ICI Land
Last Document Review Date: October 9, 2014
TABLE OF CONTENTS
Introduction ......................................................................................... 3
In Scope ..................................................................................... 3
Out of Scope ............................................................................... 3
Executive Summary .............................................................................. 4
Resources............................................................................................ 4
Compliance Checklist ............................................................................ 5
ICI Land Valuation and Land Rate Codes ................................................. 7
General ............................................................................................ 7
Highest and Best Use ...................................................................... 7
Land Size ....................................................................................... 7
Split Classification – Vacant Land ...................................................... 8
Valuation – Occupiers and Legislated Land Values ............................... 8
Occupier Example ........................................................................ 8
Forest Example ............................................................................ 9
Land Rate Codes................................................................................ 9
Step 1: Developing Rate Codes ......................................................... 9
Step 2: Establishing Rate Code Boundaries ...................................... 10
Principles .................................................................................. 10
Rate Code Boundaries ................................................................. 10
Rate Code Boundaries – Neighbouring Jurisdictions and Areas ......... 11
Supporting Sales Analysis – Establishing Rate Codes ...................... 11
Step 3: Numbering Rate Codes ....................................................... 13
Rate Code Descriptions..................................................................... 14
Minimum Requirements – Rate Code Descriptions ............................. 14
Application of Rate Code Descriptions .............................................. 14
Appling Rate Types .......................................................................... 15
General Principle ........................................................................... 15
Rate Type Application .................................................................... 15
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Applying Land Adjustments and Size Curves ....................................... 16
General Application Discussion ........................................................ 16
Land Adjustments ......................................................................... 17
Size Curve ................................................................................... 18
Auditing Rate Codes ......................................................................... 19
Excess and Surplus Land ..................................................................... 20
Excess Land .................................................................................... 20
Surplus Land ................................................................................... 20
Land Analysis – Excess Land ............................................................. 21
Adjustments for Excess Land .......................................................... 24
Surplus Land ................................................................................... 24
Land Analysis ............................................................................... 25
Unique Properties ............................................................................... 27
Air Space Parcels ............................................................................. 27
Water Lots ...................................................................................... 27
Appendix A: Frequently Asked Questions ............................................... 28
Appendix B: Examples of Excess/Surplus Land Calculations ..................... 31
Example A ...................................................................................... 31
Example B ...................................................................................... 32
Example C – Mixed Income/Cost Property ........................................... 33
Conclusion ...................................................................................... 35
Appendix C: Land Characteristics Definitions .......................................... 36
Appendix D: Rate Table Description ...................................................... 39
Appendix E: Rate Type Table ............................................................... 40
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INTRODUCTION
In Scope
Valuation and coding direction for the uniform assessment of
land using valueBC are in scope, including:
o Ensure land is valued at highest and best use (HBU) as
vacant.
o Ensure correct land size is reflected.
o Ensure correct apportionment for split classifications.
o The use of land rate codes supported by market
analysis, with uniform and consistent use throughout
BC Assessment (BCA).
o Setting rate code boundaries, ensuring the number of
rate codes are controlled, audited and kept to a
minimum.
o Choosing appropriate rate types.
o The appropriate application of land characteristic
adjustments.
o Providing detailed rate code descriptions.
o Land attributes to be collected for uniform analysis and
valuation. Legislated and non-legislated properties are
within scope, except for land residual scenarios.
o Size curve adjustments are market based and relevant.
Out of Scope
The following are out of scope:
o Rate amounts
o Market analysis procedures to support derivation of rate
code amounts
o Rate codes associated with legislated rates
o Timber land rate codes
o Farm land rate codes that use a legislated rate amount
from farm land valuation schedules (published by the
Surveyor of Taxes)
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EXECUTIVE SUMMARY
This document applies to the assessment of industrial,
commercial and investment (ICI) land and covers three
topics:
o ICI land valuation and land rate codes
o Excess and surplus land
o Unique properties such as air space parcels and water
lots
RESOURCES
B.C. Geographic Place Name Search Engine
Land and Resource Registries Portal
Natural Areas Atlas for the Capital Region
Online Cadastral Maps (web)
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COMPLIANCE CHECKLIST
The following is a list of items that must be completed in
order to be considered compliant with this document:
1. ICI land is to be valued on a direct comparison approach
based on its HBU.
2. Land determined to be excess or surplus should be identified
and valued if market evidence supports it.
3. Classification for vacant ICI land is to be split based on the
area of the land located within each zoning.
4. Rate codes apply to a competitive set (may be local or
broader).
5. The numbering convention for rate codes outlined in this
document must be followed.
6. Rate codes must be described clearly and concisely using the
minimum requirements as set out in this document.
7. A rate code boundary must be changed where there is change
in the homogeneous nature of the majority of properties.
8. All rate codes must be reviewed annually and their review
date updated in valueBC whether or not the rate amount has
been changed.
9. Unused rate codes must be trended for at least one year after
active use in order to support non-market change reporting.
Then they must be purged after they have been retained and
trended for that inactive year.
10. Rate code amounts and boundaries must be supported by
market analysis (e.g., study 10).
11. All land size curves must have market support.
12. Land size curve entries on the Rate viewer must clearly
describe the type of properties it is being used for.
13. Market support must accompany any adjustments to the land
rate for market influencing characteristics at the Rate viewer
level that varies from the base rate for the competitive
market set.
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14. Rate codes must not be used to adjust for individual folio
physical characteristics.
15. Rate code boundaries abutting on neighbouring jurisdictions
must be reviewed with the person establishing the rate code
amount in the abutting jurisdiction.
16. Rate codes must contain a minimum of 125 properties
except:
o For statutory rate codes.
o Where the number in the competitive market set is less
than 125 properties (e.g., rural areas).
o Reasoning for using a rate code with less than 125
folios must be clearly stated on the Rate viewer/Notes
tab. Ensure your comments are linked to the correct
rate code (space in the description field is limited).
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ICI LAND VALUATION AND LAND RATE CODES
General
The following applies to the assessment of ICI land:
1. Land is valued by the direct comparison approach.
2. Rate amounts and rate code boundaries must be supported
by market analysis (e.g., study 10). Market analysis
documents should be saved to the Rate viewer. One analysis
per rate code.
3. Rate codes for ICI properties should apply to the local
competitive market set, which by exception (e.g., urban
versus rural), may be less than the 125 folio threshold.
Highest and Best Use
When valuing land, the site’s HBU as if vacant must be
determined.
Land Size
The correct land size of a property should be reflected in both
the Property viewer/Keypane and within the appropriate
section on the input form (i.e., acres, square feet or number
of units). Land dimension type must also be selected to
reflect the land unit of measure (i.e., square measure, area
measure, or width and depth). There are exceptions to this
rule. It is appropriate to use the effective size to reflect
restrictions such as riparian areas or restrictive covenants.
NOTE
Please indicate in the comments that effective size was utilized
in the (Land tab component) valuation. However, Keypane size
should reflect the actual size.
ICI land valuation will differ in urban and rural areas, which
will be reflected in the Rate Type and Rate Table Description
fields. While consistency is important, appraisal judgement is
required to determine the appropriate land valuation method,
such as square measure, units measure or area rate. For
example, high-density urban areas such as the Lower
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Mainland are moving towards units measure, (typically rate
per buildable square foot), to reflect current market
conditions.
Split Classification – Vacant Land
Some vacant parcels are subject to split zoning, thus
classification is required to reflect mixed-use development.
The general rule of thumb is to value first – class second,
through an appropriate percentage division. The split is
determined by the percentage of land (size) related to one
classification. Split classification is not determined by the
value it contributes to the property. If you require two rate
codes, one for, say, residential, and one for commercial, this
is fine; however, you still place the total land size as the
inputs and split the component according the area of land in
each zoning.
NOTE
The exception to placing the total land size and splitting the land
according to the area by component apportionment is legislated
lands (farms, forest) and occupiers of exempt property (refer to
Occupiers). The Assessment Act requires the value of occupiers
reflect the fee simple ownership and market value.
Valuation – Occupiers and Legislated Land Values
Occupiers require the size of the land be split from the
original parcel to address the fee simple ownership and
market value of the area occupied. Legislated property (farm
and forest) requires the size of the land be split from the
original parcel to address the non-market value of the lands.
Occupier Example
2.0 acre parcel of crown land
1.0 acre is occupied
o The land size containing the crown land will read 2.0
acres with a 50 percent component apportionment.
o The land size (separate roll number) containing the
occupier will read 1.0 acre – reflecting the fee simple
ownership and market value.
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Forest Example
100-hectare parcel – 25 hectares in managed forest class
o The roll number remains the same – however the land
split will be different.
o For the non-managed forest piece 100 hectare (less 25
hectares in managed forest land) land size is 100
hectares with a 75 percent component apportionment.
o For the managed forest portion 25 hectares is entered –
no component apportionment for the size.
o You may notice some component apportionments on
managed forest land – this is to account for the
differences in soil quality in the valuation of the lands –
not the size. Please contact Assessment and Valuation
Services (AVS) for any managed forest related issues
and valuations.
Land Rate Codes
Step 1: Developing Rate Codes
Rate table description codes A, J or N can be applied to an
assessment area, jurisdiction, or neighbourhood. The rate
table description code identifies the size of the market area to
which the rate code is applied:
Code
A
Description
Area
J
Jurisdiction
N
Neighbourhood
Use
for any land component in an
assessment area (e.g.,
legislated rates)
for any land component in a
specific jurisdiction (e.g., park
land)
for any land component in a
specific neighbourhood (e.g.,
most residential and
commercial properties)
Most rate codes will fall within the neighbourhood level,
unless it can be determined that the particular property type
has the same market value throughout the jurisdiction or
assessment area. For example, legislated rates do not change
by jurisdiction or neighbourhood. Therefore, the boundary for
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this type of rate code will encompass the entire assessment
area. A jurisdiction-level rate code could be used for
municipal parkland or other properties that have similar
values throughout a jurisdiction.
The rate code level should be established in the context of the
competitive set for the property. Knowledge of the market
and sales for each property type should be relied upon to
determine which rate table description code to use.
Step 2: Establishing Rate Code Boundaries
Principles
1. A boundary occurs where there is a clear change in the
homogenous nature of the majority of properties. The result
of the change in market value is that the rate code and
amount is no longer representative.
2. To establish a rate code boundary ideally there should be
sufficient sales evidence to demonstrate that a particular
group of properties has a different market value than other
properties. For some commercial and industrial
neighbourhoods, there may not be enough sales in one year
but there may be sufficient sales over several years or paired
sales relationships can be established for market movements.
Rate Code Boundaries
A boundary dividing market areas might present itself in the
form of a change in zoning, a major physical feature, such as
a highway or river, or a political boundary such as the border
between two municipalities. A boundary must be supported
by sales evidence and logic. Rate code boundaries are
established through field inspections, market sales, land
characteristics and knowledge of the specific area. For
example, changes in zoning commonly require application of
separate rate codes. If 200 lots in a neighbourhood are zoned
for multi-family use and 150 are zoned for commercial use,
then two different rate codes could be used providing sales
evidence supports different values.
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Rate Code Boundaries – Neighbouring Jurisdictions and Areas
When revaluing annually, or creating a new rate code, review
the neighbouring rate code and amount with the appraiser
responsible for that code/amount. For example, Boundary
Road has Burnaby on one side and Vancouver on the other
and New Westminster and Burnaby are divided by 10th
Avenue. These two appraisers must discuss their trending
and/or value creation. Rate codes and rate types are
applicable to specific markets. The use of rate codes and their
boundaries always reflect market activity. Creating new rate
code boundaries without market support is not an acceptable
practice.
Supporting Sales Analysis – Establishing Rate Codes
Sales evidence will determine where a change in market value
occurs for properties with similar characteristics. In general,
boundaries should be established between two areas when
buyers would consider purchasing in one area but not the
other 1.
If the group is not large enough to establish sales trends then
the property attributes should be adjusted by a manual or
characteristic adjustment. For example, if five lots in a
neighbourhood of 100 lots are traversed by creeks, each lot
must have a manual or characteristic adjustment for creek
rather than their own rate code. These manual or
characteristic adjustments must be supported by market
support.
The minimum number of properties required in a rate code is
125. These sources were considered:
o Mass appraisal texts 2 recommend at least five sales and
five percent of the group of properties selling to support
market value conclusions.
1
IAAO. Property Appraisal and Assessment Administration. (1990:
Chicago) p. 340.
2
BUSI 444 Computer Assisted Mass Appraisal (UBC Real Estate Division)
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o The IAAO recommends that, as a general rule, 50 or
more contemporary sales are needed to calibrate a
model 3; note that five percent turnover in this case
would require a sample size of 1,000 properties.
These are the exceptions to this rule:
o Statutory rate codes.
o If sales evidence shows that an entire market area is
less than 125 folios, a rate code may be used for this
smaller group of properties. For example, a commercial
neighbourhood may have fewer than 125 folios total in
the neighbourhood. The target for number of folios
within a rate codes remains at 125 save and except
situations as above or where market evidence clearly
shows a need for a separate rate code. There is a
difference in rural and urban areas in terms of number
of ICI properties, but 125 must remain a target. This
scenario (fewer than 125) will be documented in the
rate code description for audit purposes.
o Time adjusted sales may be included in the sales
evidence. If time adjusted sales are included a
determination of the market movement needs to be
included. Sales up to five years old can be utilized in
nominally trending or a relatively flat market. If the
market is trending upward substantially, utilize no more
than a three-year horizon to trend market movement.
3
IAAO. Property Appraisal and Assessment Administration. (1990:
Chicago) p. 341.
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Step 3: Numbering Rate Codes
The following numbering system must be used to label all rate
codes.
Rate Code Range
0000-0999
1000-1999
2000-2999
3000-3999
4000-4999
5000-5999
6000-6999
7000-7999
8000-8999
9000-9999
*1000 – 9000
Rate Code Description
non-typical lots, etc.
all residential lots (excluding
stratas and apartments)
all apartment lots
all strata lots
all commercial zoned lots
all industrial zoned lots
all non-farm acreage
properties requiring special
handling-including water
lots and log storage
farm – non-soil oriented
uses
farm – soil-oriented uses
managed forest rate codes
reside at the provincial
level.
Please do not change; AVS
will update the managed
forest land rates.
NOTE
When choosing a rate code(s) reference the actual use codes as
a guide. Actual use codes 273, 274, and 275 are industrial
warehousing and self-storage and although in the 200 series
commercial actual use range these properties may be more
common in the industrial rate code range. In terms of mixed-use
properties subject to split classification, use the predominant
contribution to value (or primary actual use) when selecting a
rate code.
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Rate Code Descriptions
Minimum Requirements – Rate Code Descriptions
Rate codes must be described clearly and concisely for
consistent interpretation and application.
The following are the minimum requirements for rate code
description:
1
2
3
4
5
6
Location
Size, table type and table number applied (if no table,
state “no table”)
Typical lot size (at curve dimension factor of 1.0)
Typical lot zoning
Default characteristics are to be entered on the Rate
viewer/Land Rate tab (space in the description field is
limited)
Review date
Application of Rate Code Descriptions
o Additional comments may be added as required
according to valueBC space limitations.
o Default characteristics are to be entered in the Rate
viewer/Land Rate tab/Characteristic spreadsheet.
o The review date must be changed annually even if the
rate amount is not updated.
o If land default characteristics exist and were added or
reviewed the Characteristic spreadsheet/Reviewed Date
field should be updated.
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See example below of a typical rate code description:
Appling Rate Types
General Principle
1. The choice of rate type is dictated by market evidence.
Rate Type Application
1. Area Rate
o Acre: this rate type is typically used when valuing
acreage (industrial, possibly development) properties.
This rate type values land using a dollar per acre rate.
Value is typically adjusted with an acreage curve.
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2. Standard Lot
o Lot: this rate type values land using a typical lot rate. It
is typically used for residential lots. The rate type can
be valued with or without (typical lot rate) a size
dimension adjustment curves – may be used for
homogeneous small commercial lots.
3. Square Measure
o Square Footage: this rate type is typically for
commercial and/or industrial lots. Land is valued using
a dollar per square foot rate.
4. Width
o Front Foot: this rate type is typically for commercial
and/or waterfront lots. This rate type values land on a
dollar per front foot rate.
5. Unit Measure
o Units: this rate type is typically used for any other units
of comparison, such as dollar/buildable foot, dollar/suite
or dollar/manufactured home pad.
Price per buildable is typically used for higher density urban
locations. This method of valuation reflects how the market
treats these types of properties. The land is valued using the
dollar per buildable based on the density that may be
achieved.
Regardless of rate type, dimension curves can be selected for
acreage, width, depth, square feet, units or any combination.
All selected dimension curves will always be used in the
component calculation.
Applying Land Adjustments and Size Curves
General Application Discussion
The typical lot in a rate code is a lot that encompasses the
general attributes within the rate code boundary such as
recurring geographical features (e.g., steep slope or view),
size, or zoning. These default characteristics are included in
the rate amount and should be noted in the rate code
description. It should be noted, however, that these
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characteristics can take up a large part of the rate code
description. Use short abbreviations where possible and keep
commas etc. to a minimum. Attributes that affect value in the
subject lot that are not contained in the typical lot must be
accounted for with land characteristic adjustment. Attributes
of the subject lot that have no apparent effect on value
should still be chosen in the dropdown boxes for future
analytical purposes (this is especially important for sales
studies of uncommon land characteristics).
Land Adjustments
Some properties will require adjustments not reflected in the
base rate code. Adjustments are only made for property
attributes that influence value. There are two types of
adjustments that can be applied to land components –
characteristic and manual. It is important they are applied
consistently to ensure equity between properties with similar
attributes and in accordance with the principle of mass
appraisal.
1. Rate codes are not to be used as adjustments to the typical
property. For example, a new rate code should not be
created to group several folios with slightly different zoning
but otherwise conform well to the standard lot already
described by another rate code (including the valuation/value
level).
2. Characteristic adjustments: land characteristic adjustments
should not be confused with default characteristics. A default
characteristic (located on the Rate viewer/Land Rate tab) is a
land characteristic that is associated with a rate code and the
value attributed to the characteristic is already inherent
within the rate code amount. These default characteristics
are not land adjustments. A land characteristic adjustment
(located on the Rate viewer/Land Characteristic Adjustment
tab) is an adjustment that is applied en masse to all land
components within a rate code that contains the specific land
characteristic. These characteristics are not included within
the default characteristic but may be common to many
properties within a rate code. The adjustment can be
negative or positive and can be either a percentage
adjustment or lump sum adjustment. Characteristic
adjustments are specified in the Rate viewer and must be
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supported by market data and comments and stored on the
Rate viewer/Attachment tab.
3. Manual adjustments: manual adjustments may be applied at
the folio level to an individual land component and may be
used to change the value of that component. Caution should
be used when applying an adjustment to a folio that has
more than one land component. Manual adjustments should
also be the exception, not the norm. A land component can
have many manual adjustments and may be applied as a
percentage adjustment or as a lump sum adjustment but not
both. As with characteristic adjustments, manual
adjustments can be either positive or negative adjustments
to the component value. Adjustments to land components
within in valueBC are additive. Manual adjustments are to be
used only for physical attributes that are not common among
many properties in the market area and must be supported
by market data. The supporting market data should be saved
on the Property viewer/Attachment tab. Manual adjustments
should have a note on the Property viewer/Notes Tab
outlining the rationale for the adjustment.
NOTE
Manual adjustments and land characteristics must have market
support.
Size Curve
NOTE
There will be some changes and/or additional information added
to this section as a result of the provincial Land Curve Project.
The valuation of ICI land may require size adjustments to
recognise the difference in lot sizes. This may be made at the
folio level or by applying a size curve. For industrial
properties, utilizing a size curve for acreage properties is
more common than for urban commercial centres where the
lots sizes may be more homogeneous.
Market support is needed to determine if a size curve is
appropriate. If it is determined that this is the best method to
address the differences in size, the first step is to review
existing size curves to ascertain if a table already exists that
is appropriate for your neighbourhood. You may be able to
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utilize further market information from that neighbourhood to
support your conclusion for the appropriate size curve.
A new size curve/table should only be created if there is no
existing size curve/table that is appropriate. The appraiser
must determine that the curve is supported by market
analysis (i.e., paired sales) and retain a copy of the market
support on the RATV for future support, PAAB etc.
NOTE
Size curves reside at the area level.
CAUTION: Do not create a size curve for one folio – this will
be audited and you will be asked to remove the folio and find
an existing size curve.
Auditing Rate Codes
A high level or primary annual audit will report:
o All rate codes that have less than 125 folios to ensure
that they are market justified, with attention paid to
areas, jurisdictions and neighbourhoods with less than
125 folios within the competitive market set.
o Rate code descriptions to ensure they meet minimum
content requirements.
Secondary audits will be conducted by field offices as part of
their annual audit plan, providing a more in-depth review of
specific neighbourhood rate codes.
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EXCESS AND SURPLUS LAND
The Dictionary of Real Estate Appraisal [Fifth Edition ©2010],
published by the Appraisal Institute (US), defines these two
terms as follows:
Excess Land
“Land that is not needed to serve or support the
existing improvement. The highest and best use of the
excess land may or may not be the same as the highest
and best use of the improved parcel. Excess land may
(does) have the potential to be sold separately and is
valued separately.”
NOTE
Word “does” is added for clarity, not in the original definition.
Surplus Land
“Land that is not currently needed to support the
existing improvement but cannot be separated from the
property and sold off. Surplus land does not have an
independent highest and best use and may or may not
contribute value to the improved parcel”.
The Appraisal Institute (US), in a document entitled “Common
Errors and Issues”, [©2012] states that:
“Excess land is commonly mishandled in assignments.
It is often confused with surplus land. It is too often
lumped in with the value of the entire property or
ignored altogether. Excess land may be sold off
separately from the rest of the property, so in effect,
the subject property becomes two subject properties.
Excess land may have a different highest and best use
than the rest of the site. This must be addressed in the
highest and best use analysis. Further, excess land will
have to be treated separately in the valuation process.
An entirely different set of comparable data may be
required. The value of excess land must be reported
separately. Be careful about adding the value of the
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excess land to the value of the rest of the property, as
the sum of the parts may or may not equal the whole.
Surplus land does not have a separate value, as it
cannot be sold off separately. It is ‘extra’ land that may
or may not contribute value to the overall property. It
does not have an independent highest and best use. It
may have the same value per unit of comparison (e.g.,
value per square foot, value per acre) as the rest of the
site, or it may contribute less per unit of comparison”.
Land Analysis – Excess Land
(Examples can be found in the Appendix B)
Analyzing zoning and legally mandated requirements,
including for site coverages, floor/space ratios, parking,
ingress and egress, setbacks, and so on, is the first step in
determining if excess or surplus land may exist. If the
property just meets the required minimums, then neither
excess nor surplus land is likely to exist. If, however, the
subject site exceeds some or all of these mandatory
requirements, then it is possible that excess or surplus land
might exist. Marketplace norms for the property and building
type must then be considered.
The analysis then steps into consideration of typical
marketplace norms for the building style, type, design etc., in
its particular location as situated on the subject site. What
might be excess or surplus land in one location, may not be in
a more suburban or rural location (where more land is a
typical market expectation). Therefore, a competitive market
set must be considered to determine these expectations. This
analysis of a competitive market set will also consider issues
such as the physical siting of the structure, site configuration,
topography, site coverages, floor/space ratios, parking,
ingress/egress etc., but now from the viewpoint of what is the
typical or acceptable marketplace norm, rather than the
minimums legally permitted.
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The following steps are helpful to determine whether either
excess or surplus land exists, and to what extent:
1. Obtain a copy of the site plan, or use an aerial photo from a
municipal website, to determine the location of the existing
building(s).
2. Check the zoning to make sure that all requirements for site
coverage, floor space ratio (FSR), ingress/egress, parking,
setbacks, etc., are considered.
3. If those minimums are met, then consider marketplace norms
through an analysis of your competitive market set.
4. Review the typical site coverage for the competitive market
set, while considering parking norms, ingress and egress
needs and norms, topography, etc. In considering the
marketplace norms, however, ensure that you are only
considering other properties that do not have apparent
excess land.
TIP
If this is an income-producing rental (i.e., a fast food restaurant,
at say $35/square feet of building), and many of your
comparables have a 20 percent site coverage, and all of that
land/building ratio is included in a similar rental rate, then no
excess land would generally exist for your subject at or above
that ratio.
5. From your review of the competitive market set, determine
marketplace norms for (especially) site coverages, but
including also any additional areas needed vehicular parking
and maneuvering. Ensure that you have considered any
oddities of the subject site – unusual topography that limits
development, unusual configurations (especially those that
are inefficient) that need additional maneuvering space, and
so forth.
6. After considering the oddities (if any) of your site and sited
building, define the indicated site coverage for your subject
based on those marketplace norms and the oddities (if any)
of your subject site.
7. Divide the building size by the defined site coverage ratio to
find out the land size that the marketplace considers as
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needed to support the existing improvements. This gives you
the ‘needed land area’ as considered by the marketplace.
8. From the total land area subtract the ‘needed land area’. If
this number is positive, and not De Minimus, then this land
will need to be valued.
9. If the land has its own HBU (i.e., different type or style of
development than what exists and/or it could be subdivided),
then it can be defined as ‘excess land’. Excess land may have
value at a different, sometimes higher, rate than the balance
of the land, but would not usually be less than a proportional
contribution (including a size curve) to the site in its’
entirety.
10. If, on the other hand, the additional land can only be used to
expand the existing facility along an economies of scale idea
(diminishing returns), provide additional parking,
manuevering, or outdoor storage space, etc., then the land is
most likely ‘surplus land’. Although surplus land can have the
same proportional value as the balance of the site, this is
much rarer. Its value contribution needs to be thought about
in the context of the economics of its potential use.
NOTE
Excess land almost always has the same rate code and is valued
the same as the entire parcel as vacant – this will assist with
determining the difference between excess and surplus as
surplus land typically (but not always) contributes less due to
inferior utility.
The component apportionment percent is used to distinguish
the appropriate amount of excess land and the remainder of
the parcel (i.e., 30 percent excess land and 70 percent
remaining parcel). Generally, use the component
apportionment percent as opposed to creating an artificial
subdivision. The only exception to this method would be
where the excess is worth more than the balance of the site,
typically due to better spot zoning/OCP, for instance. In that
case, consider a two-component methodology, with
appropriate deductions from each component to achieve said
subdivision into two differently zoned parcels.
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NOTE
Most areas will have some properties with two methods of
valuation (e.g., costed gas station with an income-valued
convenience store). In these instances, you will have an excess
land portion attributed to the improvements valued on the cost
approach, together with a portion of the land designated or
attributed to the income improvements. In some cases, there
will be a residential/commercial split where the excess also
needs to be considered.
Adjustments for Excess Land
Any adjustments made to the land value are reflected on all
components with the exception of waterfront (width
valuation). Remember – the entire lot is one legal lot.
Regardless of whether there is excess land or not, value the
lot as vacant at its HBU. If adjustments are required they
apply to the entire lot regardless of where they are located,
such as corner adjustments, easements, access issues,
location adjustments, etc. This will also assist in determining
if the land is actually excess land.
Excess land is valued as a separate component as it adds
value over and above the current use. The excess land
portion still forms part of the total land value as vacant;
however, it is not being used at its HBU and is not required to
support the existing improvement.
For example, a 100,000 square feet lot is valued at $75 per
square foot and requires an adjustment for size -5 percent
and +10 percent for corner as well as an adjustment for an
access easement along the back of the property. It is
discovered that only 75,000 square feet is required to support
the existing improvements and 25,000 square feet is
researched and deemed excess land – the adjustments of; -5
percent for size, +10 percent for the corner and the easement
remain on the excess land portion as well. The indicated rate
for both the excess piece and the main component should be
the same.
Surplus Land
Surplus land cannot be subdivided nor is it required to
support the existing structure. Surplus land may be a portion
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of land that is only suitable for uses such as parking or
storage, such as an odd shaped portion of the lot, land that is
required for a buffer, is encumbered by no-build restrictions,
easements or overhead power lines, or has riparian or
topographical challenges. Surplus land may or may not
contribute some value to the property; or subdivision is not
possible.
Land Analysis
The following steps must be taken in the determination of
surplus land:
1. Is there unutilized land?
2. Can it be subdivided or used for further expansion of the
existing improvements? If so, this is excess land – not
surplus.
3. Are you able to identify that the land contributes value to the
overall site however at contributes less than the HBU?
4. Is the unutilized land typical within the competitive market
set?
5. Can the surplus land be rented out as land or yard storage,
parking, etc.?
6. Is there enough surplus land that is market supported to
consider its contribution (De Minimus rule)?
Surplus land is often accounted for by:
1. Land or yard storage rental rates typical of the competitive
market set.
2. A CAP rate adjustment.
3. Direct comparison approach using valueBC rate code with
appropriate adjustments to reflect the diminished utility and
value.
Analyzing sales and understanding what the market
considered within the competitive market set is necessary to
determine which approach is applicable.
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The CAP rate adjustment or direct comparison methods are
recommended as they are typically the most supportable
approach to surplus land. Yard storage rates are typically
minimal, such as one dollar, which, in most cases, would
contribute less than the value of the land; however, if there is
lease information for yard storage and is typical of the
competitive market set this is acceptable. If yard storage is
not typical of the competitive market set, you cannot consider
including it in the income stream.
There is no flag on valueBC for surplus so utilize the manual
adjustment surplus land and add in the comments.
NOTE
Use caution when valuing surplus land to avoid double counting.
For example, if surplus land valuation is included in the
capitalization rate or as a yard storage rental rate, do not adjust
the land component further unless market evidence indicates
otherwise as this would be considered double counting.
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UNIQUE PROPERTIES
Air Space Parcels
Under review.
Water Lots
Under review.
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APPENDIX A: FREQUENTLY ASKED QUESTIONS
Question
How should I base rate codes for ICI properties?
1. Answer
Base rate codes for ICI properties on the local competitive
market set. Since rate codes in valueBC may be adjusted for
land attributes, it is possible to include a significant number of
properties in one rate code.
Question
What is necessary to adjust the CAP rate to account for
surplus land?
2. Answer
A CAP adjustment may be made at the income or property
record level (use with caution to avoid double counting) for
surplus land that contributes some value in addition to the
economic income for the property. Any adjustment must have
market support.
Question
How should income related to yard storage be treated?
3. Answer
A yard storage occupancy has added to valueBC for a number
of ICI model types – IND, marinas, MHP, MOT, REC, and RET.
When determining whether to add an occupancy line entry for
yard storage for an income record, consider whether the yard
storage income is already included in the economic rate for
the property or whether there is an area of surplus land that
is or may be rented for storage.
CAUTION: Ensure CAP rate is reflective of the yard storage
area and not adjusted for surplus land.
Question
How should truck manoeuvring distances be accounted for
when reviewing excess land for an improved industrial site?
4. Answer
Truck manoeuvring distances for typical warehouse
operations for semi-trailers of 63 feet is measured as follows:
from the loading dock to the outside edge of the turnout area
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is approximately 126 feet for a left hand (counter clockwise)
approach and 140 feet for a right hand (clockwise approach).
Question
How should small pieces of surplus land be treated?
5. Answer
Use the De Minimus rule to determine if surplus land adds any
contributory value to the land. In the case of surplus, land the
De Minimus rule refers to land that is so inconsequential in
size or value that, in law and practice, it does not make sense
to separately assess it.
Facts:
o 13,464 square feet light industrial warehouse situated
on 1.64 acres (71,438 acres).
o The property is valued through a general industrial
warehouse incomeDCA model.
o There is an additional 37,000 square feet of land
storage valued at one dollar per square feet included in
model.
o Using aerial imagery the appraiser determines that a
triangular piece of land approximately 9,000 square feet
to the right of the building is considered surplus to the
property at its HBU.
o This area would not support an expansion to the
existing warehouse building and could be considered an
example of the De Minimus rule.
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APPENDIX B: EXAMPLES OF EXCESS/SURPLUS LAND
CALCULATIONS
Note that all excess or surplus land calculations begin with
estimating the amount of land required to support the
existing improvements. In addition, good notes should be
placed on the system, clearly explaining what/where the
excess land exists. In some or many cases, consider attaching
an aerial photo with the surplus areas delineated and
explained with notes, as in the examples that follow.
Example A
This industrial property is used for light manufacturing,
consistent with many throughout the area. Your research
reveals the following sizes and ratios:
At a market rent, usually a similar property to the subject can
be obtained, but with only a 25 to 35 percent site coverage as
typical, while owner-occupied properties are more likely to
have a 20 to 30 percent coverage. From the above analysis, it
can be seen that the subject offers subdivision or further
development potential. Comparing to market norms and the
actual zoning bylaw, it can be seen that the subject could be
subdivided into some sort of configuration (yellow arrow for
obvious suggestion).
Assuming that you concluded that, in the subject’s case after
considering all factors including access, manuevering,
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topography, site configuration, etc., the site coverage ratio
should be 30 percent, then the excess or surplus calculation
would be as follows:
o Area required to support subject bldgs: 4066/30% =
13,555 square feet (49%)
o Actual site size: = 27,878 square feet
o Excess or Surplus Land: 14,323 square feet (51%)
In this case, since it appears that the land could be
subdivided, it would be termed excess land. It should be fully
valued using a component apportionment of 51 percent to the
excess land, with the balance valued via the income approach
that’s attached to the improvements, with a component
apportionment of 49 percent to that (non-excess) land
portion. Finally, because the property is subdividable, the
appraiser should most likely add a positive adjustment for this
feature on both components (of an equal percentage) since
the underlying rate code, in this case, does not include
subdividability as part of the base rate.
Example B
In this case, by comparing to nearby, similarly used
properties at 1015 and 1025-1027 (shown above), we can
see that the property appears to have some unused potential.
In those two instances, those properties are achieving site
coverages of, respectively, 37 and 47 percent, leading us to
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observe that the 29 percent of the subject is probably too
low, indicating an under-utilization of the land. Sketching this
out, we can see at least initially, that a building expansion
should be available on the area defined in red, that might use
(including access and manuevering) all of the area in orange.
In that case, the area in orange is roughly 17,500 square
feet. This equals 27 percent of the site, indicating that this
should be the apportionment percentage for the second land
component. This indicates that the existing improvement
would now achieve a 39 percent site coverage on the
hypothetical 47,942 square feet site (the 73 percent
component), which is now within market norms for the
property and building, considering its siting, oddities, and
locale.
By considering the property itself, the zoning bylaw and
market norms, we can see that this case is reasonable, but
that no further subdivision is available. We further anticipate
that an expansion of the existing building into this area would
achieve a similar rent as the rest of the subject, and the
comparables. Since the additional land does not have a
different HBU from the balance of the site, nor is it
subdividable, it would be termed as surplus land.
However, the underlying economics of a proposed building
addition are believed to mirror the rest of the building on the
site (or similar buildings in the area). Therefore, neither land
component apportionment would need a positive nor negative
adjustment for this feature. Both land components would
have identical manual adjustments or characteristic
adjustments applied (if any).
Example C – Mixed Income/Cost Property
This is an example of a typical case of a convenience store
combined with a drive-through fast food restaurant (with a
small seating area) on a gas station site, plus, in this case, a
car wash. This is a very typical modern development now.
The fast food and convenience store total some ±4,100
square feet and the site is ±54,000 square feet. In addition to
that, there is a drive-through car wash (stationary/nontracked), plus the canopy over the multiple pump station.
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From your market analysis of fast food and convenience
stores in your locale, you determine that a typical site
coverage for a stand-alone fast food restaurant would be 12
to 25 percent. Investigating the same for convenience stores
indicate that most are housed in small retail strip plazas,
where the site coverages at in the order of 25 to 35 percent.
You know that, relatively speaking, the convenience store
uses more of the site (for parking, and turnover) than other
tenants in these plazas. This leads you to think that the lower
portion of the range is appropriate. Further considering the
good siting on the subject, and the combined isleway
synergies of the two uses, you believe that a site coverage
ratio of 20 percent would be appropriate to support the
combined convenience store/restaurant.
This indicates that the area needed to support those uses is
4100 square feet/20 percent = 16,400 square feet. This is the
non-excess/surplus land portion. The component
apportionment in this instance would then be 16,400 square
feet/54,000 square feet, or a 38 percent land component
apportionment. Sketching this out to make sure it makes
some sense, that amount of apportionment would look like
this on the site:
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This shows that, with combined accesses and isleways that
benefit all users on the site, the amount of space attributed to
support the fast-food restaurant and convenience store is
rational. These are valued via an income approach with the
aforementioned 38 percent land component.
The balance of the improvements should now be valued on
the cost approach, and a land component apportionment of
62 percent should be attributed as excess land. The abovenoted is the correct order of operations needed to determine
what amount of land should be estimated as excess/surplus
land in these cases.
Conclusion
Excess or surplus land calculations always begin with
estimating the amount of land needed to support the existing
improvements. What is left over can be excess or surplus.
What the value or that excess or surplus is, is based upon its
potential use, the economics of that use, and the market
demand for that additional land. Simple ratio analysis,
without considering the specifics of the subject site and where
and what the excess or surplus might look like, can result in
over or under-estimation of its potential utility and/or value.
Consideration must be given in all cases to any site oddities
that reduce efficiencies (i.e., poor site configurations), bad
topography, bad siting of the existing structures, and so on.
This may decrease the site coverage ratio (i.e., increase the
land mass) needed to support the existing income
improvements and may thus decrease the potential quantity
and/or value of excess or surplus land.
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APPENDIX C: LAND CHARACTERISTICS DEFINITIONS
Code
#
Description
Definition/Practice
01
No Water
02
No Hydro
03
04
05
Well
Unpaved Road
No Road
06
07
08
09
10
12
14
Sanitary Sewer Available
Curb and Gutter
Underground Conduit
Alley
Sidewalk
Natural Gas Available
Railway
15
17
18
19
20
Strata Duplex
No Sewer
Community Water System
Common Beach
Logged
No water main or water system is available for connection and no
well or water source is evident.
No hydro service is available to site. Not to be used if service is
available but not connected.
Water is supplied by a well system.
Property is accessible by loose surface roadway.
Property is not accessible by road. (i.e., no legal access or gazetted
but un-constructed road).
Sanitary sewer system or septic system is available for connection.
Indicates that the side of street abutting the property is serviced.
Hydro and/or communication services are underground.
Property abuts an alley.
One or both sides of the fronting street have a sidewalk.
Natural gas service is available.
Property is located adjacent to or near a railway access and definitely
benefits from a resulting enhancement to value.
Land improved with a stratified duplex.
21
22
23
24
25
Double Frontage
Cul-De-Sac
Corner
Waterfront
Bordering Waterfront
26
View – Prime
27
28
29
Building Site Cleared with
Driveway
Restricted Use
Shape – Panhandle
30
31
32
33
34
36
37
38
41
42
44
45
46
47
48
49
50
51
52
Shape – Pie
Shape – Extreme
Flooding or Poor Drainage
No Percolation
Subdividable
Water Lot
View – Good
View – Fair
Adjacent to Railway
Open Ditch
Slope – Moderate
Slope – Strong
Slope –Steep
Above Road
Below Road
Rock Extrus
Diff Access
Reclaimd Land
Archaeological/ Heritage Site
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Denotes property is on a community system.
Property shares a beach with adjacent properties.
The property has been logged of the majority of its merchantable
timber.
Property has roads at front and rear lot lines.
Only if the property abuts or is situated on the turn-around section.
Property is a corner lot.
Non-residential property that enjoys waterfront accessibility.
Property enjoys waterfront accessibility but is separated from
shoreline by a strip of public land or road.
View is unobstructed, panoramic and attractive so as to definitely
enhance value.
Denotes a vacant property having a cleared building site and
driveway.
Property use is restricted (i.e., easement, right of way, covenant).
Property has panhandle configuration with narrow access strip of
limited use.
Property has wedge shape.
Property has extremely irregular or unusually elongated shape.
Property is subject to seasonal flooding or poor drainage.
Property has failed a percolation test.
Property is a water lot.
View is partially obstructed but still enhances value.
View is restricted but still enhances value.
Slopes are seven to 16 degrees (12 percent to 30 percent).
Slopes are 16 to 30 degrees (30 percent to 60 percent).
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53
Higher Use Potential
54
Contaminated Site
55
Remediated Site
56
57
58
64
65
66
68
Adjacent to Alrt
Alrt—further than 200 feet
Alrt –within 200 feet, not
adjacent
Adjacent to Walkway
Flight Path
Under Improvement (Not
High/ Best Use)
Legal Non-Conforming Use
Traffic Above Average
Traffic Heavy
Typical T-Lot
69
Other T-Lot Influence
70
71
Waterfront – Full Time
Residential
Waterfront – Rec-Paved
72
Waterfront – Rec-Gravel
73
Waterfront – Rec-4x4
74
Waterfront – Rec-Boat/Fly
75
76
78
79
80
85
86
87
88
89
Site Prep Required
Site Prep Completed
Greenbelt
Creek Influence Yellow- Nutm
Creek Influence Red- Fish
Playground
Site Borders Busy Street
Location within Neigh Code
Corner Unit
Green Legacy Site
90
91
92
93
94
Location within building
Geological/Environ Sensitive
Non-Buildable
Power-Line Proximity
Restrict Covenant / Devel
Permit
Location Inferior to Rate
Code
Location Superior to Rate
59
60
62
95
96
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Due to zoning, OCP or other factors the property has the potential to
be put to a higher use than its current use. (i.e., also includes
property “ripe” for subdivision).
Denotes properties where some form of site contamination is proven
to exist. Includes those properties registered at site registry and
where some potential of contamination exists (phase 1 complete).
Denotes a site that has been remediated or remediation plans have
been implemented (note the stage of remediation in land remarks
section).
To identify a property being put to a legal non-conforming use.
Denotes a property located at the top of a “T” road layout. Negatively
affected by vehicle light pollution, etc. (i.e., due to traffic pattern,
vehicles drive directly toward the property).
Denotes a property with other T-Lot influence than above where
property is negatively affected by vehicle light pollution, etc. (i.e., at
one end of cul-de-sac, “L” shaped traffic pattern, lane influence).
Waterfront property occupied as a full-time residence (not
recreational/seasonal).
Waterfront property serviced by a paved road and used on a
seasonal/recreational basis (i.e., summer cabin on lake).
Waterfront property serviced by a gravel (unpaved) road and used on
a seasonal/recreational basis (i.e., summer cabin on lake).
Waterfront property limited to 4x4 vehicle access to the property and
used on a seasonal/recreational basis (i.e., remote summer cabin on
lake)
Waterfront property, access to the property is limited to boat or fly-in
only and used on a seasonal/recreational basis (i.e. remote summer
cabin on lake).
Denotes property that borders highly trafficked roadway.
To be used for any known property with a conservation easement or
covenant, whether or not it has been approved under the
Environment Canada Green Legacies or Islands Trust Natural Area
Protection programs (refer to Restrictions on Title – Schedule E).
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W2
W3
W4
W5
W6
Code
Office Com. Plan allows
Higher Use
CLASS A-Fill, wharves, other
permanent structures
CLASS B-Gangways, berths
and millponds
CLASS C-Ingress/egress
(area req. to access berths)
CLASS D-marg. Useable or
unusable intertidal areas
Lakefront
Riverfront
Oceanfront
Fly-in-Access
Boat-in-Access
Transferable Density
Volumetric
Economically Affected –
Wildfires
Visual Fire Impact
Minor Property Fire Impact
Partial Property Fire Impact
Major Property Fire Impact
Waterfront – Poor
W7
Waterfront – Fair
W8
Waterfront – Average
W9
Waterfront – Good
97
C1
C2
C3
C4
R1
R2
R3
R4
R5
T1
V1
W1
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Waterfront land (river, lake, ocean, etc.) possessing few of the
attributes of typical waterfront land within the competitive market set,
or where the majority of those attributes are significantly inferior or
lower quality than the typical example. Generally regarded as being
substantially inferior to the average. Can be used for all property
types.
Waterfront land (river, lake, ocean, etc) possessing some, but not all
of the attributes of typical waterfront land within the competitive
market set, or where one or more of those attributes is inferior or of
lower quality than the typical example. Generally regarded as being
inferior to the average. Can be used for all property types.
Typical waterfront land (river, lake, ocean, etc.) within the competitive
market set. Can be used for all property types.
Waterfront land (river, lake, ocean, etc.) possessing all of the
attributes of typical waterfront land within the competitive market set,
but where one or more of those attributes is significantly superior or
of much better quality than the typical example. Generally regarded
as being superior to the average. Can be used for all property types.
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APPENDIX D: RATE TABLE DESCRIPTION
Describes the range of use within an assessment area that a
value code may be used:
Code
A
Description
Area
J
Can be accessed by any component in an
assessment area. An example may be the use of
farmland rates or commissioner’s rates.
Jurisdiction
N
Can be accessed by any component in a give
jurisdiction. An example is where land is valued
throughout the jurisdiction according to zoning
(i.e., apartment density, or industrial use).
Neighbourhood
S
Can be accessed by any component in a given
neighbourhood. The majority of folios placed on the
land calculation system fall under this rate table
description.
Statutory
T
For future use by head office.
Timberland
Can be accessed by any component in any
assessment area. The timberland rates are created
and controlled by head office.
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APPENDIX E: RATE TYPE TABLE
There are five different rate types:
Type
Area Rate
(Acre)
Standard
Lot
Square
Measure
(Square
Foot)
Width
(Frontage
Rate)
Units
Measure
Description
Used to value large parcels using a dollar per acre
rate. Value is typically adjusted with an acreage
curve.
For valuing groups of similar lots such as
residential lots. Can be valued with or without size
dimension adjustment curves.
Mainly for commercial and industrial properties
using a dollar per square feet rate.
Typically for waterfront or commercial core
properties using a dollar per front foot rate.
This rate type is typically used for any other units
of comparison (e.g., dollar per buildable square
feet, dollar per suite or dollar per manufactured
home pad, multi-family, development land, etc.).
This rate type is not to be used to (e.g., PV of one
unit, strata land residual, etc.). Units of measure
should never be used for face of roll. If units are
used, ensure there is a dimension for face of the
roll.
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