Casual Legal: Moving Municipal Lands – Determining Fair Market Value under the MGA
By Zoë Beckett
Reynolds Mirth Richards Farmer LLP
Alberta Municipalities Casual Legal Service Provider
As the snow melts and the real estate market warms up, municipalities may be considering whether to sell municipality-owned land. A question that often comes up when making this determination is ‘do we need to sell the property for its market value and if so, how do we determine that? The Municipal Government Act (MGA) defines “market value” in Section 1(1)(n) as “the amount that a property […] might be expected to realize if it is sold on the open market by a willing seller to a willing buyer”. As a result of this definition, municipalities frequently rely on a realtor’s assessment, a market appraisal, or the property’s tax assessment to determine a property’s fair market value.
A realtor’s assessment is generally a reasonable basis for determining the amount a property may sell for on the open market. A municipality may want to ensure the realtor has some experience or some basis for the determination made, particularly as a sale below market value requires the municipality to advertise the sale per section 70 of the MGA. A realtor’s assessment, or multiple realtor’s assessments are often easier to access and less expensive than the formal market appraisal report.
Alternatively, a municipality may engage an appraiser to provide a formal appraisal report of the market value of a particular property. A market appraisal is often a detailed report assessing market value for the ‘best use’ of the property or make other assumptions (such as the property being rezoned) and then compare the property to the value of similar properties within the municipality or comparable municipalities. It is important for a municipality to consider both the assumptions made and the comparisons used in a formal report before accepting the provided value as fair market value. This is because the municipality may find themselves in a position where they are required to prove the property was sold for market value.
Lastly, a municipality may rely on the property’s tax assessment to determine the market value of the property. This value is determined as required under the MGA and related regulations. However, this value may not account for recent or ongoing improvements to a property or be a regulated assessment. A municipality should consider any additional steps required to reasonably confirm the tax assessment is reflective of the property’s market value.
Once a municipality has taken steps to determine the market value of a property and decided to proceed with a sale of the same, the municipality must consider its statutory obligations with respect to the sale of municipally owned property. As noted above, in the event a below market value sale is desired, the municipality is required to advertise the proposed sale before it can proceed under section 70 of the MGA. Once a municipality has properly advertised the proposed sale, the municipality is free to choose to whom they sell the property and for what price. Because there is no clear formula or method for determining what the market value of a property is under the MGA, a municipality may face uncertainty as it seeks to sell municipally owned property. A municipality with questions about determining market value or about how to complete the advertising process required under the MGA should obtain legal advice before proceeding.
To access Alberta Municipalities Casual Legal Helpline, Alberta Municipalities members can call toll-free to 1-800-661-7673 or email casuallegal [at] abmunis.ca (casuallegal[at]abmunis[dot]ca) and reach the municipal legal experts at Reynolds Mirth Richards and Farmer LLP. For more information on the Casual Legal Service, please contact riskcontrol [at] abmunis.ca (riskcontrol[at]abmunis[dot]ca), or call 310-MUNI (6864) to speak to Alberta Municipalities Risk Management staff. Any Regular or Associate member of Alberta Municipalities can access the Casual Legal Service.
DISCLAIMER: This article is meant to provide information only and is not intended to provide legal advice. You should seek the advice of legal counsel to address your specific set of circumstances. Although every effort has been made to provide current and accurate information, changes to the law may cause the information in this article to be outdated.
