the County and the City of Edmonton. [ 16 ] The only sales evidence presented by Altus on behalf of the applicants involved a portfolio sale of the Broadmoor properties.

The portfolio sale involved ten properties within the County and twenty five other properties located outside of the County. [ 17 ] The Assessor argued that portfolio sales are not reliable indicators of the market value of individual properties within the portfolio, particularly in circumstances wherein the bulk of the properties were not located in the County. [ 18 ] Altus did present evidence of the five year average vacancy rate in the Millennium Business Park for similar properties which was in the amount of 35.57% and also lead evidence of extensive efforts to lease these buildings, which efforts were not successful in reducing the vacancy rate below 30%.

Discussion [ 19 ] The issue before me is reduced to the question of whether the decisions of the Board were reasonable, as that term has been defined in Vavilov . [ 20 ] It is common ground that the Municipal Government Act, RSA 2000, c.M-26 (as amended) ( MGA ) and the Matters Relating to Assessment and Taxation Regulation, 2018 Alta Reg 203/2017 , s9(1) ( MRAT ) Mandate a Market Value approach be used in assessing the subject properties. [ 21 ] However, the MGA and MRAT do not prescribe which methodology is to be used by assessors for commercial properties with lease space to determine market value. [ 22 ] There is no precise formula which can determine the market value of commercial properties, nor is there a precise formula to determine the appropriate vacancy allowance.

Market values and vacancy allowances are estimates. [ 23 ] The County uses “the income approach to value” to determine market value as of the valuation date and it is common ground that this approach is an appropriate methodology to assess market value. [ 24 ] It is also common ground that a vacancy allowance must be applied.

The parties differ on whether a vacancy allowance of 25% as assessed by the Board is appropriate or the 30% rate argued by the applicants. [ 25 ] It bears noting that a vacancy allowance is only one factor to be considered in assessing market value. [ 26 ] Determining market value, including the appropriate vacancy allowance, must involve the exercise of discretion and judgment on the part of the decision maker, which approach was noted by the Court of Appeal at para 16 in the Altus decision. [ 27 ] As noted in Vavilov at para 83 , the focus of the reasonableness review is to determine whether the decisions made were within “the range” of possible conclusions that would have been open to the decision maker. [ 28 ] Counsel for the applicants conceded that the Board was within its jurisdiction in weighing the evidence and submissions before in making decisions in the exercise of its discretion and judgment. [ 29 ] The decisions of the Board clearly indicate that it was fully cognizant of its mandate in determining the market values for the subject properties.

It considered comparable assessments within the Millennium Business Park as provided by the County. [ 30 ] The Board, as it was entitled to, accorded more weight to the County’s evidence dealing with comparable sales and vacancy rates within the Millennium Business Park. The Board noted that the evidence presented by the applicants on this subject was incomplete. [ 31 ] The Board rejected the argument that the portfolio sales of the Broadmoor properties provided reliable evidence of market value of the Broadmoor properties.

Counsel for the applicants conceded that the Board was entitled to weigh this evidence and reject it. [ 32 ] It is noteworthy that, in rejecting the relevance of the portfolio sales for the Broadmoor properties, the Board had no other market value evidence from the applicants to rely on, as none had been presented. [ 33 ] Ultimately, the Board accepted the 30% vacancy rate for the Broadmoor I property and concluded that a 25% rate was appropriate for the balance of the Broadmoor properties as well as the Portage properties. [ 34 ] The decisions of the Board were transparent, rational and logical.

They were clearly within the range of possible outcomes available to the Board based on the evidence and submission presented to it. [ 35 ] The Board concluded that a 25% vacancy allowance was appropriate in assessing market value. The applicants argued that a 30% vacancy allowance should be applied. Given that the Board’s decisions were matters of discretion and judgment, it would be difficult to conclude that a 5% differential on the subject of the vacancy allowance constituted reviewable error.

[ 36 ] In the result, both applications for Judicial Review are dismissed with costs awarded against the applicants. No costs are awarded for or against the Board. Heard on the 13 th day of April, 2023. Dated at the City of Edmonton, Alberta this 19 th day of April, 2023. R. Paul Belzil J.C.K.B.A. Appearances: Jennie A. Buchanan Lawson Lundell LLP for the Applicants Carol M. Zukiwski& Michael Swanberg Reynolds Mirth Richards & Farmer LLP for Strathcona County Kate Hurlburt, K.C. Emery Jamieson LLP for the Strathcona County Composite Assessment Review Board