Source: https://www.bewleylaw.com/noteworthy-2018-property-tax-cases/
Timestamp: 2019-04-20 06:22:00+00:00

Document:
Property tax cases decided last year include Land Partners, LLC v. County of Orange (2018) 19 Cal.App. 5th 741, which provides insight for taxpayers seeking to obtain an award of attorney fees against the County Assessor in a refund action; Durante v. County of Santa Clara (2018) 29 Cal.App.5th 839, which reaffirmed that the transfer of a life estate is a reassessable change in ownership, and serves as a reminder to raise all issues at the assessment appeal hearing so they will not be barred on appeal; Glovis America, Inc. v. County of Ventura (2018) 28 Cal.App. 5th 62, a possessory interest case, where the Court allowed the assessor to use lease options as part of the anticipated term of possession; and Next Century Associates, LLC v. County of Los Angeles (2018) 29 Cal.App.5th 713, which was a case in which the Court of Appeal disapproved of cryptic Assessment Appeals Board findings of fact which valued the property at the roll value although the assessor had abandoned that value in favor of a value at least $18 million lower.
1. Land Partners, LLC v. County of Orange (2018) 19 Cal.App. 5th 741. Land Partners, LLC and Los Alisos Ranch Company (collectively Land Partners) owned a 68 acre parcel of land improved with a mobilehome park in the City of Westminster. Following a change in ownership, the assessor reassessed the value of the property at a new value of $60,010,000. The assessor’s valuation was sustained on appeal. Land Partner’s claim for refund alleged that the assessor overvalued the property by at least $22 million; the erroneous valuation was caused by the incorrect application of the income approach, which was an appropriate valuation method. In addition to the refund, the complaint also sought attorney fees based on the erroneous assessment.
Lack of evidentiary support for repair costs.
The case makes it clear that assessor must act in the belief that a particular provision is unconstitutional; not simply make a mistake in applying the law.
2. Durante v. County of Santa Clara (2018) 29 Cal.App.5th 839. Plaintiff and her sister inherited a home in San Jose when their mother died in 2003, taking title as tenants in common, each with a 50% interest in the property. Only plaintiff lived in the home. In 2009, plaintiff’s sister granted her a life estate in her 50% interest. As a result, plaintiff had sole ownership rights in the property for the rest of her life, with her sister regaining a 50% interest on plaintiff’s death.
Based on the 2009 deed, the County reassessed the property because of the life estate which had been conveyed to plaintiff, resulting in a significantly higher property tax bill. Plaintiff appealed the reassessment on the ground that the creation of a life estate did not effect a change in ownership; however, following a hearing, the reassessment was upheld. Plaintiff filed suit for refund. The trial court found that the 2009 deed granting plaintiff a life estate constituted a reassessable change in ownership.
The Court of Appeal found no error. The evidence was that a life estate, which is an interest substantially equivalent to the fee interest, changed hands when it was transferred to plaintiff from her sister. The interest was subject to reassessment.
Plaintiff also argued that the property was improperly valued. The Court found this issue to be outside of the scope of the case, presumably because the issue had not been raised in the assessment appeal hearing. The Court concluded it could only determine whether the trial court correctly decided whether reassessment was allowed by law; no opinion was expressed on valuation.
The outcome of the case was certain. Perhaps the lesson of the case is to make sure to raise all grounds for appeal, i.e. reassessment and valuation, at the assessment appeal hearing; otherwise reviewing courts have no basis to consider those arguments.
3. Glovis America, Inc. v. County of Ventura (2018) 28 Cal.App. 5th 62. This is a possessory interest case. In 2007 Glovis leased land from the Navy to provide vehicle inspection and processing services at Port Hueneme. In 2013 Glovis and the Navy signed a five-year lease, exempt from federal contract terms, which provided for a term beginning September 16, 2013 and ending September 15, 2018, with two five-year options at the request of the Lessee and approval of the Government. The lease contained a “release rate” provision such that 180 days prior to the end of a term an appraisal can be prepared to determine market value; as well as a provision permitting Glovis to perform long-term maintenance in lieu of paying rent. Ventura County issued a tax bill for 2014-15 and a supplemental tax bill for 2013-14, using 15 years (not 5 years) as the reasonably anticipated term of possession.
Glovis appealed arguing it did not have an extension option because (1) it lacked a unilateral right to extend the lease term; (2) the contract was subject to competitive bidding every five years; and (3) previous leases did not include options. It also argued that it could not be determined whether the lease options would even be exercised. The evidence showed this was Glovis’ fifth lease with the Navy and all prior leases were renewed; prior leases were subject to competitive bidding, though this one was not; and this was the first lease to include an option to extend the lease term. The Assessment Appeals Board sustained the assessment and Glovis challenged the Board’s determinations in the trial court. The court granted County’s motion for judgment on the pleadings with leave to amend. Days later Glovis amended its complaint, and included an amended agreement with the Navy which revised the term of possession to exclude the two five-year options. The trial court refused to consider the amended lease with the Navy and sustained the County’s demurrer to the amended complaint without leave to amend.
The Court also concluded that it was not unreasonable to assume that the option would be exercised. The long history of possession supported the assessor’s years long valuation. The fact that the Navy could terminate at any time, only affects value; not taxability.
4. Next Century Associates, LLC v. County of Los Angeles (2018) 29 Cal.App.5th 713. Next Century Associates, LLC purchased the Century Plaza Hotel and the real property on which it is located, in mid-2008, for $366.5 million. On January 1, 2009, the assessor enrolled $367,612,305 as the value of the property. Next Century asserted that the “global economic meltdown” of late 2008 caused the property’s market value to drop significantly between the date of purchase and January 1, 2009, and applied for a reduction in the property’s assessed value.
The assessor did not try to support the enrolled value at the hearing. Its DCF analysis produced a valuation of $349,800,000, about 17.8 million below the enrolled value. The Board rejected the assessor’s DCF analysis because it contained an error; it overstated the hotel’s 2006 NOI.
Next Century filed a suit for refund. After a review of the administrative record and remanding for clarification, the superior court entered judgment in favor of the County.
On appeal, Next Century alleges that the Board was required to either accept Next Century’s proposed assessed value, calculate its own assessed value, or direct the Assessor to recalculate the assessed value.
“Although the Assessor’s analysis contained an error, if the error were corrected, it would not increase the Assessor’s valuation conclusion (per the Assessor) and might (per Next Century) result in a value consistent with that advocated by Next Century. In other words, if anything, the error made the Assessor’s proposed valuation too high.
Here, the Board stated that Next Century’s “income growth rates” do not justify the decline in value it sought, nor do they “justify a 29% decline in the subject property’s NOI from year 2008 to year 2013.” But the Board did not indicate (1) how it reached these conclusions or (2) what value it believes the income growth rates do support and why.
In any event, no party put forth evidence that the existing roll value remained valid. On the contrary, the parties agreed it was too high. Thus, there was no substantial evidence supporting the continued validity of that valuation and any presumption in favor of the existing roll value was rebutted.
This is powerful language to remind Assessment Appeals Board’s of the importance of their responsibility in finding value and thoroughly explaining their analysis and rationale behind the decisions they make in their findings of fact.

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