Highest and Best Use

Understand highest and best use in Canadian real estate — what it means, how it's determined, and why it’s key to property value and development.

Highest and Best Use

June 27, 2025


What is Highest and Best Use?

Highest and best use refers to the reasonably probable use of a property that results in the highest value, provided it is legally permissible, physically possible, financially feasible, and maximally productive.

Why Highest and Best Use Matters in Real Estate

In Canadian real estate appraisal and development, highest and best use analysis guides property valuation, investment decisions, and development planning.



It involves assessing:
  • Zoning and land use permissions
  • Market demand and trends
  • Physical characteristics of the site
  • Financial feasibility of alternatives



Understanding highest and best use ensures properties are utilized or developed in ways that optimize their value.

Example of Highest and Best Use in Action

An appraiser determined that redevelopment for a mid-rise residential building represented the property's highest and best use given market demand and zoning.

Key Takeaways

  • Identifies use that maximizes property value
  • Must be legally, physically, and financially viable
  • Guides appraisals and development plans
  • Affects investment and planning approvals
  • Essential in land and property valuation

Related Terms

Additional Terms

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Mortgagee in Possession

A mortgagee in possession is a lender who takes control of a property after borrower default, but before foreclosure or power of sale. The lender. more

Lease Surrender Agreement

A lease surrender agreement is a negotiated contract between a landlord and tenant that ends a lease before its scheduled expiration. Terms may. more

Green Infrastructure

Green infrastructure refers to natural or engineered systems that manage stormwater, reduce heat, and improve sustainability in developments.. more

Escrow Holdback

An escrow holdback is a portion of funds withheld at closing and held in escrow until specific conditions are met, such as completion of repairs,. more

Underused Housing Tax

The Underused Housing Tax (UHT) is a federal annual 1% tax on the value of vacant or underused residential property owned by non-resident,. more

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