The appellant ("Beaudet") was a partnership engaged in the construction of four adjoining apartment building, which it then rented out, resulting in a self-supply at fair market value of each building (including land) under ETA s. 191(3) when the first tenant commenced occupancy.
Lamarre J found that in "an ideal competitive market" (para. 81), the fair market value of a building would consist only of costs, including indirect costs such as advertising and leasing costs and the builder's construction management fees (see para. 79). Here, there was no evidence of elements such as zoning restrictions which would establish a significantly higher value for the four buildings as a whole, so that there should be no upward adjustment over such costs.
In particular, Lemarre J included financing and notional project management fees costs (estimated at 1.5% and 5% of total costs), and advertising expenses. Excluded from costs were cost overruns due to substandard ground conditions and a reduction (equal to the remediation cost) was made for problems relating to a leaking roof and substandard soundproofing.
After noting (at para. 81) that it was only in the case of the fourth building that the respondent's expert had made a significant addition for the developer's estimated profit, and after having noted (at para. 79) a statement in an appraisal text that in order to make an addition for the developer's profit "it is essential that the appraiser first verify the market conditions to be sure that such a contractor's profit exists," she rejected such an addition in this case given inter alia that 35% of the units in the building still had not been rented at the time of first occupancy.
The land value was increased to reflect its appreciation over its cost to Beaudet, that had been incurred several years earlier.