A review of

the subdivision
development method
By Tony Sevelka, AACI, P. App (Part I)
Introduction • subdivision approach • estimate accurately the staging
One of the most controversial • subdivision method or phasing of land development
areas of appraisal theory relates • subdivision residual approach and related expenses,
to the use and application of the Often, land value estimates • forecast marketing and related
subdivision development method emanating from the SDM are holding expenses over the
(SDM) as a means of estimating significantly higher than those absorption period,
market value of undeveloped land. correspondingly derived from the • estimate the annual real estate
Failure to appreciate under what sales comparison approach (SCA) taxes,
circumstances to apply the SDM, (direct comparison approach). • include overhead and an
how to properly assess the types Not surprisingly, the courts have entrepreneurial [developer’s]
and levels of risk associated with shown a preference for the SCA. profit allowance in the discount
the subdivision process in the con- In theory, if both the SDM and rate and/or line item allocation
text of highest and best use, and the SCA are applied correctly, the for entrepreneurial [developer’s]
the provision for developer’s profit value estimates should be similar. profit, and
are the most problematic aspects It is the divergence in value that • estimate the appropriate
of the method. has challenged the reliability and discount rate consistent
Often, the SDM has been relevance of the SDM, especially with the selection of the
viewed with skepticism. Lack of in the area of expropriation and line item allocation for
consistency in the application of condemnation. entrepreneurial [developer’s]
the SDM and the many names profit.
assigned to the method have Overview of the SDM The SDM, in addition to being
failed to produce a unified body of The steps involved in the execution very complex, time-consuming and
valuation theory. The many names of the SDM are listed as follows:1 costly to prepare, when used on
given to the method has caused a • accurately determine the high- its own without an abundance of
great deal of confusion and misun- est and best use of the land, reliable market data, can be the
derstanding. A review of Canadian • create or affirm a supportable least accurate raw land valuation
and American case law uncovered subdivision development plan, technique.2
the following list of names used to • determine the timing and cost Many reasons have been
characterize the SDM: for approval and development advanced as to why the SDM
• anticipated use method (including mitigation needs and fails to qualify as an acceptable
• cost development method costs of obtaining development valuation model in estimating the
• developer's residual approach entitlements), market value of raw land:
• development approach • forecast a realistic pricing • There is no consensus within
• development cost or contrac- schedule over time, the appraisal or development
tor’s approach • forecast accurately the lot community as to how the
• development method absorption rate and price mix valuation model should be
• development value approach (including properly supported executed,3 or whether the
• land development method projections of community or model has any application in
• lot method market growth over the absorp- the valuation of raw land.
• residual approach tion period), • There is no consensus between

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 the appraisal and development competitive market, not after land left in the United States [and
communities as to how devel- costly alterations as yet unmade Canada].10
oper’s (entrepreneurial) profit had turned it from raw land into As a tract of land progresses
should be computed.4 a ‘developable’ condition…[and legally and physically from a state
• The numerous steps, including made reference to the trial of raw acreage to a completed
absorption estimates, in the court’s observation that] “the subdivision, with all infrastruc-
valuation model are susceptible prudent, well informed buyer ture improvements in place and
to an unacceptable margin of would know the current condi- a proven market for new housing
error that can lead to an unreli- tion of the land and pay a rea- (finished lots), the SDM also pro-
able indication of value. sonable price for the land, not gresses from non-acceptance to
• The appraisal of raw land as if a price that assumed the land acceptance by the courts. These
subdivided into finished lots is a to be in a ‘different’ or ‘more two extremes of the subdivision
hypothetical exercise that con- developed’ condition.” process were discussed in United
siders the contributory value of States v. 147.47 Acres of Land,
non-existent improvements and Applicability of the SDM 352 F. Supp. 1055, 1060 (M.D.
the disposition of non-existent Application of the SDM is most Pa. 1972):11
lots at retail prices. appropriate and useful under the It may well be that even though
• The estimate of value generated following circumstances: the highest and best use of a
by the SDM, when applied as • It is most relevant when land property is for a residential subdivi-
the only approach to value, is is not in raw acreage and an sion, if no meaningful steps have
not susceptible to verification, actual subdivision of legally been taken in that direction, viz.,
as it cannot be measured for its marketable individual finished construction expenses and actual
reasonableness by way of com- lots exists on the ground pursu- lot sales, then a ‘lot method’
parison to transactional data. ant to an executed subdivision appraisal or a ‘developer’s residual’
• The valuation model assumes or development agreement, and approach [Subdivision Develop-
a developer (subdivider) as the subdivision is the highest and ment Method], as it is also known,
prospective-purchaser of the best use.7 would be inappropriate. But that is
raw tract and construction of a • It is useful as a means of test- not the situation here. The status
subdivision though a bona fide ing the financial feasibility of of the subdivision and its availabil-
developer would have no inter- acquiring a raw tract at a speci- ity for sale within the reasonably
est in raw land not zoned to fied price under conditions of foreseeable future was an actual
permit subdivision. Even if the assumed certainty where all of and real one, certainly not hypo-
raw tract were acquired pursu- the outcomes of the subdivision thetical, remote or speculative.
ant to rezoning, construction process are predicated on the Someone about to purchase the
of infrastructure improvements stated cost and revenue inputs property on…the date of condem-
would not likely be commenced and financial goals of the devel- nation, would have to regard it as
until a sufficient number of oper.8 having a highest and best use as
conditional builder presales of • It is important for use in loan a subdivision and, in determining
finished lots had been achieved underwriting of development what purchase price he would be
to warrant subdivision construc- financing, where it is critical to willing to pay, would have to con-
tion of the tract in whole or in schedule mortgage advances to sider all factors, including sales
part.5 correspond to the development price for individual lots and addi-
Perspective on market value phasing of a subdivision and tional expense of development,
Market value is not founded on link loan repayment, with partial in arriving at his decision…This is
an ‘as if’ or ‘assumptive’ premise. discharges, to lot sales (absorp- not a case where a landowner [or
An ‘as if’ or ‘assumptive’ premise tion), thus ensuring that the appraiser] dreamily contemplates
implies a contingent and prospec- lender has adequate security at the use to which his property may
tive value, which is inconsistent all times.9 be put at some undefined future
with an ‘as is’ market value at In many condemnation and time but rather one where the
the effective date of appraisal. A expropriation cases, the SDM has property is geographically suited
dispute arose as to the meaning of been indiscriminately applied under for development; is located in a
‘market value’6 in Jabbour v. Bas- the wrong circumstances or in the booming developmental area; has
satne, 673 A.2d 201 (D.C. App. wrong way: been subdivided into lots according
1996) over the valuation of raw If all of the land that has been to a duly certified map; has been
land. The appeals court ruled that, appraised by the development cleared and graded and improved
[a] reasonable person would approach were actually subdivided, with the creation of a spring-fed
assume land to be equivalent to there would be enough subdivision lake, the construction of access
specified cash only in its cur- lots on the market to last hundreds roads, and the digging of a deep
rent [‘as is’] condition on the of years and little, if any, farm- well sufficient to supply water to

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150 homes; and where actual sales without any supporting infrastructure …[W]here the landowner has
of lots as identified on the map have improvements. Of course, where tendered evidence of a proposed or
taken place, the deeds of which con- no actual subdivision exists on the possible subdivision, attempting to
tain building restrictions compatible ground, use of the SDM impresses establish the number or value of indi-
only with a residential estate develop- upon the land a hypothetical subdivi- vidual lots and where the evidence
ment. sion of the land into serviced lots. indicates that the developer had
And, viewing subdivision as a For that reason alone, the court may not made affirmative efforts before
dynamic process in the context of the conclude that the premise of sub- the condemnation to effectuate the
weight that the ‘lot method’ should divided lots underlying the method development of the subdivision, the
be given, the Supreme Court of Con- of valuation is erroneous and of no evidence has been held to be inad-
necticut in Leona Robinson, Executrix relevance in determining the value of missible in most of the cases…The
(Estate of Walter Langer), et al v. the land in the condition that it actu- courts frequently reason that, since
Town of Westport, 14272-222 Conn. ally exists at the time of expropriation so many factors impinge upon the
402, 610 Al2d 611 [1992], stated: or condemnation. Further, the SDM future value of prospective lots, not
As the proponent of a hypothetical creates an illusion of precision, yet the least being the future condition
highest and best use is able to prog- makes no provision for the unex- of the market, such evidence is too
ress along the spectrum from raw pected in a process that is inherently speculative to be considered, and
land with few or no improvements fraught with risk. would tend to permit the trier of fact
to, ultimately, a completed subdivi- Projecting finished lots on an to surmise the value of the land at an
sion, the weight to be assigned such undeveloped tract involves a great indefinite future date…This violates
evidence will be enhanced. deal of uncertainty and speculation the general principle that value is to
And, as a phased subdivision as to when (or if) subdivision might be determined as of the date of the
development, a somewhat similar occur; the number and type of lots taking…Thus, it can readily be seen
view was expressed by the Supreme (i.e., townhouse, semi-detached, that the subdivision of a parcel of
Court of New York in Investors Col- single family, etc.) likely to be pro- land is not merely a matter of drawing
lateral Corp. v. State of New York, duced; the estimated cost (direct and lots on a plan with paper streets.
[1985] 494 N.YS.2d 352, 114 indirect) and availability of funds to In City of Harlingen v. Estate
A.D.2d 437: produce those lots; the anticipated of Sharboneau,13 Sharboneau’s
Claimant was a real estate devel- pricing and sell-off (absorption) of appraiser established that a con-
oper and subdivider and subject tract those lots; and timing of development demned 9.852-acre tract had the
had been the subject of ongoing expenditures and receipt of revenue potential to support 44 single-family
and sequential subdivisions in a high from lot sales. Also, the developer’s lots averaging 7,700 square feet
growth area. At least one year before profit expectation (as a separate line each, based on an analysis of three
the de facto taking…[C]laimant had item or as part of the discount rate) existing subdivisions in the area,
prepared and obtained from the Town and selection of an appropriate dis- summarized below:
of East Fishkill Planning Board prelim- count rate reflecting the time-value Having established the potential
inary approval of the subject subdivi- of money and lot absorption risk (not lot yield and assuming an absorption
sion. The subdivision was virtually achieving lot sales as scheduled) are period of three years, the appraiser
at the end of and a climax to a long difficult to quantify with any degree described the valuation process in
ongoing sequence of subdivisions of of certainty. At each step in the the following manner:
the property acquired by claimant in valuation process, an assumption or An adequately sized tract or subdi-
1969. Thus, the subdivision was not estimate is made for which there is vision is valued by estimating the total
merely a plan prepared but never a corresponding margin of error. The gross sales of all the lots. From the
filed…or a subdivision plan filed but margin of error for a particular input amount deductions are made for all
not acted upon, and in the context in the SDM may be acceptable, but, absorption period holding costs such
of this case was not conjectural or if the margin of error for all of the as taxes, insurance, management/
speculative. inputs is viewed collectively, the court security/maintenance, entrepreneurial
may conclude that the overall poten- remuneration [developer’s profit at
Admissibility of SDM tial for error renders the valuation 25% of gross lot sales receipts] and
An appraiser choosing to rely on the model unreliable. financial holding costs. If the property
SDM in valuing raw land in an expro- On the admissibility of evidence of is undeveloped open land, the cost of
priation or condemnation proceeding proposed or possible subdivision of construction is also deducted in order
may encounter significant admissibil- condemned land, in State v. Inhabit- to derive the estimated value of the
ity challenges. There are a number of ants of Town of Phillipsburg12 the New property as raw land.
different procedures in executing the Jersey appeals court stated: Note: The estimated net income in
SDM, and the court could construe
this lack of uniformity in methodology Area Total Avg. Area Yield
as a bar to general acceptance within Subdivision (ac.) Lots (sf) Per Acre
the appraisal community. Addition-
Knightwood Estates I 11.408 61 6,793 5.34
ally, the appraisal methodology as
Knightwood Estates II 17.830 79 7,700 4.43
currently presented by the Appraisal
North Pointe 8.809 39 7,147 4.43
Institute involves 10 steps, if the
Subject 9.852 44 7,700 4.47
tract being appraised is raw land

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each year of the three-year sell-out Eaton, James D., Real Estate Valuation in preneurial profit and equity yield require-
period was discounted at 10.5% to Litigation. 2d ed. Chicago: Appraisal Institute, ments, and provide additional printout
1995. material in support of their original article.
a present value of $413,770, from Also see Douglas D. Lovell, ‘Condo-
Fanning, Stephen F., Terry V. Grissom, and
which was deducted the upfront Thomas D. Pearson, Market Analysis for Valu- minium and Subdivision Discounting,’ The
development cost of $123,150 ation Appraisals, Chicago: Appraisal Institute, Appraisal Journal, (October 1983): 524-
necessary to complete the subdivi- 539. The article focuses on the valuation
1994.
of ‘for sale’ properties – that is, “as if
sion and generate the projected Guntermann, Karl L., ‘The Valuation of Unde- completed” condominium and subdivision
net income from finished lot sales, veloped Land: A Reconciliation of Methods,’ projects.
and to reflect the residual value of The Journal of Real Estate Research, (Spring 8 J. R. Kimball, Barbara S. Bloomberg, and
1994): 169-177. Steven A. Jones, ‘Subdivision Analysis
$290,620 attributable to the raw
Lovell, Douglas D., and Robert S. Martin, Sub- and Valuation,’ The Appraisal Journal,
land in its “as is” condition. (October 1986): 493-503. Where the
division Analysis, Chicago: Appraisal Institute,
Ultimately, the Texas Supreme 1993. value of the land is readily discernable
Court rejected Sharboneau’s by sales comparison (direct comparison
Owens, Robert W., ‘Subdivision Development: approach), the authors illustrate a pro-
appraisal evidence of the SDM as Bridging Theory and Practice,’ The Appraisal cedure of financial feasibility that allows
not relevant in estimating the market Journal, (July 1998): 274-281. the appraiser and the client to study the
value of a 9.85-acre taking, as it Sevelka, Tony, ‘Subdivision Development: Risk, performance of a proposed subdivision
bypassed all of the problems that Profit and Developer Surveys,’ The Appraisal enterprise.
could occur during an actual devel- Journal, (Summer 2004): 242-252. 9 Chuck Munson, ‘Lender Residential Sub-
division Evaluation Using Discounted Cash
opment, substituting instead the Sevelka, Tony, ‘When is subdivision the Flow Analysis,’ The Appraisal Journal,
best possible outcome.14 In revers- highest and best use?,’ Canadian Appraiser, (October 1994): 572-579.
ing the trial court’s judgement, the (Spring 2004): 39-45. 10 J. D. Eaton, Real Estate Valuation In
Texas Supreme Court observed Skolnik, Martin A. and M. Carla Domingo, Litigation, 2nd ed. (Chicago: Appraisal
‘Supply and Demand Considerations in Resi- Institute, 1995), 246.
that the SDM included more than a dential Subdivision Analysis,’ The Appraisal 11 Ibid., 254-255.
dozen analytical steps, most involv- Journal, (January 1994): 57-63. 12 State v. Inhabitants of Town of Phillips-
ing assumptions and estimates, any ULI-the Urban Land Institute, Residential
burg, [1990] NJ-QL 521, 573 A.2d 953,
one of which could seriously affect 240 N.J. Super. 529.
Development Handbook. 2d ed. Washington, 13 City of Harlingen v. Estate of Sharboneau,
the appraisal’s accuracy. This wide D.C., 1990. No. 99-1118 (Tex. 05/17/2001), TX-QL
margin for error counsels against 2866. In an unprecedented move, on
using…[the appraiser’s subdivision Endnotes August 29, 2000, legal counsel on behalf
development] approach to value 1 Appraisal Institute, The Appraisal of Real of the Appraisal Institute filed an Amicus
Estate. 12th ed. (Chicago: Appraisal Curiae or “friend of the court” brief
undeveloped land in ordinary circum- stating that, “[t]he Subdivision Develop-
Institute, 2001), 343.
stances…In addition,…[the apprais- 2 Ibid., 342. ment Analysis or Method is a generally
er’s] subdivision development analysis 3 Appraisers usually apply a discounted recognized and accepted technique in
made little or no adjustment for the cash flow (DCF) multi-period spreadsheet the appraisal profession used to reliably
valuation analysis, whereas developers estimate the fair market value of undevel-
buyer’s risk that the subdivision might oped land when subdivision development
often simply rely on a static model in pric-
fail…[The appraiser] merely assumed ing undeveloped land. represents the highest and best use of
that it would take three years to sell 4 Appraisers and developers either expense that land.”
all the lots in the hypothetical subdivi- developer’s profit as a separate line item 14 The court, in discussing the discount rate
or treat developer’s profit as a residual in of 10.5% used by the appraiser, made
sion. This prediction is insufficient to reference to the Appraisal Institute’s
their proformas.
account for unexpected competition, 5 Because of the significant risks and up- publication on the SDM noting that “[t]he
political opposition to the develop- front development costs of subdivision, discount rate applied, which is derived
ment, economic stagnation, or other actual subdivision construction is not from and supported by the market, should
likely to commence until the developer reflect the risk involved.” The Appraisal of
risks that the subdivision could turn Real Estate 329 (11th ed. 1996). It also
has negotiated an adequate number of
out to be a bad investment…[The conditional lot presales. made reference to the “many marketplace
appraiser’s] subdivision analysis 6 Defined as “The most reasonable price uncertainties for which the appraisal must
determined only what a developer which a property should bring in a account.” Douglas D. Lovell & Robert
competitive and open market under all S. Martin, Subdivision Analysis 33-40
could hypothetically afford to pay to (1993). The appraiser’s “discount rate
conditions requisite to a fair sale with the
profitably subdivide the property, not buyer and seller each acting prudently, represented only ‘financial carrying cost
what a developer would pay in the knowledgeably, and assuming the price is for the debt service and return on equity,’
competitive, risk-filled marketplace of not affected by undue stimuli.” with no adjustment for risk. Nowhere
7 William Ted Anglyn, Robert Moreyra, and else in his analysis did…[the appraiser]
the real world. account for marketplace uncertainties.”
John C. Putman, ‘Subdivision Analysis
– A Profit-Residual Model,’ The Appraisal
NOTE: In part II of this article, appearing
References Journal, (January 1988): 45-59. The
in the next issue of Canadian Appraiser,
Boykin, James H., Land Valuation: Adjust- authors illustrate a procedure for valuing
a fully developed and ready to market the author reviews the subdivision devel-
ment Procedures and Assignments, Chicago:
subdivision, which they refer to as a opment method from the perspective of
Appraisal Institute, 2001.
“sellout property.” The authors concede highest and best use.
Brueggeman, William B., Jeffrey D. Fisher, and
that their premise of a completed subdivi-
Leo D. Stone, Real Estate Finance. 8th ed.
sion is “often theoretical (especially when
Homewood, Ill.: Richard D. Irwin, 1989.
the units are not totally completed until
Duvall, Richard O. and David S. Black, ‘The sold)”, but is pertinent to loan underwrit-
Development Approach to Valuation in ing and investment analysis. In response Tony Sevelka, AACI, P. App is
Eminent Domain Litigation: Capitalizing on to a rebuttal letter at page 411 of the July the president of InterVal in
Potential Use,’ The Appraisal Journal (July 1988 issue of The Appraisal Journal, the Mississauga, ON.
2000): 351-359. authors at pages 412-420 discuss entre-

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A review of the

subdivision
development method
B y T o n y S e v e l k a , AA C I , P. A pp Pa rt II
Highest and best use arranged and servicing contracts are the courts to accept the SDM as an
While the courts have cited count- in place. Signing of the subdivision appropriate valuation model. As aptly
less reasons for rejecting the SDM agreement, which must be backed noted by the court in D & D Con-
as a means of estimating land value, by a letter of credit or other form of struction Ltd. v. Consor Builders Ltd.,i
the primary reasons for rejection security adequate to cover the cost [a]ll the ‘development’ in the
can be found in the conclusion that of infrastructure improvements, is a world is of little benefit if the [pro-
subdivision is not the highest and clear expression that the developer posed] lots cannot be sold. That
best use and the necessary founda- is committed to development of the comes down to market factors…
tional requirements have not been land as a subdivision. Market conditions are essentially the
satisfied. Provided there are no unforeseen economists’ twin pets of demand
When describing highest and best impediments on or off the land to the and supply.
use, the courts consistently maintain development of the land in question, The collective requirements of
that the contemplated use must not construction of the subdivision can ripeness and effective demand are
be speculative or too remote in time, legally commence following execu- articulated in the expropriation case
and that there be demand for that tion of a subdivision or development of Shindle v. Yorkton, City Of ii involv-
use. Often, the word immediate or agreement. Unless a subdivision ing 160 acres, by way of reference
imminent is used in describing highest exists on the ground, inclusive of to the following two cases:
and best use. Black’s Law Diction- infrastructure improvements, many In Hulmann, the property that was
ary Centennial Edition (1891-1991) courts, in construing the issue of already zoned for single and semi-
provides the following definitions: ripeness, argue that sales of indi- detached housing developments,
vidual lots is hypothetical, and in was expropriated in October, 1970.
Immediate – Present; at once; with- the absence of signed servicing Sanitary sewers and other services
out delay; not deferred by any inter- contracts, budgeted infrastructure were then available and there was
val of time. In this sense, the word, costs are too uncertain to warrant a strong demand for semi-detached
without any very precise signification, use of the Subdivision Development housing. In 1969, the claimant had
denotes that action is or must be Method. Further, evidence of suf- prepared a draft plan of the subdivi-
taken either instantly or without any ficient and effective demand for new sion. This plan was submitted to the
considerable loss of time. housing consistent with the type municipal authorities but was not
proposed (a proxy for finished lots) is approved for the reason that the
Imminent – Near at hand; mediate the last and most critical foundational land was going to be expropriated.
rather than immediate; close rather hurdle that must be overcome for The board adopted the position of
than touching; impending; on the
point of happening.

Both immediate and imminent

relate to the ripeness and demand
of the land for subdivision at the
time of condemnation or expropria-
tion. Ripeness of land for subdivi-
sion means that the landowner and
the municipality have executed a
subdivision or development agree-
ment that indicates the maximum
number of permitted lots and the
obligations, financial and other-
wise, of the developer, inferring that
construction financing has been

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the appraiser… “that the property instead awarding compensation of agricultural purposes. The appel-
was in such an intermediate process, $192,000 (excluding disturbance lants had no development plan
having been ripe for development damages) based on the comparative of their own for establishing the
since June, 1969, about one and (or market data) method of land valu- subdivision. Mr. Ervin Shindle
one-half years prior to the expropria- ation, while commenting as follows: [Planner] said their plan to develop
tion,” at which time a plan had been …[D]espite the thrust of the a subdivision “did not get off the
filed, services were available…and residential development in the direc- ground” and Mr. Staseson advised
there was a rising market for semi- tion of the subject land, I find, on the Mr. and Mrs. Shindle to defer
detached lots- and concluded that evidence, nothing to indicate that development until about 1978.
the development approach to value development of it was imminent. I No roads or services had been
was clearly the appropriate one.iii find, too, that there is ample evi- extended into the land and there
In Harris, 60 acres of farmland was dence of reasonably like sales within was no storm sewer. The time for
expropriated on 10 November, 1971, a reasonable date of the expro- development was not ripe because
of which 17.2 acres had already been priation. For these reasons, I am many lots remained unsold in
sold to Kenman in 1970, under an reluctant to accept the development Heritage Heights which adjoins the
agreement for sale. In the summer of method in determining the market subject land in the north east part
1971, Kenman applied to the Nova value of the subject land, and prefer of the city and which the city itself
Scotia Water Resources Commis- to adopt the comparative approach, was developing. Lots also remained
sion and the Department of Public and here more so because the sub- unsold in Silver Heights subdivision
Health for 60 ‘hookups’ for modern ject property was not reasonably ripe being developed by the appellants
sewer services. The application was for development. Eddy v. Minister of on the south side of the city.
approved 12 days after the property Transportation and communication In an appeal to the British
was expropriated. A plan prepared on (1974) 7 LC.R. 120; POW Invest- Columbia Supreme Court of an
10 December, 1970, and revised on ments Ltd. v. Nova Scotia (1973) 5 arbitration award involving Van-
26 July, 1971, showed the 63 lots (3 L.C.R. 57, (1975) 2 S.C.R. 86. couver School District No. 39
were added) in the area. MacKeigan, Shindle appealed the judgement and Royal Oak Holdings Ltd.vi, the
C.J.N.S., at p. 247, stated: of the lower court to the Saskatch- meaning of ‘immediate’ in a rent
The Plan had no official approval ewan Court of Appeal,v arguing in renewal clause had implications
and was merely lines on a piece of part that, for determining highest and best
paper, except for the Kenman area. [t]he learned trial judge erred in use and market value of a site.
It is common ground that the plan of holding that the subject property was The relevant valuation clause of
the Kenman area, as first drawn and not ripe for development and thereby the lease reads in part as follows:
again as revised, had received unof- erred in not taking this into consid- …SAID LANDS would be
ficial ‘preliminary approval’ of officials eration when valuating the subject valued…if vacant and ready for
of the Halifax County Town Planning property [and that] immediate development to their
Board and that it should be treated as the comparable sales method was highest and best lawful use by a
if it had actually received formal tenta- unreliable because there were insuf- person or persons ready, willing
tive approval at the time of expropria- ficient reasonably-like sales within a and able to purchase and develop
tion. By that time, survey stakes had reasonable time of the expropriation the SAID LANDS for that immedi-
been placed marking streets and at of the subject property and in this ate use…
least some lots in the Kenman area; case the development method of As authority that the words
engineering specifications had been valuating the subject property was ‘forthwith’ and ‘immediately’
prepared for installation of roads, preferable. have the same meaning, the
water and sewer (although no physi- In dismissing the appeal and arbitration panel referred to The
cal work had been done); quotations affirming the trial judge’s ruling, the Accident Insurance Company of
had been received for sewer pipe and Saskatchewan Appeals Court made North America v. Young, [1891]
other supplies; and, as noted, ‘hookup’ the following observations: 20 S.C.R. 289, which had quoted
approvals were secured a few days Whether land is ‘ripe for develop- from Queen v. Justices of Berk-
after expropriation.” ment’ or whether development of it shire, 4 Q.B.D. 469, that,
In Harris, the learned arbitrator, is ‘imminent’ are questions of fact forthwith and immediately
from whose award the appeal was and of degree, and the learned trial “are stronger than the expression
taken to the Appeal Division of the judge not having overlooked or mis- ‘within a reasonable time’, and
Nova Scotia Supreme Court, found apprehended some material evidence imply prompt, vigorous action, with-
that the Kenman “lots were ripe for of fact, his findings should not be out any delay, and whether there
development” and applied the devel- disturbed by this court. has been such action is a question
opment method in arriving at their As counsel for the city pointed of fact, having regard to the circum-
value. This finding was not disturbed out, the subject land was located stances of the particular case.”
on appeal.iv outside the city limits and was zoned This interpretation was found
The Saskatchewan District Court for agricultural use and was not to be consistent with the Oxford
ruled that Shindle’s 160-acre tract annexed within the city limits until English Dictionary, Second Edition,
was not ‘ripe’ for development, reject- January 1978. The subject property Vol. VII, definition of immediate:
ing the development method which at the time of expropriation [Novem- Immediate --”Of time: Pres-
indicated a value of $578,251, ber 15, 1976] was being used for ent or next adjacent” and “occur-

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ring, accomplished, or taking effect Conclusion Guntermann, Karl L., ‘The Valuation of Unde-
without delay or lapse of time; done veloped Land: A Reconciliation of Methods,’
Regardless of the method applied to The Journal of Real Estate Research, (Spring
at once; instant.” the valuation of land, it must be rele- 1994): 169-177.
On the basis of the interpretation vant, reliable and properly applied as
of the meaning of ‘immediate’ in the a measure of market value. Courts Lovell, Douglas D., and Robert S. Martin,
context of highest and best use, the Subdivision Analysis, Chicago: Appraisal
prefer the SCA (direct comparison Institute, 1993.
arbitration panel concluded that, approach) over the SDM as a means
[t]he phrase ‘…immediate use’ of estimating land value. Courts Owens, Robert W., ‘Subdivision Develop-
distinguishes it from uses that are will, however, entertain the SDM, ment: Bridging Theory and Practice,’ The
not immediate. Appraisal Journal (July 1998): 274-281.
provided subdivision is the highest
The C-3A zoning of the site pro- and best use, and development is Sevelka, Tony, ‘Subdivision Development:
vided for an outright approval use, ‘imminent’ or ‘immediate,’ but only if Risk, Profit and Developer Surveys,’ The
which is a legal entitlement, and all of the foundational requirements Appraisal Journal, (Summer 2004): 242-252.
a conditional approval use, which of the SDM are satisfied, and the Sevelka, Tony, ‘When is subdivision the
involves the exercise of discretion SCA (direct comparison approach) highest and best use?,’ Canadian Appraiser,
by the city’s Development Permit is not a viable option. Accordingly, (Spring 2004): 39-45.
Board. under the best of circumstances,
The ‘as of right’ zoning permit- Skolnik, Martin A. and M. Carla Domingo,
the SDM should be sparingly used ‘Supply and Demand Considerations in Resi-
ted immediate development of the in the valuation of land with subdivi- dential Subdivision Analysis,’ The Appraisal
site with a broad range of retail sion potential in condemnation and Journal, (January 1994): 57-63.
uses to a maximum density floor expropriation proceedings. An SCA
space ratio (FSR) of 1.0, with issu- ULI-the Urban Land Institute, Residential
should always be prepared, even Development Handbook. 2d ed. Washington,
ance of a development permit within when reliance must be placed on D.C., 1990.
seven to 12 weeks. On this basis, transactional data from outside of
the indicated value of the property the general area in which the con- Endnotes
was $6,000,000. Alternatively, the i D & D Construction Ltd. v. Consor
demned property is located. Builders Ltd. [1985] A.J. No. 151 (Q.L.)
‘conditional approval use’ would (Queen’s Bench).
allow quite a comprehensive range References i Shindle v. Yorkton, City Of [1979] S.J. No.
of other uses, notably for manufac- Boykin, James H., Land Valuation: Adjust- 525 (Q.L.).
ment Procedures and Assignments, Chicago: iii Hulmann v. Durham Board of Education
turing and residential, to a maximum Appraisal Institute, 2001. (1974), 7 L.C.R. 152.
density of 3.0 FSR with issuance of iv Harris et al. v. Minister of Lands and
a development permit taking at least Brueggeman, William B., Jeffrey D. Fisher, Forests (1975), 10 L.C.R. 243.
60 months, with any development and Leo D. Stone, Real Estate Finance. 8th v Shindle v. Yorkton (City) [1982] S.J. No.
ed. Homewood, Ill.: Richard D. Irwin, 1989. 670 No. 7181 (Q.L.).
subject to public notification. On the
vi Vancouver School District No. 39 v. Royal
basis of conditional approval use at Duvall, Richard O. and David S. Black, ‘The Oak Holdings Ltd. [1999] B.C.J. No. 1308
an FSR of 3.0, the indicated value of Development Approach to Valuation in (Q.L.). Application by the School Board
the property was $11,000,000. Eminent Domain Litigation: Capitalizing on for leave to appeal the arbitration panel’s
Potential Use,’ The Appraisal Journal (July award was denied by the British Columbia
The arbitration panel ruled that 2000): 351-359. Supreme Court.
the outright entitlement to develop-
ment at an FSR of 1.0 was more Eaton, James D., Real Estate Valuation in
consistent with the highest and best Litigation. 2d ed. Chicago: Appraisal Institute,
1995.
use of the site as implied by the
valuation clause in the ground lease, Fanning, Stephen F., Terry V. Grissom, and Tony Sevelka, AACI, P. App is
and fixed the market value of the Thomas D. Pearson, Market Analysis for Valu- the President of InterVal in
site at $6,000,000. ation Appraisals, Chicago: Appraisal Institute, Mississauga, ON.
1994.

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