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RMOW loses assessment appeal

The Resort Municipality of Whistler has lost its appeal of the tax classification of three condo-hotels for the 2000 tax year. The B.C.

The Resort Municipality of Whistler has lost its appeal of the tax classification of three condo-hotels for the 2000 tax year.

The B.C. Property Assessment Appeal Board did, however, decide to return the majority of the fourth and largest condominium hotel under appeal to a commercial classification.

The appeal board, in its decision handed down Jan. 6, 2001, ruled that 186 condo units in the Blackcomb Springs were to be re-classified commercial, or Class 6. The other 29 units will remain residential as assessed by the B.C Assessment Authority last year.

If all four condo-hotels had remained residential it would have meant approximately a $450,000 "loss" in municipal tax revenue. The ruling that most of the Blackcomb Springs should be taxed as commercial represents a "recovery" of about $170,000 in property tax revenue for the 2000 tax year.

The Alpenglow, Timberline Lodge and Cascade Lodge were kept at Class 1, representing a $280,000 shortfall in municipal tax income. For the owners, the decision means annual tax savings of around $1,500 to $2,000 per unit.

Calvin Smyth, the B.C. Assessment Authority’s assessor for the Whistler area, said the same classifications will now hold for the 2001 tax year.

The municipality had budgeted for a $450,000 loss in revenue this year, in the event that it lost its appeal on all four properties. The RMOW has not, however, budgeted for any further condo-hotels changing from a commercial to a residential tax classification.

Smyth said there is a potential for more properties to try and move into a residential classification based on the recent ruling.

The four condo-hotel properties were downgraded from a commercial to a residential tax classification last year after owners re-organized their management and rental programs to slip through the criteria for a Class 6 classification.

The municipality launched an appeal of the re-classifications in January 2000. The appeal went before the Property Assessment Appeal Board Dec. 12, 2000.

In order to be classified commercial under the current regulations, the condo units must be in a building of more than 20 strata units, where at least 85 per cent of the units are managed by one management company.

The units must also have been offered for rent for periods of less than seven days for more than six months of the year ending Oct. 31.

The board ruled that all four buildings had met the second test. But, the Alpenglow, Cascade Lodge and the Timberline do not meet the first criterion. No one property management company manages 85 per cent of the units in each of those three complexes. They therefore are entitled to a residential designation.

As Smyth explained, any business units within a condo-hotel property – including retail outlets or restaurants, for example – are included in the overall count when determining the percentage of strata units managed by one company. This helped some properties fall short of the 85 per cent test.

Blackcomb Springs, on the other hand, met the first two criteria. More than 85 per cent of the units are managed by one company.

But the owners in that complex tried to slip through the criteria by taking 29 units out of the rental pool and offering them for rent only for periods of seven days or more, for six months and one day of the year ending Oct. 31. This was called the Whistler Week program and it was enough to see the entire complex downgraded to residential by the Assessment Authority for the 2000 tax year.

But, on the RMOW’s third-party challenge, the appeal board ruled that only those 29 units can remain residential. The rest go back to Class 6.

Counsel for the RMOW argued that the owners, by offering the Whistler Week, were in breach of the restrictive covenant on the property and were acting illegally. Whistler said that owners should not be permitted to benefit from a wrongful act and that the board should treat the units as if they were conforming with the restrictive covenant.

The munciaplty’s acting director of finance, John Nelson, gave evidence that the covenants were part of Whistler’s "warm bed" policy. He told the appeal board other resorts that have not pursued a similar policy see owners using their units on peak weekends and during peak ski and summer months but otherwise leaving them empty. This in turn leaves restaurants, pubs and retail establishments dead mid-week and during shoulder seasons.

The board ruled that it was "by no means clear that restricting rentals to periods of seven days or more amounts to a breach of covenant."

The board also noted that a breach of covenant is a breach of agreement between private parties. "It is not unlawful, in and of itself, to breach an agreement, even one registered against title to the land. So, unless there is a law requiring that a person do that which they have been covenanted to do in an agreement, breach of covenant is not unlawful," reads the board’s decision.

The RMOW also argued that the hotel units could not be termed "residential". They said the properties look and smell like hotels, complete with lobbies and room service. They said a guest would be hard pressed to see any difference and the units should be classified as per their collective use.

The board, however, was satisfied that the properties used for sleeping and other domestic activities can be termed as being used for residential purposes.

The appeal board also ruled that single units are not hotels.

Smyth said there is still one more appeal pending for the 2000 tax year. The owners of units in the Tantalus also re-organized their affairs and are appealing their commercial classification for the 2000 tax year.

"There are also some other properties that have tried to split their management but we didn’t agree," said Smyth. "They still appear to be managed by one company."

He said there may be other condo-hotel properties that fall below the 85 per cent management rule if they count the business lots into the overall number of strata lots. "We are looking at them to see if they drop below 85 per cent." He said some properties may still appeal before the deadline this year, but at this point none have advised the B.C. Assessment Authority of their intention to do so.

In the meantime, the Ministry of Municipal Affairs and the B.C. Assessment Authority is conducting a review into the tax classification issue throughout the province. After a summer of soliciting input from various stakeholders, including the RMOW and Whistler condo-hotel unit owners, a set of recommendations is being prepared that will be presented to cabinet.

Mayor Hugh O’Reilly also plans to meet with Municipal Affairs Minister Jim Doyle later this month to continue pressing for a resolution to end taxation instability and forestall any appeals for the 2001 year.

Many unit owners have said they don’t mind being classified as commercial if they are then taxed on income earned in the same way regular hotels are, instead of on the resale value of the units.

The provincial review, however, is not looking at the valuation aspect of the taxation issue.