Schutz v. The Queen

Schutz v. The Queen
Court (s) Database
Tax Court of Canada Judgments
Date
2008-11-12
Neutral citation
2008 TCC 523
File numbers
2004-4147(IT)G
Judges and Taxing Officers
Eugene P. Rossiter
Subjects
Income Tax Act
Decision Content
Citation: 2008TCC523
Date: 20090123
Docket: 2004-4147(IT)G
BETWEEN:
PAULA SCHUTZ,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent,
Docket: 2004-4148(IT)G
AND BETWEEN:
DEBORAH SEWELL,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent,
Docket: 2004-4149(IT)G
AND BETWEEN:
PETER THOMPSON,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent,
Docket: 2004-4150(IT)G
AND BETWEEN:
DAVID SMITH,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent,
Docket: 2004-4151(IT)G
AND BETWEEN:
GUY McLEAN,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent,
Docket: 2004-4153(IT)G
AND BETWEEN:
DAVID SUCHANEK,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent,
Docket: 2004-4154(IT)G
AND BETWEEN:
MICHAEL PEIRCE,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
AMENDED AMENDED REASONS FOR JUDGMENT
Rossiter, A.C.J.
Introduction
[1] Appleby College (“Appleby”) is a boarding school, situated on the shores of Lake Ontario in Oakville, Ontario, comprising more than 500 students in total, 200 of whom are boarders, equally divided in terms of gender. In 1996 and 1997, approximately 25 of the 65 faculty members, resided on campus in accommodations owned and provided by Appleby. The employees who enjoyed this benefit included the Headmaster (the Principal of Appleby), Housemasters (staff who resided in and provided supervision to the students living in dormitories), Assistant Housemasters (personnel assisting Housemasters residing in dormitories), a Don (employee who occupied a small apartment in a dormitory and carried out supervision duties of students therein) and Teachers (staff members who resided in semi-detached or detached premises, separate and apart from dormitories).
[2] Pursuant to the terms of employment established by Appleby, the above mentioned employees were required to reside on college premises in order to fulfill the duties of their employment. Certain staff members paid rent while others had a benefit attributed to them. All, save Paula Schutz, reported the benefit in one form or another on their income tax returns.
[3] The Canada Revenue Agency (“CRA”) took the position that each such employee a) received a benefit; and b) the benefit reported was understated; resulting in CRA conducting reassessments on each Appellant for the 1997 taxation year.
Issues
[4] It was conceded by the Appellants that each received a taxable benefit in the form of lodging under subsection 6(1) of the Income Tax Act (“Act”). There are three remaining issues:
(1) What is the fair market rental value of the lodging received by each of the Appellants?
(2) What, if any, discount to the fair market rental value should be granted in view of the Appellants respective living circumstances?
(3) Did the employer derive ancillary advantage from the benefit afforded to the Appellants, and if so, should the amount of the benefit included in the income of each respective Appellant be reduced?
Facts
Campus & Staff Living Accommodations
[5] Appleby College is a boarding/day school, located near Lake Ontario in Oakville, Ontario, consisting of approximately 500 students in total, 200 of whom are boarders, equally divided in terms of gender.
[6] A number of positions at Appleby require employees to live on campus in order to fulfill the duties of their employment so as to allow Appleby to operate as a boarding school. Approximately 25 staff members of Appleby reside in residential accommodations located on a 55 acre campus owned and provided by Appleby. These employees include the Headmaster; Housemasters; Assistant Housemasters; Dons and other faculty members, some of whom may or may not have particular duties associated with the accommodations in which they reside. The on-campus teachers either pay a specified annual rent to Appleby or are conferred a taxable benefit by virtue of their employment which is recognized when they file their annual income tax returns. There are no written leases. The staff members are assigned specific accommodations; they must acquire their own appliances and no changes can be made to the premises without express permission of Appleby including erecting fences. Additionally, they must vacate the property at the end of July if they are not to continue with their position during the following academic year. The accommodations range from single family dwellings and semi-detached housing (similar to a duplex), both situated on and off campus, to semi-detached housing attached to dormitories and small 500 square foot apartments located in the middle of dormitories where 50 to 60 students are housed. None of the Appellants had a lot, per se, associated with the premises assigned to them. All, except David Smith, were subjected to some level of noise in excess of ambient noise and suffered, to some extent, from excessive volumes of traffic and parking problems due to the location of their tenancy. All, with the exception of David Smith, had their residential privacy hindered due to students or others, such as alumni, attending the residential premises. Some of the accommodations were in better physical condition than others; all lacked air‑conditioning; some had quality finish and were historical in nature, while others had spartan quality finishing and could be categorized as old, tired and in dire need of renovation.
[7] The students participate in academic as well as extra-curricular activities; the curriculum also includes extra service hours, increased study of international languages, mathematics and sciences. The age group ranges from 13 to 18 years and boarders are primarily grade 9 to grade 12 students (all grade 12 students are required to board-in). Monday to Friday is generally academic in nature whereas Wednesday afternoon and Saturday are viewed as sports days. Meals take place on campus and there is supervised study time in residence with other free time allocated to students later in the evenings. On the weekends, there is a small residential component but there are additional organized activities offered to the students. Supervision is required around the clock with sign-in and sign-out procedures in place for students who choose to leave the campus.
[8] In an attempt to maximize revenues, Appleby rents out many of its facilities, on weekdays, weeknights and weekends. The rentals include the residential, classroom and athletic facilities. Appleby also operates camp programs during the spring break and summer months.
[9] Appleby has four dormitories on campus, each housing 50 to 60 students. Every dormitory has a Housemaster, an Assistant Housemaster and a Don; all live in dwellings attached to the dormitories. The Housemaster’s duties include:
(a) ensuring the smooth running of the house;
(b) ensuring the safety and security of the students;
(c) monitoring the students’ conduct and behaviour;
(d) confirming the students’ rooms are in a reasonable state of repair;
(e) ensuring the students attend meals when required;
(f) organizing duty roster within the house;
(g) making sure that the curfews are adhered to;
(h) providing counselling and guidance to students when, and if, required;
(i) acting as a communication liaison with parents and ensuring the general well-being of the students;
(j) encouraging student involvement in Appleby and its offerings;
(k) reporting to the parents on the general progress of a student and their level of enjoyment at Appleby;
(l) trying to make residential life an enjoyable experience and encouraging a close bonding experience for the students by organizing fundraisers, student dances, casino nights and other similar activities.
[10] Essentially, the Housemaster stands in loco parentis to the students. The Assistant Housemaster carries out the same functions as the Housemaster, however, the decision making authority is left in the hands of the Housemaster.
[11] The Dons are usually university graduates who are considering becoming teachers; they work at Appleby for one academic year in order to acquire teaching experience. They reside in a small studio apartment in the middle of a dormitory and are expected to actively engage the students. A Don is responsible for the general overall supervision of students residing in dormitories especially during study time which takes place every evening from 7:30 p.m. to 8:30 p.m. He or she also organizes students’ activities and prepares the students for the weekends.
Headmaster & Headmaster’s Residence
[12] The Headmaster’s residence is a two-storey, fully detached house built in 1912. The home includes four bedrooms, living room, dining room, kitchen, a semi-finished basement for storage with low ceilings and a garage attached by a breezeway. The basement is principally used for storage of liquor supply, such as wine and beer, as well as other household storage, such as bookshelves for extra school books. The house is located in an area close to Lake Ontario. There is no fencing on the property; there is nothing on the property that would identify the surrounding lot of land as being part of a private residence.
[13] The Headmaster’s residence is encircled by three playing fields: Main Field, Creek Field and Walker Field. Main Field is a football field used for physical education classes as well as fall and spring football or rugby practices and games. The field is also used for track and field events and rented out during the summer for camps and other activities. Adjacent is Creek Field, it is a rugby and soccer field; its usage is similar to that of Main Field. Also bordering is Walker Field, it is an artificial turf filed hockey pitch used in the summer, fall, and spring. The field has very significant rentals; it is rented out to various organizations and used for major university-level competitions. In 1996 and 1997, Walker Field was undergoing reconstruction and a bubble dome was eventually put over one third of the field. To the north of the Headmaster’s residence is an upper and lower bowl area located in front of and behind the residence; this area incurred daily traffic and activity due to intramural sports during the school year, more specifically Monday to Saturday, and always during the holiday season. Appleby rents out their various fields and facilities including the dining hall to local minor soccer and hockey teams, corporate and church groups, charitable associations for events, summer camps and alumni, all of which contribute to elevated noise levels, traffic, parking issues and a lack of privacy. The roads on campus are open and unsupervised permitting free flowing traffic to the public with constant ongoing parking problems. Additionally, there are several hills used for tobogganing and bobsledding, especially on the weekends.
[14] Guy McLean joined the Appleby staff in 1971 as a teacher, he was later appointed as Headmaster in 1987. Appleby is run by a Board of Governors but the day to day operations of Appleby rest with the Headmaster. He hires all staff members, fixes their salary as well as their terms of employment.
[15] The Headmaster was obligated to live on campus premises given that Appleby is a boarding school. He had no written lease for his residence and was required to pay $500 per month in rent (commencing July 23, 1997) as per his contract of employment. The utilities were paid by Appleby at $166 per month but the appliances were purchased and owned by the Headmaster.
[16] The Headmaster and his wife own another residence approximately two hours from Appleby; they use the home for holidays, summers and weekends. Nevertheless, Mr. McLean does spend many holidays and Saturdays watching campus activities, particularly sports, and only leaves the campus approximately 145 days a year due to business travel or time-off where he returns to his other residence.
[17] Various activities take place in and about the campus near the Headmaster’s residence; these activities put restrictions on the Headmaster’s own privacy, almost as if he were living in a very large public fish bowl. He is very visible in a vibrant busy campus with students, parents and the public coming and going at all hours; weekends tend to be somewhat busier. The Headmaster’s residence comes with a significant expectation of entertaining and a substantial piece of privacy is given up when one lives where one works, essentially making the Headmaster on duty 24/7. He meets students and parents in person and receives telephone calls in his residence. Moreover, there is a certain code of conduct that the Headmaster must adhere to in his own home, including dressing appropriately on certain days, all of which is scrutinized very closely due to the location of his residence. As a result, there are significant limitations imposed on the Headmaster and this restricts his ability to host personal functions or gatherings.
[18] The basement of the Headmaster’s residence is used for storage with preparations for events being done in the garage. The Headmaster has an office in his residence where, in addition to the patio and living room, he meets with students, parents, teachers, members of the Board of Governors and also holds public relations meetings. The Appleby Board meets monthly during the academic sessions (10 times per year) and the Headmaster entertains the Board at his residence after the meetings take place. The members of the Board also meet at the Headmaster’s residence approximately every two months. In essence, the Headmaster uses his residence for functions or meetings about 12 times per month or 3 times a week.
[19] The Headmaster has approximately 15 major, non-cancellable, annual events taking place at his residence; this includes drinks, dinners and brunch for 150 to 250 guests. The events are basically a two to three day affair; one day for set up, one day for the event itself and one day for the cleanup. These functions involve caterers, kitchen, setup and clean up personnel. Some of these gatherings are fundraisers and are a significant part of the Headmaster’s responsibility. In addition, there were collateral community and charity activities for which the residence was used, such as the United Way breakfast. One could say that the Headmaster’s residence is set up for entertaining in view of the fact that the kitchen is almost commercial in nature.
[20] Appleby does not have quarters for visiting heads of other schools or dignitaries and, as a result, the Headmaster would host and boarder them for two to three days, or even a week at a time, approximately three times a year. Dignitaries such as Desmond Tutu and Prince Edward have been entertained at the Headmaster’s residence.
[21] In 1996 and 1997, the Headmaster suffered higher levels of noise than he would normally endure; during this period, the Powell House was being torn down and reconstructed causing the main road on campus to be re-routed. On a typical day there would be no real disturbance to the Headmaster between the hours of 7:00 a.m. and 6:00 p.m. since he was not in his residence. From 5:30 p.m. to 7:15 p.m. there were considerable disturbances due to the activities on the adjacent fields, entertaining, public parking issues involving individuals parking in his driveway, joggers and pedestrians going passed his residence. The level of noise would vary from mild to aggravating; the Headmaster’s spouse constantly complained to him about the noise and disturbances but it was simply part of the Headmaster’s lifestyle. Furthermore, there were also many complaints from faculty members regarding the noise levels; as a result, some faculty members chose to move off campus, in particular the Appellant, Deborah Sewell.
[22] Throughout the year in 1997 there were the usual school breaks in each term as well as summer break. The Headmaster would be away from the campus for part of those breaks.
[23] Separate and apart from the noise and loss of peace and quiet enjoyment of the residence, the Headmaster’s hosting of events was an inevitable inconvenience; hosting events at other locations on or off campus was not a viable option due to the economical and logistical issues of Appleby. In addition, breakage occasionally occurred in the house when guests were present. Also, the Headmaster’s inability to use the outside property due to the constant flow of people and rental groups around the property as well as the lack of fencing and shielding from the day to day traffic, all added to the property’s lack of quiet enjoyment and privacy. The Headmaster often experienced problems getting out of his driveway, especially on Wednesdays and Saturdays, due to people parking on campus including in his driveway. On a daily basis, he would tend to leave the residence early in the morning to get a coffee and would park at another location on campus so as to be able to use his car throughout the day, given that his driveway had routine parking problems. Nevertheless, there were certain advantages to living in the Headmaster’s residence, such as the proximity to his employment, the attractiveness of the residence, the campus environment, saving on commute time and the stress of travel, the sense of a community atmosphere and the safety and security of his young children. Regardless of these advantages, the Headmaster did not have much privacy in his own home and one could say that he was not in his own space.
Dormitories
[24] Colley House is a student dormitory built in 1911; it houses approximately 60 boys per academic year. The residence is comprised of single dorm rooms that house up to four students per room. The basement has a common room with lockers and showers available to “day students”. One quarter of the “day students” would be assigned to the residence; they would drop off their personal belongings before school and return throughout the day, change in the locker rooms and use the shower facilities. The Housemaster has a two‑storey apartment on the main floor of the House with the front door opening into the student hallway. The outdoor property has a fenced area of approximately 15 by 20 feet. The Assistant Housemaster lives in an apartment on the third floor of the House with a connection to the student corridor and access to the outside area.
[25] The Baillie House and the Walker House are student dormitories, with essentially the same set-up as the Colley House including “day student” lockers, showers, classrooms and laundry rooms in the basement in addition to a communal room on each floor. There is also direct student access to the Housemaster’s apartment from the top floor while the Assistant Housemaster’s apartment has direct student access from the first and second floors.
[26] The Powell House is the newest residence on campus built in 1997; the original structure was constructed in 1917. In 1996, the House was partially built because the original structure had been torn down. All of the dormitories, with the exception of Colley House, had back door entrances to the apartments. None of the Houses had air-conditioning, appliances or garages.
Paula Schutz
[27] Paula Schutz was a Don in the Baillie House dormitory and was responsible for the general overall supervision of the students therein. Her duties included supervising study time several times per week as well as the organization of student events on weekends. She was a university graduate seeking experience that would assist her in becoming a teacher. The conditions of her employment included:
(1) residing in a studio apartment located in the middle of the Baillie House (the entrance to the apartment was situated in the students residence);
(2) salary of $15,000 for the first term; and
(3) sharing the apartment, post‑Christmas, with a fellow Don.
Deborah Sewell
[28] Deborah Sewell had been an employee of Appleby for 17 years, initially as a drama teacher, then as an Assistant Housemaster and later appointed Housemaster of the Baillie House in 1996-1997; she was married with two children, then aged nine and seven.
[29] The Baillie House was a three story structure. The Housemaster’s unit was two stories with three bedrooms, a walk-up studio, two and one-half baths, living room, dining room, kitchen, den and a great room. The top floor of the House had an entrance that opened from the students’ hallway into Mrs. Sewell’s study. The door was always open to students; essentially she was a parent figure to the students. There were parking spots available to Mrs. Sewell but no defined lot surrounding the House. Immediately adjacent was Walker Field where field hockey and soccer were played in addition to frisbee, picnics and barbecues.
[30] The Housemaster position was a 10‑months teaching position. During the day, Mrs. Sewell taught six courses; supervised the students in their daily activities; acted in loco parentis for the girls in her dormitory; made sure they were up and about in the morning, attended their meals and classes. She dealt with medical issues, study time, parent-teacher meetings and looked after the students’ well-being. Her duties seemed to be more intense in the evenings; there were a variety of situations where Mrs. Sewell had to deal with girls running away; issues of mental instability and intoxication; girls sneaking out or others trying to get into the dorm to see them; students not in their dormitory when required; and girls requiring medical treatment. There were 52 girls in the dormitory and they enjoyed chatting and talking with the Housemaster; she essentially provided counselling on a daily basis, met with the girls, parents and others in positions of authority.
[31] Mrs. Sewell experienced various disruptions to the peace and quiet enjoyment of her accommodations such as the ongoing activities on the Walker Field; noise from the arena; people traffic coming and going in all directions; dog walkers and pedestrians; students coming into her home; individuals seeking to use her unit’s washroom; the use of her children’s gym set; intoxicated students and numerous calls from parents. There was excessive noise 24/7 except for when all the girls left campus, however, there was always a certain level of disruption about to occur or occurring. This is a unique type of intrusion; the noise generated by 52 young girls is quite different from other environments as there was no privacy and people were constantly in the environs of the campus. The disruptions occurred so often that Mrs. Sewell requested a privacy fence and her nanny was under the impression that she was taking care of all the students in the dormitory.
[32] After four years as Housemaster, Mrs. Sewell left her position due to the high intrusion it posed to her life; it was all consuming. In 1996, Mrs. Sewell paid Appleby $3,774 to reside in the Baillie House, but no payments were made in 1997; however, she did report a taxable benefit for each year on her income tax return.
Michael Peirce
[33] Michael Peirce was an Assistant Headmaster for Student Services at Appleby. He resided in a house adjacent to the Baillie House with his children then aged seven and nine. The house was a 1950’s chalet with a living room, dining room, office, powder room, kitchen and on the second level there were three bedrooms and a single bathroom.
[34] There were many intrusions and disruptions at this location; to the west of the house was Walker Field where there would be constant noise caused by the field hockey games and the rentals on Sunday morning. Behind the house, there was a hockey arena with a parking lot and a one-way road system; during the hockey season there were parking issues as people would park in his space. Various individuals attempting to enter the arena would come to his house for help. He had a small fenced‑in yard with a swing set and a tree house. The lawn furniture was often moved outside the fenced area by individuals passing by and looking for somewhere to sit; they would also use his children’s swing set practically every weekend in the spring and fall. The house was in proximity to the Baillie House and there were various disruptions before and after study periods. Mr. Pierce could not entertain in his yard because he was constantly in the public eye. In the summer time, all day and every day, the sports fields were used; five days for sport camps and two days for rentals. He was living in a very public space and it became quite stressful in view of all the disturbances.
[35] As Assistant Headmaster for Student Services, Mr. Pierce was head of the school’s crisis team and was required to carry a crisis cell phone with him at all times. He had to be in constant contact with the school and this was one of the reasons he lived on campus. If students had issues they would go to his house to talk; during a slow period they would drop by his house three to four times per month and during a busy period he would receive visits twice a week and people expected him to be accessible.
[36] Mr. Pierce paid a utility fee in addition to $800 - $900 per month in rent totalling $10,044 in 1996 and $10,003 in 1997.
David Suchanek
[37] In 1996, David Suchanek was Housemaster at the Walker House and co‑director of the Residential Life Program; however, he left this position in August of the same year. The Walker House faced Walker field and was a two‑storey dormitory; there was direct access from the first and second floors into Mr. Suchanek’s accommodations where 60 boys could enter on a daily basis and shout his name. His daily activities were similar to that of Mrs. Sewell; they revolved around students, particularly those in the residence where he was Housemaster. Mr. Suchanek later moved into what is known as the Little Grey House; it was a very small 900 square foot cottage like home where he resided for roughly four months. He later moved into a duplex which became his family residence. The duplex was 1800 square feet; it comprised three bedrooms, two bathrooms, a living room and an open concept dining room/kitchen, an unfinished basement with an office and laundry room in addition to a living area. His children at the time were one and four years of age while his third child was born in 1997. Mr. Suchanek had an open door policy therefore students would be at his home every weekend. He also incurred many disruptions due to his close proximity to the soccer field and hockey arena. Various people, including alumni, were constantly knocking at his door in order to ask him to open the facilities so that they could play basketball, squash or hockey; he also received numerous telephone calls. In terms of location and proximity to the hockey arena, Mr. Suchanek could hear the constant whistling in the arena even though the semi-detached duplex was off the beaten track. He paid $8,300 in rent in 1996 and $9,800 in 1997. He also paid utilities after he moved from the Walker House and owned his own appliances.
Peter Thompson
[38] Peter Thompson was the Assistant Housemaster in the Powell House from September 1993 to summer 1996. Post‑September 1996 he was the Housemaster in the Colley House where 57 boys were housed. His daily activities were not unlike any of the other Housemasters or Assistant Housemasters. The Colley House was very old and Mr. Thompson’s apartment opened into the residence itself. Also, there was a lot of disruptive noise within the House at all hours, from music being played by the students to random incidences such as late night stomping, bullying, fighting and threats; the occurrence of these disturbances was unpredictable. Appleby provided him, his wife and their two children with lodging and normal household amenities, however, there was constant noise from the ongoing construction on the campus as well as loud banging due to the children and their activities. There were daily disturbances except for Saturday and Sunday when he would not ordinarily be called upon. Mr. Thompson felt he was responsible for the children of the House and therefore needed to act like a parent figure.
[39] There were certain advantages to living in on campus residence as well as living in other areas of the campus, these included:
(1) the proximity to one’s employment;
(2) residing in a campus environment;
(3) saving on commute time;
(4) decreased stress levels in travel;
(5) a sense of community; and
(6) a sense of safety and security for the children.
The maintenance of the property was carried out by Appleby and the campus was a nice area to raise children.
Bruce W. Rae
[40] Bruce W. Rae prepared an Appraisal Fair Market Rental Report of certain residences located on the Appleby campus for the Appellants and was qualified as an expert in the area of appraisals of the fair market rental value of property.
[41] In conducting his analysis of the fair market rental value of the properties at Appleby, Mr. Rae assumed he was dealing with a real market where there was a real Landlord and a real Lessee. In other words, he assumed it was a fee simple where the Landlord would expose his property to the market, that is where the Landlord would not be Appleby and the Lessee would not typically be a teacher. Also, he assumed that the people who would occupy the specific units would have no responsibilities or duties associated with the occupation of the property.
[42] Mr. Rae described the property as being unique in that it was a private school with recreational facilities for students, in a complete campus environment. He felt that there were no similar properties to properly analyze. He searched for sales or rentals similar to the subject properties and was unable to find any decent comparables; therefore he believed that there were problems with the comparables or the marketing information on which he would base his assessment.
[43] Mr. Rae conducted seven analyses and ranked the properties in relation to the quality of accommodation. The higher rental rates would ordinarily go to the larger properties, for example a large detached house would rent at a greater value than a small detached house and a detached house would have a greater rental value than that of a semi-detached.
[44] In conducting the analysis of each of the properties, Mr. Rae reviewed all of their attributes and then referred to a variety of comparables that he later analyzed (keeping in mind that he had a problem finding good comparables). He then provided his opinion with respect to a possible range of fair market rental values based on square footage and also a possible range of fair market rental values based on rent per month. Mr. Rae did not, however, analyse lot size, property configuration, location with regards to traffic volume and noise, or any other issues associated with a particular property such as the ravine located next to the Headmaster’s residence. In fact, he was instructed not to take into consideration the employer-employee relationship or any other disturbances that may be associated with the property when conducting his analysis.
[45] Headmaster Residence - In conducting his analysis of the Headmaster home, Mr. Rae felt that there were certain comparables that were more relevant than others and explained the reasons as to why some comparables were of a particular significance. For example, in providing his analysis for the Headmaster’s property, he believed that the most pertinent comparable was 372 Lakeshore West due to the fact that the property was older and in poor condition while the other comparables were newer and of a higher quality. The comparable was also within 200 feet of Appleby, in a low density area with many estate houses in the vicinity, well treed and on a mature location much like the Headmaster’s property. As a result, he gave this property the most emphasis; however he noted that this comparable had a significant amount of privacy since it was located on a six and a half acres lot, with a pool and a garage, therefore superior to the Headmaster’s residence. Mr. Rae felt that the comparables utilized were very good in terms of size and utility; they were analogous to the subject properties in the sense that they provided similar accommodations but he was also of the opinion that the comparables were somewhat limited.
[46] Baillie and Colley Houses - In analysing the Baillie and Colley residences, Mr. Rae referred to comparables that he believed were superior given that the properties had decks, yards, driveways, garages and air-conditioning (save 69 Armandie). The comparables were attached to other townhouses; three were mid‑row and one was an end unit; four were free-hold and one was a condo townhouse; moreover there was no internal access between the townhouses. The Colley and Baillie Houses were comprised of apartments therefore he used townhouses as comparables. In terms of the Baillie House, the comparables were the best he could find; however, there was a difference in square footage between the comparables and those of the subject property. In addition, they were free‑hold townhouses that had more value then condominium townhouses. The apartments in the Baillie and Colley Houses were attached to dormitories, this was factored in a negative way; Mr. Rae’s “gut feel” was that the high number of neighbours would have a harmful impact and there would be a substantial downward adjustment of approximately 20 to 30%. The Colley House fair market rental value was determined to be less than that of the Baillie House due to the fact that it was a 100 year old structure with old mechanics and facilities. The Baillie and Colley Houses had similar utilities but there was a large variation in the comparables used due to the difference in square footage, but the most influential factor on the estimated rental value was the latter subject property’s age, thus there was a downward adjustment of 30 to 40%. The age of the property reflected on the utility, mechanics, finish and condition of the residence and there was also a very small kitchen.
[47] Don’s Apartment — The Don’s apartment was a very small unit, therefore Mr. Rae considered smaller units (600 to 800 square feet) as comparables. He did not factor in that the apartment was located in the middle of a dormitory and completed his analysis based on multiple listings, one being a very small apartment in a residential building. Also, he looked at high density areas similar in utility but could not find apartments as small as the unit in question.
[48] Semi-detached — The semi-detached property was a duplex in operation; it was built in 1996 and was partitioned into two halves. The difficult comparisons for this property were those on Marine Drive located one block from Lake Ontario and in close proximity to a shopping mall; while the comparison on Matthew Street was a semi-detached, spartantly finished, fairly cheap and some four miles away thus too far away for comparison. Mr. Rae noted that they were better comparables than those of attached houses. The semi‑detached property did not have a garage, nor did it have a basement; it had poor quality finish and was built as a cheap accommodation; there was also a soccer field between the property and the road. The only aspects that the comparables had in common were the design as a semi‑detached and that all were $1,400 per month in rent.
[49] 101 Whittington Place — This residence, occupied by David Smith, was located off campus and was therefore unique. It was over 100 years old and had been converted into a duplex, creating two units. It was originally a very old farmhouse, tired and in need of renovations or repairs.
[50] Mr. Rae acknowledged that the properties used as comparables did not provide a similar environment and were not good comparables because they were only analogous in structure. The comparables were fee simple, with separate lots, separate parameters and different utility; some even had garages. The house located at 101 Whittington Place was essentially a tear down; the value was in the land not in the building. There were even concerns about it not being in compliance with the code. Nonetheless, the comparables were similarly located, in a quiet, sedate and mature location much like the Appleby campus.
[51] In conducting his overall analyses Mr. Rae did not try to quantify the restrictions and parameters of Appleby, such as noise, traffic, parking problems and the various responsibilities of the residents or other problems that the occupants may have encountered due to all the different facets of their environment. Overall, there was a problem acquiring decent comparables because of the nature of the property, as a result, there was a 5 to 10% negative adjustment. In addition, there were other drawbacks at Appleby such as no definable lots or air‑conditioning, no garages, fireplaces or private yards. In essence, Mr. Rae’s analysis or valuations were, at best, estimates or a “gut feel”.
Bruce W. Rae Fair Market Rental Value Appleby College
(1996-1997)
Property/Residence
Appellant /Occupant
Per Month
Headmaster House
Guy McLean
$3,000 to $3,500
Peirce Residence
Dr. Michael Peirce
$1,400 to $1,600
Baillie House
Deborah Sewell
$1,000 to $1,200
Colley House
Peter Thompson
$700 to $800
Don’s Apartment
Paula Schutz
$500 to $600
Semi-Detached
David Suchanek
$800 to $900
101 Whittington Place
David Smith
$900 to $1,000
Little Grey House
David Suchanek
No appraisal provided
Walker House
David Suchanek
No appraisal provided
Donovan Bennett
[52] Donovan Bennett prepared an Appraisal Fair Market Rental Report for the Respondent and was qualified as an expert in the field of real estate valuations. Mr. Bennett initially approached his analysis in a different manner than that of Mr. Rae; he interviewed some of the occupants in order to determine the level of interference they may have experienced due to their close proximity to young students. Mr. Bennett conducted an analysis in terms of comparisons of on and off campus student housing costs at the university level. There was a 25 to 30% difference between on and off campus housing costs; on campus being about 25 to 30% lower. He used a Direct Comparison Approach by using comparable properties within a certain radius of Appleby, looking to properties that were similar in terms of utility with size also being considered.
[53] In conducting his analysis, Mr. Bennett adjusted the rent for the loss of quiet enjoyment, this was not done by Mr. Rae [Mr. Rae’s figures were without regard to lot or lot size, property configurations, location in terms of traffic volume, noise and the effect of residing in a student dormitory or the effects of living on campus]. Mr. Bennett applied a discount when he felt it was appropriate but did not apply a premium for residing on or off campus. He analyzed the number of hours where there would be disturbances in the housing as well as the nature of those disturbances in order to arrive at an appropriate discount. He considered five days, Monday to Friday, as school days. He felt there were two hours pre-class with significant noise and disturbance (100% disturbance) and assigned it a value of nil. From 8:00 a.m. to 5:00 p.m., he suggested there were zero disturbances. From 5:00 p.m. to 8:00 p.m., he believed there were significant disturbances, therefore the value given was nil. During study, dinner, and sleep time there were rules and guidelines in place at Appleby that would curtail noise, thus he did not consider any disturbances past 8:00 p.m. He allowed a total of five hours per day or 25 hours per week of 100% disturbance for every week of the calendar year. In considering weekends, Saturday and Sunday, Mr. Bennett allowed 12 hours per day at a 100% discount, therefore a value of zero was allocated for 24 hours on weekends. The 25 hours of 100% disturbance during the week and the