Title: Orchard Glen East v. Prince William County

State: virginia

Issuer: Virginia Supreme Court

Document:

Present: Carrico, C.J., Compton, Stephenson,
1 Lacy, Keenan, and 
Koontz, JJ., and Poff, Senior Justice 
 
ORCHARD GLEN EAST, INC. 
 
OPINION BY JUSTICE LAWRENCE L. KOONTZ, JR. 
v.  Record No. 961603                September 12, 1997 
 
BOARD OF SUPERVISORS OF 
PRINCE WILLIAM COUNTY 
 
 
FROM THE CIRCUIT COURT OF PRINCE WILLIAM COUNTY 
 
LeRoy F. Millette, Jr., Judge 
 
 
In this appeal, we consider whether a condominium  
development, in which no individual units were sold or offered 
for sale by the developer, was properly assessed for real estate 
taxes based on the value of the individual units as separate 
parcels, rather than on the value of the development as a single 
parcel actually used as an apartment complex. 
 
The essential facts are not in dispute.  Orchard Glen East, 
Inc. (Orchard Glen) planned, designed, and constructed the 
development in question on its property in Prince William County 
(the County).  Orchard Glen recorded the appropriate condominium 
declaration, or condominium instruments, in the land records of 
the County, subjecting the development to the provisions of the 
Condominium Act, Code §§ 55-79.39 through -79.103.  Thereafter, 
beginning in 1988, it constructed 243 individual condominium 
units in a three-phase project. 
 
As a result of an ongoing evaluation of the local housing 
market during an early stage of the construction, Orchard Glen 
                     
     
1Justice Stephenson participated in the hearing and decision 
of this case prior to the effective date of his retirement on 
July 1, 1997. 
 
  
decided to lease the individual units as apartments rather than 
to market them as condominium units.  Consequently, as each phase 
of construction was completed, the units in that phase were 
leased as apartments.  Orchard Glen has never sold or offered for 
sale as a condominium any of the individual units within its 
development even though, at all times relevant to the tax 
assessments at issue, it could have done so pursuant to the 
recorded declaration. 
 
On December 28, 1994, Orchard Glen filed an application in 
the trial court, as authorized by Code § 58.1-3984, to correct 
alleged erroneous tax assessments by the County on the project 
for the years 1991, 1992, 1993, and 1994.  Orchard Glen asserted 
that overassessments ranging from 2.8 to 6.8 million dollars had 
been made for those years.  On May 4, 1995, Orchard Glen filed an 
application to reduce the assessment for 1995 by 5.7 million 
dollars.  In each instance, Orchard Glen asserted that the 
assessments were erroneous because, rather than being made on its 
property as a single apartment complex, the assessments were made 
on the individual units as separate parcels.  The trial court 
consolidated the two cases for trial.
2
 
Ruling on pre-trial motions, the trial court granted partial 
                     
     
2Prior to filing these applications, Orchard Glen had 
applied to the Prince William County Board of Equalization to 
have its property assessed for each of the years in question as a 
unitary apartment complex.  The Board rejected Orchard Glen's 
request but reduced the County's assessment of all or some of the 
individual units for each of the years in question.  The trial 
court ultimately vacated these reductions and adopted the fair 
market value assessments originally set by the County.  The 
action of the trial court vacating the reductions granted by the 
Board is not an issue in this appeal. 
summary judgment for the County, finding that Code § 55-79.42 
permitted a taxing authority "to assess a condominium project as 
individual condominium units even if no individual unit has been 
sold," and further finding that Code § 58.1-3202, requiring local 
taxing authorities to assess multi-unit real estate leased to 
residential tenants without regard to the property's potential 
value as a condominium, had no application to a property already 
subject to condominium instruments. 
 
At the subsequent evidentiary hearing, the principal 
evidence presented by the parties consisted of expert testimony 
concerning the method of assessing the property to determine its 
fair market value for tax purposes.  Orchard Glen's position was 
that the property should be assessed as an apartment complex and 
in comparison to other properties being similarly used because 
this was its highest and best use under market conditions.  The 
County maintained that, so long as the condominium declaration 
remained in force, the highest and best use of the property was 
as a condominium and, thus, the individual units were to be 
assessed according to their value as separate parcels of real 
estate.
3
 
The trial court entered judgment for the County, finding 
that the assessment of the property as a unitary apartment 
complex "would result in the property being assessed at its 'use 
                     
     
3At trial and on appeal the County has conceded that Orchard 
Glen merely had to terminate the condominium instruments in order 
for the project to be appraised as a unitary apartment complex.  
Code § 55-79.72:1(A).  The parties agree that since the trial of 
this case this has been done, and the project is now assessed as 
a single parcel. 
value' which, in this case, is different and less than the 
property's 'fair market value'" as individual condominium units, 
for which the trial court found that there was an active market 
in the County.  The trial court further found that the parties 
had stipulated to the presumption of correctness in the County's 
assessment of the individual units and that Orchard Glen "failed 
to produce sufficient evidence that the County's original 
assessments . . . were the result of manifest error."  We awarded 
Orchard Glen this appeal. 
 
DISCUSSION
 
We begin our analysis of the issues presented in this appeal 
with a focus on the primary assertion of Orchard Glen.  The 
essence of that assertion is that during the tax years in 
question its project was an apartment complex and not a 
condominium and, thus, its project was erroneously taxed as a 
condominium. 
 
Although Orchard Glen had recorded the appropriate 
condominium instruments, it asserts that because it leased rather 
than sold the individual condominium units it had not created 
"statutorily complete" condominium units in its project.  In 
support of this assertion, Orchard Glen relies upon the statutory 
definition of condominium found in Code § 55-79.41 which provides 
that: 
 
"[c]ondominium" means real property . . . lawfully 
submitted to this chapter by the recordation of 
condominium instruments . . . .  No project shall be 
deemed a condominium within the meaning of this chapter 
unless the undivided interests in the common elements 
are vested in the unit owners. 
 
(Emphasis added). 
 
Orchard Glen contends that the emphasized language in this 
statutory definition means that no condominium exists until at 
least one individual unit is sold.  This is so, it reasons, 
because, under common law principles, it cannot be a tenant in 
common with itself in the common elements of the project.  Thus, 
Orchard Glen concludes that, as the owner of all the individual 
units which it leased to individual tenants, it owned an 
apartment complex and not a condominium complex.  We disagree. 
 
As estates in land, condominiums are creatures of statute 
wholly unknown at common law, see Cooper v. Kolberg, 247 Va. 341, 
348, 442 S.E.2d 639, 643 (1994), and the creation of a 
condominium is controlled by the Condominium Act.  Code 
§ 55-79.45 specifically addresses the creation of a condominium 
and provides that "[n]o condominium shall come into existence 
except by the recordation of condominium instruments pursuant to 
the provisions of this chapter."  Code § 55-79.72:1(A) provides 
that "[i]f there is no unit owner other than the declarant, the 
declarant may unilaterally terminate the condominium."  We have 
previously held that the rights and liabilities afforded to a 
condominium under the Condominium Act accrue at the time the 
master deed, now the condominium instruments, is recorded.  See 
United Masonry, Inc. v. Jefferson Mews, Inc., 218 Va. 360, 377, 
237 S.E.2d 171, 182 (1977).  Accordingly, we hold that a 
condominium is created upon the recordation of the appropriate 
condominium instruments and is not dependent upon the subsequent 
sale of one of the individual condominium units within the 
condominium project.  For these reasons, we reject Orchard Glen's 
assertion that its project was an apartment complex and not a 
condominium complex for purposes of the issues presented in this 
appeal. 
 
For similar reasons, we reject Orchard Glen's contention 
that Code § 55-79.42 requires a taxing authority to treat a 
condominium in which no units have been transferred as a single 
parcel.  Orchard Glen relies on language in that statute which 
directs that the unit of "any unit owner other than the declarant 
. . . shall be separately assessed and taxed."  Id.  However, 
nothing in Code § 55-79.42 prohibits the taxing authority from 
treating as separate parcels of real estate any completed units 
still in the possession of the declarant.  To the contrary, the 
statute expressly states that once a unit is completed, it 
"constitutes for all purposes a separate parcel of real estate." 
 Id. (emphasis added.)   
 
Read in its full context, Code § 55-79.42 permits the taxing 
authority to assess individually each completed unit in a 
condominium project without regard to ownership, and to include 
in that assessment a proportional share of the assessment of 
common areas of the project which are not subject to withdrawal 
or conversion by the declarant.  Common areas which remain 
subject to withdrawal or conversion by the declarant are to be 
assessed separately as the sole property of the declarant.  
Orchard Glen's project was fully developed, with no common areas 
subject to withdrawal or conversion.  Accordingly, each unit was 
subject to assessment as an individual parcel. 
 
We also find no merit in Orchard Glen's assertion that Code 
§ 58.1-3202 bars the County from assessing its property as a 
condominium rather than as a unitary apartment complex. 
Code § 58.1-3202, in pertinent part, reads: 
 
 . . . the fair market value of multi-unit real estate 
leased primarily to residential tenants shall be 
determined without regard to its potential for 
conversion to condominium or cooperative ownership.  A 
sale of apartment property shall not be presumed to be 
for such conversion unless overt action which is a 
prerequisite to conversion by the buyer has been taken 
within three months from the recordation of the deed. 
 
The express language of the statute demonstrates that it applies 
to property which has not been made the subject of recorded 
condominium instruments.  Accordingly, the trial court correctly 
 determined that this statute had no application to Orchard 
Glen's property because at all times relevant to the assessments 
that property was a condominium and no "conversion to 
condominium" was involved. 
 
We next consider Orchard Glen's contention that the amount 
of the assessments of the property was disproportionate to that 
of other properties in the County which were assessed as unitary 
apartment complexes.  Orchard Glen contends that since its 
property was also being used as a unitary apartment complex, the 
assessment of the property as a condominium complex violated the 
constitutionally mandated requirement of uniformity in tax 
assessments.  See Va. Const. art. X, §§ 1 & 2.  We disagree. 
 
"The constitutional mandate requires uniformity in the 
assessment of 'properties having like characteristics and 
qualities, located in the same area.'"   Lee Gardens Arlington 
Limited Partnership v. Arlington County Board, 250 Va. 534, 538, 
463 S.E.2d 646, 648 (1995)(quoting Smith v. City of Covington, 
205 Va. 104, 108, 135 S.E.2d 220, 223 (1964)).  Article X, § 1 
expressly provides that "[a]ll taxes shall be levied and 
collected under general laws and shall be uniform upon the same 
class of subjects within the territorial limits of the authority 
levying the tax."  (Emphasis added.)   
 
The class within which Orchard Glen's property fell during 
the assessments at issue was that of property subject to recorded 
condominium instruments in which the individual units were 
capable of being offered for immediate sale at the owner's 
option.  The properties to which Orchard Glen would have the 
County compare its assessment for uniformity purposes were not 
subject to condominium instruments and, thus, were not capable of 
being sold as individual units.  Accordingly, these properties 
were not of "like characteristics and qualities" to Orchard 
Glen's property, and they do not present an appropriate 
comparison for determining the uniformity of the County's 
assessment of the property in question. 
 
Finally, we consider whether the trial court correctly 
determined that Orchard Glen failed to carry its burden of 
rebutting the presumption of correctness afforded to the County's 
assessment.  As noted above, Orchard Glen does not dispute this 
standard, and at trial relied primarily on its assertions that 
its project was not a condominium complex or that, even if it 
was, market conditions dictated that its highest and best use was 
as an apartment complex.  The County's position, supported by the 
testimony of its expert witnesses, showed that a market existed 
for condominiums and that the fair market value of the project if 
marketed as a condominium complex exceeded the fair market value 
of the project used as an apartment complex.  The trial court 
considered this evidence and determined that Orchard Glen had not 
met its burden.  We agree. 
 
Although there was a conflict in the expert evidence, that 
conflict alone was insufficient to overcome the presumption 
favoring the County.  "Courts should be reluctant, within 
reasonable bounds, to change assessors' judgments because courts 
are not duly constituted tax authorities."  Board of Supervisors 
of Fairfax County v. Telecommunications Industries, Inc., 246 Va. 
472, 476, 436 S.E.2d 442, 444 (1993).  Here, there was sufficient 
evidence supporting the County's original assessment of the 
project's fair market value at its highest and best use as a 
condominium complex.  The evidence presented by Orchard Glen 
placed the issue, at best, in equipoise, and, thus, was 
insufficient to overcome the presumption in favor of the taxing 
authority's judgment.  See id. at 475, 436 S.E.2d at 444; Board 
of Supervisors of Fairfax County v. Donatelli & Klein, 228 Va. 
620, 627, 325 S.E.2d 342, 345 (1985). 
 
For these reasons, we will affirm the judgment of the 
circuit court. 
 
Affirmed.