November 25, 1999,  E.C.B. No. 39/94/176 (68 L.C.R. 167)

* Fiona M. St. Clair Presided over the hearing of this matter but subsequently left the board and did not participate in these reasons for decision.

REASONS FOR DECISION

1. INTRODUCTION

The claimants, Peter Panagiotis Daflos and Evanthia Daflos ("the Dafloses"), were the registered owners in fee simple of a two acre parcel of property located at 23901 Dewdney Trunk Road in Maple Ridge, British Columbia, legally described as: Parcel Identifier 000-857-076, Lot 11, Section 21, Township 12, New Westminster District, Plan 33977 (the "subject property"). They bought the subject property, which was improved with a one storey "ranch" style residence and detached outbuilding, in May, 1989 for $220,000 and made it their family home. In July, 1991, they attempted unsuccessfully to subdivide the subject property into approximately 11 building lots as part of a joint application with the owners of two neighbouring parcels. Shortly afterward, they listed the subject property for sale at an asking price of $825,000 but received no written offers. Over the years the Dafloses heavily mortgaged and re-mortgaged the subject property, including granting a registered third mortgage for $350,000 in November, 1993 to Peter Daflos's father, the claimant Konstadinos Daflos.

On September 14, 1995, the respondent, The Board of School Trustees of School District No. 42 (Maple Ridge-Pitt Meadows) (the "School District"), expropriated the Daflos's property for the purpose of constructing a new school maintenance facility. The expropriation followed several years of intermittent negotiations between the parties. At the time of the taking the School District made an advance payment of $450,000 under what is now section 20 of the Expropriation Act, R.S.B.C. 1996, c. 125 (the "Act"), for what it estimated was or would be payable as compensation. The advance payment was based on an appraisal report dated August 10, 1994 and updated on January 30, 1995, which valued the subject property for single family residential use at between $430,000 and $450,000. Subsequently, the School District commissioned a further appraisal which estimated the market value of the subject property at the date of expropriation to be $515,000. In August, 1996, the School District made a further advance payment of $65,000. The advance payments totalling $515,000 were sufficient to pay out fully the first and second mortgages registered on title and to pay to Konstadinos Daflos on account of his third mortgage a total of $162,774. The School District says no further compensation is payable.

The Dafloses seek further compensation from the School District and have applied to the board for a determination of the amounts to which they are entitled. In their further amended statement of claim dated August 13, 1997 and filed with the board at the commencement of the compensation hearing, the Dafloses claim $645,000 for the market value of the subject property under section 31 of the Act and $130,084 for disturbance damages under section 34(1)(a) of the Act. Those alleged damages are made up entirely of mortgage expenses which they say they incurred as a direct result of both the threat or "aura" of expropriation associated with the subject property from at least the early fall of 1991 and pre-expropriation delay on the part of the School District. They also claim for disturbance damages under section 34(1)(b) for the reasonable costs of relocating to other land, costs under section 45, interest under section 46, and penalty interest under section 47(b) for what they say was the School District's unreasonable delay in proceeding with the expropriation.

Konstadinos Daflos was formally added as a claimant at a late stage in the proceedings but the parties agree, and the board accepts, that he is an "owner" for the purposes of the Act. He relies primarily on the Dafloses' further amended statement of claim in respect of his own claim for compensation as a security holder for the market value of his security interest. However, he also claims disturbance damages amounting to $5,250 for three months' interest on the principal balance of his third mortgage under section 5(1) of the Expropriation Act General Regulation, B.C. Reg. 451/87 (the "General Regulation").

The compensation hearing in this matter took place in Vancouver, B.C. Both Peter Daflos and Evanthia Daflos gave evidence on their own behalf. The other witnesses for the claimants were Ken Hollett, an accredited real estate appraiser with the firm of Collingwood & Associates, who testified concerning his appraisal report on the subject property dated June 13, 1997, and Norman Starnaman, the mortgage manager for Village Credit Union which held a first mortgage charge over the subject property. Additionally, Adam Andruschak, secretary-treasurer of the School District, was called and cross-examined by the claimants as an adverse witness. The sole witness appearing on behalf of the School District was Reid S. Umlah, an accredited real estate appraiser with Hooker Carmichael Property Consultants Ltd., who testified concerning the appraisal report he had prepared dated June 25, 1997.

2. BACKGROUND

Based upon its assessment of the oral and documentary evidence adduced, the board makes the following background findings in this matter.

2.1 The Daflos Family

Peter Daflos, who was 46 years of age at the date of the hearing, emigrated to Canada from Greece in 1970. Since that time he has been involved primarily in the restaurant business. He testified that, in the years leading up to the expropriation, he owned five such businesses, including a company known as Jim's Pizza (1980) Ltd. He married Evanthia Daflos and the couple have three teenaged children. Evanthia Daflos worked as a cook at the Jim's Pizza outlet and together they operated the business. Until May of 1989 the Dafloses lived in a smaller rancher located on 124th Avenue in Maple Ridge but sold that home in trade and moved to the subject property partly, they testified, to accommodate the needs of a growing family. Initially, one of the Daflos's nieces from Greece who was attending university boarded with them. Also, Konstadinos Daflos emigrated from Greece in the fall of 1989 and lived with the family from time to time for the next six or so years. At the date of the hearing he was 85 years old and residing once more in Greece.

2.2 The Subject Property

The subject property is a long rectangular shaped and generally level parcel. It measures 121.75 feet in width, fronting the north side of Dewdney Trunk Road, and 717.76 feet in depth, for a total area of approximately two acres. The parcel adjacent to the east of the subject property is a municipal works yard and immediately beyond that is an elementary school. The parcels adjacent or close by to the west and north, prior to their acquisition by the School District, comprised residential acreages. At the date of expropriation, the front portion of the subject property to a depth of about 250 feet was improved with a residence and an outbuilding variously described as a garage, barn or workshop. The next 250 feet was improved with a fenced riding circle while the rear 200 feet or so was generally cleared but vacant land.

The residence in which the Dafloses have lived since 1989 is a substantial single storey structure, built in the early 1970s, comprising six bedrooms and three bathrooms, with an attached double garage. There is a minor discrepancy in the evidence provided by the appraisers as to the precise main floor area, but the board is satisfied that it totals approximately 2,950 square feet with the attached garage occupying an additional 576 square feet. At the date of expropriation the residence was evidently in good repair.

Shortly after purchasing the subject property, the Dafloses bought additional furnishings and undertook interior renovations and exterior improvements which included roof repair, driveway paving, landscaping and fencing. Peter Daflos testified that the expenses incurred were largely paid for by his father and that they brought the family's total investment in the subject property up to $300,000. An above ground swimming pool was also added at some point prior to the date of expropriation.

2.3 Mortgage Financing

The history of mortgage financing by the Dafloses with respect to the subject property reveals a pattern of ever-increasing borrowing. Initially, at the time of purchase, the Dafloses secured an amortized first mortgage of $161,000 from the National Bank of Greece. The mortgage was for a three year term with interest at the rate of 12.75% per annum. Within two and a half months, the Dafloses obtained a second mortgage for $58,000, repayable on demand, from the same lender. Interest under this mortgage was calculated at the lender's prime rate plus 2% per annum (15.5% initially). The mortgage was said to be collateral security for the lender's advance of monies to Jim's Pizza (1980) Ltd. In August, 1990, the Dafloses added a third mortgage of $40,000 from the National Bank of Greece. It carried an initial one year term with interest at the rate of 16.5% per annum. In other words, within fifteen months of purchase, the Dafloses had mortgaged the subject property in the total principal amount of $259,000.

It became necessary for the Dafloses to refinance the subject property during 1992. For that purpose they engaged the services of a mortgage broker, Delta Equities Ltd. In July of that year they secured a new amortized first mortgage of $300,000 from Village Credit Union out of the proceeds of which they paid off the three existing mortgages to the National Bank of Greece. The new mortgage was initially for a one year term with interest at the rate of 8.75% per annum. In November they obtained an interest-only second mortgage for $47,000 from private lenders, Germain Paul Bonin and Helen Bonin. This mortgage was also for a one year initial term with interest at 17.16% per annum. Both the first and second mortgages were extended beyond their initial terms. Finally, in November, 1993, as already noted the Dafloses granted a third mortgage for $350,000 to Konstadinos Daflos. Its terms reflected that interest was to run at the rate of 6% per annum and that the mortgage was repayable on demand. Therefore, by the end of 1993, the Dafloses had mortgaged the subject property in the total principal amount of $697,000. Peter Daflos's evidence at the compensation hearing was that, by the time of expropriation, the total indebtedness under the mortgages had reached about $850,000.

The board pauses in its factual narrative at this point to observe that the relevance of the pattern of borrowing to this matter lies in the Daflos's allegations that the School District's conduct prior to expropriation caused them severe economic hardship, forcing them to do further borrowing simply to "stay afloat", to pay a mortgage broker in order to find willing lenders, and to pay mortgage interest at rates significantly above those normally charged. These allegations form the basis for claims for disturbance damages which comprise $6,850 in mortgage brokerage fees paid to Delta Equities Ltd., $7,025 for interest on the first mortgage to Village Credit Union charged at higher than the posted rates, $53,095 in both principal and interest on the new second mortgage, and $63,114 in interest owing on the third mortgage to Konstadinos Daflos. The School District denies that any of these financial costs are referrable to the expropriation. Based largely on Peter Daflos's own testimony, it submits that what really was taking place was an "intermingling" of personal and business funds, the latter going to support restaurant businesses which he indicated had become less profitable.

2.4 Land Use Regulations and Development Efforts

Although from the time they purchased the subject property the Dafloses used it as their family home, they testified that they viewed it as an investment property for redevelopment within the first three years. At that time the immediate vicinity of the subject property, north of Dewdney Trunk Road and known as the "North Cottonwood" area, remained primarily rural residential except for the institutional uses already referred to. The subject property, like those adjacent to the west, was zoned RS-3 (One Family Rural Residential), which required a minimum lot size of 1.98 acres and permitted only one dwelling unit per lot together with associated agricultural uses. It had been removed from the Agricultural Land Reserve in 1988 but was still designated "Agricultural" in the Official Community Plan ("OCP"). However, the neighbourhood was also in transition from rural to urban densities, reflected in the growing number of development inquiries and proposals.

During the spring and early summer of 1991, the Dafloses, who had no previous development experience, agreed to co-operate with the owners of two adjacent parcels in a proposed subdivision of their respective properties. Mr. and Mrs. Lutsch owned a two acre parcel to the west, on which was located a small, one storey rental house. The configuration of the Lutsch parcel was almost identical to that of the subject property. The two parcels were separated by a slightly larger panhandle lot owned by Mr. and Mrs. Bloy on which there was also a single family residence. Together the three parcels created a rectangular assembly comprising 6.37 acres, which the owners proposed to subdivide into 36 single family lots of approximately 6,000 square feet each, retaining the Daflos's residence on a double lot.

In May, 1991, the planning firm, Genesis Development Consultants Ltd., prepared a subdivision plan for use by the owners. On June 21, 1991, Peter Daflos entered into a memorandum of agreement with Mr. Lutsch and Mrs. Bloy with respect to the proposed subdivision. In early July, the owners through a real estate agent, Rick Schmidt, made an application to the District of Maple Ridge to amend the OCP and to have the parcels rezoned RS-1b (One Family Urban (medium density) Residential). In September, the District's planning department recommended that the application be denied as premature. The primary reason given was lack of sewer capacity to service the proposed subdivision. However, the planning department also recommended that staff review the parcels in question for possible inclusion into the urban boundary as an expansion of the Cottonwood urban area. Both those recommendations were accepted by the District's municipal council on October 7, 1991.

The Dafloses made no further efforts to pursue this land assembly after the rejection of the rezoning application. Peter Daflos testified that he believed it would be necessary to wait six months to a year before reapplying, by which time he anticipated that a cannery in the area which had once utilized any excess sewer capacity would be dismantled. In the meanwhile, the Dafloses listed the subject property for sale, apparently trying to capitalize on the indication that the municipality was reviewing the area for possible inclusion into the urban boundary. There was evidence to confirm that the subject property was listed in the multiple listing service catalogue by at least March, 1992 at an asking price of $825,000. On May 30, 1992, the School District purchased the Bloy's property, ending any prospect of proceeding with the land assembly involving the three parcels. There was no documentary evidence of any other development plans by the Dafloses thereafter, but Peter Daflos testified that he had retained an architect to prepare plans for a townhouse development on the subject property sometime prior to early November, 1993.

From the time of the unsuccessful effort to rezone and subdivide in July, 1991 up to the date of expropriation in September, 1995, the subject property continued to be zoned RS-3. In late 1993 it was redesignated "Institutional" within the OCP. On June 13, 1994, the District of Maple Ridge adopted a further amendment to the OCP known as the "North Cottonwood Urban Area Plan". With the exception of those parcels designated for existing or proposed "Institutional" uses, which included the subject property, the North Cottonwood Urban Area Plan proposed mainly single family urban residential redevelopment to a maximum of 7 units per acre. Additionally, land fronting on Dewdney Trunk Road to the west of the subject property was designated for future "Service Commercial" use. These were the relevant OCP designations in place at the date of expropriation.

2.5 Pre-Expropriation Negotiations

During 1991 the School District was reviewing options for the future site of a new maintenance shop. One of those options, proposed by the District of Maple Ridge, was to acquire land adjacent to its municipal works yard comprising the subject property together with the parcels owned by the Bloys and the Lutsches. On July 16, 1991, Mr. Andruschak, the secretary treasurer of the School District, wrote to the deputy planner for Maple Ridge to indicate the School District's agreement with that proposal. He added:

"We want to begin negotiations soon, but understand there is a rezoning application underway. We would like to start negotiations after the application has been dealt with by Council, because it is in our best interest to do so."

On October 8, 1991, one day after Maple Ridge council rejected the rezoning application, the School District at a closed meeting approved the location of the new maintenance facility and directed Mr. Andruschak to proceed with negotiations for acquisition.

The negotiations between the School District and the Dafloses proved to be difficult and protracted. The parties were far apart on the question of what the subject property was worth. The Dafloses also wished to remain in their family home. The School District retained Paul Kundarewich, a real estate appraiser, to attempt to reach an agreement. There is evidence that he visited the subject property as early as June 21, 1991, to carry out an appraisal, and that he pursued discussions with the Dafloses in the late fall of that year. The Dafloses had some harsh words at the hearing for Mr. Kundarewich's methods, which they described as aggressive and intimidating. He had, they said, threatened to isolate the subject property and reduce its value if they failed to co-operate. The Dafloses retained a lawyer, Jeffrey Hayes, to advise them and a real estate appraiser, Brian K. Davies, to act as a consultant in the negotiations.

For several months in early 1992, the parties through their agents and advisors discussed the possibility of entering into an agreement pursuant to section 3 of the Act. However, in April of that year, the School District evidently abandoned that course and, instead, made a direct offer to purchase the vacant rear portion of the subject property approximating one acre in size. The price offered was $100,000, and the offer was made subject to obtaining various approvals and to being able to acquire the adjacent Bloy property. It also provided that the School District would have a right of first refusal to purchase the rest of the subject property, once subdivided, if the Dafloses decided to sell. The Dafloses refused the offer, which Peter Daflos at the compensation hearing described as "insulting". On May 30, 1992, the School District succeeded in purchasing the Bloy property for the price of $445,000. On July 20, 1992, the School District renewed its offer to the Dafloses to purchase the one acre portion but now at a price of $116,000. At the same time, they offered to purchase the whole of the two acre Lutsch property for $230,000. Both offers were refused.

Ultimately, the School District decided to resort to expropriation of the remaining lands it required. On June 8, 1993, the School District approved a bylaw authorizing the expropriation of the Lutsch property. Two weeks later it passed the following resolution:

"That the Board direct the Secretary Treasurer to proceed with the expropriation of the complete parcel of land presently owned by Mr. Daflos and required by the Board for the future Maintenance site facility."

The School District proceeded to expropriate the Lutsch property on October 29, 1993. However, it did not proceed at that time to expropriate the subject property. Mr. Andruschak, during his testimony at the compensation hearing, suggested this was mainly because the School District was continuing to talk to Peter Daflos and considering various alternative proposals he had made. However, it is clear to the board from a review of internal documents of the School District that a more compelling reason for not doing so was lack of approval from the Ministry of Education for the additional funding required. On February 9, 1994, in response to an open letter to both the School District and the District of Maple Ridge from Peter Daflos, expressing his frustrations and asking to be expropriated, the chairman of the School District wrote in part:

"What is clear however, is that the Board intends to expropriate your land which is required for the District's future maintenance and operations centre. The Board regrets it was unable to satisfactorily achieve a mutually agreeable price for the sale of land, and now finds it necessary to expropriate.

The Board has applied to government for the required funds to pay you when the land is expropriated, however, these arrangements are still in process and we await authorization from the government."

By early May, the Dafloses had involved their local M.L.A. in the issue, but it appears that the anticipated funding authorization did not come until the fall of 1994.

2.6 The Expropriation

On November 8, 1994, the School District passed bylaw no. 4-94/95 authorizing the expropriation of the subject property. An expropriation notice dated November 15, 1994 was filed in the New Westminster Land Title Office on November 18, 1994 and was served on counsel for the Dafloses on November 28, 1994. However, it was not until July 12, 1995 that the School District issued a certificate of approval of the expropriation, and not until September 14, 1995 that it filed its vesting notice respecting the subject property in the land title office.

The board finds the explanation for the further delay in expropriation proceedings largely in the fact that the Dafloses, on December 7, 1994, filed with the board a notice of request for an inquiry under section 9 of the Act. The request was based on their contention that the proposed expropriation of the whole of the subject property was not necessary to achieve the objectives of the School District and that its objectives could be better achieved by varying the amount of land to be taken. The board appointed an inquiry officer and its files show that the inquiry officer conducted a hearing into the matter on April 11, 1995. At the request of the parties, the inquiry was twice adjourned to allow settlement discussions to take place, and was permanently adjourned as of May 29, 1995. The intended expropriation could not proceed while the inquiry was still underway.

The settlement which resulted in abandonment of the inquiry concerned only the Daflos's right to remain in their home on the subject property pending resolution of the issue of compensation. At the time of the compensation hearing, the Dafloses were continuing to live there under a lease arrangement. Counsel for the parties drew to the hearing panel's attention the relevant clause of the settlement agreement which was finalized on June 30, 1995. It reads:

[T]he [School] Board will direct the Expropriation Compensation Board to determine the compensation issue as if the Lease had not been granted, without deducting the value of the Tenancy or salvage rights from, or adding any damages resulting or arising from or relating to the continued occupancy by Mr. and Mrs. Daflos to, the compensation otherwise payable.

3. THE ISSUES

Because at the date of the compensation hearing the Dafloses continued to reside on the subject property, the parties agreed that the board's consideration of the claim for disturbance damages for the reasonable costs of relocating to other land under section 34(1)(b) of the Act should be deferred to a later time. That being the case, the issues which the board must determine at this juncture are as follows:

(1) What was the highest and best use of the subject property on September 14, 1995, the date of expropriation, and was that use different from the then existing use?

(2) What was the market value of the subject property on September 14, 1995?

(3) Are the Dafloses entitled to disturbance damages in addition to an award for market value and, if so, do they have compensable claims under section 34(1)(a) of the Act for mortgage expenses?

(4) Is Konstadinos Daflos entitled to disturbance damages for three months' interest on the principal balance of his third mortgage under section 5(1) of the General Regulation?

(5) Has any of the parties caused an unreasonable delay in proceedings such that the party should be subject to interest penalties under section 47 of the Act?

(6) Are the claimants entitled to their actual reasonable legal, appraisal and other costs under section 45 of the Act?

4. HIGHEST AND BEST USE

The board recognizes that it is the determination of the highest and best use of a property at the moment of expropriation which is the cornerstone of any attempt under the Act to estimate the market value of that property. In the present instance, the parties are essentially agreed on the highest and best use of the subject property as of September 14, 1995, the date of expropriation. Mr. Hollett, the Daflos's appraisal expert, expresses it in his report as

. . . a holding investment, with potential for subdivision of the site as part of an assembly with the two adjacent lots to the west, in conformity with the potential uses of the Residential designation, and possibly also the Service Commercial designation. (p. 19)

Mr. Umlah, the appraisal expert retained by the School District, concludes that the highest and best use is

As a holding site for short term single family residential and medium to long term service commercial redevelopment within the context of an assembly. (p. 1)

The rationale for characterizing the subject as a holding property, on which both parties agree, is set out by Mr. Umlah at p. 27 of his report as follows:

It is often assumed that the concept of highest and best use must be associated with some form of immediate productivity or that the land must be fully developed and continually productive to have utility. This assumption ignores the possibility that the highest and best use of a vacant site may simply be to leave it in the state for a prescribed or indefinite period of time. Occasionally, sites are held in a vacant state by investors/developers awaiting certain events which will, at some point in time, result in a specific use.

In their respective discussions, the two appraisers arrive at the same opinion on a number of other salient considerations. First, although at the date of expropriation the subject property (as well as the former Lutsch and Bloy properties adjacent) were designated "Institutional" within the OCP, both appraisers disregard that designation on the grounds that it was put in place to accommodate the School District's proposed maintenance facility. This treatment accords with section 33(g) of the Act which provides:

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

(...)

(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.

Accordingly, the appraisers have concluded as to highest and best use on the basis of the most reasonable and probable alternative use. Given that, at the date of expropriation, the remaining lands in the North Cottonwood Urban Area Plan (except for the municipal works yard and the elementary school) were designated within the OCP for mainly single family urban residential redevelopment, and that lands fronting on Dewdney Trunk Road to the west of the subject property were designated for future "service commercial" use, the appraisers agree that the subject property as well as the two adjacent properties to the west would most likely also have had these designations as of September 14, 1995, but for the School District's plans.

Second, based largely on their review of documents in the municipal planning department, both Mr. Hollett and Mr. Umlah calculate that approximately 0.75 of an acre of the subject property offered potential for future service commercial uses under CS-1 zoning while the remaining 1.25 acres offered potential for urban residential subdivision under RS-1b zoning.

Third, there appears to be little or no disagreement on the horizon of development potential for the subject property. With respect to the residential component, both appraisers expressed the view that development could have been achieved in the "short term", which evidently contemplates a period not exceeding three years. With respect to the service commercial component, both Mr. Hollett and Mr. Umlah considered that such development could not have been realized for a number of years because there was insufficient residential development at the date of expropriation to support it. Mr. Hollett opined that such use would have been achieved in the "intermediate term" while Mr. Umlah said the "medium to long term".

Finally, the appraisers seemed to share the view that retention of the residence on the subject property, located as it is within that component which had service commercial potential, would have offered some holding value until such time as service commercial redevelopment was warranted. If the subject property had been assembled with the adjacent Lutsch and Bloy properties, they suggest, the rear portion might have been developed for urban residential use while the front portion retained its RS-3 zoning with the residence providing rental income to help offset holding costs. However, Mr. Umlah cautioned that, since the remainder parcel created by the assembly and subdivision would be below the two acre minimum required under RS-3 zoning, variance approval would be required.

The board accepts the foregoing analyses of highest and best use of the subject property provided by the appraisers in their respective reports. The board defers to the later discussion of the claims for disturbance damage its consideration of the further question as to whether highest and best use was the same as, or different than, existing use.

5. MARKET VALUATION

Because highest and best use of the subject property on September 14, 1995, the effective valuation date, has been determined to be a mixed use, comprising a residential component of 1.25 acres and a service commercial component of 0.75 acres, the board will consider the market valuation of each of these components in turn.

5.1 The Residential Component

Both the Dafloses and the School District relied upon the opinions of value expressed by their respective appraisers. The appraisers, in turn, relied upon the direct comparison approach in arriving at their estimations of the market value of the residential component. Mr. Hollett, the Daflos's appraiser, also performed an analysis of value using both the direct comparison approach and the cost approach on the alternative assumption that the entire subject property would be designated for residential use. However, since Mr. Hollett acknowledged that this was not its highest and best use, little attention need be paid to that alternative. The parties also urged the board to be guided in determining the market value of the residential component by the board's earlier decision in Lutsch v. School District No. 42 (Maple Ridge-Pitt Meadows) (1996), 60 L.C.R. 21, although for somewhat different reasons.

5.1.1 The Daflos's Case

(a) The Appraisal Evidence

It was Mr. Hollett's initial estimation that, under RS-1b zoning and at typical yields for subdivisions in the Maple Ridge area under that zoning, the subject property would have yielded about 11 lots within the context of an assembly with the two adjacent owners. Taking into account the service commercial component on the front portion of the subject property, however, the residential component on the rear portion would, in his opinion, have yielded a total of 7 lots.

In performing his direct comparision analysis, Mr. Hollett utilized 10 residential land sales in the vicinity, which he described as sales of acreages with subdivision potential that were either vacant or had improvements of nominal value. The parcels ranged in size from 1.47 to 8.37 acres and, like the subject property at the date of expropriation, were all zoned RS-3 at the dates of sale. Five of the sales took place during 1993, two years or more prior to the date of expropriation, and four others occurred during 1994. Mr. Hollett's data included the proposed subdivision for each of the parcels, ranging from between 4.0 and 7.3 lots per acre. From these proposed densities, he was able to calculate the price paid per raw lot as well as the price per acre for each sales comparable. The unadjusted prices per raw lot ranged between $40,909 and $67,500 while the prices expressed on a per acre basis ranged between $200,000 and $337,500.

Viewed from the perspective of price per raw lot, Mr. Hollett considered his best comparable in terms of location, date of sale, and development density to be his comparable no. 9. This was a 3.2 acre, irregularly shaped parcel of land at 12221 - 240th Street, fronting the west side of 240th Street and the south side of Heaps Avenue in the North Cottonwood Urban Area, northeast of the subject property. It sold in June, 1994 for $790,000, equating to a price of $246,875 per acre. The purchaser contemplated subdivision at a density of 5.0 units per acre resulting in a price of $49,375 per raw lot.

In Mr. Hollett's opinion, the price per raw lot indicated by comparable no. 9 was supported by his comparable no. 7. This was a much larger, nearly triangular shaped parcel comprising 7.06 acres at 23850 Heaps Road in the North Cottonwood Urban Area, almost directly north of the subject property. The sale date of this comparable, March of 1995, was closest in time to the date of expropriation. In his report Mr. Hollett had indicated a sale price of $1.7 million which equated to $240,793 per acre. Based on a proposed subdivision of the parcel into 35 lots at a density of 4.96 lots per acre, it equated to a price per raw lot of $48,571. However, at the compensation hearing, the Dafloses introduced into evidence through the appraiser a land title transfer document which indicated comparable no. 7 had actually sold for $1.846 million. Adjusting on this basis, Mr. Hollett derived $261,544 as the price per acre and $52,757 as the price per raw lot.

Viewed on a price per acre basis, Mr. Hollett concluded that comparable nos. 8 and 9, supported by comparable no. 7, offered the best sales comparisons. Comparable no. 8 was a rectangular shaped 1.47 acre parcel located at 12087 - 240th Street within the North Cottonwood Urban Area. It was situated to the east and slightly north of the subject property and similarly adjoined the municipal works yard. This parcel sold in September, 1994 for $378,800 which equated to $257,687 per acre. The purchaser anticipated subdividing it into seven lots at a density of 4.76 lots per acre, indicating a price per raw lot of $54,114.

Mr. Hollett took into account what he described as a change of conditions in the Maple Ridge residential market in the period leading up to the valuation date. At pp. 32 and 33 of his report, he observed that most of the comparable sales took place during 1993 and 1994, whereas "demand softened during 1995". This indicated to him that "some downward adjustment" was appropriate to most sales. Accordingly, based on his analysis of the comparables, he estimated the market value for the residential component of the subject property at the date of expropriation to be in the region of $46,000 per raw lot or $240,000 per acre.

Since Mr. Hollett considered that the residential component would have yielded 7 lots at $46,000 per raw lot, he calculated market value on this basis at $322,000. Alternatively, on a per acre basis, 1.25 acres at $240,000 per acre resulted in a market value of $300,000. Mr. Hollett simply averaged the two figures to arrive at the sum of $311,000, his final estimation of the market value of the residential component.

(b) Applicability of the Lutsch Decision

The Dafloses say that what the board determined as to market value in the Lutsch decision is also of assistance in the present case. In Lutsch the valuation date was October 29, 1993, and the highest and best use of the property at that date was held to be short term holding for future residential urban development within the context of an assembly comprising the three properties owned respectively by the Lutsches, the Bloys and the Dafloses. The board considered the evidence of the appraisers for the respective parties, who were in virtual agreement as to the raw lot value of the Lutsch property although not as to the number of lots likely to be obtained from that property or within the assembly as a whole. The Lutsch's appraiser, Mr. Erho, estimated the adjusted value at $45,050 per raw lot while the School District's appraiser, Mr. Umlah, estimated it at $45,000. Mr. Umlah also calculated the adjusted value per acre at $247,253 (rounded to $247,500). The board arrived at its final conclusion as to the proper measure of compensation by applying Mr. Umlah's raw lot value of $45,000 to the two acre Lutsch parcel within a 6.37 acre assembly of the three adjacent properties yielding 36 lots. This calculated to a market value for the Lutsch property of $508,634.

Although the Dafloses seek to rely in some respects on the Lutsch decision, they also point out that there are significant differences with the present case which require adjustment. For one, the expropriation there occurred nearly two years earlier, before changes were made to the OCP which made a portion of the subject property eligible for commercial redevelopment. For another, they say, the value determined in Lutsch should be adjusted to account for the value related to the house located on the subject property. As for any estimated decline in the residential market between the two valuation dates, the Dafloses maintain that the School District should have expropriated the subject property at the same time as they did the Lutsch property. They argue, therefore, that it would be unfair to consider any such decline in determining market value when the intervening delay was a result of the School District's conduct.

5.1.2 The School District's Case

(a) The Appraisal Evidence

For his direct comparison analysis of the residential component, Mr. Umlah selected sales of 7 parcels within the municipal boundaries of Maple Ridge. All of the comparables, he indicated, offered potential for urban redevelopment, mostly for subdivision into residential lots at the maximum density prescribed under RS-1b zoning. All but one were zoned entirely RS-3 at the dates of sale; his comparable no 6, located far to the west of the subject property in West Maple Ridge, had split RS-1/RS-3 zoning. All but two, Mr. Umlah reported, were in a similar raw development state as the subject property, with no active rezoning or subdivision applications in place at the time of sale. Most of the comparables were improved with single family residences capable, according to Mr. Umlah, of generating some holding income during the rezoning and subdivision approval process. The parcels ranged in size between 1.47 and 7.06 acres. Four of the sales occurred in 1994 or early 1995, while three of them took place after the date of expropriation, in two of those cases some eight and nine months later. Like Mr. Hollett, Mr. Umlah had information concerning anticipated subdivision of the parcels from which he was able to suggest probable densities. However, unlike Mr. Hollett, Mr. Umlah focused almost entirely on the price paid per acre for each of the comparables and did not undertake a market valuation based on price per raw lot. The unadjusted prices expressed on a per acre basis ranged between $200,000 and $310,110.

Mr. Umlah relied most heavily on four comparables (nos. 1, 2, 3 and 7) which were all situated within the North Cottonwood Urban Area and which, he said, indicated unadjusted values ranging from $217,703 per acre to $257,687 per acre. The first three were the same comparables upon which Mr. Hollett primarily relied (his comparable nos. 7, 8 and 9). However, Mr. Umlah made adjustments involving those three which contributed to a significantly different estimate of market value for the subject property's residential component.

Three express factors entered into Mr. Umlah's adjustments: first, what he observed as a softening of the market for residential land after the early months of 1994 and particularly in the late spring and early summer months of 1995; second, the imposition of higher development cost charges ("DCCs") by the District of Maple Ridge; and third, what he considered the less desirable location of the subject property in relation to most of the comparables. With respect to market conditions in Maple Ridge generally, Mr. Umlah made reference to the prices being paid for serviced RS-1b zoned lots in the neighbourhood of the subject property and concluded that they had dropped approximately 10% since the spring of 1994. In addition to falling prices for the end product, he said, developers were also faced with increasing costs to develop urban lots because of higher DCCs, which were increased by 12% in September, 1994 and by a further 2% in September, 1995, negatively influencing the price which a developer could afford to pay for urban residential land.

These market observations caused Mr. Umlah to make downward adjustments of 15% for the parcel located at 12221 - 240th Street (Umlah's comp. no. 3; Hollett's comp. no. 9), which sold in June, 1994, and the parcel at 12087 - 240th Street (Umlahs' comp. no. 2; Hollett's comp. no. 8), which sold in September, 1994, suggesting time adjusted values for the two of approximately $219,000 per acre and $210,000 per acre respectively.

The parcel located at 23850 Heaps Road (Umlah's comp. no. 1; Hollett's comp. no. 7) sold in March, 1995, much closer in time to the valuation date and after the time when the major increase in DCCs occurred. Never