Title: Keswick Club v. County of Albemarle
Citation: N/A
Docket Number: 060672
State: Virginia
Issuer: Virginia Supreme Court
Date: January 12, 2007

Present:  All the Justices 
 
KESWICK CLUB, L.P. 
 
      OPINION BY 
v.  Record No. 060672             JUSTICE LAWRENCE L. KOONTZ, JR. 
 
     January 12, 2007 
COUNTY OF ALBEMARLE 
 
FROM THE CIRCUIT COURT OF ALBEMARLE COUNTY 
James A. Luke, Judge Designate 
 
 
In this appeal, a taxpayer challenges a judgment upholding 
a county’s assessment of the fair market value of real estate 
owned by the taxpayer for the 2003 and 2004 tax years.  
Specifically, we consider whether the county failed to properly 
consider the income and sales approaches to valuation before 
basing its assessment solely on the cost approach. 
BACKGROUND 
 
The property that is the subject of this appeal is Keswick 
Club, an approximately 153-acre property in Albemarle County 
(“the county”).  Keswick Club is a private recreational club 
with facilities that include an eighteen-hole golf course, pro 
shop, clubhouse with restaurant, spa, swimming pools, tennis 
courts, exercise room and other amenities.  Keswick Club is 
located adjacent to an upscale residential subdivision known as 
Keswick Estates and a luxury hotel known as Keswick Hall.  
During the relevant times, Keswick Club, L.P. (“the taxpayer”) 
was the record owner of the subject property. 
 
 
2 
 
In 2003, the county performed its biennial reassessment of 
real estate values for the 2003 and 2004 tax years.  
Subsequently, the county issued to the taxpayer a notice of 
reassessment stating that Keswick Club’s assessed fair market 
value for 2003 was $12,771,500.1  The taxpayer disputed the 
county’s assessment of Keswick Club’s fair market value and 
submitted an appraisal report prepared by a private appraiser.  
This appraisal report reflected Keswick Club’s fair market value 
at $2.9 million utilizing the income and sales approaches to 
valuation, but not the cost approach.2 
 
In a letter to the taxpayer dated May 15, 2003, the county 
disagreed with the methodology used in the private appraisal 
report and explained that it had chosen to use the cost 
approach, not the income approach or the sales approach, in 
valuing Keswick Club.  The county stated in the letter that: 
                     
1 The notice of reassessment indicated that the prior 
assessed value of Keswick Club was $11,318,900. 
2The cost, income, and sales approaches are the three 
valuation approaches or methods most widely used to assess the 
fair market value of real estate.  In simple terms, the cost 
approach values property by adding the value of land to the 
value of improvements, which is measured by the cost to 
reproduce those improvements minus depreciation.  The income 
approach estimates the value of income-producing property by 
measuring the income the property is expected to generate.  The 
sales method values property utilizing recent sale prices of 
comparable properties.  Each of the three approaches has several 
commonly used names, but for simplicity and consistency, we will 
refer to them as the cost, income, and sales approaches. 
 
 
3 
 
We have reviewed the appraisal report you 
provided and as a result disagree with the final value 
estimate.  In our opinion, given the status of the 
golf clubs located within the County, it is difficult 
to arrive at a fair market valuation by employing the 
income approach.  The sales comparison approach was 
also not used due to the lack of available sales 
information within our jurisdiction.  We have chosen 
to value area golf clubs using the cost approach. 
 
 
The county’s letter also noted that the other golf clubs in 
the county were assessed at $21,585,700, $13,281,200, and 
$9,159,800.3 
 
The taxpayer sought review by the county Board of 
Equalization, which reduced Keswick Club’s fair market value by 
$1,345,400 to account for functional obsolescence and other 
factors.  The county subsequently made a further reduction to 
account for a decrease in acreage such that Keswick Club’s final 
assessed fair market value by the county was $11,175,700.4 
 
The taxpayer filed an application in the Circuit Court of 
Albemarle County pursuant to Code § 58.1-3984 requesting that 
the circuit court correct the county’s 2003 and 2004 
assessments.  The taxpayer asserted that the county used only 
                     
3 In the letter, the county notified the taxpayer that 
Keswick Club’s assessed fair market value had been reduced by 
$227,900 to account for an additional depreciation allowance. 
4 The taxpayer claims that it paid its 2003 tax based on 
Keswick Club’s assessed fair market value prior to the reduction 
by the Board of Equalization.  The taxpayer paid its 2004 tax 
based on the $11,175,700 assessed fair market value after the 
 
 
4 
the cost approach in making its valuation and by doing so 
“failed to consider all factors required by law for a lawful and 
proper valuation of the subject property.”  The taxpayer 
maintained that Keswick Club’s actual fair market value, 
estimated using the “proper and preferred” methods of valuation, 
was $2,900,000.  The county filed a responsive pleading 
asserting, among other things, that its valuation method was 
proper and that it had used the cost approach “only after 
considering but properly rejecting the use of other valuation 
methods.” 
 
At a bench trial held in the circuit court, the parties 
presented evidence of Keswick Club’s financial performance on 
the issue of whether the income approach could feasibly be 
applied in appraising Keswick Club.  The undisputed evidence 
showed that Keswick Club had operated at an uninterrupted loss 
for many consecutive years.  Keswick Club’s general manager 
testified, however, that Keswick Club was projected to become 
profitable in future years as the result of aggressive efforts 
initiated by Keswick Club’s new owner, Orient Express Hotels, 
Inc. (“Orient Express”).  Orient Express had purchased Keswick 
Club in 2002 when the previous owner, Metropolaris, Inc., 
                                                        
reduction by the Board of Equalization and the further reduction 
made by the county. 
 
 
5 
exercised its option under a 1999 “put and call agreement” 
between itself and Orient Express to sell all of Keswick Club 
L.P.’s stock to Orient Express for $3.7 million.5   Keswick 
Club’s general manager testified that, although the “loss-making 
situation” had decreased since Orient Express purchased Keswick 
Club, the club continued to operate at a loss. 
 
The county assessor who had assessed Keswick Club testified 
that, in making his appraisal, he “looked at all three 
approaches to value” before choosing to base his assessment 
solely on the cost approach.  The assessor stated that he chose 
to use the cost method because it rendered the “most accurate 
appraisal of the property” and is “appropriate when you have a 
special-use property” such as a golf course. 
 
The county assessor testified that he rejected the income 
approach because he did not receive any income statements or 
other financial information pertaining to Keswick Club.  
However, the assessor acknowledged that he never requested any 
such information.  On the issue of whether he would utilize the 
                     
5 The put and call agreement involved the transfer of shares 
in a subsidiary of Metropolaris, KGC Inc.  This subsidiary of 
Metropolaris was the sole shareholder of Keswick Club General 
Partner, Inc., the general partner of Keswick Club, L.P., and 
the majority shareholder of Keswick Club, Inc., the sole limited 
partner of Keswick Club, L.P.  It suffices for purposes of this 
appeal that the transfer of the shares in KGC, Inc. amounted to 
a sale of all of the beneficial ownership in Keswick Club. 
 
 
6 
income approach on a for-profit business that was losing money, 
the assessor stated that he would still consider such property 
“income producing property.”  He further stated that he would 
not use the income approach because he could not “do a proper 
analysis of a property with a negative income to create . . . an 
accurate reflection of market value.” 
 
The county assessor testified that he attempted to develop 
an appraisal based on the sales approach but could locate only 
one comparable sale inside the county.  The assessor testified 
that “[a]fter careful examination” of that sale he chose not to 
use the sales approach in appraising Keswick Club.  The assessor 
testified that he did not look outside the county for comparable 
sales, but gave no reason for his failure to do so.  The 
assessor also testified that he did not consider the 2002 sale 
of the beneficial ownership of Keswick Club as a comparable sale 
because there was no record of the sale in the county real 
estate records and because he did not consider the sale to be an 
arms-length sale on the open market.  The assessor’s testimony 
indicated that he had not seen any documents related to the put 
and call agreement governing the sale, that he knew nothing 
about the terms of that agreement, and that he did not make any 
effort to become aware of the terms of the agreement. 
 
 
7 
 
Both parties presented expert testimony by private 
appraisers and presented as evidence appraisal reports prepared 
by those experts.  The taxpayer’s expert, David Sangree, 
testified that he utilized the income approach and the sales 
approach, but not the cost approach, to appraise Keswick Club.  
Sangree testified that he used the income approach despite the 
fact that Keswick Club was losing money based on his projection 
that, due to improved operating performance and capital 
improvements undertaken by the new management, Keswick Club was 
likely to become profitable.  Sangree testified that, in 
applying the sales approach, he used the 2002 sale of Keswick 
Club as a comparable sale because “the subject sale is certainly 
the most important sale to consider.”  Sangree also used several 
golf courses outside Albemarle County and two out-of-state golf 
courses as comparable sales.  Sangree estimated the fair market 
value of Keswick Club at $2,900,000. 
 
The county’s expert, Ivo Romanesko, testified that he did 
not use the income approach to appraise Keswick Club because 
projecting future profits would require a great deal of 
speculation given the club’s history of losing money.  Instead, 
Romanesko utilized the cost and sales approaches.  In using the 
sales approach, Romanesko located comparable sales outside the 
county but did not search for comparable sales occurring outside 
 
 
8 
the State.  Romanesko did not consider the 2002 sale of Keswick 
Club as a comparable sale because in his opinion the situation 
created by the put and call agreement did not amount to an open 
market sale.  Romanesko’s final valuations of Keswick Club using 
the cost and sales approaches were $12,950,000 and $12,000,000, 
respectively. 
 
In its closing argument and post-trial brief, the taxpayer 
contended, among other things, that the county erred in basing 
its assessment solely on the cost approach.  The taxpayer 
asserted that the cost approach is less reliable for determining 
the fair market value of income producing property than the 
income and sales approaches.  Because the county only utilized 
the cost approach in making the assessment, without a credible 
basis for not considering the income or sales method, the 
taxpayer contended that the assessment was not entitled to the 
presumption of validity normally afforded to a taxing 
authority’s assessment.  In response, the county generally 
contended that it considered all three valuation approaches in 
making its assessment and that the assessment should be upheld 
as not manifestly erroneous. 
 
In a letter opinion, which subsequently was incorporated by 
reference into a final order, the circuit court approved the 
county’s $11,175,700 assessment of Keswick Club.  The circuit 
 
 
9 
court ruled that, under Tidewater Psychiatric Institute, Inc. v. 
City of Virginia Beach, 256 Va. 136, 501 S.E.2d 761 (1998), a 
taxing authority may use the cost approach as its sole valuation 
method if no reliable data for the income or sales methods is 
available.  The circuit court noted the county assessor’s 
testimony that he considered all three valuation approaches 
before determining that the cost approach would be “best” for 
Keswick Club.  The circuit court also noted that Romanesko had 
appraised Keswick Club’s fair market value at $12,500,000.  
Accordingly, the circuit court concluded that the taxpayer 
failed to prove that the county committed manifest error in 
assessing Keswick Club’s fair market value and approved the 
county’s $11,175,700 assessment.  This appeal followed. 
DISCUSSION 
 
The principles that guide our review of a judgment 
upholding a taxing authority’s assessment of the fair market 
value of real estate are well established.  The Constitution of 
Virginia requires that real estate be assessed at its fair 
market value.  Va. Const. art. X, § 2; see also Code § 58.1-3201 
(requiring taxing authorities to assess real property at one-
hundred percent fair market value).  We have defined the fair 
market value of a property as its sale price when offered for 
sale “by one who desires, but is not obliged, to sell it, and is 
 
 
10 
bought by one who is under no necessity of having it.”  Tuckahoe 
Woman’s Club v. City of Richmond, 199 Va. 734, 737, 101 S.E.2d 
571, 574 (1958); see also Lake Monticello Service Co. v. Board 
of Supervisors, 237 Va. 434, 438, 377 S.E.2d 446, 448 (1989). 
 
A taxpayer seeking relief from an allegedly erroneous 
assessment has the burden to show that the assessment exceeds 
fair market value.  Code § 58.1-3984; see Shoosmith Bros. v. 
County of Chesterfield, 268 Va. 241, 245, 601 S.E.2d 641, 643 
(2004); Board of Supervisors of Fairfax County v. HCA Health 
Services, Inc., 260 Va. 317, 329-30, 535 S.E.2d 163, 169-70 
(2000); Tidewater Psychiatric Inst., 256 Va. at 140-41, 501 
S.E.2d at 763.  Generally, a taxing authority’s assessment of a 
property’s fair market value is presumed valid and a circuit 
court will reject and correct a taxing authority’s assessment 
only if the taxpayer demonstrates that the taxing authority 
committed manifest error or disregarded controlling evidence in 
making the assessment.  See Shoosmith Bros., 268 Va. at 245, 601 
S.E.2d at 643; HCA Health Servs., 260 Va. at 329-30, 535 S.E.2d 
at 169-70; Tidewater Psychiatric Inst., 256 Va. at 140-41, 501 
S.E.2d at 763. 
 
In determining the fair market value of real estate, taxing 
authorities commonly use one or more of three valuation 
approaches:  the cost approach, income approach, and sales 
 
 
11 
approach.  Each of these approaches utilizes different 
characteristics of a property to estimate fair market value, and 
each analyzes different elements of the property which would 
likely affect the price a potential buyer would be willing to 
pay for the property on the open market.  Ideally, an appraisal 
should, if possible, derive its final determination of a 
property’s value using all three approaches in order to maximize 
the likelihood that the valuation accurately reflects the 
property’s fair market value.  See Arlington County Board v. 
Ginsberg, 228 Va. 633, 641, 325 S.E.2d 348, 353 (1985)(stating 
that “[e]verything which affects market value must be 
considered”); see also Lake Monticello Serv. Co., 237 Va. at 
439, 377 S.E.2d at 449 (fair market value “focuses on those 
elements which influence a buyer and a seller in arriving at a 
sale price”). 
 
However, with respect to any given property, a taxing 
authority may determine that the use of one or more of these 
approaches is not feasible.  In cases where a taxing authority 
bases an assessment of fair market value solely on one approach 
in determining the fair market value of property, the resulting 
assessment is entitled to the presumption of validity so long as 
the taxing authority “consider[s] and properly reject[s]” the 
other valuation methods.  HCA Health Services, 260 Va. at 330-
 
 
12 
31, 535 S.E.2d at 170; Tidewater Psychiatric Inst., 256 Va. 140-
41, 501 S.E.2d at 763.  In applying the “considers and properly 
rejects” standard to a taxing authority’s decision to apply a 
single approach, we have refused to afford a presumption of 
validity to an assessment when the taxing authority failed to 
make an “effort to acquire the data necessary to perform 
appraisals” based on the other approaches.  HCA Health Services, 
260 Va. at 330, 535 S.E.2d at 170. 
 
Since the taxpayer challenges the assessment in this case 
based on the county’s choice of the cost approach as the sole 
method used to make the assessment, we must determine whether 
the evidence in this case reflects that the county considered 
and properly rejected the income and sales approaches before 
relying solely on the cost approach.  In doing so, we reiterate 
that “courts must be hesitant, within reasonable bounds, to set 
aside the judgment of assessors; otherwise, the courts will 
become boards of assessment thereby arrogating to themselves the 
function of the duly constituted tax authorities.”  City of 
Richmond v. Gordon, 224 Va. 103, 110, 294 S.E.2d 846, 850 (1982) 
(internal quotation marks omitted). 
 
The assessment of real estate, especially with regard to 
unique properties such as golf courses, is a process upon which 
even experts can disagree, as reflected by the disparity between 
 
 
13 
the approaches used and the results reached by the county 
assessor and the experts in this case.  Accordingly, in 
determining whether the county considered and properly rejected 
the income and sales approaches in this case, we do not review 
the ultimate conclusions of the professional appraisers 
regarding the utility or non-utility of applying a certain 
approach to valuing Keswick Club’s fair market value over an 
alternate approach. 
 
We begin our review of the evidence with the county’s May 
15, 2003 letter to the taxpayer.  In that letter, the county, in 
explaining its method for valuing Keswick Club, stated that 
“[w]e have chosen to value area golf clubs using the cost 
approach.”  The county further stated that due to the “status of 
golf clubs in the county” it would be difficult to determine 
fair market value using the income approach and that the sales 
approach was not used in valuing Keswick Club due to the lack of 
comparable sales in the county.  The county’s statement that it 
had chosen to value all area golf clubs using solely the cost 
approach evidences a categorical determination by the county 
that golf courses as a class of property would not be appraised 
using the income and sales methods.  Such a determination 
disregards the fact that golf courses, like other properties, 
are constantly vulnerable to changing market forces that may 
 
 
14 
affect fair market value and each is a unique property.  For the 
county to apply the cost approach in an arbitrary, categorical 
fashion to all golf courses invokes a serious risk that 
information relevant to the determination of fair market value 
will not be considered.6 
 
The evidence adduced at trial further suggests that the 
county applied the cost approach to Keswick Club in an automatic 
fashion without sufficiently attempting to gather the data 
necessary to utilize the income approach or sales approach.  
Regarding the income approach, the county assessor’s testimony 
indicates that he rejected the income method because he was not 
provided income statements or other financial information 
concerning Keswick Club.  However, the assessor acknowledged in 
his testimony that neither he nor any other county official ever 
requested Keswick Club’s income statements or financial 
information, even though the county was entitled to request this 
                     
6 The county indicated at trial that its reference to the 
“status of golf clubs in the county” in the May 15, 2003 letter 
reflected its belief that, while golf courses in the county 
operated to generate income, no club was operating to maximize 
income, and that the income approach would thus not accurately 
reflect fair market value.  However, even if the county’s golf 
courses do not operate in a fashion so as to maximize profit, 
such a fact would not be a reason to reject the income approach 
outright but, rather, would be a factor to consider in 
determining what weight the income approach would have in the 
ultimate assessment of the property’s value with respect to each 
golf course. 
 
 
15 
information under Code § 58.1-3294.7  The fact that the county 
did not attempt to obtain the financial information that would 
be crucial to a determination whether the income approach would 
be feasible or appropriate, despite being statutorily empowered 
to do so, further indicates that the county arbitrarily 
determined to use the cost method in appraising Keswick Club 
without properly considering the feasibility of using the income 
approach. 
 
Regarding its consideration of the sales approach, the 
county stated that it considered that approach but rejected it 
due to the paucity of comparable sales within the county and its 
decision not to look for comparable sales outside the 
jurisdiction.  The county also chose not to consider the 2002 
sale of Keswick Club, which the county concluded was not an 
arms-length transaction.  In reviewing whether the county 
considered and properly rejected the sales approach, the 
evidence shows that the county considered only one sale within 
the jurisdiction.  The evidence in the record is insufficient 
for us to decide that the county’s decision not to look for 
comparable sales outside of the jurisdiction was error.  
                     
7 Code § 58.1-3294 provides, in relevant part, that “[a]ny 
duly authorized real estate assessor . . . may require that the 
owners of income-producing real estate . . . furnish . . . 
 
 
16 
However, the evidence supports the conclusion that the county’s 
refusal to sufficiently investigate, or investigate at all, the 
terms and circumstances of the 2002 sale of Keswick Club amounts 
to a failure by the county to consider and properly reject the 
sales approach. 
 
It is well settled that a recent sale of the subject 
property, while not conclusive in determining fair market value, 
is entitled to “substantial weight.”  Arlington County Board, 
228 Va. at 640, 325 S.E.2d at 352; Board of Supervisors v. 
Donatelli & Klein, Inc., 228 Va. 620, 628, 325 S.E.2d 342, 345 
(1985); American Viscose Corp. v. City of Roanoke, 205 Va. 192, 
196, 135 S.E.2d 795, 798 (1964).  As the county correctly 
contends, a taxing authority may choose not to consider a sale 
of the subject property that is not an arms-length transaction 
made on the open market.  See Tidewater Psychiatric Inst., 256 
Va. at 140-41, 501 S.E.2d at 763 (recent sale of subject 
property rejected by taxing authority where sale price was well 
below the recent sale price of comparable properties).  
Nevertheless, given the strong evidence of fair market value 
that a recent sale of the subject property can provide, a taxing 
authority should carefully scrutinize the factual circumstances 
                                                        
statements of the income and expenses attributable over a 
specified period of time to each such parcel of real estate.” 
 
 
17 
of such a sale before determining that it does not meet the 
criteria for an arms-length transaction.  
 
In this case, the county stated that it did not consider 
the 2002 sale of Keswick Club to be a comparable sale because 
the sale took place under a put and call agreement negotiated 
three years prior to the sale.  However, the county assessor 
acknowledged at trial that he knew “nothing” about the terms of 
this agreement or the circumstances pertaining to it.  
Furthermore, the evidence does not reflect that the county made 
any attempt to acquire information relevant to this agreement 
that would have informed its conclusion that the sale was not an 
arms-length transaction.  The fact that the sale was of the 
beneficial interest of an entity owning Keswick Club, as opposed 
to the outright sale of the real estate, is not a sufficient 
reason, in and of itself, to fail to investigate the terms of 
that sale.  In light of the principle that a recent sale of a 
subject property is to be afforded substantial weight in 
assessing that property’s fair market value, the county’s 
failure even to attempt to familiarize itself with the terms of 
the put and call agreement leads to the conclusion that the 
county did not “consider and properly reject” the sales 
approach. 
 
 
18 
 
For these reasons, we are of opinion that the county’s 
categorical application of the cost approach to the valuation of 
all golf courses resulted in a failure by the county to consider 
and properly reject the income and sales approaches before 
solely utilizing the cost approach in assessing the fair market 
value of Keswick Club.  Here, the county did not attempt to 
obtain the data necessary to perform appraisals based on the 
income and sales approaches.  An assessment based on a single 
approach to the determination of market value, where the taxing 
authority failed to consider and properly reject the other 
approaches, is not entitled to a presumption of validity.  HCA 
Health Servs., 260 Va. at 329-30, 535 S.E.2d at 169-70.  
Therefore, the taxpayer was required only to show that the 
county’s assessment was erroneous, not that the county committed 
manifest error or disregarded controlling evidence in making its 
assessment.  Id. at 330, 535 S.E.2d at 170. 
CONCLUSION 
 
The circuit court’s letter opinion reflects that the court 
reviewed the county’s 2003 and 2004 assessments of Keswick Club 
under the standard of review applicable when the assessments are 
entitled to a presumption of validity, requiring the taxpayer to 
prove that the county committed manifest error or disregarded 
controlling evidence.  However, since the assessments were not 
 
 
19 
entitled to a presumption of validity, the proper standard of 
review was the less stringent standard, requiring the taxpayer 
only to prove that the county’s assessments were erroneous.  The 
circuit court erred in reviewing the taxpayer’s application to 
correct the county’s assessments of Keswick Club under the wrong 
standard of review.  Accordingly, we will reverse the judgment 
of the circuit court and remand this case so that the circuit 
court can apply the proper and less stringent standard of review 
applicable under the facts of this particular case. 
Reversed and remanded.