The appellants take the position that the surface portion of their lands in the City of Toronto, which were used for surface parking and the placement of advertising signs, were to be properly classified for purposes of the Assessment Act (Ontario) in the Commercial Property Class and that the “air rights” above the parking lot surfaces were properly classified in the Commercial Property Class, Vacant Land Subclass – whereas the position of the Municipal Property Assessment Corporation (“MPAC”) was that the density potential or development potential defined by the City zoning by-laws and referred to as “air rights” by the appellants was not land but rather, a restriction attached to the land, so that all of the land was being used for the purposes of surface parking and advertising signs and that the properties were properly classified wholly in the Commercial Property Class.
The Board first recognized the common law position (also referred to in the Cadillac Fairview decision, which it referred to) that:
Ownership of land confers rights in the air space above the lands and in the subsurface below the land. …
[T]he subject properties’ undeveloped air space is part of the land/real estate/real property. The use of the air space is restricted by the zoning by-law.
In nonetheless confirming the MPAC position, the Board stated:
The Board finds that neither the undeveloped air space above the subject properties or the rights to use the undeveloped air space are land within the meaning of the Act. Since they are not land, they cannot be a “portion of a parcel of land” eligible for a subclass. …
The air spaces above the subject properties have not been severed and alienated separately by a strata plan. They are not capable of standing on their own as land. …
The evidence is that the transfers of density rights are dealt with by agreements between parties and not by transfers of land under the Land Titles Act or Registry Act. …
There is no doubt that the density rights to a property have a value and that this value must be considered in determining the current value of the properties. If the subject properties transferred some of their density rights to another parcel of land, the evidence is that the properties losing density would have a lower current value and the property receiving the rights would have a higher current value. The description of the properties for assessment purposes would not change for the air space above the land which has not been severed as an integral portion of the property.