Source: https://www.aptcnet.com/property-tax-resources/national-property-tax-updates/ohio-property-tax-updates
Timestamp: 2019-04-20 08:11:50+00:00

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In a recent decision, the Ohio Board of Tax Appeals (BTA) found a 135,000 square foot, big box retail property, owner occupied by Lowe’s and 16 years old as of the valuation date to be a special purpose property, allowing the tax valuation to represent value-in-use instead of the typically mandated value-in-exchange. Lowe’s Home Centers, LLC v. Cuyahoga Cty. Bd. of Revision (Feb. 16, 2019), BTA No. 2017-39.
Ohio case law recognizes an exception to the requirement of valuation-in-exchange for real property tax purposes for “special purpose” properties which have a limited market because of unique characteristics limiting their functional utility to the uses for which they were originally built.[i] For these properties, the tax valuation can be based on the value of its present use to its current user.
The BTA has mistakenly extended this exception to a big box retail property by adopting the school district appraiser’s report, valuing the property at almost $90 per square foot, an increase from the original assessment of $70 per square foot.
Defined the property’s highest and best use to be “for continued use by current occupant for its ongoing business.” The BTA bases its finding that the special purpose exception applies largely on this determination.
Relied on lease renewals that were almost exclusively renewals with no exposure to market.
Relied on leased fee comparable sales without appropriate property rights adjustments.
Concentrated on Lowe’s continued occupancy of the property since its construction.
As the definitions used by the BTA itself demonstrate, whether a comparable is “first” or “second” generation cannot be the end of the inquiry. Neither is a description of whether it reflects market conditions. Whether the lease of the property is to its first user or to a subsequent user, whether the property sells occupied by that first user, or a subsequent user; neither is a measure of market conditions. The important consideration is whether or not that lease or sale had sufficient market exposure to be considered a market transaction. In light of this decision, it is even more imperative to properly define the highest and best use, and to use appropriate market data to measure the value-in-exchange that is required by Ohio real property taxation law.
[i] Appraisal Institute, The Appraisal of Real Estate 28 (13th Ed.2008).
[ii] Lowe’s Home Centers, Inc. v. Washington Cty. Bd. of Revision, 154 Ohio St.3d 463, 2018-Ohio-1974.
The Supreme Court of Ohio (SCO) affirmed in its recent Westerville  and GC Net Lease  cases that all evidence relevant to the value of a property’s unencumbered fee simple estate must be considered for real estate tax purposes, even when there has been a recent sale.
Real property in Ohio must be valued in the fee simple estate, as if unencumbered, according to Revised Code 5713.03. Properly following this methodology permits the uniform valuation of real estate across the spectrum of property types while including consideration of non-market leases, credit-worthy tenants and other non-sale-price evidence.
The SCO applied this methodology when it found a recent, arm’s-length sale no longer conclusively determines a property’s value as it did under prior law in landmark case Terraza. It followed to find appraisal evidence must be considered when such evidence is relevant to the value of the unencumbered fee-simple estate in Bronx Park.
In Westerville, a city school board sought to increase the value of a single tenant office building based on a sale, submitting the relevant deed and conveyance fee statement. The taxpayer defended against the increase by offering an appraisal and related testimony. In addition to providing his own conclusion of value, the appraiser testified the sale was part of a larger bulk sale and the sale price was an allocation.
The relevant Board of Revision adopted the sale price as value. On appeal, the BTA also adopted the sale price while applying caselaw created prior to the controlling and most recent version of 5713.03; caselaw that emphasized the use of a sale price to determine value.
Finding error in the BTA’s decision, the Supreme Court vacated and remanded. In its decision, the BTA stated the only way to rebut a sale was with respect to its voluntariness, recency, or if a relationship between the parties was demonstrated, which the SCO found was incorrect. The BTA relied on caselaw that claimed it would never be proper to adjust a recent arm’s-length sale because of an encumbrance, which the Court found was improper. Finally, the SCO in Westerville found that sale price evidence remains the best evidence of value, but not the only evidence of value. The Court held that appraisal evidence is admissible and competent evidence of value alongside a sale price and that the fact-finder has a duty to consider whether the appraisal constitutes a more accurate valuation of the property than the sale price.
Once again applying decisions in Terraza and Bronx Park, the Court reached the same conclusion in GC Net Lease. The primary difference between the underlying BTA decisions was that here, the Board claimed to have considered the lease but found any adjustment improper because the evidence suggested the lease rate was commensurate with market rents. The SCO found this claim to be insufficient consideration of the evidence and that the amount of rent charged under a lease must be considered in the context of at least two other factors: the creditworthiness of the tenant and whether the lease at issue is a net lease.
Ohio counties are currently in the process of certifying property values and will begin mailing out property tax bills for tax year 2018 (pay 2019) soon. The window to formally challenge these values is open from January 2 through March 31, 2019. Early analysis by a professional familiar with local assessors, opposing counsel, and relevant assessment law will optimize your chances of obtaining appropriate relief.
Supreme Court of Ohio addresses the valuation of retail property lacking its own parking lot but permitted use of an adjacent lot by way of an easement in recent Worthington case.
Ohio Revised Code 5713.03 mandates that real property be valued in the fee simple estate, as if unencumbered. This methodology permits uniform valuation of any property type and circumstance and resolves questions related to the treatment of above and below market leases, credit-worthy tenants, and the effects of easements, among others.
In Worthington, a taxpayer, Kroger, filed a complaint to decrease its property’s value (parcel of land improved with a supermarket) and had an appraisal performed in support. Because the land was unusually small compared to similar retail properties, the Kroger owned parcel did not have its own parking lot. However, patrons were permitted to park on an adjacent property through an easement.
The taxpayer appraiser valued the property by using both the sales-comparison approach to value and the income-capitalization approach. Upon reaching values under each approach, he found it necessary to make an adjustment to account for the parcel size. While the subject occupied 1.699 acres, Kroger’s appraiser determined the average size of comparable properties was 5.801 acres. He then multiplied the land value per acre from his analysis by the 4.102-acre difference between the subject and the average comparable size and deducted this amount from his conclusions to adjust for the unusually small size of the subject property.
The relevant board of revision relied on the taxpayer appraiser’s conclusions and adopted his value. The Board of Tax Appeals likewise found the appraisal reliable but rejected the adjustment for the parking lot acreage because it found it both an improper removal of the benefit of the easement and a blanket deduction for a cost to cure.
The Supreme Court held the Board of Tax Appeals decision to be in error and found the appraiser’s adjustments to be the best method of valuing the property appropriately, in the fee simple estate. The Court ruled the deduction to account for the acreage of the subject was completely consistent with R.C. 5713.03 and was a discount related not to the value of access to parking but rather to the extraordinarily small lot size of the parcel in comparison to like properties. The appraiser valuation of only the property owned by the Taxpayer, while ignoring any effects of encumbrances, was found to be appropriate.
Ohio counties will begin mailing out property tax bills for tax year 2018 (pay 2019) soon. The window to formally challenge these values is open from January 2 through March 31, 2019. Early analysis by a professional familiar with local assessors, opposing counsel, and relevant assessment law will optimize your chances of obtaining appropriate relief.
Important Ohio Supreme Court Property Tax decision announced recently in Bronx Park III Lancaster case argued by Victor Anselmo of APTC member firm Siegel Jennings on behalf of Walgreens. The Supreme Court made it clear that the Ohio Board of Tax Appeals and Ohio courts cannot simply rely upon a sale price to set value for a property tax assessment. Ohio courts and tax tribunals must consider any evidence the parties present relevant to the value of the unencumbered fee simple estate, including evidence of above market lease rates, above market credit worthy tenants, and a longer remaining lease period.
 Bronx Park S. III Lancaster, LLC v. Fairfield Cty. Bd. of Revision, Slip Opinion No. 2018-Ohio-1589.
Cuyahoga, Lake, Lorain, and Lucas counties, among others, will be conducting their sexennial reappraisal of real property assessments for tax year 2018 (payable 2019). Many of these counties will have an informal review period, prior to certifying the values for the tax bills, where taxpayers can provide input. Taxpayers should be on the lookout for proposed value notices in August – September. Participating in an informal review should be made on case by case basis, and the window for the informal review process is typically short. Early analysis with a professional familiar with local assessors, opposing counsel, and procedures will optimize your chances of obtaining appropriate relief.
The Supreme Court of Ohio reversed two Franklin County Board of Revision (BOR) decisions in March, finding the evidence accepted by the Board for each to be lacking. In both cases, the Court found the evidence to be so deficient that it amounted to a legal error to rely on it.
In the first case, South-Western City Schools Bd. of Edn. v. Franklin Cty. Bd. of Revision, a taxpayer offered the testimony of an appraiser at the BOR in support of its requested reduction. Evidence of a sheriff sale and appraisal created for the sheriff’s sale with a valuation date six months from tax lien date were also in the record. The BOR adopted the sheriff’s sale appraisal value. On appeal from the BOR to the Ohio Board of Tax Appeals (BTA), the BTA found the evidence insufficient to determine value but enough to show the original value was incorrect. It sent the case back to the BOR to make a finding of value based on competent evidence.
Similarly, in South-Western City Schools Bd. of Edn. v. Franklin Cty. Bd. of Revision, the Supreme Court found the evidence offered to be so inadequate that relying on it was legal error. Here, the deficient evidence offered by the taxpayer at the BOR was a printout containing information about one comparable sale marked with the notation “not arm’s length.” It was the only evidence submitted. No appraiser appeared, and no appraisal was submitted. In this case, the BTA felt there was sufficient evidence to show that the original value was too high, and that reduction granted by the BOR reduction was supported by the record.
Under Ohio case law (Bedford rule), once a BOR has granted an owner’s requested reduction based on competent and “minimally plausible” evidence, an opposing party who appeals must prove the value they are seeking rather than relying on the reinstatement of the auditor’s original value. However, this rule does not apply if the evidence relied upon by the BOR was deficient to the extent found in these two cases. Relying on such incompetent evidence in each case resulted in legal error.
The Supreme Court reversed the BTA decisions in both cases. It was legal error for the BOR to rely on deficient evidence and further error for the BTA to find such evidence met the threshold of minimal competence that would require application of the Bedford rule.
In a case brought to the Ohio Supreme Court by Siegel Jennings on behalf a local business owner and property owner, the Court reaffirmed that sale prices used to set real property tax assessments should not include the value of non-real estate assets (Orange City School District Bd. of Edn. v. Cuyahoga Cty. Bd. of Revision, Slip Opinion No. 2017-Ohio-8817). The case involved a retail property that was purchased by the tenant exercising its lease’s option to purchase. The local school district filed an increase complaint based on a recorded sale price of $951,776. This amount was labeled the "purchase price" in the written purchase agreement, however $51,776 of that amount was payment for past due rent including past rent concessions owed by the tenant. The Ohio Supreme Court rejected the school district's argument that parol evidence rule of contract interpretation prohibited considering evidence to allocate the portion of the price paid for non-real estate items. Instead, the Court affirmed that the amount to be taxed is real property alone, a concept that Siegel Jennings has long been advocating: "The 'sale price' for tax-valuation purposes is the amount paid for property-title transfer -- not amounts paid for other assets."
Ohio's 2017 tax year property tax valuation review period has begun. The deadline to contest your 2017 tax assessment is March 31, 2018. Early analysis with a professional familiar with local assessors, opposing counsel, and procedures will optimize your chances of obtaining appropriate relief.
Single Tenant Net Lease occupants have been under fire in Ohio. Boards of Education that have routinely sought to increase the taxes on net lease tenants are now trying to deny tenants the ability to be involved in the proceedings. Schools have been raising the issue as a means of a threat in negotiations and have been attempting to gather facts to pursue a case that would deny tenants the ability to participate in tax hearings, even when such claims are meritless.
This issue recently was brought forward in a case now pending at the Ohio Supreme Court, where a multitenant shopping center was at issue. Kohl’s department store was the tenant on one of parcels and responsible for all the real estate taxes for that parcel. The Ohio Board of Tax Appeals held that Kohl’s was not a proper complainant under Ohio Revised Code Section 5715.19 and therefore lacked standing and dismissed them as a party. Beavercreek Towne Station LLC v. Greene Cty. Bd. of Revision, BTA No. 2015-1488, et al., 2016 Ohio Tax LEXIS 2222 (Oct. 25, 2016).
R.C. 5715.19 determines which individuals are permitted to file. In addition to the property owner, this includes people like an owner’s spouse, or other various people acting for the owner, such as a person who holds a designation from a professional assessment organization, a licensed real estate broker; or a trustee of the trust.
Not included on this list are tenants, even when the tenant is solely responsible for paying the real estate taxes. A tenant can act as an agent in the owner’s name, as any agent can, but a tenant does not have standing to contest the tax assessment in her own name, unless the tenant also owns other taxable real property in the same county. This can lead to inequitable results when a tenant responsible for all the real estate taxes assessed on a property tries to file a decrease in its own right and gets dismissed, leaving the taxpayer with no recourse to contest an unfair assessment.
In an effort to correct this inequity, Siegel Jennings has been working on a legislative amendment currently in the Ohio Senate to correct this result. The amendment would allow a tenant to file a complaint where the tenant is responsible for paying the full amount of taxes charged against the property. That would allow tenants who are bearing 100% of the taxes an avenue to context those taxes when they are based on an inaccurate assessment. It would also reduce instances where tenants who are responsible to bear the entire amount of taxes are left with no way to redress an unfair based on a technical issue instead of on the merits of their case.
The taxpayer sought a decrease in the value of 14 of 16 office condominiums, all which were unfinished shell space. Its appraiser valued the unsold units as single economic unit, noting that the relevant absorption rate indicated a marketing period of over ten years. The appraiser concluded the highest and best use, as improved, was a multi-tenant, office property for rent until the remaining units could be sold. The Ohio Supreme Court held that the appraisal of the unsold units as a single economic unit violated the statutory provision that requires each unit of a condominium property to be a separate parcel for “all purposes of taxation and assessment of real property.” ORC 5311.11. Olentangy Local Schools Bd. of Ed. v. Delaware Cty. Bd. of Revision, Slip Opinion No. 2016-Ohio-8332.
Similarly, the taxpayer sought a decrease in the value of 16 of 20 residential condominium units that were operated as an apartment complex. Its appraiser valued the unsold units as a single economic unit, testifying that the economic crisis had “fractured” or “stalled” the subject condo development. The appraiser found the highest and best use to be as a “market-rate multi-family” property. Again, the Court held this approach violated the statutory requirements of ORC 5311.11, even though the taxpayer argued that the properties being parceled as condominiums did not mean that condominium use was the highest and best use of the property. The Court held that valuing the condo units as a single economic unit created an assemblage of parcels for valuation purposes and that such an assemblage was prohibited by the language of the statute. Columbus City Schools Bd. of Ed. v. Franklin Cty. Bd. of Revision, Slip Opinion No. 2016-Ohio-8375.
In both cases, the Court relied on is prior decision in Dublin City Schools Bd of Edn. v. Franklin Cty. Bd. of Revision, 139 Ohio St.3d 212, 2014-Ohio-1940, where it held that a “bulk-appraisal” valuation of 21 of 28 units in a condominium complex treating the 21 units as a single economic unit, was improper and ran afoul of the language of ORC 5311.11.
In both cases, the taxpayers had prevailed before the county boards of revision, the first level of review.
HB 231, introduced in May 2015, has been referred to the House Local Government committee. This bill would amend Ohio Revised Code 5715.19(A) to require counties, municipal corporations, townships, and school boards that file complaints to change the real estate tax assessment of property they do not own to pass a resolution approving the complaint and specifying the compensation paid to any person retained to represent the county, municipal corporation, township, or school board in the matter of the complaint.
SB 235 has passed both the House and Senate. It would exempt from property tax the increased value of property on which industrial or commercial development is planned until construction of new commercial or industrial facilities at the property commences.
Ohio taxpayers should have received or will receive shortly their first half 2016 tax bills. Review these bills to determine if assessments are excessive. The deadline to contest these assessments is March 31, 2017. Once this deadline has passed, the ability to appeal the 2016 valuation is gone. Assessments for properties located in counties that have undergone a reappraisal or statistical update for tax year 2017 should be examined particularly carefully because these values will be the basis of your property taxes for the next three years.
The fact that an appraiser opines to a value different than the sale price is not sufficient to overcome the presumption of a sale price; there must be specific evidence rebutting the indicia that are generally present in a recent, arm’s length transaction.
Columbus City Schools Bd. of Edn. v. Franklin Cty. Bd. of Revision, Slip Opinion No. 2016-Ohio-757.
Rite Aid of Ohio, Inc. v. Wash. County Bd. of Revision, 2016-Ohio-371 (Ohio Feb. 4, 2016), the Ohio Supreme Court found that it was improper for an appraiser to engage in a use valuation of a Rite-Aid drug store because the special-purpose doctrine did not apply. The special-purpose doctrine is an exception to the general rule in Ohio property tax valuation of determining the value-in-exchange rather than value of the current use.
On appeal to the Ohio Supreme Court, the county argued that prior case law required that the Rite-Aid be valued in use as it presented a “special purpose” situation. The county presented an appraisal that valued the property on tax lien date as a Rite-Aid drugstore and posited a valuation in terms of continued use as a Rite Aid even after a sale, presumably with Rite-Aid continuing as lessee under a long term-lease. In her appraisal, the county’s appraiser selected five sale comparables, all of them drugstores. In contrast, Rite Aid submitted a competing appraisal, which contained six sale comparables—general retail rather than drugstores—valuing the property for its “highest and best use” as a general retail store.
The Court illustrated the difference in valuing a property for its “highest and best” use versus a “special-purpose” use situation. The Court stated that the highest and best use of the improvements to the land will usually be expressed in terms of the general type of use to be made of such property. For instance, a retail store might be the highest and best use, and if currently in that use, an appraisal report might say: "continued use as a retail store." By contrast, in the special-purpose situation, one would expect to see: "continued use by the current occupant in its ongoing business."
The Court contrasted the subject Rite Aid to a prior property, owned by Meijer Stores where the Court had applied the special purpose doctrine. With the Meijer Stores facility (a 190,000-square-foot store plus other improvements), the purchasers in the real-estate market might not be able to use the massive facility just recently built by Meijer to its own particular specifications. Additionally, the building suffered immediate economic or external obsolescence. By comparison, the Court found that the older, 11,000-square foot Rite Aid drugstore did not meet similar characteristics as the property in the Meijer case and therefore did not qualify for use valuation under the special-purpose doctrine.
Because there was no evidentiary basis upon which to apply the special-purpose doctrine and engage in use valuation, the Ohio Supreme Court affirmed the decision below, which adopted the Taxpayer’s appraisal value based on the value-in-exchange.
Ohio is one of the few places where the local school district can initiate an action to increase your real estate taxes by increasing the property tax assessment. Usually, the school district will be prompted by a recent sale price that is higher than the current tax assessment; however, there is no requirement that a recent sale be the basis. A school district can file an increase complaint simply because it feels a property is under assessed. The deadline to file increase complaints is March 31, 2016. Property owners will get notice by the end of April if a complaint has been filed against one of their properties. Where appropriate, the taxpayer may file a counter-complaint. The deadline to file a counter-complaint is 30 days from notice of the original complaint, so it is important to respond to such notices promptly. In all increase cases, but especially where there has been a recent sale, formulating a defense strategy early will maximize the chances of curtailing any property tax increase. If taxpayers do not introduce certain evidence at the first county level hearing, they may not be allowed to introduce it later in the proceedings.
Publicly owned golf courses operated by private, for profit managers may still be eligible for property tax exemption in Ohio.
The Ohio Supreme Court recently affirmed the grant of a real estate tax exemption for city owned golf courses operated by a private, for-profit manager. City of Cincinnati v. Testa, Slip Opinion No. 015-Ohio-1775. The Court analyzed the exemption under Ohio Revised Code Section 5709.08, which allows exemptions for public property used exclusively for a public purpose.
The city owned courses were managed by a private operator who was paid a flat management fee. All operating revenues and proceeds including green fees and cart rental fees were received by the city. A percentage of proceeds from the sale of food, beverages, merchandise, and golf lessons went to the management company.
Because the City of Cincinnati retained direction and control over the golf courses, the Court held that the situation was not the functional equivalent of a lease, where a private company leases and occupies publicly owned property and profits from it. Instead, the management company was paid a flat management fee and there was no right of exclusive possession granted to the management company. The City set the golf courses' hours, rates, and conducted frequent physical inspections. These inspections did not require the prior permission of the management company to enter the golf courses.
The Court also held that percentage of food, beverage, merchandise, and lesson revenue that went to the private management company did not make the golf courses ineligible for the tax exemption. This revenue, which did not go the City, did not violate the "exclusive for a public purpose requirement" of the statute. Instead, they were found to be "incidental" to the stated public purpose of making golf courses available to the general public as part of the City's mission to provide recreational and cultural activities to enhance the health and wellness its residents and residents of the surrounding areas.
The amount of direction and control retained by the public owner as opposed to the private manager, and the lack of a lease or grant of possessory rights to the manager were important factors in determining whether these golf courses qualified for a property tax exemption.
Like many jurisdictions, Ohio tax assessors and courts privilege arm's length sale prices as indicators of property value for property tax purposes. However, the Ohio Supreme Court recently refused to implement a contractual allocation of an asset purchase price which included multiple parcels of real estate as well as a warehousing business. The Court concluded that the particular record in the case was insufficient to permit use of allocated sale prices to set value.
The valuation contest had at issue some parcels which were not included in the sale.
Deeds for the sales included parcels that were not part of the valuation contest.
The asset purchase agreement did contain an allocation of total asset contract price for real estate for two properties.
The total sale price on the settlement statement equaled the sum of the 2 real estate price allocations in the asset purchase agreement but did not specify the properties included in transfer either by street number or parcel number.
The purchase included a warehousing business as well as multiple parcels of real estate.
Additional clarity regarding the allocation in the asset purchase agreement, conveyance fee documents, or in the evidence presented to the local reviewing board or tax appeals board may have led to the adoption of the sale prices to determine the value for tax purposes. Therefore, whether you are buying or selling a property (or a business and the real estate in which it is housed), it is important that you consult with professionals regarding the real estate tax implications of purchase price allocations and the manner in which they are documented and recorded.
The Ohio Supreme Court recently confirmed (Olentangy Local School Bd. of Edn. v. Delaware Cty. Bd. of Revision, Slip Opinion 2014-Ohio 4723) that a property's sale price from an auction may be used as evidence of property value in the right circumstances. The school board, opposing use of the sale price, had argued that an auction sale categorically prohibits its use in determining value. The Supreme Court disagreed.
Property was listed for sale on MLS during which time the listing price was once reduced, prior to being put up for auction.
Advertisements regarding an auction to sell the property were placed in the newspaper and online.
Interested buyers were allowed to inspect the property both before and on the day of auction before bidding.
Approximately 75-85 people were present at the auction in person and an additional 50 participated online.
The seller had the right to reject the highest bid.
There were multiple bids before the highest bid was accepted and the property was sold.
However, the Court did rule that there is a presumption based on statute that an auction sale price is NOT evidence of a property's value. That presumption may be rebutted by the proponent of the sale showing that the sale was, nevertheless, an arm's length transaction between typically motivated parties that should be regarded as the best evidence of value.
Ohio property owners have already or soon will be receiving new 2014 proposed value notices in their mailboxes. Certain counties afford property owners a preliminary review process before the proposed values become finalized. For such counties, it is imperative that property owners contact a professional familiar with the review process to determine whether participation in the informal process is worthwhile. Please note that any information provided to the county may end up in a file that could be used against the property owner at a formal hearing. For taxpayers unsatisfied with the informal process or if no informal meeting has been offered, the formal appeal process begins in January with a deadline of March 31, 2015. Values determined during a reappraisal period can potentially carry forward up to six years.
Additionally, 2014 has brought with it the Ohio court system’s much anticipated application of the newly amended statute, R.C. 5713.03. The statute now requires that true value for real estate assessment be based on the “fee simple estate, as if unencumbered” and also provides that where there is a recent arm’s length sale, the auditor may, rather than must, consider the sale as true value.
For many years, Ohio law has been settled that valuation of assisted living facilities for real estate tax purposes must separate real estate value from business value. Therefore, rent and sales comparables of apartment buildings were used in comparison in order to capture the real estate value only.
The Ohio Supreme Court recently heard a challenge to this methodology where a school board's appraisal used sales of other assisted living properties and income from other assisted living facilities for comparison. Because the business components were not adequately separated from the real estate components of the sales; and similarly, the income approach used rent that included both lease of real estate and additional services, the school board's appraisal was not considered reliable. When using a cost approach to value the assisted living property, either apartment building cost schedules or nursing homes schedules may be used as the initial point of comparison, as long as appropriate adjustments are made.
Health Care REIT, Inc. v. Cuyahoga Cty. Board of Revision, Slip Opinion No. 2014-Ohio-2574.
Ohio property owners will be receiving their first half 2013 tax bills shortly. Owners should review these bills carefully to determine if assessments are excessive. If you could not sell the property in January 2013 for the assessor's value, the assessment is likely too high. The deadline to contest these assessments is March 31, 2014. Once this deadline has passed, the ability to appeal the 2013 valuation is forever gone. Although the complaint form is short and does not require a large amount of information, completing it incorrectly can get your appeal dismissed. Beware if you have purchased property in the last year at a higher price than the assessment; it is likely the school district will file an increase complaint to get your assessment increased to the purchase price. Where appropriate these increase complaints should be vigorously defended to minimize any increase in your tax liability.
An Ohio Court of Appeals, the Ohio Board of Tax Appeals (BTA) and the Ohio Supreme Court recently reaffirmed that a bank sale subsequent to a sheriff sale or a short sale may represent the market value of the property for tax purposes, depending on the factual specifics of the transaction.
In the Cattell case, the Lake County Court of Appeals held that a bank sale was not a distressed sale since the property was listed on the open market for some time, and was generally available to any qualified purchaser. In the Massillon case , Ohio BTA refers to the Cattell case and its prior cases to reaffirm that a property purchased from a bank where the bank/seller "acquired the property through prior foreclosure proceedings" does not, by itself, make subsequent transfers by the bank unreliable in determining value.
In the Columbus case, the Supreme Court of Ohio held that a short sale may often, but does not necessarily, reflect a distress sale. Although the property owner was in a distressed situation; the seller in the transaction, the lender, acted freely in negotiating the sale. The Court found the lender as seller, was not distressed and acted as any typically motivated seller would do.
All three cases again emphasize that a sale of Ohio property has to be examined on its individual facts to determine whether the sale is indicative of market value, which involves more than just a determination of whether the parties are acting at arm's length.
1. Cattell v. Lake Cty. Bd. of Revision, 11th Dist. No. 2009-L-191, 2010-Ohio-4426.
2. Massillon City School Dist. Bd. of Edn. v. Stark Cty. Bd. of Revision, BTA No. 2011-L-2700 (May 31, 2013).
3. Columbus City School Dist. Bd. of Edn. v. Franklin Cty. Bd. of Revision, 134 Ohio St.3d 529, 2012-Ohio-5680.
On the footsteps of the last Ohio Property Tax Update that described major changes in Ohio tax law, some significant developments have taken place related to implementation of the law and changes to the law. In December 2012, following the June 2012 initial passage of the landmark legislation, Governor John Kasich signed a bill modifying when the revisions to Ohio Revised Code 5713.03 apply. This is a very positive development as the application of the newly-enacted revisions has been accelerated. The change assists in providing uniformity and setting a much shorter overall timeframe for the law to take effect as opposed to the prior legislation. Previously, according to the language in the June 2012 legislation, Ohio counties only had to make the revisions effective once the next 3-year revaluation cycle took place. This meant that some counties would not apply the changes until as late as 2015. The revisions now take effect as of the effective date of the bill. The attorneys at Siegel Jennings continue to advocate for an immediate application of the new law to all pending cases, but in the event that Ohio courts follow a strict reading of the effective date language, this change moves that date forward considerably.
Additionally, language was added to R.C. 5713.03 to protect owners of certain types of multi-family properties from over-assessment. The statute specifically addresses properties that participate in the federal program that utilizes low income housing tax credits. In a 2009 Ohio Supreme Court case, Woda Ivy Glen Ltd. Partnership v. Fayette Cty. Bd. of Revision, the Ohio Supreme Court decided that the use restrictions imposed by these federal tax credits should be taken into account for valuation purposes. With the recent changes to the statute, the decision in the Woda case is further strengthened, and owners of this property type have been provided with additional protection against arbitrary assessments by local officials.
The central portions of the legislation, which relate to valuation standards and how sales are considered, will have massive implications state-wide. The attorneys at Siegel Jennings expect many more important developments to follow as the new law is reviewed and considered all the way from the local level to the Ohio Supreme Court.
The attorneys at Siegel Siegel Johnson and Jennings (Siegel Jennings) are happy to report a major change in Ohio law which helps property owners by bringing back consistency and uniformity in assessments. After a series of unfavorable court decisions starting from 2005, Siegel Jennings lawyers teed the issue up with the state legislature and worked to return Ohio to a jurisdiction that provides an even playing field to commercial property owners, specifically concerning the weight to be afforded sales of commercial real estate. On June 11, 2012 Governor Kasich signed into law a statute that states that true value for real estate assessment is based on the "fee simple estate, as if unencumbered." To understand why and how that is so important, it is useful to look back over developments in Ohio law over the past decade.
Ohio law provided that assessments shall be made based on "true value" and that "the auditor shall consider the sale price ... to be the true value for taxation."
Prior to 2005, Ohio courts interpreted that law to allow the County Auditor as the assessor (as well as the BTA and Common Pleas Courts) to consider whether a sale actually represented the market value. Under that law, appraisal evidence, lease studies, or comparable sales were utilized to determine if a sale was reflective of market value. Moreover, only sales that reflected market value or those which were adjusted to reflect market value were appropriate to use as comparable sales. Rent comparables also were required to be reflective of market value as of the tax lien date rather than the date of inception.
That changed in 2005, when the Ohio Supreme Court interpreted the statutory language that states that "the auditor shall consider the sale price ... to be the true value for taxation" to mean that there is no further evidence necessary to prove true value. Later, the Supreme Court expanded the ruling by stating that leased fee sales were also acceptable. Even worse, later cases expanded the law to include leased fee sales as comparable sales even when appraising fee simple owner-occupied properties. And, finally, other cases set law that severely limited the County Auditor, the BTA, or Common Pleas Courts from taking into consideration circumstances which indicated that the sale was not representative of market value.
The attorneys at Siegel Jennings noticed that in oral arguments the Ohio Supreme Court stated that the language of the statute was clear. Accordingly, Siegel Jennings lawyers set out to further clarify the statute through the legislative process. The new statute clearly states that true value is to reflect the "fee simple estate, as if unencumbered." The new statute further provides that where there is a recent arm's length sale, the auditor may consider the sale to be true value. Read together, in order for the auditor to consider the sale to be true value, that sale has to reflect the fee simple estate, as if unencumbered. This change will bring all Ohio taxpayers to a point where they will be taxed in a fair and uniform manner.
Taxpayers may have a small window of opportunity in order to have their property taxes reviewed informally with the county before the tax rolls are certified.
Certain counties in Ohio afford property owners the ability to have their revaluations preliminarily reviewed before those values are certified and finalized for the next three-year cycle. Currently, properties located in and around large metropolitan areas such as Columbus (Franklin County), Cincinnati (Hamilton County), Akron (Summit County), and Dayton (Montgomery County), are subject to either reappraisals or valuation updates because of the counties where those properties are located. For these counties and certain others in Ohio where this situation applies, it is imperative that property owners immediately contact a professional familiar with the review process to determine whether the county should be contacted to discuss property’s current valuation. There are many advantages to participating in the early review process, but time is quickly running out because of state-imposed deadlines to finalize values.
Certain counties in Ohio afford property owners the ability to have their revaluations preliminarily reviewed before those values are certified and finalized for the next three-year cycle. Currently, properties located in and around large metropolitan areas such as Columbus (Franklin County), Cincinnati (Hamilton County), Akron (Summit County), and Dayton (Montgomery County), are subject to either reappraisals or valuation updates because of the counties where those properties are located. For these counties and certain others in Ohio where this situation applies, it is imperative that property owners immediately contact a professional familiar with the review process to determine whether the county should be contacted to discuss property's current valuation. There are many advantages to participating in the early review process, but time is quickly running out because of state-imposed deadlines to finalize values.
For taxpayers unsatisfied with the informal process or where the county does not offer an informal meeting, there is a formal appeal process that begins in January and ends March 31, 2012. Values determined during a reappraisal period can potentially carry forward for up to six years, as in many instances significant changes are not made during the three-year period between reappraisals.
Most commercial property owners are painfully aware of the impact the recession has had upon property values. The Ohio Supreme Court and the Ohio Board of Tax Appeals have recently focused upon the impact that changes in market conditions have upon property values for tax purposes. In Worthington City Schools Bd. of Edn. v. Franklin Cty. Bd. of Revision, 124 Ohio St.3d 27, 2009-Ohio-5932, the Ohio Supreme Court emphasized the duty of a reviewing court to consider evidence related to changes in market conditions in a property tax matter, in addition to considering changes in the property itself. This case was remanded back to the Ohio Board of Tax Appeals, where it was appealed yet again to the Ohio Supreme Court. A decision is now pending at the Supreme Court.
Taxpayers need to be aware of the necessary requirements to prove how changes in market conditions have negatively impacted their property values. Evidence such as appraisals must contain the required information to prove to the reviewing court that changes existed and how such changes impacted the value of the property. Taxpayers also need to be aware of changes in market conditions near the time of the date of sale of real property, and how that may affect the strength of their case in challenging the assessor’s value.
March 31, 2011. Ohio law offers no exceptions to this statutory deadline. In the event that a taxpayer files on April 1 or later, that complaint will be dismissed, with the result being that the taxpayer will have to wait an entire year before filing another complaint.
Ohio and in particularly Cuyahoga County has been rocked by a countywide scandal that has ended with the arrest of its auditor (assessor) and one of its county commissioners. The allegations are wide spread and have caused great concern as county valuations were called into question. The auditor, among others in the county, has been accused of tampering with assessments. The local boards of revision have seen members fired or transferred.
The county has a back log of cases several years deep and is increasing the number of boards hearing cases. The state board of tax appeals which hears cases after they are appealed from the local level has seen an increase in filing at the same time that the staff and examiners were reduced for appellate cases.
The length of time from filing an appeal until it is finally decided could be as long as four years. The time delay is note worthy not just due to the inordinate amount of time it takes to resolve a case but, because in Ohio there are reassessments every three years and there is a continuing complaint provision. Taxpayers will then be required to argue assessments for the various years and valuation changes that have occurred during these turbulent years.
What is can taxpayers do to protect against excessive taxation? Taxpayers need to keep in contact with their tax attorneys and remain open to ideas that may shift as the procedures and personalities change across the state.
Like many states, the sale price in a recent, arm's length transaction is strong evidence of property value for real estate tax purposes. The Ohio Supreme Court recently held that in properly deciding whether a sale is recent, more than just the proximity in time must be considered. In Worthington, the sale occurred eighth months from tax lien date. Although not adopted at the board of revision level, upon appeal the Board of Tax Appeals determined the value of the property to be the sale price. The Supreme Court vacated and remanded the case, holding that the BTA had not properly considered other factors relevant to recency, such as an immediate loss of tenants after purchase, the subsequent failure to sell, and lower values that were reflected in later appraisals.
Berea City School District Bd. of Edn. v. Manlaw Investment Co, Ltd. (2005), 106 Ohio St.3d 269, 2005-Ohio-4979.
2 Worthington City Schools Bd. of Edn v. Franklin Cty. Bd. of Revision (2009), 124 Ohio St.3d. 27, 2009-Ohio-5932.
With the economy in its current state taxpayers must be diligent in minimizing expenses. Contesting over assessed property taxes should be foremost on the list of ways to reduce costs. In order to contest the 2008 taxes payable in 2009 taxpayers must file with the county board of revision no later than March 31, 2009. Complaints must be received by the county by the deadline as such it is wise to have the complaint time stamped to prove that the complaint was timely filed.
Furthermore, taxpayers need to be aware that a tax complaint may have been filed against them by their local school district. Ohio is one of the few states where school districts will file a complaint with the county auditor (assessor) seeking to increase the taxes on properties within their jurisdiction. Although unwanted and expensive as well as potentially inequitable, it is well settled law that permits school districts to file tax cases.
Finally, Ohio tax law is full of pitfalls. Prior to filing taxpayers should seek counsel to ensure that the filing that they intend to make is meritorious as well as properly filed.
Taxing authorities in Ohio are responding to the credit crisis and the housing meltdown in a way that may not benefit taxpayers. Several counties have approached the state tax director seeking approval to not increase assessments due to the housing crisis. The State has responded that the counties are required to show that in whole the assessments of the county are supported by the market place. Some County auditors are trying to hold on to values and spin the reassessment into benevolently not raising assessments.
As taxpayers we must be diligent in our pursuit of fair assessments and make certain that although values may not change during reassessment, that our properties are actually fairly assessed. The fall marks the period of certification of tax rolls in Ohio. The period in which taxpayers can file claims begins in January. Watch out for assessments that do not fall with the market.
March 31, 2008 marks the deadline for filing tax complaints in Ohio. For many taxpayers this may bring trouble. Taxpayers need to be aware that a tax complaint may have been filed against them by their local school district. Ohio is one of the few states where school districts will file a complaint with the county auditor (assessor) seeking to increase the taxes on properties within their jurisdiction. Although unwanted and expensive as well as potentially inequitable, it is well settled law that permits school districts to file tax cases.
Taxpayers must be careful how they respond to a tax complaint. Many the cases are brought based upon a recent purchase while others may simply be "fishing expeditions". There are a number of different courses of action that vary depending on the unique circumstances of a given case, one of which starts by filing a counter-complaint within 30 days of receipt of the original complaint. In any event, before engaging in any correspondence with anyone seeking to increase your taxes, consult with a real estate tax attorney. Ohio law is full of pitfalls for both tax payers and school boards that file tax complaints.
Now is the time to act upon the well intentioned tax plans envisioned in the past year. Property owners in Ohio have recently or will be shortly receiving their tax bills for 2007. Between January and March 31, 2008 taxpayers have the right to contest their tax assessments.
However, care must be taken in determining whether to file. Tax law varies from state to state and what constitutes a reliable approach in one state may not apply in Ohio. Furthermore, a properly assessed property in one state may be over assessed in Ohio. Taxpayers should also be aware that when a complaint is filed in Ohio there will inevitably be a counter appeal made by the local school district. And it is because of the school district is involved that extra care must be taken.
If a complaint is filed and the property is under assessed then the school district may argue to the county board that the value should be increased. Furthermore, if the complaint is not prepared correctly the school district can and likely will argue that he complaint should be dismissed which can have the effect of prohibiting an appeal of the taxes for up to three years.
Therefore taxpayers should act quickly to ascertain the reasonableness of an appeal and take due care in the filing of the complaint.
Ohio is in the process of phasing out the personal property tax along with its franchise tax. These taxes are being replaced by a broad Commercial Activities Tax (CAT). However, with change comes "growing pains". Tax payers that have or should remove business fixtures from real estate values will find resistance from assessors in agreeing to reductions from real estate assessments for business fixtures. Business fixtures are those fixtures that are for the benefit of the business and do not benefit the real estate although they are affixed and may be permanent.
Ohio law has determined that business fixtures are personal property and are taxed as such. In the past a determination that an item was a business fixture was not welcomed by taxing authorities, however the fixture did not escape taxation completely. If a property were excluded from the real estate rolls it would be picked up on the personal property tax return. Now that the personal property tax is nearly phased out taxing authorities have been reluctant to classify business fixtures as personal property. However, diligent pursuit of fair taxation can lead to lower taxes in Ohio.

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