BC Assessment estimates the value of most properties as of July 1 each year, based on market value. In other words, your current year assessment notice is based on a value of what your property would have been worth according to comparable market sales as of July 1 of the preceding year.
Highest and best use
BC Assessment assesses most properties based on the property's highest and best use, which is the foundation of market value.
Highest and best use of a property is an economic concept that measures the interaction of four criteria: legal permissibility, physical possibility, financial feasibility, and maximum profitability. According to the Appraisal Institute of Canada, analysing a property's highest and best use allows appraisers to understand the market forces that can affect a property's market value, and identify the potential uses of a property. Analysis of highest and best use also helps appraisers identify sales of comparable properties to help develop an opinion of market value.
The principle of highest and best use does not apply to non-market properties assessed using legislated (regulated) land rates, including, but not limited to linear properties (i.e., power lines and railways), managed forest land, and farm land.
Highest and best use example
A local government has introduced a new Official Community Plan (OCP) that allows for rezoning part of the downtown currently occupied by two to three storey commercial buildings. The OCP's land use policy changes now allow the area to be redeveloped into a maximum of 20-floor high-rise mixed residential and commercial towers. The local landowners have applied to the municipality for and received the higher density zoning, resulting in a number of smaller buildings being sold, demolished, and redeveloped into new high–rises.
What is the highest and best use of this three-storey retail commercial building?
Based on a review of recent comparable sales in the downtown area, it is physically possible, legally permitted, financially feasible, and economically productive to redevelop the retail store property into its highest and best use as a mixed-use residential and commercial high-rise.
If the property was listed for sale, would the market value be as an existing low-rise commercial building, or land for a potential mixed-use high-rise tower?
Given the new OCP and subsequent rezoning achieved by the landowner, BC Assessment would assess the property based on its highest and best use as land that can be developed into a mixed-use residential and commercial high-rise tower.
Effects of new Official Community Plans on property assessments
An Official Community Plan (OCP) provides a long-term vision for land use in a community. As per provincial legislation, an OCP is a statement of objectives and policies to guide decisions on planning and land use management, within the area covered by the plan, respecting the purposes of local government. Local governments may update an OCP, or enact an entirely new OCP, as part of an overall, integrated strategy to change the patterns of land use. The strategy can include a variety of uses and density of development, enhancing community aesthetics with revitalization, and/or improving the linkages between community and transportation networks.
OCP land use designations provide guidance on the types of land use parameters, such as permitted uses and density and what type of zoning should be allowed within a specific area. BC Assessment will assess market value to impacted properties based on their new highest and best use due to changes in an OCP combined with market transactions, which indicate there is a corresponding increase in market value for the properties. The same principle applies if a municipality grants a rezoning to a property, permitting additional land uses and/or higher density land use.
Effects of local government rezoning on property assessments
Official Community Plans (OCPs) guide permitted future use(s) of a property at a general level (e.g., potential uses, density, building height, etc.). Zoning provides more detailed and site-specific land use parameters including permitted uses, density, building height, site coverage, building setbacks, parking requirements, etc.
If a property is rezoned, it is typically to permit more land uses and/or increased density to be developed on the property. Performing a highest and best use analysis, including review of market transactions, will determine if the new zoning results in a higher market value than the current use.
BC Assessment assesses market value properties based on their highest and best use as permitted by an OCP and current zoning. In addition, when an OCP supports rezoning of a property to permit additional uses and/or density, and there is a pattern of rezoning in an area, BC Assessment can assess market value based on a reasonable probability of the highest and best use of the property.
Important considerations when a property's land use is rezoned, regardless of its actual current use:
- The new rezoning land use of a property may result in a higher value when compared to the current use (depending on market evidence).
- When applying highest and best use, the value of the property will represent the most productive (highest value yielding) of the two uses.
- The greater the allowable density; then typically, the greater the value of the land will be.
- As an example, between a single-family dwelling use and a multi-family multiple storey building, the highest & best use would most likely be the multiple-storey building if there were demand in the given market for multi-family units.