994552 N.W.T. Ltd. Appellant (Appellant) v. Town of Kindersley and Saskatchewan, 2019 SKCA 77

Court of Appeal for Saskatchewan Docket: CACV3061 Citation: 994552 N.W.T. Ltd. v Kindersley (Town) , 2019 SKCA 77 Date: 2019-08-08 Between: 994552 N.W.T. Ltd. Appellant (Appellant) And Town of Kindersley and Saskatchewan Assessment Management Agency Respondents (Respondents) Before: Whitmore, Ryan-Froslie and Barrington-Foote JJ.A. Disposition: Appeal allowed Written reasons by: The Honourable Madam Justice Ryan-Froslie In concurrence: The Honourable Mr. Justice Whitmore The Honourable Mr.

Justice Barrington-Foote On Appeal From: AAC 2016-0125, Regina Appeal Heard: April 4, 2019 Counsel: Kurtis Wintermute for the Appellant No one appearing for Town of Kindersley Neil Robertson, Q.C. (as he then was) for SAMA Ryan-Froslie J.A. I. Introduction [ 1 ] 994552 N.W.T. Ltd. [994552 N.W.T.] was granted leave pursuant to s. 33.1 of The Municipal Board Act , 1988-89, c M-23.2 , to appeal against a decision of the Assessment Appeals Committee of the Saskatchewan Municipal Board [Committee].

Its appeal pertains to the 2016 municipal property tax assessments of two full-service hotels located in the Town of Kindersley. [ 2 ] The issue as framed by the leave decision is: Whether the Committee erred when it concluded the Board of Revision [BOR] had no authority or jurisdiction to address the disparity in capitalization rates between full-service hotel properties and limited-service hotel properties, where 994552 N.W.T. had failed to establish any error in the assessment of its own full-service hotel properties. [ 3 ] In my view, for the reasons set out herein, the Committee erred and the appeal should be allowed.

II. background [ 4 ] The property assessments in issue were done by the Saskatchewan Assessment Management Agency [SAMA]. SAMA values all hotel properties using an income approach [1] that applies direct capitalization to convert or “capitalize” the expected level of potential income of hotel properties into a market value based assessment.

To do so, SAMA uses the following formulation: Market Value = Net Annual Operating Income (NOI) Capitalization Rate For the purposes of the formula, the capitalization rate is determined from the sale of similar properties. [ 5 ] The seeds of this appeal were sown in two earlier decisions of the Committee: Moose Jaw (City) v Altus Group Ltd. , AAC 2013-0130 (6 May 2015) Assessment Appeals Committee Decision (2d Qtr) [ Moose Jaw ], and Altus Group Ltd. v Martensville (City) , AAC 2013-0154, 0088, 0120 and 0121 (16 Dec 2015) Assessment Appeals Committee Decision (4th Qtr) [ Martensville ].

Those decisions considered appeals from owners of full-service hotels, including 994552 N.W.T., with respect to their 2013 property assessments. [ 6 ] In performing its 2013 property assessment, SAMA did not treat full and limited-service hotels as similar properties. Rather, it grouped them into separate stratas and used sales from each strata to calculate the applicable capitalization rate. SAMA had two full- service and two limited-service hotel sales to work with.

Those sales resulted in a capitalization rate of 7.5 percent for full-service hotels and 11.8 percent for limited-service hotels. [ 7 ] A number of property owners with full-service hotels in different municipalities appealed their 2013 property assessments, arguing one of the sales used to establish the capitalization rate for full-service hotels (the Derrick Hotel in Estevan) had not been properly verified and was unreliable. That argument was accepted by the BOR in the Moose Jaw appeal, but was rejected by the BOR in the Martensville appeal.

In the Moose Jaw appeal, the assessor, using the one remaining full-service hotel sale and the two-limited service hotel sales, provided the BOR with a new capitalization rate for both full-service and limited-service hotels of 10.9 percent. [ 8 ] The Moose Jaw and Martensville BOR decisions were appealed to the Committee. In both cases, the Committee found the Derrick Hotel sale could not be used to calculate the capitalization rate for full-service hotels. SAMA’s application to this Court for leave to appeal the Moose Jaw decision was refused ( City of Moose Jaw v Temple Hotels Inc. , 2015 SKCA 123 ).

[9] In the Martensville appeal, the Committee concluded (at para 22): “The parties to this appeal have agreed to abide by theCourt’s decision. In this instance, the effect of that ruling is a cap rate of 10.9% for full and limited service hotels, including thesubject properties” (emphasis added). [10] The end result was that the 2013 property assessments for all full-service hotels, including those owned by 994552 N.W.T.,was re-calculated using a 10.9 percent capitalization rate.

SAMA, however, chose not to apply that capitalization rate in calculating theassessed value of limited-service hotels. [11] 994552 N.W.T. agreed with SAMA that its 2014 and 2015 assessment appeals could be resolved by using a capitalization rateof 10.9 percent for its full-service hotels.

However, it appealed its 2016 full-service hotel property assessments on the basis thoseassessments were inequitable because SAMA had not followed the Committee’s decisions in the Moose Jaw and Martensville appeals asit continued to use a capitalization rate of 11.8 percent from limited-service hotels. 994552 N.W.T. contended, based on those decisions,that full-service and limited-service hotels are “similar properties” and that both should be assessed using the same capitalization rate.

Itsubmits that SAMA’s failure to do that has resulted in inequity. [12] SAMA’s explanation for not following the Committee’s 2013 direction is set out at paragraph 20 of the BOR’s decision, whichforms the basis for the current appeal: 994552 N.W.T. Ltd. v Town of Kindersley, 2016 SKMBR 2901004: [20] The Board asked the respondent [SAMA] why they had chosen to ignore the decision of the Committee and apply the single,combined CAP rate of 10.9% only to [full-service hotel] properties when, in fact, it was to be applied to both [full-service hotel] and[limited-service hotel] properties.

The Appraiser indicated they had received instructions from senior management within SAMA. Theycould not state the specific reasons why senior management made a decision to ignore a decision and direction from the Committee. Theyspeculated that, had they applied the combined CAP rate, the assessed value of dozens of [limited-service hotel] properties would haveincreased and numerous new appeals might have been filed in 2016. Apparently the Appraiser wanted to avoid this. It is clear SAMA deliberately chose to ignore the Committee’s decisions.

While the reasons given for SAMA’s doing so are rightfullydescribed as speculative, that does not change the fact that it was a deliberate choice by SAMA. [13] Despite this fact, the BOR dismissed 994552 N.W.T.’s appeal. While the BOR found it was an error for SAMA not to haveapplied the same capitalization rate to both full-service and limited-service hotels, it concluded there had been no error with respect to theassessment of 994552 N.W.T.’s full-service hotel properties. This was so because the 10.9 percent capitalization rate set by the Committeehad been applied by SAMA to those property assessments.

The BOR noted there was no appeal before it with respect to a limited-servicehotel property and, accordingly, it had no authority to change the assessed value of those properties. [14] 994552 N.W.T. appealed the BOR’s decision to the Committee pursuant to s. 246 of The Municipalities Act, SS 2005, c M-36.1. In a decision dated March 20, 2017, 994552 N.W.T. Ltd. v Town of Kindersley, AAC 2016-0125 (20 March 2017) AssessmentAppeals Committee Decisions (1st Qtr), the Committee upheld the BOR’s decision.

It concluded: [26] We can find no evidence the Assessor did not follow the legislation in determining the assessment for the subject properties. Wefind the Board reasonably believed the MVS [Net Market Valuation Standard] was met and the Appellant did not meet their burden ofproof on a balance of probabilities.

The Appellant did not show the Board or the Committee how equity was not met. [27] We find the Board did not make a mistake when it upheld the original assessed value because there is no evidence to indicate theassessment is incorrect and the assessment is presumed correct unless an assessor makes an error of fact, law or assessment principles[Regina (City) v Laing Property Corp. (1994), (SK CA), 128 Sask R 29 (CA)]. [15] Leave was then granted to appeal the Committee’s decision to this Court.

III. jurisdiction and standard of review [16] Pursuant to s. 33.1 of The Municipal Board Act, this Court’s jurisdiction is limited to appeals based on questions of law orjurisdiction. The standard of appellate review is correctness: Gary L. Redhead Holdings Ltd. v Swift Current (Rural Municipality), 2017SKCA 47, [2017] 9 WWR 296. IV. Analysis A. The assessment scheme [17] Key to a determination of this appeal is an understanding of the assessment scheme put in place by the Legislature.

Thatscheme is set out in The Assessment Management Agency Act, SS 1986, c A-28.1, The Municipal Board Act, the relevant municipallegislation, which in this case is The Municipalities Act, the regulations pertaining to those Acts (Municipalities Regulations, RRS c M-36.1 Reg 1 [Regulations]) and the Market Value Assessment in Saskatchewan Handbook, ver 3 (Regina: Saskatchewan AssessmentManagement Agency, 2012) [Handbook], which was prepared by SAMA as a guide for property assessments. [18] Pursuant to s. 12 of The Assessment Management Agency Act, the Legislature created an agency – SAMA – to, among otherthings, “establish and diligently maintain assessed values and undertake [land] valuations in a manner consistent with and inaccordance with this Act, the regulations and the appropriate municipal Act” (emphasis added).

SAMA was given the power unders. 12(1)(

d) to prepare and establish, by order, assessment manuals, guidelines, handbooks or other materials required for the valuation ofproperty. Such orders, however, have no effect until approved by the Minister in accordance with s. 12.1(2). The Handbook was preparedand approved in accordance with those sections and is used in assessing property for municipal tax purposes.

[ 19 ] In accordance with s. 22(1) of The Assessment Management Agency Act , all assessable property in every municipality is to be revalued under the direction and supervision of SAMA once every four years.

All municipalities, urban and rural, are to use SAMA to assess property for municipal tax purposes, except Regina, Saskatoon, Moose Jaw and Prince Albert, though there are provisions under the Act for those cities to retain SAMA to do their assessments and for other municipalities to retain their own assessors. [ 20 ] The Municipalities Act sets out how assessments are to be carried out in areas outside the cities of Regina, Saskatoon, Moose Jaw and Prince Albert. [2] Building on the four-year assessment cycle established by The Assessment Management Agency Act , s. 195(2) of The Municipalities Act provides for annual assessments with all property being assessed as of the applicable “base date”. “[B]ase date” is defined in s. 193(

d) as the date established by SAMA “for determining the value of land and improvements for the purpose of establishing assessments rolls for the year in which the valuation is to be effective and for each subsequent year preceding the year in which the next revaluation is to be effective ” (emphasis added). For the purposes of this appeal, the last revaluation occurred in 2013. [ 21 ] Pursuant to s. 204(1) of The Municipalities Act , a municipality must prepare an assessment roll each year that includes all assessed property in the municipality.

Among other things, the assessment roll identifies the property, its classification for tax purposes (e.g., residential, agricultural, commercial, etc.) and the assessed value attributed to it by SAMA as of the “base date”. In accordance with the assessment scheme, the assessed value given to a property as of the base date remains in place for the next four years, unless: (

a) there are changes to the property as contemplated by s. 219 of The Municipalities Act , namely: (

i) destruction of or damage to the property; (ii) demolition, alteration, or removal of an improvement; (iii) construction of an improvement; (iv) a change in use; (

v) the property is subdivided; or (vi) titles pursuant to a condominium plan are issued; (

b) appeal decisions change the assessment: ss. 195(4.1), 241 and 256(5)); or (

c) there is a written agreement adjusting the assessment: s. 228. [ 22 ] Sections 194.1 and 195 of The Municipalities Act set out how SAMA is to value property for assessment purposes.

Section 194.1 provides that non-regulated property assessments, which include hotel assessments, “shall be determined according to the market valuation standard”. That standard employs mass appraisal. [ 23 ] “[M]arket valuation standard” and “mass appraisal” are both defined terms within The Municipalities Act : 193 (e.1) “ market valuation standard ” means the standard achieved when the assessed value of property: (

i) is prepared using mass appraisal; (ii) is an estimate of the market value of the estate in fee simple in the property; (iii) reflects typical market conditions for similar properties ; and (iv) meets quality assurance standards established by order of the agency ; (Emphasis added) “[M]ass appraisal” means “the process of preparing assessments for a group of properties as of the base date using standard appraisal methods, employing common data and allowing for statistical testing ” (emphasis added). [ 24 ]

Section 195 of The Municipalities Act sets out a number of principles pertaining to property assessment. That

section makes it clear that “equity” is the dominant and controlling factor in property assessment. [ 25 ] The portions of s. 195 relevant to this appeal are as follows: Preparing annual assessments 195

(1) An assessment shall be prepared for each property in the municipality using only mass appraisal.

(2) All property is to be assessed as of the applicable base date. ...

(4) Each assessment must reflect the facts, conditions and circumstances affecting the property as at January 1 of each year as if those facts, conditions and circumstances existed on the applicable base date .

(4.1) Subject to any modification made pursuant to subsection 22(12.1) of The Assessment Management Agency Act , each assessment must reflect any decision of the appeal board that has been issued with respect to the property that is the subject of the assessment, unless the decision has been appealed pursuant to

section 33.1 of The Municipal Board Act.

(5) The dominant and controlling factor in the assessment of property is equity. ...

(7) Equity in non-regulated property assessments is achieved by applying the market valuation standard so that the assessmentsbear a fair and just proportion to the market value of similar properties as of the applicable base date. (Emphasis added) [26] Tax payers have an annual right of appeal with respect to the assessment of their property. This is evident from s. 215(1) of TheMunicipalities Act, which requires every notice of assessment or amended notice of assessment to set out the date by which an appeal isrequired to be made.

Appeals can only be taken by a person who has an interest in the property subject to the appeal and who believes anerror has been made in the valuation or classification of the property, or in the preparation of the assessment notice (s. 225). [27] Appeals of property assessments are generally made in the first instance to the BOR, which, pursuant to s. 220 of TheMunicipalities Act,[3] is established by the council of each municipality. [28] As stated by Caldwell J.A. of this Court in Corman Park (Rural Municipality) v 618421 Saskatchewan Ltd., 2018 SKCA 29 atpara 48, 73 MPLR (5th) 1 [Corman Park]: … In terms of function, boards of revision serve as akin-to-trial-level decision-makers in circumstances where an assessment is deemed tobe correct until proven otherwise.

That is, they make findings of fact on the basis of the evidence adduced, interpret the law relatingto the specific errors raised in the notice of appeal and then apply that law to the facts as found to reach their decision as to whetherthe assessor has erred in a material way. (Emphasis added) [29] In Sasco Developments Ltd. v Moose Jaw (City), 2012 SKCA 24, 385 Sask R 287, Cameron J.A. described what constitutes amaterial error on the part of an assessor in these terms: [35] On such appeals the function of the Board of Revision is to review the valuation for error by the assessor—error as specificallyalleged in the notice of appeal—and, if such error be found to exist, to give effect to it subject to the limitations imposed upon theBoard’s remedial powers: Regina (City) v.

Laing Property Corp., (SK CA), [1995] 3 W.W.R. 551 (Sask. C.A), 128Sask R. 29. By error is meant material error of fact, or law, or standard appraisal principle and practice, or some combination ofthese. And the person who takes the appeal bears the burden of establishing, on a balance of probabilities, the error or errors the assessoris alleged to have made: Estevan Coal Corp. v. Estevan (Rural Municipality No. 5), 2000 SKCA 82, 199 Sask. R. 57. (Emphasis added) [30] The powers of a BOR are set out in s. 240 of The Municipalities Act. The relevant portions of that

section for the purposes ofthis appeal are as follows: Decisions of board of revision 240(1) After hearing an appeal, a board of revision or, if the appeal is heard by a panel, the panel may, as the circumstances require and asthe board or panel considers just and expedient: (

a) confirm the assessment; or (

b) change the assessment and direct a revision of the assessment roll accordingly: (

i) subject to subsection (3), by increasing or decreasing the assessment of the subject property; (ii) by changing the liability to taxation or the classification of the subject property; or (iii) by changing both the assessed value of the subject property and its liability to taxation or its classification.

(1.1) Notwithstanding subsection (1), a non-regulated property assessment shall not be varied on appeal using single property appraisaltechniques.

(2) A board of revision or panel shall not exercise a power pursuant to subsection (1) except as the result of an appeal.

(3) Notwithstanding subsection (1), an assessment shall not be varied on appeal if equity has been achieved with similar properties. … [31] Of importance to this appeal is s. 240(2), which makes it clear that a BOR “shall not exercise” the powers granted in s. 240(1)except as a result of an appeal.

Further, a BOR’s powers are limited to changing only the classification, assessed value, or liability totaxation of the property subject to the appeal. [32] Pursuant to s. 241 of The Municipalities Act, “[t]he assessor shall make any changes to its assessment roll that are necessary toreflect a decision” of a BOR. [33] The Saskatchewan Municipal Board is established pursuant to s. 3 of The Municipal Board Act. Pursuant to ss. 12(1)(

a) and 16of that Act, the Saskatchewan Municipal Board shall appoint three or more of its members to sit as a committee for the purpose of hearingassessment appeals.

[34] The Committee is empowered by s. 256 of The Municipalities Act to modify the decision of a BOR by adjusting the assessmenteither up or down. The relevant portions of that

section for the purposes of this appeal read as follows: Decisions 256(1) After hearing an appeal, the appeal board may: (

a) confirm the decision of the board of revision; (

b) modify the decision of the board of revision to ensure that: (

i) errors in and omissions from the assessment roll are corrected; and (ii) an accurate, fair and equitable assessment for the property is placed on the assessment roll; or (

c) set aside the assessment and remit the matter to the assessor to ensure that: (

i) errors in and omissions from the assessment roll are corrected; and (ii) an accurate, fair and equitable assessment for the property is placed on the assessment roll.

(2) If the appeal board decides to modify the decision of the board of revision pursuant to subsection (1), the appeal board may adjust,either up or down, the assessment or change the classification of the property.

(3) Notwithstanding subsections (1) and (2), a non-regulated property assessment shall not be varied on appeal using single propertyappraisal techniques.

(3.1) Notwithstanding subsections (1) and (2), an assessment shall not be varied on appeal if equity has been achieved with similarproperties. …

(5) If the assessment roll has not been confirmed by the agency pursuant to

section 258, the assessor shall make any changes to theassessment roll of the municipality that are necessary to reflect the decision of the appeal board. (Emphasis added) [35] SAMA, relying on this Court’s decision in Regina (City) v Laing Property Corporation, (SK CA), [1995] 3WWR 551 (Sask CA) [Laing], states that appeals before the Committee are confined to changes in the assessment of the property that issubject to the appeal and that the Committee has no authority to direct general revaluations or reassessments. In my view, that is not whatLaing says.

Laing made no reference to general revaluations or reassessments. To illustrate my point, it is useful to repeat the relevantparagraphs in Laing: [29] Having regard for all of this, we are of the view the legislation envisions in the main an appeal to the Committee to review thedecision of a board of revision for error, as alleged by the appellant, and if error be found, to do what the board of revision in the exerciseof its powers of correction and variation should have done, remembering that at bottom lies the personal judgment of the assessor.

Unlessthat judgment be founded on material error of fact, of law, or of assessment principles and practice as laid down in the Manual, it shouldnot be interfered with. And even then, if the value ascribed to an improvement by an assessor should appear for whatever reason to bemore or less than its fair value, the assessed value should not be varied so long as it bears a fair and just proportion to the assessed value ofother improvements in the municipality. [30] Without necessarily suggesting the mandate of the Committee does not extend beyond this, this is its primary mandate.

Asa general matter, it is for the assessors to make the evaluations, not the Committee. And in the absence of error as alleged by theappellant, or in the presence of error of the kind against which relief is foreclosed by s. 256, one would think the valuation andassessment should be left to stand. Were it otherwise — were the Committee to freely and without restraint substitute its views forthose of the assessor or to perform the assessment anew — the efficiency and timeliness of the assessment and taxation schemewould break down.

In short, the statutes envision appeals against erroneous valuations and assessments, not applications forrevaluation and reassessment. (Italics in original, bold emphasis added) [36] Appeals to the Committee are not applications for revaluation or reassessment, either generally or with respect to the propertysubject to the appeal. Rather, they are a review of a BOR’s decision for alleged errors. This is clear from s. 256 of The Municipalities Act,as well as paragraphs 29 and 30 of Laing itself. In other words, appeals to the Committee from decisions of a BOR are to be based onalleged error.

Only if error exists can the Committee intervene and substitute its view for that of the assessor as to what constitutes an“accurate, fair and equitable assessment” of the property under appeal. [37] While an appeal decision cannot change the assessed value of property not subject to the appeal for the assessment year underappeal, such decisions may have broader application. For example, if the appeal results in a change to the assessment formula or altersapplicable assessment principles or practices, then such a change may have an effect on the assessment of similar properties on a go-forward basis.

If such changes occur, then SAMA is required to apply them to similar properties so that equity is maintained. Equity fornon-regulated properties is achieved pursuant to s. 195(7) of The Municipalities Act “by applying the market valuation standard so that theassessments bear a fair and just proportion to the market value of similar properties as of the applicable base date” (emphasisadded). This means SAMA must reassess similar properties when the next assessment roll is prepared.

Its power to do so is set out unders. 22(12) of The Assessment Management Agency Act, which provides: “In accordance with the rules of assessment of the appropriate

municipal Act, the agency may revise the valuation of any municipality generally or in part or with respect to any individual property in the municipality ” (emphasis added). [ 38 ] Further, pursuant to s. 72(2) of The Municipal Board Act : “Unconfirmed assessment rolls, property tax rolls and, where applicable, equalized assessments of a municipality shall be amended by the municipality or the Saskatchewan Assessment Management Agency, as the case may require, to reflect the decisions or orders of the board”. [ 39 ] Property owners affected by such revaluations would not be prejudiced because they have an annual right to appeal their property assessments and would be in a position to challenge any revaluation in the year in which it occurs. [ 40 ] This approach is supported by the Handbook, which plays an important role in the assessment scheme.

Chapter 2 of the Handbook is entitled “Valuation Parameters”. Page 2 of that

chapter identifies “valuation parameters” as factors that determine the value of a group of properties. The Handbook states: “The valuation parameters outlined in each valuation process are guides to indicate appropriate variables to consider in the analysis of value (i.e. the valuation formula) and the values that would be appropriate to use in the valuation models” (at page 3). [ 41 ] Assessors must gather and analyze the data necessary to determine value. Page 16 of

chapter 2, Valuation Parameters, discusses the sorting and classification of property and states that “[p]erhaps the most difficult part of the valuation parameter development process is to divide properties into groups that have similar traits and value characteristics. However, this step is the key to a successful market value based assessment analysis”. [ 42 ] The objectives of classification (also referred to as stratification) are set out in

chapter 2 at page 17 [4] : • To enable the valuation of a number of properties easily and efficiently. • To stratify the properties into specific classes so that comparisons are meaningful. • To have a broad enough definition of classes so that there are sufficient numbers within the group to establish valuation parameters and values. [ 43 ] Page 18 of the

chapter on Valuation Parameters identifies classification or stratification of properties into groups with similar physical characteristics and similar value-driven characteristics as “the most important step in the mass appraisal valuation process”. Further, page 28 of that portion of the Handbook deals with statistical testing in mass appraisal. To attain the market valuation standard as described in s. 193 (e.1) of The Municipalities Act , the assessed value of property must meet quality assurance standards established by SAMA’s order. SAMA’s order, reflected at page 28 of the Valuation Parameters

section of the Handbook, identifies the assessment to sale ratio [ASR] as the most common indicator for measuring how an assessed value compares to the sale price of the property: ASR = Assessed Value / Adjusted Sale Price By order dated May 23, 2012, the acceptable range for the median assessed value to adjusted sale price ratio for all property, other than residential property, was 0.950 – 1.050 with the target being 1.000. [ 44 ] The Handbook identifies two aspects of mass appraisal performance that are typically measured to determine the accuracy and equity provided by mass appraisal models: appraisal level (accuracy) and appraisal uniformity (equity).

The latter – appraisal uniformity – which refers to the fair and equitable treatment of individual properties requires two things: (1) equity within groups – that properties are appraised equitably within groups or categories (e.g., property classes, neighbourhoods); and (2) equity between groups – that each of these groups are appraised at the same level or ratio of value (Valuation Parameters,

chapter 2 at page 29). [ 45 ] Because hotels are developed, bought and sold on the basis of expected income, the Handbook views the income approach as the appropriate method for valuing such properties. That approach adopts the direct capitalization method, which was described earlier in these reasons. The Handbook recognizes there are many types of hotels. Hotels can range from small motels with no services to large full- service luxury hotels. The costs of operating and the expertise in managing a hotel will vary depending upon its size and the facilities involved. All of this, of course, affects net annual operating income. Accordingly,

chapter 11 of the Handbook, which is entitled Hotel/Motel, at page 12 sets out a list of different types of hotels, which includes motels with limited amenities, limited-service hotels, full-service hotels, select-service hotels, suite hotels, extended-stay hotels, resort hotels, and gallonage or tavern hotels. According to the Handbook, “it is up to the assessor to determine how hotels should be grouped (stratified) for determining valuation parameters”. [ 46 ] While page 19 of the Hotel/Motel

chapter of the Handbook identifies other possible methods for establishing capitalization rates such as mortgage equity or band of investments, it also indicates those methods “ are not suitable for use in mass appraisal valuations in Saskatchewan” (emphasis added). The Handbook does not indicate how capitalization rates should be calculated if there are insufficient sales of one type of hotel to establish such a rate. Presumably, one way to correct that deficiency would be to look to another group of hotels that could be classified as “similar”.

That is what occurred in the Martensville and Moose Jaw appeals. [ 47 ] SAMA, at paragraph 41 of its factum, acknowledged that in 2016 it revalued all full-service hotel properties using the capitalization rate of 10.9 percent, in accordance with the Martensville and Moose Jaw decisions. It did not, however, revalue limited- service hotels. B.

Application of the law to the appeal at hand [ 48 ] With the overall assessment scheme and principles identified herein in mind, I turn to the question of whether the Committee erred when it concluded it had no authority or jurisdiction to address the disparity in capitalization rates between full-service and limited- service hotels as 994552 N.W.T. had failed to establish any error in the assessment of its full-service hotel properties. 1. Position of the parties

[ 49 ] 994552 N.W.T. argues its full-service hotel properties are similar to limited-service hotels for assessment purposes based on the Committee’s earlier Martensville and Moose Jaw decisions. Those decisions required that sales for both full-service and limited-service hotels be used to calculate the capitalization rate for those hotel properties. That rate was 10.9 percent. 994552 N.W.T. contends SAMA, however, used a capitalization rate of 11.8 percent for limited-service hotels, which constitutes an error.

Further, it argues, that error renders the statistical testing required to attain the market valuation standard meaningless and creates inequity. It is 994552 N.W.T.’s position that the Committee erred in concluding it had no jurisdiction to correct that inequity. It submits the Committee should have applied the “neighbourhood approach” to the valuation of full-service hotels and used the same capitalization rate as that applied to limited-service hotels, namely 11.8 percent. [ 50 ] SAMA contends the Committee did not err in dismissing 994552 N.W.T.’s appeal.

It says the Committee had no jurisdiction to vary the assessment of limited-service hotels as there was no appeal relating to such properties before it. SAMA submits no change in the capitalization rate with respect to limited-service hotels was required because full-service and limited-service hotels are two distinct groups, which have been valued separately. SAMA acknowledged that it is “unusual” to use sales from one group of properties to determine a capitalization rate for another distinct group of properties.

Despite that, SAMA takes the position that both full-service and limited-service hotels were correctly assessed. [ 51 ] At this juncture, it is useful to repeat the question for which leave to appeal to this Court was granted, namely: Whether the Committee erred when it concluded the BOR had no authority or jurisdiction to address the disparity in capitalization rates between full-service hotel properties and limited-service hotel properties where 994552 N.W.T. had failed to establish any error in the assessment of its own full-service hotel properties. [ 52 ] The question assumed, for the purposes of this appeal, that the assessor did not err in assessing 994552 NWT’s full-service hotels.

However, this does not accord with the findings of the BOR. The Committee’s Martensville and Moose Jaw decisions required a capitalization rate of 10.9 percent to be used to value both full-service and limited-service hotels. The assessor was bound by s. 195(4.1) of The Municipalities Act to apply those decisions. While the assessor used a capitalization rate of 10.9 percent to value full-service hotels, he applied a different capitalization rate to limited-service hotels. The effect of that decision is at the heart of this appeal.

In my view, that decision constituted error and rendered the assessment of full-service hotels inequitable. V. The Committee’s 2015 decisions [ 53 ] In its Martensville decision, the Committee found that the issues before it were substantially the same as the issue raised in the Moose Jaw appeal. SAMA had applied for leave to appeal the Committee’s Moose Jaw decision to this Court and, accordingly, the Committee’s decision in the Martensville appeal was to be made in concert with the Moose Jaw decision emanating from this Court.

At paragraph 22 of Martensville , the Committee stated: “The parties to this appeal have agreed to abide by the Court’s decision.

In this instance, the effect of that ruling [denial of application for leave to appeal] is a cap rate of 10.9% for full and limited service hotels, including the subject properties”. [ 54 ] In arriving at its conclusion, the Committee found that because this Court had denied SAMA leave to appeal the Committee’s Moose Jaw decision excluding the Derrick Hotel sale from the calculation of the capitalization rate for full-service hotels, its Moose Jaw decision had in effect been “upheld”. [ 55 ] The fact this Court denied SAMA’s application for leave to appeal the Committee’s Moose Jaw decision, should not be viewed as affirming that decision or endorsing its correctness.

Leave decisions only deal with the issue of whether leave to appeal should be granted, nothing more. In particular, they do not deal with the substantive issues raised by the appeal itself. [ 56 ] Because leave to appeal was denied, the Committee’s Moose Jaw and Martensville decisions continued in effect. Section 72(2) of The Municipal Board Act provides that SAMA shall amend the “property tax rolls ... of a municipality” to “reflect the decisions or orders of the board [Committee]”.

The requirement to amend the roll is not limited to property that is subject to an appeal before the Committee, as is the case pursuant to s. 195(4.1) and s. 257(1) of The Municipalities Act .

Rather, s. 72(2) requires the assessment roll, which includes all assessed properties within a municipality, be amended on a go-forward basis ( The Municipalities Act , s. 204(1) ). [ 57 ] As stated by this Court in South Hill Mall Property Holdings Inc. v Prince Albert (City) , 2017 SKCA 52 at para 19 , a property assessment will usually be the same for each year of the four-year valuation cycle “unless the ‘facts, conditions and circumstances affecting the property’ change, an assessment appeal requires a change or the assessor alters the assessment model ” (emphasis added). [ 58 ] The Committee recognized that property assessments may change between base years.

At paragraph 36 of the Moose Jaw decision, the Committee stated: “A property’s facts, circumstances and conditions can also change from one assessment cycle to another. The law provides for assessors to revise assessments and for owners to appeal assessments annually. An appeal body is not necessarily bound by its previous decisions ” (emphasis added). [ 59 ] In my view, the Committee’s Martensville and Moose Jaw decisions changed how full-service and limited-service hotels were to be assessed. Those decisions used sales for both full-service and limited-service hotels to determine a capitalization rate.

They treated and thus categorized both full-service and limited-service hotels as similar properties. The same capitalization rate was to be used to calculate their assessed value. This view is supported by page 36 of the Valuation Parameters

chapter of the Handbook: For mass appraisal purposes in Saskatchewan, market value based assessments must reflect typical market conditions for similar properties as of the base date. For that reason, typical potential net operating income that reflects market conditions as of a given base date is to be used to determine both capitalization rates and to apply capitalization rates in determining market value based assessments. (Emphasis added) Further, at page 19 of the Hotel/Motel

chapter of the Handbook it states that the selection of a capitalization rate “starts with an analysis of

the capitalization rates demonstrated in the sales of similar hotels ” (emphasis added). [ 60 ] Finally, SAMA, in its written submissions to the BOR in its appeal, stated: [69] SAMA has respected the Board’s Assessment Appeals Committee’s decisions. It was determined that the two stratifications could be combined to develop a cap rate. The neighbourhoods are comparable so the sales for both neighbourhoods are used to develop the cap rate. (Emphasis added) [ 61 ] SAMA was statutorily bound to apply the Committee’s Martensville and Moose Jaw decisions.

Even if SAMA felt the Committee had erred in making those decisions, it could not refuse to follow them. If SAMA had applied them, it could then have appealed the limited-service hotel assessments in accordance with either s. 30 of The Assessment Management Agency Act or s. 225(3) of The Municipalities Act . It could have argued those assessments were incorrect and that the Committee’s earlier decisions in Martensville and Moose Jaw were wrong.

The Committee would then have been in a position to re-evaluate those decisions and make a ruling. [ 62 ] SAMA’s failure to comply with the Committee’s Martensville and Moose Jaw decisions gives rise to the question of whether equity has been achieved in the assessment of 994552 N.W.T.’s full-service hotel properties. 1. Was equity achieved? [ 63 ] Equity is the dominant and controlling factor in the assessment of property. What constitutes equity in non-regulated property assessments is set out in s. 195(7) of The Municipalities Act and bears repeating here: 195

(7) Equity in non-regulated property assessments is achieved by applying the market valuation standard so that the assessments bear a fair and just proportion to the market value of similar properties as of the applicable base date. [ 64 ] It is the application of the market valuation standard that ensures equity. That standard is only achieved when the assessed value of property (

i) is prepared using mass appraisal, (ii) is an estimate of the market value of the estate in fee simple in the property, (iii) reflects typical market conditions for similar properties , and (iv) meets quality assurance standards established by SAMA’s order . [ 65 ] In my view, the market valuation standard was not attained with respect to the property subject to this appeal.

This is so because the assessments in issue do not reflect typical market conditions for limited-service hotels, which were treated as similar properties and because the assessed value of the full-service hotels does not meet the quality assurance standards established by SAMA. Property sales cannot be used to value properties in more than one strata.

Using sales more than once would make statistical testing meaningless: Various c/o Atlas Group Ltd. v Prince Albert (City) , AAC 2013-0270 to 0276 and AAC 2013-0277 to 284 (cross-appeals) (20 January 2015) Assessment Appeals Committee Decisions (1st Qtr) at para 37; Conexus Credit Union v Prince Albert (City) , AAC 2013-0259 and 0291 (cross-appeals) (7 November 2014) Assessment Appeals Committee Decisions (4th Qtr) at para 27. SAMA used the two sales pertaining to limited-service hotels to calculate a capitalization rate of 10.9 percent for full-service hotels.

This is only acceptable if full-service hotels and limited-service hotels are treated as similar properties. SAMA did not do that. Instead, SAMA calculated the capitalization rate for limited-service hotels at 11.8 percent using only limited-service hotel sales. Its use of two different capitalization rates to value similar properties skews the market value of the limited-service hotels. It also results in an ASR of 0.92 percent, which is below the ASR targets set by SAMA’s own order.

This is evident from the following chart found in 994552 N.W.T.’s materials: Assessment ID City Service Adjusted Sales Price Predicted Income Calculated CAP Applied CAP Assessment ASR YORKT- 515051800 Yorkton Full $5,355,000 $539,914 8.57% 10.90% $4,953,339 0.79 ESTEV- 515213900 Estevan Limited $6,290,000 $804,922 10.88% 11.80% $6,821,373 0.92 MOOSE- 475028850 Moose Jaw Limited $4,386,396 $689,934 13.37% 11.80% $5,846,898 1.33 median 10.88% 0.92 [ 66 ] If the market valuation standard has not been attained then equity has not been achieved.

The BOR, in its decision, recognized this but concluded the error in assessment was not with respect to the property under appeal, but rather with limited-service hotel properties for which there was no appeal. The BOR found it had no authority to order a change to the assessed value of limited-service hotels (BOR decision at paras 25–28).

Further, the BOR could not change the capitalization rate used to assess full-service hotels, as that would contravene the Committee’s Moose Jaw and Martensville decisions. [ 67 ] The Committee agreed with the BOR’s decision, but, in doing so, it concluded at paragraph 26 that “[t]he Appellant did not show the Board or the Committee how equity was not met”. [ 68 ] In my view, this statement by the Committee constitutes error. The BOR found the assessment was inequitable.

At paragraph 25 of its decision, the BOR accepted “as a matter of fact and law” 994552 N.W.T.’s arguments with respect to the issues surrounding equity and the market valuation standard. In other words, the BOR found inequity as identified herein. [ 69 ] In my view, the BOR did not have the authority to correct the inequity. The effect of the Committee’s earlier decisions in Martensville and Moose Jaw was to combine full-service and limited-service hotels into one group or strata for assessment purposes.

In other words, the Committee changed the assessment model and that change, on a go-forward basis, should have been applied by SAMA to all full-service and limited-service hotels. The BOR could not apply the 10.9 percent capitalization rate to limited-service hotels however, because there was no appeal with respect to those hotels before it. Further, it could not increase the capitalization rate for full-service hotels to 11.8 percent as requested by 994552 N.W.T., because to do so would contravene the Committee’s earlier decisions in

Martensville and Moose Jaw . [ 70 ] On the other hand, in my view, the Committee did have both the authority and the jurisdiction to intervene. The property assessments under appeal did not meet the market valuation standard and, more importantly, equity with respect to those properties had not been achieved because of a deliberate decision by SAMA not to follow the Committee’s Martensville and Moose Jaw decisions. This created a situation which is the antithesis of that found in Imperial Oil Limited v Regina (City) , 2016 SKCA 107 , 408 DLR (4th) 46 [ Imperial Oil ].

In Imperial Oil , equity had been obtained even though there was an error. Here, even though no error appeared to exist with respect to the assessment of the property under appeal, equity was not achieved. The Committee had the power pursuant to ss. 256 (

b) or (

c) to correct the inequity. Further, pursuant to s. 54 of The Municipal Board Act , it had the power to direct SAMA to comply with its orders: Board authorization to act 54 If default is made by any person, local authority or board of education in the doing of

an act, matter or thing that the board has authority, pursuant to this or any other Act, to direct and has directed to be done, the board may authorize any person as it sees fit to do the act, matter or thing, and in that case the person so authorized may do the act, matter or thing, and the expense incurred in the doing of it may be recovered from the person, local authority or board of education in default as money paid for and at the request of that person, local authority or board of education and the certificate of the board of the amount expended shall be conclusive evidence of that amount. 2.

The appropriate remedy [ 71 ] So what is the appropriate remedy when a tax assessment agency – in this case SAMA – deliberately ignores a Committee decision and thereby causes inequity? No case authority was cited that addresses what can only be described as a highly-unusual circumstance. Section 256(1) of The Municipalities Act provides that the Committee may modify the decision of a BOR to ensure (

i) errors in and omissions from the assessment roll are corrected and “an accurate, fair and equitable assessment for the property is placed on the assessment roll”. Equity could have been achieved by the Committee directing the assessor to correct the assessment roll to reflect the Martensville and Moose Jaw decisions. That such an order would be justified in the unique circumstances of this case is underscored by the fact that the inequity here was caused by SAMA’s failure to comply with its statutory duty, as set out in s. 12(1) (

b) of The Assessment Management Agency Act , to: “establish and diligently maintain assessed values and undertake valuations in a manner consistent with and in accordance with this Act, the regulations and the appropriate municipal Act”. SAMA failed to implement the Committee’s decisions as required by the assessment scheme. [ 72 ] 994552 N.W.T. requests that the capitalization rate used in assessing its full-service hotels be increased to 11.8 percent by applying the “neighbourhood approach”. [ 73 ] In my view, such an approach is not warranted here.

The Committee has already established the appropriate capitalization rate for full-service and limited-service hotels as being 10.9 percent. In the face of that decision, the neighbourhood approach makes no sense and would have the effect of overturning the Committee’s Martensville and Moose Jaw decisions. Further, it ignores the fact there is one sale of a full-service hotel that must be taken into consideration in establishing the capitalization rate. If that sale is considered along with the two limited-service hotel sales, the capitalization rate would be 10.9 percent, not 11.8 percent. [ 74 ] Section 12(1) (

f) of The Court of Appeal Act, 2000 , SS 2000, c C-42.1 , gives this Court the authority to “make any additional decision that it considers just”. In my view, this subsection is broad enough to include an order requiring SAMA to comply with the Committee’s Martensville and Moose Jaw decisions. Compliance with those decisions would then afford both SAMA and the owners of limited-service hotels the opportunity to appeal the revised assessments and correct any errors they believe exist in the assessment model or its application. VI. conclusion [ 75 ] The appeal is allowed. The Committee’s decision is set aside. In accordance with s. 12(1) (

f) of The Court of Appeal Act, 2000 , there shall be an order directing SAMA to comply with the Committee’s Martensville and Moose Jaw decisions on a prospective basis. [ 76 ] As the judge hearing the leave application ordered no costs with respect to that application, those costs need not be addressed here. [ 77 ] There shall be an order, however, that SAMA pay to 994552 N.W.T. its costs with respect to the appeal proper, assessed in the usual way. “Whitmore J.A.” for Ryan-Froslie J.A. I concur. “Whitmore J.A.” Whitmore J.A. I concur. “Barrington-Foote J.A.” Barrington-Foote J.A.