December 18, 2000, E.C.B. Control No. 04/98/192 (71 LCR 251), 05/98/192, 06/98/192

REASONS FOR DECISION

1.  INTRODUCTION

[1]  The claimants owned three contiguous parcels of land on Garden City Road in Richmond, British Columbia. From north to south they were as follows:

In February 1997, 6620 Garden City Road had a residence that was used as a rental property; 6640 Garden City Road was owner-occupier; and 6680 Garden City Road was vacant.

[2]  The respondent, the City of Richmond ("Richmond"), expropriated the three properties for a Community Park pursuant to the Expropriation Act, R.S.B.C. 1996, c. 125 ("the Act"). Richmond expropriated 6680 Garden City Road, the property owned by the company, on February 3, 1997 and the other two properties on February 12, 1997.

[3]  Although the claimants agreed with Richmond that the highest and best use for the property was multi-family development, they sought greater compensation than the advance payments based on a higher density land use. The total claim for compensation brought by Ilse Gonev and Jeanne Douglas was:

The total claim for Mary Forster was :

The total claim for 366808 B.C. Ltd. was:

[4]  Advance payments were made as follows:

[5]  Because the valuation evidence was essentially identical for all three properties, the claims were presented together. The primary issues at the hearing were the density that would have been probable but for the expropriation and the effect of that density on the market value. In addition to gauging what the base density designation in the Official Community Plan ("OCP") might have been, there were other factors that we have to consider. As a preliminary issue we have to decide whether reference could be made to other sections of the OCP. We also have to consider whether the properties might have been assembled; the effect of market factors and absorption rates; and whether a purchaser might have paid any more for the chance of achieving greater density as outlined in the OCP. A secondary issue was whether any disturbance damages could be recovered when compensation for market value in each case was based on multi-family development. Richmond challenged each of the disturbance damages individually, in any event.

2.  BACKGROUND

2.1  The properties

2.1.1   6620 Garden City Road

[6]  Ilse Gonev and Jeanne Douglas bought 6620 Garden City Road in 1980 as an investment. The property had a frontage on Garden City Road of 82.5 feet (25 metres) and a depth of 518 feet (158 metres) for a total area of 0.98 acres (0.40 hectares). There was a residence on the property that Ilse Gonev and Jeanne Douglas rented out until the time of the taking. Both women had worked for the City of Richmond until their retirement in the early 1990’s. They both had traded a number of other real estate investments independently and one other investment property together.

2.1.2   6640 Garden City Road

[7]  Mary Forster bought 6640 Garden City Road with her husband (now deceased) in 1950. The dimensions of this property were identical to the property at 6620 Garden City Road. At the time of the expropriation Mrs. Forster was still living on her property and in fact continued to live on the property with Richmond’s consent for some time after the expropriation. However, she was in poor health and eventually she had a stroke in October 1998. At the time of the hearing she was in a nursing home and two of her children, Monika Forster and Robert Rosic, gave evidence in her place. Both described their mother as having been interested in real estate investing and as having bought and sold various properties over the years.

2.1.3   6680 Garden City Road

[8]  The corporate claimant, 366808 B.C. Ltd. purchased 6680 Garden City Road in 1989. After May 1992 the company was wholly owned by Paula Tsui, a Hong Kong singer and recording artist. She and her company were represented locally by Connor Chow, a director of the company whose job it was to manage Ms. Tsui’s property in British Columbia. The property at 6680 Garden City Road had a similar depth to 6620 and 6640 Garden City Road, but the frontage on Garden City Road was twice as wide, at 165 feet (50 metres), for a total area of 1.96 acres (0.79 hectares). In 1989 there was a house on the property that was rented out, but the house was demolished in 1993 after it was learned that the City intended to expropriate.

2.1.4   Three parcels, collectively

[9]  The three parcels together make a rectangle of 3.92 acres (1.59 hectares), 330 feet (100 metres) wide by 518 feet (158 metres) deep. All three properties are level and partially cleared. They are on the east side of Garden City Road, between Granville Avenue and Alberta Road, in a neighbourhood called McLennan North. (See Figure 1.)

Figure 1

2.2   Dealings with Richmond including the takings

[10]  In 1992 all of the claimants were approached by Richmond to see if they would sell their property for a proposed park. No sales resulted and, in February 1993, Ilse Gonev, Jeanne Douglas, and Mary Forster ran a joint newspaper advertisement for their two properties, inviting offers to $25 per square foot (or approximately $1,068,000 for each property). The advertisement brought few enquiries and no offers. Ilse Gonev and Jeanne Douglas did receive two offers for their property from Cressey Development Corporation, in September 1992 and April 1993, for $683,021 (or approximately $16 per square foot) but they considered these offers inadequate. In September 1994 Richmond made a definite offer to Gonev and Douglas for $24 per square foot (or approximately $1,025,800), which it said was the price it had recently paid for two other properties on Granville Avenue. This offer was not accepted. In the fall of 1995 Gonev and Douglas were given a new appraised value by Richmond of $1,225,000 ($28.70 per square foot) and there was discussion about expropriation.

[11]  Mary Forster and the respondent, Richmond, had numerous discussions about acquisition of her property between 1992 and 1996. Richmond attempted to find an appropriate property to trade or exchange with Mrs. Forster but in the end no agreement was reached. Some of these discussions were handled by Robert Rosic for his mother. He was eventually given an appraisal by Richmond, dated July 1996, which valued the property at $35.63 per square foot or about $1,522,500.

[12]  Richmond also attempted to negotiate a purchase of the property owned by the company between 1992 and 1996, but these attempts were unsuccessful as well.

[13]  In the end Richmond expropriated all three properties. Expropriation notices were filed in September 1996 and all of the properties vested in the respondent in February 1997. Development of the Community Park had not yet begun at the time of the hearing over two years later. Richmond indicated that it intended to purchase further properties for the Community Park and that the park would be developed at some point in the future when the City had more funds.

2.3  Richmond - population and economic factors

[14]  Richmond is a suburb of Vancouver located to the south across the Fraser River. Over the past 10 years it has experienced a high population growth, averaging 3.2% a year. By 1997 the population was approximately 150,000. Overseas immigration and investment were strong factors in the real estate market in Richmond.

[15]  With the increase in population there had been corresponding increases in various measures of residential housing. The average selling price of single family residences in Greater Vancouver showed a steady increase throughout the early 1990s, peaking in 1995, with a 7% decline in 1996. The value of building permits issued in Richmond had increased from 1992 to 1994, dropped markedly in 1995, recovered in 1996, and dropped again in 1997. Condominium sales were a significant component of the real estate market in Richmond. The number of condominiums sold in Richmond increased in 1996 over 1995. However, by January 1997 CMHC was reporting 872 high-rise units under construction in Richmond, while the annual absorption rate over the past year had been just 35% of that number. At the same time, there were 455 low-rise units under construction with an annual absorption rate reaching only 75% of that. By February 1997 the number of completed but unsold condominium units had increased to 277, a 33% increase over the number in August 1996.

2.4  Land Use Controls

2.4.1   OCP and City Centre Area Plan

[16]  The OCP for Richmond was adopted in June 1989. In June 1995 Richmond adopted the City Centre Area Plan as a schedule to the OCP. Richmond also produced a City Centre Implementation Plan in May 1995. The City Centre Plan designates four areas as part of the City Centre. The Downtown Area is the central area, with a high density core centred on No. 3 Road and Westminster Highway. The Southeast Area is adjacent to the Downtown Area and it in turn contains four local areas, including McLennan North Sub-Area, where the subject properties are located. Other relevant Sub-Areas in the Southeast Area are the McLennan South Sub-Area, directly to the south of McLennan North, and the St Albans Sub-Area, which is directly west of the McLennan South Sub-Area. (See Figure 1.)

[17]  The City Centre Plan describes the residential policy for the Downtown Area as "a mix of multi-family housing forms including higher-density mixed use and high-rise in an urban setting." It describes the policy for the Southeast Area as "predominantly lower-rise housing including multi and single family in a green park like setting". This Plan designates the whole of the City Centre Area, including McLennan North, as a mandatory Development Permit area. Guidelines are set out for residential buildings, streetscapes, and landscaping.

[18]  The City Centre Implementation Plan describes the whole Southeast Area as "a series of low to medium-density residential neighbourhoods". McLennan North Sub-Area is described as "a mix of low to medium-density, grade-oriented, multi-family housing", with a total floor area to land area ratio (FAR) between 0.55 and 1.6. By contrast the heart of the City Centre has areas with 100% of the residential housing being high-rise with a FAR of 3.0. In the McLennan North Sub-Area, 80% of the housing is projected to be townhouses with 0.75 to 1.2 FAR. Of the three Sub-Areas in the Southeast Area it is only St Albans that is projected to have any mid-rise residential housing with a density over 1.6 FAR: 13% of St Albans is projected to be mid-rise with a FAR of 2.0.

[19]  We heard evidence primarily from David McLellan, the general manager for urban development for Richmond, that the FAR for particular projects tend to be at set increments related to the particular type of development, whether single family, townhouse, low-rise apartments, or high-rise apartments and the relative costs of different methods of construction. Masonry construction is more expensive than frame construction. McLellan said that mid-rise or high-rise apartments require masonry construction and normally have a final net FAR after road dedication of at least 2.0. Three and four storey low-rise apartments use frame construction and usually have a net FAR after road dedication between 1.2 and 1.4. Three storey townhouses have a net FAR of approximately 0.75. Single family residences and duplexes have a net FAR of 0.55. If a FAR is in between these levels, it is usually because there is a mix of housing types.

2.4.2   Sub-Area Plans

[20]  Richmond was also working on several more detailed Sub-Area Plans during 1995.

2.4.2.1  McLennan North Sub-Area Plan

[21]  After a number of public meetings throughout 1995 Richmond finally adopted the McLennan North Sub-Area Plan in July 1996. This was the Plan that included the subject properties. The McLennan North Sub-Area Plan is bounded by Westminster Highway on the north, Garden City Road on the west, Granville Avenue on the south, and No 4 Road on the east.

The development policy for this Sub-Area is described as having the following features:

• striving to achieve a "complete" neighbourhood with access by public transport and walking or cycling to a range of services and amenities;
• promoting a broad range of "grade and ground-oriented" housing opportunities that decrease in density from west to east;
• encouraging the development of affordable and universally accessible housing by taking advantage of special opportunities in the neighbourhood provided by zoning, re-zoning, density bonusing, public/private/non-profit partnerships and the use of other innovative approaches (emphasis in the original).

[22]  The Plan basically divides the northern portion of the Sub-Area into four vertical bands of approximately equal size, with base densities decreasing from west to east. In the band immediately adjacent to Garden City Road the base density is 1.6 FAR. The description of potential development for this band includes many options with the maximum density being high rise apartments (up to 45 metres or 14 storeys over a parkade). The band to the east of that has a base density of 0.95 FAR and is described as having 2, 3, and 4 storey townhouses and low-rise apartments (4 storeys maximum). The third band to the east has a base density of 0.65 FAR, consisting of two-family dwellings with 2 and 3 storey townhouses. The band on the eastern boundary has a base density of 0.55 FAR and is described as having 1 and 2 family dwellings and 3 dwelling townhouses (2 ½ storeys maximum). A large part of the southern portion of the McLennan North Plan is designated Community Park, although there is an area of residential development on Granville Avenue and No 4 Road in the south eastern portion of the Sub-Area Plan with a base density of 0.65 FAR. The subject properties are on the western side of the portion designated Community Park, south of the band with the highest base density of 1.6 FAR.

[23]  This Plan also provides for "density bonusing", which is defined as an increase in density over the base density that developers may be able to obtain in exchange for such features as "affordable housing; specialized housing for people with disabilities; privately-owned /publicly accessible open spaces; community facilities and services; and specialized architectural and landscaping features that improve the … streetscape and exceed the requirements."

[24]  Finally, the Plan provides supplementary guidelines for Development Permits for all proposed multiple-family sites. These include specific building, landscape, and streetscape requirements, including particular requirements for buildings along Garden City Road where the subject properties are located. A developer in McLennan North must comply with the Development Permit guidelines in the City Centre Plan and the McLennan North Plan, as well as general ones for multi-family development. The Development Permit process allows Richmond to negotiate various aspects of size, design, siting, and off-site servicing and land dedications before the zoning and Development Permit are granted.

2.4.2.2  McLennan South Sub-Area Plan

[25]  The McLennan South Sub-Area Plan was adopted in May 1996. This Plan is relevant to a consideration of what the density of the subject properties would have been since it covers an area close to the subject properties. As indicated above, a large part of the southern portion of the McLennan North Plan is designated Community Park, and there are no residential densities specified for any properties to the south of the subject properties until one crosses Granville Avenue and is in the neighbourhood covered by the McLennan South Sub-Area Plan. The boundaries of the McLennan South Sub-Area Plan are Granville Avenue on the north, Garden City Road on the west, Blundell Road on the south and No. 4 Road on the east.

[26]  The general goal with respect to residential development for McLennan South is to promote "a country-estate, human-scale residential development oriented to families and children". This is to be achieved by setting aside a large part of the neighbourhood for single family housing and limiting development in most of McLennan South to 2½ storeys. The exception is a narrow corridor on the western boundary of the Sub-Area along Garden City Road, and extending round both corners to encompass the western parts of Granville Avenue and Blundell Road where 3 storey townhouses over parking would be allowed. This narrow band on the western boundary for 3 storey townhouses is designated as 0.75 FAR. The interior of the western half of the McLennan South where 2½ storeys are the maximum has a 0.65 FAR, while the eastern half with primarily single family residences has a designation of 0.55 FAR.

2.4.2.3  St Albans Sub-Area Plan

[27]  Richmond adopted the St Albans Sub-Area Plan in June 1995. The St Albans Sub-Area is south west of the subject properties, immediately to the west of McLennan South. Granville Avenue is the northern boundary of the St Albans Plan, No 3 Road is part of its western boundary, Blundell Road is the southern boundary and Garden City Road is the eastern boundary. Thus, this Plan is relevant to a consideration of what the density of the subject properties would have been, since it also covers an area close to the subject properties, although closer to the City Centre. Granville Avenue is in effect an extension of that part of Garden City Road adjacent to McLennan North and the subject properties, since the main flow of traffic on Garden City Road curves to the west and proceeds along Granville Avenue towards the City Centre.

[28]  The goal of the St Albans Sub-Area Plan is to provide for residential development at medium densities in compliance with the goals and objectives in the City Centre Area Plan. The Plan showed almost the entire Sub-Area as multi-family low rise with 3 storey apartments, townhouses, 2 family or single family Dwellings. No base FAR is specified, although there is a prescribed percentage for several different FARs for this Sub-Area in the City Centre Implementation Plan. There is one property on Granville Avenue designated high rise. The only other designated uses are institutional.

2.4.2.4 Cook Sub-Area

[29]  There is not yet a Plan for the Cook Sub-Area immediately west of the subject properties. This Sub-Area of the City Centre Area is bounded by Westminster Highway to the north, Granville Avenue to the south and Garden City Road to the east.

[30]  According to Richmond planning staff this Sub-Area will have an average final net density of 1.2 to 1.4 FAR with densities above that for specific sites plus some bonus density in exchange for community amenities and concessions. Immediately across Garden City Road from the subject properties are 4 storey low-rise apartments dating from the 1970’s.

2.4.3  Zoning

[31]  The zoning on all three properties at the time of expropriation was R-1 which permitted single family residences on relatively large lots. It was a zoning that was generally applied to unsewered areas, and was viewed as a transitional designation by both the municipal planners and developers. At the time of the expropriation the nearest sanitary sewer was at Alberta Road, some 100 to 150 metres to the north of the subject properties.

2.4.4  Bylaw with respect to Traffic Access from Garden City Road

[32]  Richmond’s Bylaw 2620, dating from 1970, restricted access to and from Garden City Road and Granville Avenue. Although each of the properties had access to Garden City Road at the time of the expropriation, the McLennan North Sub-Area Plan provided as part of its Development Permit guidelines that projects on Garden City Road must be serviced including parking access from rear lanes or streets. This was a consideration with respect to the proposed highest and best use of the subject properties.

2.5  Applications for Re-zoning

[33]  A number of re-zoning applications have been approved in McLennan North, as well as McLennan South and St. Albans, that gave densities higher than the base density that had been specified in the Sub-Area Plans. None of these re-zonings had been approved at the time of the takings. In McLennan North there were six re-zonings applications. Five of these applications were from the same developer, Cressey Development Corporation, which had made offers on one of the subject properties. The applications were made in September 1996; reports to Council from city staff were submitted in May 1997; and the re-zonings were approved in September 1997, six months after the two dates of taking.

[34]  The project that was situated on Garden City Road, in the band with the highest base density of 1.6 FAR, was approved for four high-rise towers with townhouses for a total net FAR after road dedication of 2.66 including amenity space. The report from Richmond’s staff to the Council recommending support for this re-zoning application indicated that a number of the policies in the McLennan North Sub-Area Plan had been met. These included the provision of a variety of housing forms, including smaller, more affordable units; the provision of open spaces; and the creation of smaller pedestrian-friendly streetscapes with two new north-south roads and two east-west walkways, including landscaping and street trees. The developer also had made a specific donation towards park development. Finally, the developer was willing to meet the various requirements in the Development Permit guidelines including providing access from the back of the site, with only emergency access from Garden City Road.

[35]  Other projects in McLennan North included one in the 0.95 FAR band that was approved for low-rise apartments at a net FAR of 1.52 and another that was approved for a low-rise apartment and stacked townhouses at a net FAR of 1.23. Two projects in the 0.65 FAR band were approved for 3 storey townhouses at 0.79 and 0.81 net FAR while one in the 0.55 FAR band was approved for duplex and triplex style townhouses at 0.68 net FAR. Again, the staff reports on these projects all recommended approval for re-zoning for virtually identical reasons to those related to the project on Garden City Road. Although all of these projects in the McLennan North Sub-Area were approved in September 1997, none of them had been developed at the date of the hearing, almost two years later, apparently because of market conditions.

[36]  In October 1997 a high density mixed use project in the St Albans Sub-Area on Granville Avenue, was re-zoned and approved for 2.00 FAR. It proposed two high-rise towers, a low-rise apartment building, some stacked townhouses, and a small commercial component. The St. Albans Sub-Area Plan did not specify any base FAR, but the City Centre Area Plan provided for 13% of this Sub Area to have apartments at 2.00 FAR. The staff report recommending support for approval indicates that most of the site was already zoned for high-rise use; a mix of housing types was included; and a 7,750 square foot private open space was being provided. Access from Granville Avenue was also restricted. This project was under construction in May 1999. In the McLennan South Sub-Area, a ground-oriented townhouse project on Garden City Road in the 0.75 FAR band was approved for 1.03 FAR in April 1998. The staff report made reference to the provision of private/public open space. This project was also under construction in May 1999.

3.  HIGHEST AND BEST USE

3.1  Effect of section 33

[37]  A preliminary issue is how we are to apply section 33 of the Act and the McLennan North Sub-Area Plan to the consideration of highest and best use. Section 33 provides:

33  In determining the market value of land, account must not be taken of

(a) the anticipated or actual purpose for which the expropriating authority intends to use the land, …

(d) an increase or decrease in the value of the land resulting from the development or prospect of the development in respect of which the expropriation is made, …

(e) an increase or decrease in the value of the land resulting from any expropriation or prospect of expropriation, …

(g) any increase or decrease in value of the land that results from the enactment or amendment of a zoning bylaw, community plan or analogous enactment made with a view to the development in respect of which the expropriation is made.

All parties agreed that the zoning designation of the subject properties as Community Park in the McLennan North Sub Area Plan must be ignored.

[38]  However, Richmond went further and claimed that section 33(g) meant that the whole of the McLennan North Sub-Area Plan should be ignored in determining the highest and best use. This would mean excluding any consideration of the designated base densities in the McLennan North Sub-Area Plan as well as more general commentary about developmental policy in the area. Richmond relied on Vision Homes Ltd. v. Nanaimo (City) (1996), 59 L.C.R. 106 (B.C.C.A.) and 286682 B.C. Ltd. v Colwood (City) (1999), 66 L.C.R. 148 (B.C.E.C.B.).

[39]  The test is set out in Vision Homes where Madam Justice Prowse, speaking for the Court of Appeal, stated at p 110:

the critical issue in determining whether previous by-laws, plans or other enactments should be excluded in determining market value is whether those provisions were passed "with a view to the development in respect of which the expropriation is made". In other words, the issue is one of nexus or causation.

[40]  Another relevant case is Horsley v. British Columbia (Minister of Transportation and Highways) (2000), 70 L.C.R. 52 (B.C.E.C.B.), a decision that was released since the hearing in this matter and therefore not considered by counsel. In Horsley the subject properties were designated Rural in an OCP that contained references to the Nanaimo Parkway for which the properties were expropriated. This board applied the test of Madam Justice Prowse in Vision Homes and concluded that there was insufficient connection between the Rural designation in the OCP and the references to the Parkway. In Vision Homes it was only those aspects of the OCP that were specifically related to the location and construction of the proposed project, Uplands Drive, which were ignored. In Horsley it was similarly only those aspects of the OCP related to the Parkway that were excluded and the remainder of the OCP, including the Rural designation, continued to apply.

[41]  In this case it is true that a large proportion of the land area in the McLennan North Sub-Area Plan has been designated Community Park. The Community Park area is so large that it is difficult to predict how the development policy and the density designations would have been applied if the park were not present. However, we think that there is some similarity to the situation in Horsley. When we apply the test as set out by Madam Justice Prowse in Vision Homes we conclude that the Community Park designation for which the subject properties were expropriated does not have much connection with the development policies and density designations in the remainder of the McLennan North Sub-Area Plan. As a result we will ignore only those parts of the McLennan North Sub-Area Plan that are to do with the designation of the Community Park.

3.2  Claimants’ position

[42]  All of the claimants retained Oleg Verbenkov, of Planet Consulting Group Inc., to provide expert opinion evidence as a planner on what he describes as the highest and best approvable land use for the three sites. Verbenkov in turn retained an architect, Thomas K. Lee, and an engineer, Rod Gonzales of Hub Engineering Inc., to assist him with development options. 366808 B.C. Ltd. retained Nick Davies of Kent-MacPherson Appraisals to provide appraisal evidence. The claimants who owned the two smaller properties engaged John Rack to provide an appraisal opinion.

[43]  Verbenkov reviewed the OCP and the relevant Sub-Area Plans and concluded that Richmond had adopted a "concentric density model" in which land use intensity generally decreased away from the downtown core area at the intersection of Westminster Highway and No. 3 Road. He conceded that none of Richmond’s planning documents used the word "concentric"; this was his own phrase. Nevertheless, he saw it as a fair description of the policies actually in effect. He noted that the greatest base density was in the most westerly portion of McLennan North along Garden City Road, and that base densities decreased as one moved east from Garden City Road (away from the City core). Assuming that the subject properties were not affected by the Community Park, he concluded that the same high base density band of 1.6 FAR would be extended throughout that stretch of Garden City Road, and would include the subject properties.

[44]  In order to estimate what bonusing density over and above the base density might have been permitted Verbenkov analyzed a number of re-zoning applications in the McLennan North Sub-Area and the adjacent Sub-Areas, where a higher density than the base FAR was approved or proposed. In the end, Verbenkov concluded a high-rise development at 2.51 FAR for the subject properties would be achievable.

[45]  Verbenkov’s conclusions on density were then used by the architect, Thomas K. Lee, to draw up two alternative plans: one at 2.51 FAR with two 14 storey apartment towers surrounded by townhouses, all over a two storey parking garage, and one at 1.61 FAR with low rise apartments over a parking garage. In Verbenkov’s opinion, both of these plans were equally probable and therefore both were compatible with the highest and best approvable land use.

[46]  Both of these options assumed that the three properties would be developed as a single assembled site of 3.92 acres (1.6 hectares). Verbenkov did not ask the architect to develop alternate development plans for separate developments. Verbenkov did say rather briefly in his reports that "similar densities could be achieved". For the largest property (6680 Garden City Road) he estimated densities of 2.23 FAR for the high-rise option and 1.51 FAR for the low-rise option. At the hearing, however, the architect Lee appeared with two designs for a separate development of 6680 Garden City Road. One of the designs was for a single 12 storey tower with 158 apartments over a two-storey parkade, resulting in a 2.27 FAR. He also suggested a low-rise 4 storey design with 132 apartments over one level of parking, for a 1.51 FAR. For the two smaller properties Verbenkov did not in fact specify any density figures for separate developments nor did Lee develop any options for separate development.

[47]  The appraiser, Nick Davies, relying heavily on Verbenkov’s report, found the highest and best use of the property at 6680 Garden City Road, the larger property that is just under two acres, to be "for multi-family development, either alone or in an assembly with adjacent parcels, at an FAR of between 1.51 and 2.51". Rack, the appraiser for the other claimants, decided that the highest and best use for 6620 and 6640 Garden City Road was "assembly with adjacent properties for high-density residential apartment development at a minimum base FAR of 1.60". Rack referred to Verbenkov’s report and stated that he concurred with Verbenkov’s conclusion.

3.3  Richmond’s position

[48]  Richmond produced Jay Wollenberg of Coriolis Consulting Corp. in Vancouver to give a planning opinion as to the development potential of the subject properties. It retained Geoffrey Johnston, of Johnston, Ross & Cheng Ltd. to give appraisal evidence.

[49]  Wollenberg undertook a review of the OCP, the City Centre Area Plan, and the four Sub-Area Plans. He commented that the McLennan North Plan singled out the north-west corner of the Sub-Area for taller buildings and high density development, together with a broad pattern of density reductions as one moves east. Because the Community Park occupied so much of the south half of the neighbourhood, he could not conclude simply from that plan what density decisions would have been made in that southern half in the absence of a park. He therefore was guided by the plan for the McLennan South Sub-Area, which envisaged townhouse developments with a 0.75 base FAR along Garden City Road and the western end of Granville Avenue. He also looked at the St. Albans Sub-Area, immediately to the west of McLennan South, which was already largely developed as lower density apartments and townhouses.

[50]  With these additional guides, Wollenberg interpreted the planning policy for McLennan North as having a density gradient that declined from north to south as well as from west to east. Thus he thought that the subject sites would probably have been designated for medium density: either townhouses or low-rise apartments with a base FAR of 0.95.

[51]  While Wollenberg agreed that the sites were in principle candidates for "density bonusing", at the date of taking none of the re-zoning applications had been approved and there was thus no history to indicate what might be achieved. Further, the density bonusing came at a cost to the developer in the form of providing amenities to warrant the bonus. Wollenberg stated that, in his experience, developers do not normally pay in advance for advantages that might not be achieved.

[52]  The appraiser, Geoffrey Johnston, did an independent analysis of the highest and best use and testified that he had not seen Wollenberg’s report before he completed his own report. He reviewed both the McLennan North and McLennan South Sub-Area Plans as well as the applications for re-zoning in McLennan North and McLennan South. The base densities in the McLennan North Sub-Area decline from west to east. Johnston assumed that there would also be a gradual decline in base density from north to south, from 1.6 FAR north of the subject properties to 0.75 FAR on the other side of Granville Avenue to the south. The subject properties are at the high end of the west-east gradient and at the mid-point of the north-south gradient.

[53]  Johnston also commented that only one of the eight zoning applications he reviewed was for a high-rise building. He emphasized the practical difficulties in developing these properties as three independent sites, with their long and narrow shape. An assembly would be needed for greater density to be practical. Road dedications would likely be required. Finally, Johnston reviewed the market for high rises in February 1997 and concluded that high-rise development was not feasible at that time because of the increasing oversupply and falling prices taken together with the expense of masonry construction. An approved high rise development near Richmond’s downtown core intersection of Westminster Highway and No. 3 Road was cancelled in May 1996 because of insufficient pre-sales. Another high-rise site at Garden City Road and Alderbridge with zoning in place permitting a 2.0 FAR was sold in early 1997 (after being listed for two years) on the basis of re-zoning half the site for commercial and delaying development for the high-rise portion for a number of years.

[54]  Taking all of these factors into consideration Johnston concluded that the most probable use of the individual subject properties would be high-density townhouses or low-density apartment. He described the highest and best use of each property as holding property pending consolidation for three or four storey townhouses or apartment development. In coming to his conclusion on highest and best use Johnston did not specifically decide what the base density for the subject properties in the McLennan North Plan would have been but for the Community Park designation. However, later in his report he did say that the most probable density of the subject properties before any required road dedication was 0.95 FAR.

3.4 Discussion

[55]  Johnston quoted the following definition of highest and best use from Real Estate Appraisal Terminology published in 1975 by the American Institute of Real Estate Appraisers and the Society of Real Estate Appraisers:

that reasonable and probable use that will support the highest present value, as defined, as of the effective date of the appraisal. Alternatively, that use from among reasonably probable and legal alternative uses, found to be physically possible, appropriately supported, financially feasible, and which results in highest land value.

In making the determination of highest and best use it is important to keep in mind that it is the highest and best use at the date of taking. See Double Alpha Holdings Corp. v. Centra Gas British Columbia Inc. (1998), 65 L.C.R. 99 (B.C.E.C.B.).

3.4.1  Base density designation

[56]  As we have indicated above, section 33 requires us to ignore the designation of the subject properties as Community Park in the McLennan North Sub-Area Plan. The first issue to be decided is what the designation for the properties would likely have been if they had not been included in the Community Park. The parties agree that it would be multi-family residential development. The question is the probable base density. While we are faced with considerable uncertainty in the determination of highest and best use and market value in this case, we do recognize that the one item the potential purchaser (and vendor) would have known for certain in February 1997 is the base density, as that would have been included in the McLennan North Sub-Area Plan.

[57]  Whereas Verbenkov, the planner for the claimants, concluded that the band adjacent to Garden City Road, with the base density of 1.6 FAR, would be extended south to include the subject properties, Wollenberg, the planner for the respondent, denied this. He concluded that, when the three Sub-Area Plans for McLennan North and the two near-by areas were considered together, the base density would be 0.95 FAR. Johnston, the appraiser for the respondent, did not consider the likely base density separately in his consideration of highest and best use. However, he subsequently states that the most likely base density was 0.95 FAR.

[58]  The McLennan North Plan states that "taller apartment buildings, up to 14 storeys in height, are deliberately located along Garden City Road and in the north-west portion of the neighbourhood to create a prominent visual gateway into the neighbourhood and to house the largest concentration of the residents close to transit routes and the City Centre" (emphasis added). The phrase "north-west portion of the neighbourhood" was used when the entire south-west portion of McLennan North along Garden City Road was designated Community Park. But for the park, that phrase might have been omitted so that taller apartment buildings would be allowed along the entire segment of Garden City Road included in the Plan. A density comparable to that in the north-west might have been allowed for the subject properties. The south-west portion of the neighbourhood is certainly as close to transit routes as the north-west portion. Similarly both the south-west and north-west areas of the neighbourhood are equally close to the City Centre of Richmond, if that is defined as No. 3 Road. It is only if the City Centre is defined in terms of the intersection of Westminster Highway and No. 3 Road that the north-west area of McLennan North can be said to be closer to the City Centre than the south-west area. The phrase "a prominent visual gateway into the [McLennan North] neighbourhood" is ambiguous, in that it might refer either to a massing at a particular point north of the subject properties or to a corridor that could extend along the entire western boundary of the neighbourhood and include the subject properties, but for the Community Park.

[59]  When the other Sub-Area Plans are considered, however, it does appear that density decreases from north to south. In the McLennan South Plan the maximum density along the western part of Granville Avenue, the boundary between McLennan North and McLennan South, is just 0.75 FAR. The same 0.75 FAR density applies along the extension of Garden City Road in the McLennan South Plan. Thus, the subject properties lie between a base density of 1.6 FAR to the north and a base density of 0.75 FAR to the south. When we turn to the St Albans Sub-Area Plan, there are no designated FARs in this Plan, but one of the explicit goals is to provide medium density housing which implies a FAR of 0.75 to no higher than 1.6. The City Centre Implementation Plan states that 13% of the housing in St. Albans will be mid-rise with a density of 2.0 FAR. The St. Albans Sub-Area Plan designated only one high-rise development in the St Albans neighbourhood and it was on Granville Avenue where some high-rise zoning was already in place.

[60]  Verbenkov has attempted to persuade us that his model of concentric density is useful in deciding the base density of the subject properties. There is a band on Garden City Road to the north of the subject properties with a base density of 1.6 FAR. There is also a high-rise development on the extension of Garden City Road, Granville Avenue, in the St Albans area to the south-west. However, we are not convinced that these two facts are sufficient to establish his model. All of the plans affecting McLennan North, McLennan South, and St Albans generally provide for town houses or low-rise apartments at a medium density but for the two exceptions highlighted by Verbenkov. We agree with Wollenberg and Johnston that the McLennan South Sub-Area Plan is an important consideration. We think that it is probable that Richmond would have provided a gradient between the band on Garden City Road to the north with a base density of 1.6 FAR and the band on Garden City Road and Granville Avenue immediately to the south with a base density of 0.75 FAR. We also note the low-rise apartments across Garden City Road from the subject properties, although that location in the Cook Sub-Area is closer to the downtown core area. Although there is not yet a Plan for this Sub-Area the evidence is that it will likely be low-rise generally, with some high-rise exceptions. After considering all of these factors we conclude that the most likely base density for the subject properties in the McLennan North Sub-Area Plan would be 0.95 FAR.

3.4.2  Assembly

[61]  In order to achieve the higher densities put forward by the claimants the three subject properties would have to be assembled. The next question is whether or not we can assume assembly.

[62]  Rack, the appraiser for the three personal claimants, simply assumed assembly with adjacent properties to achieve his highest and best use of high-density apartment development. Although he provided for a one year holding period, this was stated to be for re-zoning and development permit application and not for assembly. Davies, the appraiser for the company, assumed that development of 6680 Garden City Road would be feasible, either alone or after assembly with adjacent properties. Johnston treated each property separately and said that the highest and best use was holding property for development, pending consolidation with other properties.

[63]  At the time of the taking none of the properties had been assembled. While there was some indication that independent development of the largest property at 6680 Garden City Road might have been feasible, we did not have sufficient evidence to support development of the two smaller properties that were approximately one acre on a stand alone basis. The evidence also established that the two acre property would benefit from assembly. With respect to any history of common action between the claimants, we have the joint newspaper advertisement in February 1993 for the two properties, 6620 and 6640 Garden City Road. We also had evidence that in late 1992 and early 1993 Cressey Development Corporation offered to buy 6620 Garden City Road from Isle Gonev and Jeanne Douglas, though this offer was rejected. There was a history of land assembly in McLennan North by Cressey Development Corporation and Magusta Developments (BC) Ltd. as evidenced by the six re-zoning applications that were submitted to Richmond in the fall of 1996. Cressey acquired properties near the subject properties in the early 1990’s before Richmond’s plans for the location of the Community Park had become clear. Richmond had acquired or purchased 17 properties in McLennan North for the Community Park. We accept that Richmond’s plans for the park may have created a planning blight beginning in 1992, which would have affected the market for the properties.

[64]  Absent the Community Park designation the subject properties would likely have been assembled with each other or with other properties for development at some point in time. While the development is seen by everyone as being in the short term we agree with Johnston’s characterization of these properties at the date of expropriation as pending consolidation.

3.4.3  Market factors

[65]  Although Richmond, like Vancouver, had increased in population and economic growth through most of the 1990’s, in 1996 and 1997 there were several signs of a slow down. The average selling price of single family residences in Greater Vancouver dropped 7% in 1996. In the months leading up to February 1997 the condominium market in Richmond, particularly for high-rise units, was becoming increasingly saturated and as a result the number of condominium starts decreased. Johnston noted that an approved high-rise site in a superior location on Westminster Highway in Richmond had been cancelled in May 1996 because of insufficient pre-sales. On the basis of these market conditions he concluded that high-rise development was not feasible at the date of taking.

[66]  Davies and Rack failed to consider such factors as market demand, absorption rates, and profitability that were not considered by the land use consultants.

3.4.4 Lee’s Plans

[67]  Lee, the architect for the claimants, came up with two designs for the assembled properties. The high-rise option with a 2.51 FAR called for two 14 storey apartment towers surrounded by townhouses, all over a two storey parking garage. The resulting complex essentially filled the entire assembled site (subject only to minimum setbacks). It would produce 392 apartments averaging about 970 square feet each and 40 townhouses of 1,200 square feet each. There would be 656 parking stalls. Lee also did an alternative low-rise plan that assumed a FAR of 1.61. This plan also covered the entire site with four floors of 980 square foot apartments for a total of 280 units, over a 450 stall parking garage.

[68]  Richmond criticized these designs as unrealistic. Lee conceded that he had not reviewed the Development Permit guidelines set out in the City Centre Plan, nor the guidelines in the McLennan North Sub-Area Plan, nor those in Richmond’s multi-family guidelines. Lee’s high-rise towers breached a number of Richmond’s development guidelines, including having twice as many apartment units in each tower as permitted, having twice as large a floor plate above the seventh floor, and the related problem of having a building form which exceeded the sight line requirement of not exceeding 45 degrees when viewed from the property boundary. The continuous ring of townhouses around the parking lot in the high-density option was also contrary to the guideline requiring townhouses to be grouped to a maximum of 25 units with no more than six in a row. There were also no outdoor spaces for the townhouses. The low-rise apartment building at somewhat over 140 metres clearly exceeded the 70 metres maximum length. Both designs underestimated the parking requirements and omitted space for hallways, stairwells, storage lockers and garbage collection. They also ignored the problems of likely road dedication, access from the rear of the properties and access for fire-trucks, as well as the need for a turn around for fire-trucks at the entrance.

[69]  Lee’s plans appear to be off-the-shelf concepts, the primary purpose of which was to maximize density to 2.51 or 1.6 FAR. While we recognize that relaxations of particular guidelines such as the number of parking stalls might have been negotiated, the sheer number of problems and omissions leads us to the conclusion that neither of Lee’s designs had a likelihood of being approved.

3.4.5 Bonus density

[70]  The McLennan North Sub-Area Plan specifically provides for bonus density over and above base density in exchange for various specified community amenities. This was a new concept that permitted Richmond to negotiate with the developer for enhanced features. The developer in turn would have some flexibility as to what might be achieved compared to Plans where a maximum density is prescribed.

[71]  Verbenkov, the planner for the claimants, in coming to his final density for the three subject properties of 2.51 FAR, concluded a significant bonus density of 0.9 FAR over his assumed base FAR of 1.6. He based this conclusion about bonus density for the subject properties on a review of some 16 re-zoning applications in the McLennan North Sub-Area and the two other adjacent Sub-Areas, paying particular attention to the three applications that fronted on either Garden City Road or Granville Avenue. These three applications plus the other five applications in McLennan North were all successful in achieving some bonus density: the project on Garden City Road, which is somewhat larger than the three subject properties taken collectively, achieved a bonus density of 1.0 FAR on top of the base FAR of 1.6 to bring the final density to 2.66 FAR including 0.1 FAR for amenities.

[72]  Wollenberg, the planner for Richmond, commented that the amount of bonus density that was achieved on different applications was very variable, and hence unpredictable. In the six projects in McLennan North the bonus density ranged from an increase of about 0.15 FAR to an increase of 1.0 FAR (or 22-63% of the base density), although the largest increase was for the project on Garden City Road. More fundamentally, Wollenberg refused to consider any potential bonus density for the subject properties since at the date of the expropriation none of the re-zoning applications had been approved and there was thus no precedent for what might be achieved.

[73]  During the hearing we learned that the final FAR that was eventually achieved in each of the applications was a net calculation after some concessions had been made, including land lost to road dedications, rather than gross on the amount of land that was purchased. Verbenkov, Davies and Rack had all assumed that the FAR that had been approved in each re-zoning application applied to the raw land before transfers for road dedication. In fact, the bonus densities for the gross land as purchased would be smaller than the bonus densities used by Verbenkov from the re-zoning applications. On one of the applications a total of 23% of the purchased land was lost to Richmond for various dedications. Thus, it is inappropriate to compare the bonus densities derived from the re-zoning applications with the potential FAR for the subject properties, which at the date of expropriation were raw land before assembly and any required road dedication.

[74]  At the date of the expropriation no one knew how much bonus density might be granted or what it might cost either in cash or in concessions. There was some evidence that in the end the developers did not have to pay that much to achieve a density bonus. However, this evidence would not have been available to the potential purchaser at the relevant time and therefore cannot be considered. See Double Alpha. No applications containing requests for bonus density had been approved and in the McLennan North Sub-Area most of the applications were not approved until seven months after the expropriation. In arriving at opinions about the highest and best use, Verbenkov, Davies, and Rack placed too much emphasis on specific details in these re-zoning applications that were eventually approved when this evidence would not have been available to a purchaser. We concur with Wollenberg that "developers do not typically 'pay in advance' for a density bonus by paying more for land, unless it is clear that the density can be achieved at negligible cost." A similar principle has been enunciated in Farlinger Developments Ltd. v. Borough of East York (1975), 8 L.C.R. 112 (Ont. C.A.). If the highest and best use of an expropriated property is based on re-zoning potential, or in this case its bonusing density potential, there must be a probability or a reasonable expectation that such a change in the land use will be approved. Purchasers are unlikely to pay any increment for relatively uncertain possibilities. In our opinion, a prudent developer purchaser would have not have been prepared to pay a much higher price, if any, for a particular potential bonus density on a raw lot in February 1997.

3.5  Conclusion on Highest and Best Use

[75]  In this case one of the primary issues is the highest and best use of the subject properties. We received some assistance from the planners’ reviews and analyses of the numerous Plans that were relevant. However, we agree with the comments of this board in Horsley at p. 65: "While an appraiser may be assisted by the analysis of a planner or land use consultant, in the board’s opinion, it is the responsibility of appraisers to determine the highest and best use on which to base their valuation". In particular it is the appraiser’s job to consider all elements that impact on the most probable use of the land, including market factors and profitability, that are not generally within the expertise of a land use consultant. We note that Johnston did a completely independent analysis of highest and best use, while Davies and Rack relied heavily on Verbenkov’s analysis and failed to consider some relevant factors.

[76]  We have concluded that the likely base density designation that would have applied to the subject properties is 0.95 FAR. In any event the various market factors independently support low-rise residential rather than high-rise. We have considered the provisions of the City Centre Plan, the City Centre Implementation Plan, and the various Sub-Area Plans. Given the emphasis on medium densities in all three of the Sub-Area Plans it is relevant that one of the applications for re-zoning in McLennan North that had already been submitted was for a high-rise development. We note the lack of specific information with respect to bonus density at the time of the expropriation. In light of all of these factors, we are persuaded that medium density multi-family housing, as either townhouses or low-rise apartments, would have been the most probable use of each site, had it not been for the Community Park designation in the OCP. It was the claimants’ position that if the subject properties were low-rise, the highest and best use was at a minimum FAR of 1.51 or 1.6 before road dedication. Given Lee’s failure to consider the many guidelines, together with the "stepped" nature of FAR depending on the type of development, and other evidence on low-rise development, we do not accept that there was a probability of achieving a FAR of 1.51 or 1.6 on the subject properties as raw land before any required road dedication. We are satisfied, however, that the highest and best use of medium density multi-family housing, as either townhouses or low-rise apartments, is probable even if the base density designation in the McLennan North Sub-Area Plan had been higher than 0.95 FAR. Each of the subject properties needs to be assembled with other properties and therefore the highest and best use is holding, pending assembly for multi-family low-rise residential development.

4.  MARKET VALUE

4.1  Claimants’ position

4.1.1  Davies - 6680 Garden City Road

[77]  All of the appraisers used only the Direct Comparison Approach.

[78]  Davies used different sales as comparisons for either low-rise or high-rise development, expressing the sale price as the price per square foot buildable. He stated that this was a more meaningful measure since multi-family residential development can have such a range of densities (from as low as 0.6 FAR through to 3.0 FAR). The four sales for low-rise development gave a range of values between $35.70 to $40.25 per buildable square foot after adjustment for inclusion of a school site levy. In each case Davies calculated the value per buildable foot based on his estimation of the likely FAR in the mind of the purchaser. Davies relied primarily on a low-rise comparable that was close to the subject in McLennan North. He concluded a value for this sale of $38.29 per buildable square foot after adjustment for the school site levy. (This was equivalent to an adjusted price of approximately $36.35 per gross square foot). Davies concluded a value of $38.50 per buildable square foot for low-rise development. Two of the comparables were for high-rise sites, and provided a lower value of $25 per buildable square foot. He explained that this was because masonry construction for high-rise development was more expensive and could not be fully recovered in the sale price of each unit. In any event, for both the low-rise and high-rise option, when he multiplied the respective value by the number of buildable square feet derived from the assumed FAR of either 1.61 or 2.51 he obtained similar gross values. Davies averaged the two highest values produced by Verbenkov’s assembly density and separate development density assumptions, to get a gross value of $5,166,000.

[79]  Davies relied on the report of the engineer, Gonzalez, who had been retained by Verbenkov to provide an estimate of off-site servicing costs. Gonzales assumed that a gravity sanitary sewer could be installed to connect with the nearest sewer line on Alberta Road. On that basis, he gave a preliminary estimate of $90,145 for off-site servicing, including municipal fees and charges, consulting fees and construction costs. If a gravity sewer was not feasible, a pump station would require approximately an extra $25,000 for a low-rise development and an extra $50,000 for a high-rise development. Gonzales was cautious to say that these estimates were preliminary, without benefit of survey, design or soils information, and without knowing whether the Alberta Road sewer had capacity for the development. He had also assumed no new roadways, no transportation reviews (although such studies would be required), and no upgrading of Garden City Road. If there were to be two separate developments rather than a single assembly, Gonzales estimated that the off-site servicing costs would be $28,500 higher, with the extra cost to be shared by the two sites.

[80]  Davies subtracted half of the average off-site servicing costs (for 6680’s share) taken from Gonzales’ estimates for the assembly and separate development cases, with and without a pump station. He also deducted a further amount for a half-road which he assumed would be needed for rear access and an estimate of what a developer would have to pay the municipality to get half the density bonus between 1.51 and 2.51 FAR. These adjustments produced his final value of $4,971,000.

4.1.2  Rack, 6620 and 6640 Garden City Road

[81]  Like Davies, Rack analysed his sales on a price per buildable square foot. He considered nine comparables and the only adjustment he made was 5% for inferior soil conditions for three properties. He concluded $38.75 per buildable square foot as the value for low-rise apartment land, and $25 for high-rise apartment land. His conclusions were, therefore, very similar to those of Davies.

[82]  Rack averaged the two similar values, assuming a high-rise site at a FAR of 2.51, or a low-rise site at 1.61 to obtain a value of $2,675,000 for each property. He did not consider any risk arising from the fact that assembly of the three properties might not occur. He made the assumption that, but for the Community Park, Richmond would have extended the sanitary sewer to the property line so that no off-site servicing costs would be required. He did discount the value by 5% to allow for one year to get re-zoning and development approvals, so that his final rounded value was $2,545,000 for each property.

4.2  Richmond’s position

[83]  Johnston analysed his comparable sales on the basis of price per gross land area (as opposed to price per buildable area). He stated that the price per gross land area was more appropriate where the final lot size and density were not known. He ranked his nine most comparable sales as superior, inferior or similar to the subjects. In the end Johnston relied on the two sales that he regarded as the most similar. Both sales were eventually consolidated into the high-rise development on Garden City Road by Cressey Development Corporation, which eventually achieved a final FAR of 2.66. The more recent sale in November 1996 was for a lot with a base FAR of 0.95 that sold at $32.15 per gross square foot. The other sale was also on Garden City Road and had a base FAR of 1.6. It was sold to Richmond in March 1993 and later swapped with Cressey for land designated for the Community Park. After time adjustment, Johnston valued this sale at $36.50 per gross square foot. Johnston took the upper end of this range and concluded a value for the subjects of $36.50 per gross square foot. (Assuming a 0.95 FAR, his figure could be converted into $38.42 per buildable square foot, which was essentially the same conclusion as had been reached by the claimants’ appraisers.) The $36.50 was then multiplied by the overall land area of 42,735 square feet for each of the smaller properties, for a value, after rounding, of $1,550,000. The larger property, being exactly twice as big, was valued at $3,100,000.

4.3  Discussion

[84]  The first question is whether we employ the price per buildable square foot in line with Davies and Rack or the price per gross square foot as used by Johnston. All of the appraisers agreed that the use of price per buildable foot is appropriate for property of a known size zoned for a particular density of multi-family residential. However, we agree with Johnston that, in the circumstances of this case, where both the final density and the amount of road dedication is unknown, the price per gross square foot for similar properties is a better indicator. We note that most of the sales of the comparables were also negotiated when their final density designations (and the amount of road dedication) were uncertain. Davies and Rack expressed the price of the comparables in price per buildable square feet based on the potential FAR that they assumed was in the mind of the purchaser. We are not convinced that the purchasers of the comparables in McLennan North necessarily had any more accurate idea of the final FAR, whether gross or net, at the time that the price was agreed than the hypothetical purchaser of the subject properties. When the ultimate FAR is unknown for both the comparables and the subject properties we conclude that the price per gross square foot for similar properties being incorporated into a development project is more reliable. In using the actual prices paid by purchasers per gross square foot of similar land, the uncertainty about the particular net FAR that might have been achieved for the subject properties, whether it is a FAR of 0.95 or 1.4, is overcome.

[85]  We are assisted by one of Johnston’s two key sales. This property was also a long and narrow one acre lot close to the subject properties in McLennan North. It was purchased by Cressey Development Corporation in November 1996 and consolidated into the near-by high-rise development on Garden City Road. This lot must have been one of the last lots that Cressey acquired for this particular development since we understand that the re-zoning application had already been submitted by November 1996. At the time of the sale the base FAR for this lot was known to be 0.95, although the lot was bought to be incorporated into a development that eventually achieved a net density of 2.66 FAR. It sold at $32.15 per gross square foot.

[86]  Johnston also relied on the sale of a property on Garden City Road that was bought by Richmond in 1993 at $19.11 per gross square foot and traded to Cressey Development Corporation in 1994. Johnston adjusted this sale for time to $36.50 per gross square foot. We note that both the sale and the trade occurred well before there was any specific provision for high-rise development, the first reference being in the McLennan North Sub-Area Plan that was adopted in 1996. It was also a sale to Richmond and we do not have any information as to the circumstances surrounding the sale. In the end, Johnston used this sale as the upper end of his range for the valuation of the subject properties.

[87]  We also considered another sale in McLennan North to Magusta Developments (BC) Ltd. This sale was used by all three appraisers. Davies relied on it as the best low-rise sale and Johnston rated it as superior to the subject properties on account of the contract provisions varying with the projected density and the availability of services and access. This sale was for three parcels that had already been assembled. The interim agreement of sale was signed in August 1995 with closing in December 1996. It was one of the few comparables where the contract provided for a change in price depending on the zoning achieved but only within a range of 2.5%. After the McLennan North Plan was adopted in July 1996 with provision for a base density of 0.95 FAR, plus density bonuses in exchange for amenities, the sale price of $36.70 per gross square foot was agreed. Davies adjusted this sale for a school site levy to approximately $36.35 per gross square foot.

[88]  In general, we found Johnston’s analysis to be superior to that of the other two appraisers. We have already indicated that in the circumstances of this case, we preferred his approach of using price per gross land square foot rather than per buildable square foot. We were assisted by one of his comparables that the other appraisers did not use. We found his analysis thorough and well-supported by the data. By contrast, Rack’s appraisal, in particular, was overly optimistic and made no deductions for the risks of achieving anything less than the maximum FARs for high-rise and low-rise development on an assembled site, but for time to re-zone. We have one comparable sale of $32.15 per gross square foot and another at $36.70 (adjusted to $36.35 by Davies) that apply to land very similar to the subject properties. These two comparables both had a base density of 0.95 FAR and eventually achieved a final net FAR of 2.66 and 1.23 respectively. There is a third sale of $36.50 on which we do not place as much reliance. In the end result we concur with Johnston’s final value of $36.50 per gross square foot. We conclude a final value of $1,550,000 for each of the two smaller properties and $3,100,000 for the larger property.

5.  DISTURBANCE DAMAGES

5.1  The effect of section 31(1) of the Act

[89]  The claimants made a number of claims for disturbance damages. Richmond opposed those claims on several grounds. The first issue to be decided is whether the claimants are entitled to any disturbance damages at all in light of section 31 of the Act. This in turn depends on whether the highest and best use of the properties is the same as the existing use at the date of expropriation.

[90]  Section 31 states:

31 (1) The board must award as compensation to an owner the market value of the owner’s estate or interest in the expropriated land plus reasonable damages for disturbance but, if the market value is based on a use of the land other than its use at the date of expropriation, the compensation payable is the greater of

(a) the market value of the land based on its use at the date of expropriation plus reasonable damages under s. 34, and

(b) the market value of the land based on its highest and best use at the date of expropriation.

[91]  Thus, the owner has two possible approaches to compensation, and he or she is entitled to the approach that results in the greater compensation. This board, in Daflos v. School District No. 42 (Maple Ridge-Pitt Meadows) (1999), 68 L.C.R. 167 (B.C.E.C.B.), has considered in some detail the common law origins of this provision in the principle against double recovery in Horn v. Sunderland Corporation, [1941] 2 K.B. 26 (C.A.). This decision also describes how section 31 and similar sections in other jurisdictions have been applied in a number of decisions.

[92]  Claimants have sometimes sought to avoid the application of section 31 by characterizing the highest and best use as "holding property for development". This description identifies the property’s future potential whether it is holding for development within six months or holding for development within 20 years. However, at the same time, a variety of existing uses such as a rented residence might be described as holding. In this way some claimants have tried to conflate the existing use with the highest and best use so that section 31 does not apply and the claimants are not excluded from claiming disturbance damages. See, for example, Husband v. Langley (Township) (1996), 59 L.C.R. 221 (B.C.E.C.B.). Often, in such cases, the principle in Horn v. Sunderland is applied directly and claims for disturbance damages that result in double recovery are disallowed.

[93]  Since this case was decided, however, the Court of Appeal has interpreted section 31 as going further than the principle in Horn v. Sunderland. In Kliman v. Board of School Trustees of District No. 63 (Saanich) (1997), 60 L.C.R. 246 (B.C.C.A.), the property was in the Agricultural Land Reserve and had a dwelling house that was being used as a rental residence. Compensation was awarded on the assumption that the land would be released from the ALR and re-zoned for single family residential lots. This board held that the highest and best use was not the existing use. Therefore, as a result of section 31 no disturbance damages were recoverable. At the appeal, the owner claimed for a disturbance damage that would not be double recovery and submitted that such a claim should not be excluded by section 31. But at p. 251 the Court said:

The difficulty with the appellants’ argument is that it calls for an interpretation of the Act which the words will not reasonably bear. Although there is some force in the contention that the cases on expropriation fashioned a rule in language similar to s. [31] in order to prevent double recovery (see Horn v. Sunderland Corp., [1941] 1 All E.R. 480 (C.A.)), the legislature has seen fit to employ language that embraces all forms of damage whether resulting in double recovery or not.

Thus, in British Columbia, if the market value is based on a highest and best use other than the existing use, all disturbance damages are excluded whether there is double recovery involved or not.

[94]  In Daflos, which considered the Court of Appeal decision in Kliman, both appraisers agreed that the highest and best use was holding for development. There were two separate components to the development but both appraisers agreed that the portion of the property that was holding for residential development was in the short term (within three years). The subject property was approximately two acres, including a residence that was owner-occupied at the time of expropriation. This board considered the problematical question of when an existing use of a property, such as owner-occupation, might be fairly included in the highest and best use of "holding for development". The board found that the claimant’s stated intentions are not sufficient to determine the matter. The link between the existing use and the highest and best use of "holding for development" is clearest when the property is vacant and in the process of actually being developed. It is weakest when, despite the development potential, the property is improved and being used for another purpose such as an owner-occupied residence. The board concluded that the existing use of the Daflos property was residential and that this was different from the highest and best use of "holding for development".

[95]  In the present case we have one owner-occupied residence, one rental residence and one vacant property. All three properties are adjacent and have the same highest and best use. Each of the owners provided evidence that it was their intention to hold their respective property for development. At the date of expropriation the three properties were all zoned R-1, permitting single family residences on large lots. Prior to development each of the properties needed to be assembled with others, and the resultant assembly needed re-zoning and a development permit. It is true that the vacant property, by the removal of the residence, is at a somewhat greater readiness for development than the other two properties that still have residences on them. However, in our opinion, the needs for assembly, re-zoning, and a development permit are the more important hurdles for the subject properties achieving development status, rather than the presence or absence of a residence. When we consider the existing use we agree with Daflos that the subjective intentions of the purchasers are not determinative. When the properties are so similar in many respects, we are reluctant to make a distinction between the different existing uses with the end result of section 31 excluding disturbance damages under section 34 for one or two of the claimants but not for all.

[96]  Turning to highest and best use, in our opinion, the characterization as "holding for development" should not be used to try and avoid the application of section 31. While an appraiser may describe the highest and best use as "holding for development", we think that, in applying section 31, the board must consider whether the market value is based on its use as a development property which is more valuable than the use to which the property is currently being put. Development normally involves some holding period until the property is re-zoned and other land regulation requirements are met and development is underway. Development, by definition, is a different use than the present use of land that lacks the zoning and other land regulation requirements for development.

[97]  Where the prospect of development is far in the future, the effect of the development on market value may be so small that section 31 is not triggered. In these circumstances the claimant would be entitled to his or her disturbance damages in addition to the market value based on highest and best use. See Pike v. Minister of Housing (1979), 20 L.C.R. 166 (Ont. Div. Ct.), and Beamish v. Regional Municipality of York (1981), 23 L.C.R. 259 (L.C.B., Ont.) and Telep v. Maple Ridge (District) (1992), 48 L.C.R. 83 (B.C.E.C.B.) where Pike was distinguished.

[98]  In this case, neither Rack nor Davies, the appraisers for the claimants, did describe the highest and best use of the properties as "holding for development". They both agreed that the highest and best use of high-density multi-family development was not the current use. (We do note that Johnston, the appraiser for Richmond, said that the highest and best use was "holding property for development pending consolidation"). On Rack and Davies’ analysis one would expect section 31 to operate and section 34 damages to be excluded. Nonetheless, the claimants attempted to get round their experts’ opinions and submitted that section 31 should not apply because the highest and best use of each of the properties is consistent with the actual use of the properties at the date of taking. The personal claimants said that, because all of the appraisers assumed a one year period during which development approval would be sought, the residences on their two properties could continue to be used during this time. The company submitted that, whether its land had a rental house, as it did in the early years, or was vacant, as was the case at the date of the expropriation, the highest and best use of high-density multi-family development was consistent with the current use.

[99]  We find that for the purposes of section 31 the highest and best use for the subject properties is multi-family low-rise residential development in the short term. We note that none of the appraisers in valuing the highest and best use for development in the short term assigned any value to the residences on the subject properties owned by the personal claimants. We find that the existing uses for the subject properties are owner-occupied, rental residence, and vacant land respectively, with zoning for single family residences on large lots. The properties require assembly, re-zoning, and a development permit before they can be developed. Following Kliman this existing use is different from the highest and best use on which the market valuation has been awarded and section 31 applies.

[100]  It is true that under section 31 there is a choice of two approaches to compensation and the claimants are entitled to the greater of the two. We do not have any evidence of the estimate of compensation under the existing use to compare with the estimation of compensation under the highest and best use. The claimant appellant in Kliman also tried to argue that the board did not have the necessary evidence from both approaches to compensation set out in section [31] for it to come to the proper conclusion of which approach was greater. This lack of evidence was put to the Court of Appeal and Donald J.A. speaking for the Court said at p. 251 "I cannot take this submission seriously in light of the fact that everyone appearing before the Board treated present value as in a lower order of magnitude than the highest and best use as a residential subdivision." Similarly, the compensation in this case, based on market value for multi-family low-rise residential development in the short term, was clearly in a much higher order of magnitude than compensation based on market value for single family residential on large lots, plus the $50,000 to $60,000 in disturbance damages claimed by each of the owners of the three properties. Therefore, as a result of section 31 the disturbance damages under section 34 for all the claimants are disallowed.

[101]  We turn now to consider some of the claims that were brought under sections other than section 34.

5.2  Occupier’s allowance (Forster)

[102]  Mary Forster claims the occupier’s allowance under section 38 of the Act. It is not clear whether this claim falls within disturbance damages that are excluded under section 31. Section 38 provides

38 (1) If expropriated land includes a residence that is

(a) occupied by a person who, in respect of that residence, would be entitled to a grant under the Home Owner Grant Act, and

(b) not being offered for sale by him or her on the date the expropriation notice under section 6 (1) (a) or order under section 5 (4) (a) was served on him or her,

the person is entitled to be paid, in addition to the amount required to be paid to him or her under section 34, an amount equivalent to 5% of the market value of his or her estate or interest in that part of the land, not exceeding 0.5 ha, that is used personally by him or her for residential purposes.

Mrs. Forster satisfies these conditions but for the fact that we have found she is not entitled to disturbance damages under section 34. The fact that Mrs. Forster continued to live in the house after the taking with Richmond’s consent is irrelevant to section 38.

[103]  Richmond argued that section 38 is merely another variety of disturbance damage, and ought to be barred to the extent that disturbance damages under section 34 are barred. This is the conclusion reached by this board in Telep v. Maple Ridge. At p. 101 the board notes the link in section 38 to disturbance damages under section 34. It also observes that the equivalent section in the Ontario statute expressed this 5% allowance as being "in respect of disturbance". Because the market value was based on a different use than the existing use, the board in Telep excluded disturbance damages under section 34 as well as the linked occupier’s allowance under section 38.

[104]  We agree with Telep and we deny the claim for an occupier’s allowance.

5.3  Accounting advice: a cost under s. 45 or a disturbance damage under s. 34.

[105]  At the beginning of the hearing, the personal claimants brought an application as to whether their expenses for tax advice should be classed as disturbance damages under section 34 or costs in asserting a claim for compensation under section 45. Ilse Gonev and Jeanne Douglas claimed $53.50 each for income tax received to date plus $250 each as an allowance for preparing tax returns. Mary Forster claimed $128.40 for income tax received to date plus $300 for the cost of preparing a tax return. If these expenses were treated as costs under section 45 then it would avoid any question of whether the expenses had to have been incurred before the hearing. Since the Income Tax Act does not treat the disposition of property to have taken place until compensation is finally determined, the personal claimants submitted that it is not reasonable for claimants to incur these expenses before the hearing. They have to know how much is being recovered before they can seek proper advice. The personal claimants cited an interim cost decision, N.Y. Automotive Ltd. v. Richmond (1999) BCEA 296 (ECB), as an example of costs being allowed under section 48 for income tax advice in connection with an expropriation. The determination of the classification of these claims was left until this decision.

[106]  Under section 45(3) an owner is entitled to costs "necessarily incurred by the person for the purpose of asserting his or her claim for compensation or damages". This provision continues to apply under the Tariff of Costs Regulation, B.C. Reg 189/99 (the Tariff). Under the Tariff, it would seem that any claim for accounting advice would have to be described as expenses or disbursements "necessarily and properly incurred in the conduct of a proceeding". See section 5(1) of the Tariff. In our opinion the accounting advice in this case is not incurred for the purpose of asserting a claim for compensation, nor is it incurred in the conduct of a proceeding. Thus it does not fit within section 45(3) of the Act or section 5(1) of the Tariff. We note that N.Y. Automotive was an interim decision and we disagree with its finding. Therefore the expenses for income tax advice cannot be costs under section 45 and if they are to be claimed they must be claimed as disturbance damages under section 34. In this case disturbance damages under section 34 have been excluded.

5.4  Interest on costs of professional services (Gonev, Douglas, Forster)

[107]  Finally the personal claimants claimed for interest on their costs for professional services of pursuing their compensation claims. Prior to the hearing of this case, the conventional view was that interest on professional accounts should be allowed, where reasonable, as an item of costs in asserting a claim for compensation under section 45. See Tidmarsh v. Comox (1995), 55 L.C.R. 81 (B.C.S.C.). However, in this case the personal claimants presented this claim as a claim under section 34 in disturbance damages or in the alternative as a claim in costs under section 45 and 46.

[108]  On July 13, 1999, near the end of the evidence in this hearing, news reached the parties and the panel that the new Tariff had been deposited on June 28, 1999. One of the provisions of the new Tariff is section 5(6) that states:

An allowance must not be made for interest on legal or real estate appraisal costs or expense or disbursement claims.

[109]  We must consider whether interest on legal or appraiser accounts can now be claimed as an item of costs under section 45. As stated above section 45(3) provides that an owner, under certain conditions, is entitled to be paid costs "necessarily incurred for the purpose of asserting his or her claim for compensation or damages". Section 45(7)(b) provides that the costs payable under subsection (3) are those prescribed in the Tariff if one is prescribed. The new Tariff prohibits the payment of interest on legal or appraisal accounts. It is clear that interest on accounts for professional services can no longer be claimed as an item of costs under section 45.

[110]  We also note that, in our opinion, this "cost" is for the purpose of "asserting a claim for compensation" rather than being "directly attributable to the disturbance caused to the owner". Therefore it can not be claimed under section 34.

6.  INTEREST

[111]  We have awarded each of the claimants compensation as follows: $1,550,000 to Ilse Gonev and Jeanne Douglas ($775,000 each); $1,550,000 to Mary Forster; and $3,100,000 to 366808 B.C. Ltd. Richmond made advance payments to each of the claimants in two installments and it appears that the second installments did not include interest. Each of the claimants is entitled to interest under section 46 of the Act on the amount of the final award taking into account their respective advance payments. 366808 B.C. Ltd. is entitled to interest from February 3, 1997 until paid, Ilse Gonev, Jeanne Douglas and Mary Forster are entitled to interest from February 12, 1997 until paid.

7.  COSTS

[112]  None of the claimants have been awarded any compensation in addition to the advance payments. Since they have each been awarded less than 115% of the amounts already paid by Richmond, we have a discretion under section 45(5) of the Act as to whether each of the claimants is entitled to all or part of its costs. The test is whether there were legal and valuation issues that made it reasonable for the claimants to pursue their claims through the various stages leading eventually to a seven-day hearing. See Baines v. British Columbia (Minister of Transportation and Highways) (No. 2) (1997), 62 L.C.R. 210 (B.C.E.C.B.). In this case, there was considerable planning and appraisal evidence on what the market value of these properties would have been but for the Community Park. There were a number of issues and there was some basis for bringing a claim for more than the advance payment. On the other hand, the claimants’ experts were mistaken in their interpretation of the final FAR achieved in the re-zoning applications as applying to raw land rather than being net after any required road dedication. Their position on highest and best use and market value was dependent on these re-zoning applications and hence on hindsight. Finally, they were overly optimistic and but for Davies to some degree, assumed that the hypothetical purchasers and vendors of the subject properties would arrive at a purchase price without taking into account any risks of achieving this hindsight dependent density. In our view, given all of these problems the claimants and their advisors ought to have realized prior to the hearing that their continuing to rely on a market value based on at least a FAR of 1.6 was unreasonable. We award each of the claimants 80% of their actual reasonable legal, appraisal and other costs under section 45 for costs incurred prior to June 28, 1999 and 80% of their reasonable costs under the Tariff of Costs Regulation, B.C. Reg 189/99 after that date.

THEREFORE IT IS ORDERED THAT Richmond shall pay:

1. Compensation to Ilse Gonev in the amount of $775,000 for the market value of her fee simple interest in the expropriated property at 6620 Garden City Road pursuant to section 31(1) of the Act.

2. Compensation to Jeanne Douglas in the amount of $775,000 for the market value of her fee simple interest in the expropriated property at 6620 Garden City Road pursuant to section 31(1) of the Act.

3. Compensation to Mary Forster in the amount of $1,550,000 for the market value of her fee simple interest in the expropriated property at 6640 Garden City Road pursuant to section 31(1) of the Act.

4. Compensation to 366808 B.C. Ltd. in the amount of $3,100,000 for the market value of its fee simple interest in the expropriated property at 6680 Garden City Road pursuant to section 31(1) of the Act.

5. Interest on the monies awarded pursuant to section 46(1) of the Act to each of the claimants as follows:

Ilse Gonev from February 12, 1997
Jeanne Douglas from February 12, 1997
Mary Forster from February 12, 1997
366808 BC Ltd. from February 3, 1997

until paid, with adjustments to take into account moneys paid by the respondent to each of the claimants as compensation pursuant to section 20(1) and (12) of the Act. Pursuant to section 46(2) of the Act, interest shall be calculated annually at the following rates:

1. Four and three-quarters per cent (4.75%) from January 1, 1997 to June 30, 1997.
2. Four and three-quarters per cent (4.75%) from July 1, 1997 to December 31, 1997.
3. Six per cent (6.00%) from January 1, 1998 to June 30, 1998.
4. Six and one-half per cent (6.5%) from July 1, 1998 to December 31, 1998.
5. Six and three-quarters per cent (6.75%) from January 1, 1999 to June 30, 1999.
6. Six and one-quarter per cent (6.25%) from July 1, 1999 to December 31, 1999.
7. Six and one-half per cent (6.5%) from January 1, 2000 to June 30, 2000.
8. Seven and one-half per cent (7.5%) from July 1, 2000 to December 31, 2000.

6. Pursuant to section 45 of the Act each of the claimants is entitled to 80% of their actual reasonable legal, appraisal and other costs for the purpose of asserting the claims for compensation or damages until June 28, 1999 and to 80% of their reasonable costs under the Tariff of Costs Regulation, B.C. Reg 189/99 after that date.