Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE: March 31, 2016 FILE NO.: ID 138737

Assessed Person(s): Waste Management of Canada Corporation Appellant(s): The County of Lambton Respondent(s): Municipal Property Assessment Corporation (“MPAC”) Region 26 Respondent(s): Township of Warwick

Property Location(s): 5768 Nauvoo Road, 7929 Zion Line, 8005 Zion Line and 8039 Zion Line Municipality(ies): Township of Warwick Roll Number(s): 3841-041-001-10300, 3841-041-001-10400, 3841-041-001-10500 and 3841-041-001-10600 Appeal Number(s): See Schedule A Taxation Year(s): 2009, 2010, 2011, 2012 and 2013 Hearing Event No.: 620430

Legislative Authority: Sections 32 and 40 of the Assessment Act, R.S.O. 1990, c. A.31, as amended

Heard: February 11, 2016 in Toronto, Ontario

APPEARANCES:

Parties	Counsel
Waste Management of Canada Corporation	Jack A. Walker, Robert D. Butterworth
MPAC	Carl B. Davis, Jennifer A. Barlow
County of Lambton and Township of Warwick	Peter A. Milligan, James G. Walker

INTERIM DECISION OF THE BOARD DELIVERED BY SUBUOLA AWOLERI, SUSAN MATHER AND JOSEPH WYGER

INTRODUCTION

1The Twin Creeks landfill site (“Twin Creeks”) in the County of Lambton (“Lambton”) received its most recent Environmental Compliance Approval (“ECA”) on December 13, 2011, permitting the use and operation of a 251.55 acre waste disposal site (“landfill”). The total site area is 743.78 acres. MPAC and Lambton take the position that the 2011 ECA must be considered as a component of the land value in determining the assessment of the property. The owner, Waste Management of Canada Corporation (“Waste Management”), counters that the ECA ought not to be considered as a component of the land value on four different grounds.

2The parties asked the Assessment Review Board (“Board”) for permission to state a case to the Divisional Court seeking an answer to this gateway issue. The Board refused the application for the stated case. The parties agreed to bring the same question of law before the Board without prejudice to Waste Management’s rights to bring a motion respecting an issue of the Board’s jurisdiction in the future.

3The legal question to be answered was framed by the three parties on consent:

Main Question

Should the market value of the rights associated with the Environmental Compliance Approval (Certificate of Approval) issued under the Environmental Protection Act, R.S.O. 1990, c. E. 19, as amended, be reflected in the current value of a landfill (waste disposal site) under the Assessment Act, R.S.O. 1990, c. A. 31, as amended?

4The parties agree that the answer to the main question is dependent on the answer to a second legal question:

Is the Ontario Court of Appeal decision in Restfulcare Inc. v. Regional Assess. Commr., Region No. 23 1986 CarswellOnt 937. (“Restfulcare”) applicable to the facts in the appeal of the Twin Creeks landfill?

5The question answered by the Court in Restfulcare is similar to the main question before this Board:

Is the market value of the intangible rights associated with a nursing home licence, properly included in the market value of a nursing home under the Assessment Act, R.S.O. 1980 c. 31?

6The Court of Appeal answered yes to the question in Restfulcare.

INTERIM DECISION

Answer to the Main Question

7The Board concludes that the question posed by the parties must be answered in the affirmative:

8Yes, the market value of the rights associated with the Environmental Compliance Approval issued under the Environmental Protection Act, R.S.O. 1990, c. E. 19, as amended, should be reflected in the current value of a landfill (waste disposal site) under the Assessment Act, R.S.O. 1990, c. A.31, as amended.

Answer to the Second Question

9Restfulcare is applicable. The Board finds that the principle espoused by the Court of Appeal in Restfulcare is applicable to the facts of this appeal. Justice Houlden set out that principle:

Where lands and premises have an inherent capacity for a certain type of use and a licence from the proper authorities authorizes the utilization of that capacity, the value of the licence is a component part of the value of the land. The licence is not property but a form of government control, like zoning, which may enhance the value of the land for which it is issued. Hence it is an element which has no separate quantifiable value; but which should be taken into consideration in determining market value.

10The appeals that are the subject of this trial of an issue are adjourned to a Telephone Conference Call to be set up by the Case Co-ordinator in consultation with the parties. The purpose of the call is to determine how the parties propose to move forward to a full hearing on the merits or other resolution of the issues.

REASONS FOR INTERIM DECISION

Waste Management Position

11Jack Walker and Robert Butterworth, counsel for Waste Management, advance four grounds in support of their position that the Restfulcare decision is inapplicable to the Twin Creeks landfill and that the ECA ought not to be considered as a component of the land value:

I. Factual differences between the ECA for a landfill operation and the nursing home licence in Restfulcare. Counsel argue that there are fundamental differences between them, such as the absolute and complete control of every aspect of a licence to dump garbage, its lifespan, transferability, purpose, and the state of the land at the expiry of the licence. The very nature of a contaminated landfill site, that is a depleting or wasting asset as it fills up over time, ending up as a major liability to the owners, carrying financial obligations and stigma, while retaining no residual value. Counsel argues that the end result is so different from that of a nursing home that Restfulcare has no application in the case before us.

II. Subsequent jurisprudence and statutory amendments relating to nursing homes. Counsel contends that Restfulcare is specific to nursing home licences and that subsequent amendments to the Nursing Homes Act require great care when considering the applicability of the Restfulcare decision to other fact situations.

III. American and Ontario jurisprudence dealing with the valuation of waste disposal sites and licences or approvals. The cases consider the inclusion of the values of intangibles of the business, namely the permits and licences that cannot be separately taxed as property but can be reflected in the overall value of the property for assessment purposes. The cases point out the difficulty in separating intangibles that are part of the business enterprise value, from the taxable realty.

IV. The impact of amendments to the Assessment Act (“Act”) in 1997, enacted years after the decision in Restfulcare. Those amendments included changes to the definition of current value. One of those changes was to exclude encumbrances from current value. The argument advanced is that the ECA is an encumbrance that the legislation requires be excluded from the value. In support of this argument, case law was presented dealing with subdivision agreements and other registered restrictions that can diminish a property’s value.

MPAC/Lambton Position

12Carl Davis, counsel for MPAC, argues that implicit in the concept of current value is that the value must be estimated as of a specific current date, not years from now. Explicitly he argues that the residual value of the landfill many decades in the future is not a factor to be addressed in a valuation as of January 1, 2008. He asserted that annual re-assessments will reflect any declining value of the asset along the way in much the same way properties such as paper mills lose value owing to growing obsolescence over time.

13Mr. Davis contended that recent sales show that lands such as Twin Creeks are worth more after an ECA is issued than before, and that those sale prices recognize and encompass both the current income and the later liabilities of the landfill site. He argued that the valuation pro forma takes into account all profits and contingent liabilities.

14Mr. Davis characterizes the ECA, not as an encumbrance to be removed from the valuation, but as an exercise of government control or police power, much the same as a re-zoning approval, the effect of which must at least be considered in the valuation.

15Peter Milligan, as counsel for Lambton, adopts and supports all of Mr. Davis’s arguments. He re-iterates that the process involved in licencing and operating a landfill is not relevant to the question of the applicability of the general principle set out in Restfulcare: Whether the ECA enhances value or not, the Board must give consideration to the factual issue of any effect that the approval may have, that may be “reflected in” the current value of the landfill.

Legislation

16Section 1 of the Act states:

“current value” means, in relation to land, the amount of money the fee simple, if unencumbered, would realize if sold at arm’s length by a willing seller to a willing buyer.

17Section 19.(1) of the Act states:

19.(1) Assessment based on current value. – The assessment of land shall be based on its current value.

18Section 40.(22) of the Act states:

40.(22) Power to determine law and fact. – The Assessment Review Board, as to all maters within its jurisdiction under this section, has the authority to hear and determine all questions of law or of fact and a decision of the Board under this section is final and binding, unless it is appealed under section 43.1.

19Section 44.(3) of the Act states:

44.(3) Same, 2009 and subsequent years. – For 2009 and subsequent taxation years, in determining the value at which any land shall be assessed, the Board shall,

(a) determine the current value of the land; and

(b) have reference to the value at which similar lands in the vicinity are assessed and adjust the assessment of the land to make it equitable with that of similar lands in the vicinity if such an adjustment would result in a reduction of the assessment of the land.

20Section 45 of the Act states:

45. Powers and functions of the Assessment Review Board. – Upon an appeal with respect to an assessment, the Assessment Review Board may review the assessment and, for the purposes of the review, has all the powers and functions of the assessment corporation in making an assessment, determination or decision under this Act, and any assessment, determination or decision made on review by the Assessment Review Board shall be deemed to be an assessment, determination or decision of the assessment corporation and has the same force and effect.

Analysis

21Counsel for Waste Management provides four separate grounds that they argue make the Restfulcare decision inapplicable to the Twin Creeks landfill valuation, and that any value of the ECA is not a component part of the land value. After consideration of the four grounds set out earlier herein and the arguments in support of them, the Board finds that none of them precludes the application of the general principle set out by the Court of Appeal in Restfulcare to the facts of this appeal, and concludes that any value that the ECA adds to the realty must be considered as a component part of the valuation.

Restfulcare

22The Board’s analysis commences with a review of the Court of Appeal’s decision in Restfulcare. The nursing home owner appealed an order of the Divisional Court which had dismissed its appeal from a decision of the Ontario Municipal Board confirming the assessment. The judgment of the three justices of the Court of Appeal was delivered by Justice Houlden on a question of law:

Is the market value of the intangible rights associated with a nursing home licence properly included in the market value of a nursing home under the Assessment Act, R.S.O. 1980 c. 31?

23Restfulcare was issued a licence pursuant to the Nursing Homes Act, R.S.O. 1980, to operate a 60-bed nursing home. In determining the value of the land and premises for assessment purposes, the assessor used the “standard income approach” and included the increase in value attributable to the nursing home licence. Restfulcare argued that to the extent that the licence contributed to the market value of the land, it should have been deducted in arriving at the market value. Restfulcare contended that the intangible rights associated with the licence were personal property and not land or real property as defined in the Act. The Court of Appeal disagreed stating that the licence itself had no market value as it was not transferrable. It was issued to “a particular person with respect to a particular facility; in effect it is attached to the premises for which it is granted.”

24Justice Houlden set out the general principle:

Where lands and premises have an inherent capacity for a certain type of use and a licence from the proper authorities authorizes the utilization of that capacity, the value of the licence is a component part of the value of the land. The licence is not property but a form of government control, like zoning, which may enhance the value of the land for which it is issued. Hence it is an element which has no separate quantifiable value; but which should be taken into consideration in determining market value.

I. Factual differences between the ECA for a landfill operation and the nursing home licence in Restfulcare

25The Board does not agree with the arguments of Waste Management that differences between the government controls over landfills and those governing nursing homes are sufficient to render the principle in Restfulcare inapplicable.

26Mr. Walker highlights the uniqueness of the ECA as an approval that permits what is otherwise prohibited, the right to contaminate land with pollutants which changes the nature and quality of the land for a long period of time. He submits that the effect of the approval on the value must be considered over the lifespan of the property from the lengthy approval stage through to its non-active stage many decades later. His materials describe a comprehensive and expensive process to obtain approvals under the Environmental Assessment Act, The Environmental Protection Act and the Planning Act that can take eight or nine years to complete. An operational period of some 25 to 28 years is followed by 80 years of monitoring and controlling a contaminated property with attendant liability and stigma. Mr. Walker differentiates this latter stage from a nursing home operator who can simply walk away after the operational stage.

Is the ECA a “Licence”?

27The Board notes that under the Nursing Homes Act and Long Term Care Act, the government approval granting rights and imposing obligations is called a licence while under the Environmental Protection Act the approval for a landfill site is referred to as an ECA.

28The parties in their materials and arguments use the term “licence” interchangeably with the term ECA and there is no suggestion or argument made that the answers to the questions posed to the Board hinges in any way on an ECA approval being conceptually different from the licence in Restfulcare. An individual cannot operate a waste disposal site except and in accordance with an ECA, issued by the Ministry. Similarly, a person cannot operate a nursing home without a nursing home licence.

29The Court in Restfulcare recognized that the nursing home licence is a form of government control much like zoning. The ECA is also a form of government control that runs with the land, and for that reason the Board is satisfied that the Restfulcare decision need not be distinguished on the basis of the ECA not being officially designated as a “licence”. Where the word “licence” appears within this decision, it is the generic description used by the Court of Appeal that applies to all lands and premises, except where it is specifically referred to as a “nursing home licence”. A “licence”, as described by the Court of Appeal, is the means by which the proper authorities authorize the utilization of an inherent capacity possessed by lands and premises, for a certain type of use. The Board finds, having heard no argument to the contrary, that the ECA is such a “licence”.

Fundamental Differences

30Waste Management’s factum includes a chart in support of its position that there is a “fundamental difference between the licensing of a nursing home and a waste disposal site”, as well as their operations, government controls, utility and residual values. The Board accepts that the level of government control and the difficulty of the process will vary with every type of licence or approval, although one might expect it to be substantially more onerous for a licence/approval to contaminate the environment as compared to a licence to care for seniors.

31The Board recognizes that there are major differences between the two types of licences/approvals, but would not characterize them as fundamental. The Board does recognize a fundamental similarity however. Much like the nursing home in Restfulcare, the Twin Creeks property has the inherent capacity for a particular use and the ECA gives it the authorization to utilize that capacity. The particular operation or utility of the use or differences between a landfill and a nursing home, do not affect the general principle which the Court of Appeal espoused for all such “lands and premises” that meet the condition of having been authorized to fulfill its’ inherent capacity. The wording was broad and general and gave no indication that it should be limited to the particular circumstances of nursing homes, but rather could be applied to other scenarios involving government control over lands.

Residual Value

32Mr. Walker and Mr. Butterworth greatly emphasize a glaring difference between landfills and nursing homes in that the reversionary or residual values at the end of the licence are entirely dissimilar, since the landfill site will arguably be worthless at that point. They argue that it is improper to value the landfill without taking into account the whole lifespan of the landfill in appraising its value at any given point in time.

33The Board considers this a valuation issue that does not affect the legal issue posed to us. The Court of Appeal in Restfulcare implies this as well in its statement that the licence in question “may enhance” the value of the land, not that it necessarily will enhance the value. Mr. Davis correctly points out that the scheme of annual assessments should take account of any declining value if that is the case. On the limited evidence before the Board and without making any valuation judgement, it appears that the market value of the rights associated with the ECA will change over time and may not always enhance the current value if in fact they do so currently.

34On a practical business approach to the issue of declining or zero residual values, Mr. Milligan makes the point that Waste Management would not invest so heavily in a landfill site without the prospect of significant gain, and echoes Mr. Davis’s assertion that properties sell for more after an ECA is issued than before. The Board takes the view that it would only be prudent business practice for an investor or willing buyer of an operating landfill site to factor into its financial plan not only current and future profits, but all future costs and liabilities that go with the ECA. It is not suggested by the parties that those variables are not quantifiable or adjustable to determine a value for the landfill at any given point in time. These are appraisal and assessment issues to be dealt with at the substantive hearing of this matter.

Transferability

35Mr. Walker highlights another difference between the ECA and the Restfulcare licence. The transferability of the licence to another individual was not permissible under the Nursing Homes Act, while the ECA is transferable with conditions. A primary condition of the ECA is that it can be applicable only to the same land, even though the operator may change. The Court of Appeal in Restfulcare made reference to the nursing home licence being not transferable in the context of determining that it had no market value as personal property. The nursing home licence was issued to a particular person, but also with respect to a particular facility such that “it is attached to the premises for which it is granted.” This is plainly also the case for a landfill approval, which runs with the land. The Board interprets the Court’s meaning to be the fact a licence/approval runs with the land, is of greater import than whether and how it may be transferrable between individual operators.

National Trust Co v. Bouckhuyt 1987 CanLII 4098 (ON CA), [1987] O.J. No. 930; 61 O.R. (2d) 640 (“Bouckhuyt”)

36In Bouckhuyt, the Ontario Court of Appeal considered whether a quota to grow tobacco was property. The quota or licence in that case was found by the Court to be “transitory and ephemeral enough” that it did not constitute property. While the control over tobacco growing was absolute and complete, similar to the subject landfill, the licence itself was allocated to the individual and could be transferred independently of the farm land itself. This distinguishes it from the ECA in the key criterion that the ECA runs with the land. The Board rejects Mr. Walker’s submission that the approval to contaminate land in perpetuity is similarly transitory and ephemeral.

37MPAC and Lambton are not arguing about whether the ECA is “property” or whether it is transferrable between individuals. The issue is, regardless of how the licence/approval is characterized, do the rights associated with it add value to the property it is attached to.

II. Subsequent jurisprudence and statutory amendments relating to nursing homes

38The Board determines that neither changes to the law governing nursing homes or subsequent jurisprudence affect the applicability of the principle in Restfulcare to the facts of this case.

39Counsel for Waste Management cautions the Board that amendments to the Nursing Homes Act in 1987 should give the Board pause in its consideration of Restfulcare.

Sugarman v. Duca Community Credit Union Ltd. 1998 CanLII 14665 (ON CTGD), [1998] O.J. No. 837 (“Sugarman”)

40Mr. Walker presents the 1998 Sugarman case wherein the Court decided that the nursing home licence in question was personal property that could be subject to a security interest under the Personal Property Security Act (“PPSA”), but that a collateral security interest could not be created by way of a chattel mortgage because it was not capable of assignment since the licence was not transferrable.

41The Court discussed the significant amendments to the Nursing Homes Act in 1987, such that it “differs in substance from the pre-amended (1980) version.” The Court urged that “when examining how the statute has been judicially considered, infra, it is important to note whether the particular case was decided prior to or subsequent to the 1987 amendments.” While the 1980 Nursing Homes Act provided that the licence was not transferrable, “…both the current Act and commercial practice permit a contingent surrender of a licence by a licence-holder and the issuance of a new licence to a proposed purchaser by the Ministry of Health. To that extent, there is a statutory and practical recognition of the significant value in the possession of a licence, despite its non-transferability.”

42The Board does not discern how the amendment to the Nursing Homes Act changes the guiding principle set out in Restfulcare. The ease with which a nursing home licence may be transferred or assigned does not impact on that principle. Further, where licences/approvals share the similarity of being attached to the land, if anything the licence/approval that has the additional feature of also being transferrable between individuals (e.g. the ECA), might be intuitively more valuable.

43The Board finds that the type of “property” that the licence/approval may be legally characterized as, or whether it has significant value to its holder or to the holder of security interest in it as personalty, is a separate issue from any value that the rights associated with it appends to the value of the realty. The key point is that the licence/approval is not transferable away from the realty, and the appended to the realty component of its value “should be taken into consideration in determining market value” of the property, according to the Court of Appeal in Restfulcare.

III. American and Ontario jurisprudence dealing with the valuation of waste disposal sites and licences or approvals

44On balance the Board finds that the cases dealing with the valuation of other waste disposal sites supports the position of MPAC and Lambton that any value that the ECA may add to the land value should be included in its assessment.

The Corporation of Elliot Lake v. Denison Mines Ltd, Rio Algom Ltd, The MNR and MPAC (2004) (“Denison”)

45The only Canadian case provided by counsel was a Board decision that dealt with a nuclear waste site that was near the end of its useful life. Mr. Walker highlights that the Board found that it was required to recognize and consider the effect on value of the contamination, stigma, liability and depreciation attributable to the land by reason of the uranium waste buried there.

46The Board considers Denison to be distinguishable on its facts. The nuclear waste areas were closed, had no potential for a sale to any willing buyer, and did not earn income from permitting people to contaminate it. This latter distinction is the very characteristic that may give the Twin Creeks landfill some value. That the owners are legally authorized to accept garbage and contaminate the lands for profit, renders it an entirely different entity from other contaminated properties. The possibility that this profitability gives the landfill some value is what Restfulcare directs this Board to consider. It may well be that such a consideration at the end of the useful life of Twin Creeks may result in a nominal value. However the Act requires the Board to make its current value consideration as of 2008, not 80 years hence.

American Sheds, Inc., et al., Plaintiffs and Appellants, v. County of Los Angeles, Defendant and Respondent. No. B111513. (“American Sheds”)

47The materials of Waste Management included a number of American precedents, but also conceded that most were largely premised upon the legislation in existence that was applicable to them, and others covered various methodologies utilized to value licensed sites. In American Sheds, the California Court of Appeal dealt with the sale of a waste disposal site and canvassed the impact of intangibles and the landfill licence on the market value.

48This case is also largely premised on American legislation, designed to ensure that intangible assets are not reflected in the value of taxable property. However, provision is made so that taxable property may be valued “…by assuming the presence of intangible assets or rights necessary to put the taxable property to beneficial or productive use.” The intangible attributes or rights in real property include zoning, location and other such attributes that relate directly to the real property involved, and “…shall be reflected in the value of the real property.”

49The Board finds these provisions in American law largely parallel what the Ontario Court of Appeal is saying in Restfulcare: the value of intangible assets and rights should not be included in the assessed value of the realty except to the extent that they put that realty to beneficial or productive use. The presence of the rights associated with the ECA must be assumed to permit its productive use as a landfill, and the value of that intangible attribute or right needs to be reflected in the overall property value. The result is more simply stated by the Ontario Court of Appeal in Restfulcare: “the value of the licence is a component part of the value of the land which may enhance the value of the land.”

Waste Management v. Kenosha County Rev. Bd., 184 Wis. 2d 541 (1994) (“Wisconsin”)

50An 80 acre sanitary landfill site was assessed using the income approach. The owner challenged the method because it included the value of not only the real estate but the landfill license as well. The assessor testified that the licence could not be sold or separated from the land and was “intricately intertwined” with the land and so included it in the income analysis. The owner argued that owner - operator income cannot be used because the resulting assessment includes not only the value of the real estate but also the business enterprise value of the owner’s use of the property. They proposed using imputed rental income which includes no business enterprise value.

51The Supreme Court of Wisconsin reviewed some principles of income valuation, including determining first whether business value is generated by the property itself and thus “appended” to the property. Such appended value is “inextricably intertwined” with the land and is transferred to the new owner upon a sale of the land. In the specific case before it, the Court determined that the “the value of the land appears to lie in its ability to receive waste over the remaining life of the landfill” and “…the net income from receiving waste reflects the property’s chief source of value.”

52The Supreme Court of Wisconsin concluded that due to the inherent capacity of the landfill to accept waste that was not present in unlicenced sites, the inherent value of this capacity would pass to a new owner even though the licence itself is not an interest in real estate. The Court stated “…a potential purchaser would attach some value to the fact that the site is presently approved and licensed.” Although this Board is not bound by this American decision, we find the reasoning instructive, and harmonious with the Ontario Court of Appeal’s reasoning in Restfulcare.

53The Supreme Court of Wisconsin recognized that some element of net income may be attributed to the business enterprise operating on the site, and that may be arguable for the Twin Creeks operation. Again, this determination is within the domain of the valuation experts who will provide evidence at the hearing.

Courtenay Assessor, Area No 06 v. Crown Isle Development Corp., 2008 BCSC 100 (“Crown Isle”)

54The concept of “inextricably intertwined” rights in property assessment has been considered by a Canadian Court as well. In Crown Isle, the Supreme Court of British Columbia dealt with the right to divert and use water from hot springs that attaches to, and is appurtenant to a resort property. The Court held that “If rights are inextricably intertwined with the real estate and contribute value, then that value is part of the value of the land and improvements for assessment purposes.” The Board agrees and finds that the right to dump garbage at Twin Creeks is inextricably intertwined with that specific property and if that right contributes to its value, it ought to be included in the valuation of the land.

IV. The impact of the amendments to the Assessment Act in 1997, excluding encumbrances from current value

55The final argument by counsel for Waste Management is that the changes to the Act in 1997 calling for the valuation of the fee simple “if unencumbered”, rendered inapplicable the principle set out by the Court of Appeal in 1986 in the Restfulcare decision. The Board has considered this proposition and does not agree that the ECA is an encumbrance that ought to be discounted from the value. We find that the licence to fill a property with refuse is an exercise of government control (referred to by counsel as the police power) for a number of reasons.

Encumbrance or Government Control

56Counsel for Waste Management argues that the ECA is an encumbrance on the lands due to the degree of control of every aspect of the operation over a very long period of time. As such it needs to be excluded from the value of the land. Counsel for the assessing authority and the municipality maintain that the licence is akin to an exercise of government control or police power which, much like zoning, can enhance value and is a component part of the land that it runs with. Several precedents were provided on this issue.

Valentini v. Reidco Wellington (1983) Ltd., 1989 CanLII 4058 (ON HCJ), [1989] O.J. No. 1164; 69 O. R. (2d) 346 (“Valentini”)

57In Valentini, the Ontario Divisional Court considered whether a plan of subdivision was an encumbrance. The Court determined that a subdivision agreement is an encumbrance because it “imposed obligations on the owners from time to time of the subject lands. Some of those obligations had a potential cost.” Waste Management draws comparisons to the ECA which imposes obligations both operating and financial that far exceed what is contained in a subdivision agreement.

58In its analysis of what constituted an encumbrance, the Divisional Court canvassed the question of whether or not the subdivision agreement could be discharged or removed from title. It found that the subdivision agreement “…was an encumbrance and under the purchase agreement the purchaser could insist on having it removed from title on or before closing.” The Board finds that the criterion of being able to remove the encumbrance from title was the basis that the decision turned on. That basis is not shared by the ECA before us, which runs with the land and cannot be removed at the behest of any potential purchaser of the Twin Creeks landfill site. The nature of the ECA does not allow a purchaser to insist on removal or discharge, unlike more garden variety encumbrances such mortgages, liens and leases.

Municipal Property Assessment Corp., v. BCE Place Ltd. 2009 CanLII 92126 (ON SCDC), [2009] O.J. No. 3338; 2009 CarswellOnt 4719 (“Bank Towers”)

59The question of leases as encumbrances was the subject of consideration by the Board, the Divisional Court and the Court of Appeal in what is known in the industry as the Bank Towers case. The Board rejected the argument that the change from market value to current value and the inclusion of “fee simple, if unencumbered” in the 1998 Act, was to address the Court of Appeal’s decision in Regional Assessment Commissioner, Region No. 11 and Nesse Holdings Ltd. (1986), 1986 CanLII 2497 (ON CA), 54 O.R. (2d) 437, [1986] O.J. No. 2997 (C.A.). (“Nesse”). The Nesse decision allowed the valuation to be based on the sale price of a property with leases that were below market rents. The Board decided that “fee simple, if unencumbered” meant that the only interests to be valued were those of the owners and not the tenants, and all leases in place were to be disregarded because they were encumbrances. The Bank Towers were to be assessed as if vacant.

60Both the Divisional Court and the Court of Appeal rejected that interpretation in no uncertain terms, concluding that “the simple amendment instructs the assessor to ignore encumbrances, such as leases that are not at market rents.” It was not to instruct the assessor to assume the entirely hypothetical scenario that an income-producing office tower was vacant at the date of assessment. This panel agrees that the Court of Appeal in the Bank Towers clarified that “fee simple, if unencumbered describes a valuation standard and does not limit the nature of the asset to be valued, which is the whole of the land.” In Restfulcare the nature of the asset to be valued was not limited by a consideration of the legal characterization of a licence, but only the valuation question of whether the licence adds value as a component part of the value of the whole of the land.

61Mr. Davis analogizes the hypothetical assessment of vacant office towers, absent a consideration of existing income-producing leases, to assessing the landfill site as if there was no income-producing licence/approval in place to dump garbage on the land. The Board agrees that much like leases at market rents, an income-producing ECA is not what the legislature envisioned excluding as an encumbrance, when it amended the Act in 1997.

908118 Alberta Ltd. v. Calgary (City), 2015 ABQB 681 (“908118”)

62Mr. Walker puts forward this case for the proposition that development restrictions should be taken into account in the valuation even if they do not constitute an encumbrance. The Board agrees with that proposition. The Court of Queen’s Bench of Alberta defined a fee simple interest as “… absolute ownership unencumbered by any other interest or estate, subject only to the limitations imposed by the four powers of government taxation, expropriation, police power, and escheat.” It went on to give examples of the police power such as zoning, building code, health code, traffic regulations and environmental regulations. The Alberta Court held that zoning and development restrictions should be considered when assessing the value of the fee simple interest in land. In 908118 the matter was sent back to the Assessment Tribunal with a direction to consider that “nominal value can meet the market value standard in such circumstances where property is restricted.”

63This case leads the Board to conclude that the environmental statutes and regulations that permit an owner to legally fill his land with refuse and contamination is an exercise of the police power, similar to zoning and equivalent to the “government control” referenced by the Court in Restfulcare. The Board agrees that restrictions on the use of the land ought to be considered in the valuation, and those restrictions may indeed cause devaluation of the Twin Creeks landfill down the road after its operational period ends. The Board also finds, that much like advantageous zoning, the effect of this exercise of police power or government control must also be considered if and when it may enhance the value of the fee simple. Both of those scenarios can be encompassed within the principle declared by the Court of Appeal in Restfulcare.

Jamal Abdul Malek v. Municipal Property Assessment Corp., Region No. 7 [2008] O.A.R.B.D. No. 279 (“Jamal”)

64This was a case where an agreement registered on the title to the properties restricted the use exclusively to student resident accommodation, resulting in lower market value. At the Board’s hearing and on appeal before the Divisional Court, MPAC argued this was an encumbrance to be ignored in the valuation. The Court upheld the Board’s conclusion that because the agreement was an absolute requirement of the zoning in place at the time it was executed, it was simply an extension of the police power restricting use, and ought to be factored into the valuation.

65On the definition of “encumbrance” in the context of the Act, the Court quoted Justice Estey of the Supreme Court of Canada in Wotherspoon v. Canadian Pacific 1987 CanLII 2807 (SCC), [1987] 1 S.C.R. 952: “By generally accepted definition ‘it comprehends every right to or interest in land which may subsist in a third person to the diminution of the value of the land, but consistent with the passing of the fee by conveyance.” The ECA before the Board does not conform to this definition as it does not subsist to the advantage of a third party and it appears not to diminish the value of the land, at least for some part of its life. It is an approval or licence granted by the government under its police power that may enhance the value or may diminish the value of the landfill depending on the timing. Whatever the effect on value, the Court of Appeal in Restfulcare determined that the effect must at least be considered in the assessment of the property.

CONCLUSION

66In its request for relief, Waste Management asked the Board alternatively, if we found as we have, that we should answer how the negative aspects, continuing and future obligations, contamination and stigma attached to the site, and a nil or negative reversionary value would impact the present current value determination. Those are legitimate questions for the hearing panel to consider upon hearing the expert opinions of the valuators who will explore those difficult and complex appraisal concepts. It is not the question put forward for this panel to answer. The three Members of this panel unanimously and unreservedly conclude that the principle set out by the Court of Appeal in Restfulcare has application to the subject landfill site. Upon application of that principle, the Board concludes that the market value of the rights associated with the ECA should be reflected in the current value of the landfill site.