Law360 Canada (June 15, 2026, 1:15 PM EDT) --
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| Balvinder Kumar |
This Saskatchewan Court of Appeal decision (
Souris Valley Lodging Inc. v. Edenwold No. 158 (Rural Municipality), [2026] S.J. No. 120) deals with issues relating to municipal law and the methods of assessment, finance and taxation of real and immovable property assessment. Two decisions were appealed by Souris Valley Lodging Inc. that arose from 2021 and 2022 assessment by the Saskatchewan Assessment Management Agency (SAMA) on two hotel properties.
In 2022, SAMA completed an assessment of two hotel properties using the modified cost approach. What this means is that this approach requires a determination of the replacement cost new less depreciation of the improvements and the application of a market adjustment factor (MAF) to calculate the value that is then added to the property (Cost Approach). A similar assessment was done by SAMA in 2021 using the same modified cost approach. I know it is not making sense…uh…let me try again by digging into the facts.
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Two market adjustment factor (MAF) models were developed by SAMA for accommodation properties in 2022. The first model was Cluster 30 model which used Cluster 30 sales. These locations had higher populations in all cities. This model was derived from 10 accommodation property sales in Cluster 30 that occurred during 2011-2018. The calculations resulted in an MAF of 0.88. The second model was a multi-cluster or non-cluster 30 model. These were derived from multi-cluster municipalities that included Clusters 41-43, 62,64 AND 81. All these were comprised of urban communities of mid-size to larger towns and villages.
The two properties in this case are located in Cluster 91 in the rural municipality (RM) of Edenwold. Cluster 91 includes rural communities with a strong urban influence. At the time no sales took place in Cluster 91. This resulted in SAMA using a comparable sale in the neighborhoods to assess the value of the properties. SAMA applied Cluster 30 model to the two properties in this appeal. So MAF of 0.88 was applied. The same approach was applied by SAMA in 2021. Not happy with the 2021 decision, Souris appealed the 2021 assessment to the board on the grounds that SAMA erred in applying the Cluster 30 model MAF. The board allowed the appeal ordering that a MAF of 0.36 be applied. The RM of Edenwold appealed the decision of the board to the committee. The decision by the committee went in their favour and 2021 assessed values were restored. Against this decision, Souris applied for leave to appeal which was dismissed.
A similar sequence was followed for the 2022 assessment. The board dismissed the appeal of 2022 assessment stating that Souris did not meet its onus of demonstrating error in the assessment. Souris appealed the board decision to the committee. Finding that SAMA did not err, the committee dismissed the appeal.
Souris did not stop here, it went further and applied for leave to appeal the committee’s decision. Leave granted on three questions of law:
1. Whether SAMA had erred in its reuse of the Cluster 30 sales;
2. Applying the incorrect standard of review;
3. Relying on a prior year’s assessment to determine the outcome of the appeal of the 2022 assessment.
Analyzing the case, the Court of Appeal only addressed the issue of whether the committee erred by relying on the 2021 Leave Decision and the interpretation of the case laws relied upon.
Prior to analyzing the case, the appellate court mentioned certain legal principles regarding leave decisions by highlighting certain cases. The court stated that leave decisions are not adjudications of matters. Leave decisions focus on whether an appeal has sufficient merit and importance to warrant an appellate court’s attention. The court further states that the observations and findings of the judge who grants leave are not binding on other colleagues or the panel hearing the appeal. There is also no precedential value in a leave’s decision’s preliminary consideration of an issue of law and that the principles of stare decisis does not apply. Keeping these points in mind and for the reasons which I have mentioned below, the appellate court allowed the appeal of
Souris and remitted the matter to the committee for reconsideration. The court reasoned that:
1. The committee did not conduct any independent analysis on the issue of whether the use of the same accommodation property sales to develop a cap rate for the income approach and a MAF for the cost approach was done in error. According to the committee, the 2021 Leave Decision had determined the issue in its entirety. The committee made no efforts to understand the legal issue and the relevant facts and concluded the issue as resolved. The committee did not make any attempts to further delve into the issue. By relying on the 2021 Leave Decision as binding, the committee erred in law.
2. The committee relied on 994552 N.W.T Ltd v. Kindersley (Town), 2019 SKCA 77 and erroneously interpreted Kindersley. The committee also relied on the 2021 Leave Decision’s comments on Kindersley that Kindersley does not prohibit the use of sales to determine the cap rate under the income approach and a MAF under the cost approach. Rather, Kindersley prohibits using sales multiple times within one model. This was not the case here.
3. The committee erred in law when it relied on the 2021 Leave Decision as determinative of the SAMA’s ability to use the same accommodation sales to construct the income approach and cost approach and according to the committee that settled the legal issue.
4. The problem here is not what the committee understood of the Kindersley case and its propositions. The error is the reliance of the 2021 Leave Decision’s interpretation of Kindersley matter without fulfilling its duty to conduct an independent analysis of the issue before the appellate court. The reliance itself constitutes the error of law.
To conclude, the committee erred in law in finding that 2021 Leave Decision to be determinative of the use of the accommodation property sales in two different models and stratifications.
Balvinder Kumar practises real estate law (residential and commercial) and is a freelance writer and author with LexisNexis.
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