Quebec Municipal Assessment: Land Value vs Building Value on Your Roll Entry

Most owners look at a single number on their assessment roll entry: the total. Right above it, two lines break that total down, the land value and the building value, and their proportion often comes as a surprise. Our article on municipal assessment versus market value in Quebec explains why the total differs from a sale price. This one is about the split: where it comes from, why it varies so much, and what it is actually used for.

What the roll entry shows: three values and a reference date

The entry for a property on the assessment roll shows, among other information, three amounts: a land value, a building value and the total property value, which is the sum of the two. These values are not set on the day you look them up, or even on the day the roll is filed. They are set as of a reference date, the market date chosen for the roll, which comes before the roll is filed.

That detail matters for what follows: the land and building split describes the property as the assessor knew it at that date, based on the features recorded in its file.

What each value reflects

The two lines do not measure the same thing.

• Land value reflects location, lot size and zoning. The same lot is worth more in a sought-after area, and a larger or better-zoned lot is worth more than a smaller one next door.
• Building value reflects cost, age, condition and the features on file: living area, number of storeys, construction quality, basement, outbuildings.

These two logics do not move at the same pace. A building ages and depreciates over time, while a location does not. As a general tendency, the land share of the total therefore tends to grow as the building gets older. It is a tendency, not a mechanical rule: renovations recorded in the file or changes in the area can shift it.

Same total, very different splits

The least intuitive consequence is that two properties with the same total value can have splits that have nothing in common. Here is an illustrative example; the figures are fictional and only show the mechanism.

• Property A: a large lot in an established area, with an older building. Assumptions: land $350,000, building $150,000, total $500,000. Land is 70% of the total.
• Property B: a small lot, with a recent building. Assumptions: land $150,000, building $350,000, total $500,000. Land is 30% of the total.

Both entries show the same total. Yet a buyer is not paying for the same thing: in one case mostly a location, in the other mostly a structure. That difference does not change the tax bill, but it matters a great deal for some uses, starting with the tax treatment of a rental property.

What the split is used for, and what it is not

It matters to an investor buying a rental property. The purchase price has to be split between the land, which is not depreciable, and the building, which can be eligible for capital cost allowance (CCA). Applying the roll's land-to-building ratio to the price paid is a commonly used method. Illustrative example: for a $600,000 purchase and a roll entry where the building is 60% of the total, this method would allocate $360,000 to the building and $240,000 to the land.

It is not the only method, and the chosen allocation has tax effects over several years. Confirm it with an accountant before it goes into a tax return.

It is not what your home insurance should be based on. Insurance is based on the cost of rebuilding, not on the building value on the roll. The two have no direct link: an older building can carry a modest roll value and a high rebuilding cost. Your insurer or insurance broker is the right reference.

It does not change your taxes. Property tax and the welcome tax are calculated on the total value, not on the split between land and building. In the example above, properties A and B are treated the same way on that point.

Where to find your entry and how to read it

In most Quebec municipalities, the assessment roll can be consulted online, usually by address. The entry shows the three values, the reference date and the main features recorded in the property's file.

To read it usefully, three questions are enough:

• Does the land and building proportion match what the property really is, a large or small lot, an older or recent building?
• Do the building features on file, living area, storeys, basement, outbuildings, match reality?
• If you are an investor, does the roll ratio look like a reasonable starting point, to be confirmed with your accountant?

If a feature on file is wrong

The building value depends directly on the features recorded in the file. A wrong living area, a missing storey or an outbuilding that was demolished but is still on file distort that value, and therefore the split. If you spot an error, a request for review is the remedy the system provides, within a deadline you should not miss. Our article on requesting a review of your municipal assessment walks through the procedure.

For any tax question about the split, especially on a rental property, an accountant is the person to consult. This article is not tax advice.