Monday, June 02, 2008

Highest and best use?

Highest and best use



November 12, 2007 5:25:45 PM


Richard Harris (


Section 38 (1) of the expropriation states:

Where the land is expropriated, the compensation to the owner shall be
based upon
(a) the market value of the land

and goes on to say:
but where the market value is based upon a use of the land
other than the
existing use, compensation under paragraph (a) shall not exceed

(f) the amount based upon the highest and best use to which
the land may
be put/

In Henderson v. Minister of Tourism (1981), 23 L.C.R. 30 at 53, Firm
(1982) 25 L.C.R.
291 (New Brunswick Court of Appeal) it was stated that:

"Market value is defined as being the highest price in terms
of money which a
property would bring if exposed for sale in the open market, for a
reasonable time to
find a prudent, fully informed purchaser buying with knowledge of all
the uses to
which the property could be adapted or capable of being used and
purchasing from an
equally prudent and informed vendor, with neither party acting under duress"

Prior to 2001 Appraisers were required to do their appraisal in accordance with
USPAP standards which required a rigorous approach to highest and best use.

Under the new Canadian appraisal standards adopted in 2001 shows the following
at line 1568:

Highest and best use:
The report must contain the appraiser's opinion as to the
highest and best
use of the real estate, unless an opinion as to highest and best use
is irrelevant. If
the purpose of the assignment is market value, the appraiser's
support and rationale
for the opinion of highest and best use is required. The appraiser's
reasoning in support
of the opinion must be provided in the depth and detail required by
its significance to
the appraisal. Based on the relevant legal, physical and economic
factors. As land is
appraised as though vacant and available for development to its
highest and best use,
opinions are required both as to:
1.the land, as if vacant, and;
2. the property, if improved.

Although the new Canadian standard is somewhat watered down front USPAP, the
appraiser must still do a thorough highest and best use analysis and
the appraisal
is not valid without one.

Hope this helps. I have info somewhere on the USPAP standards which I will
try and find.

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