Opinion ID: 1893465
Heading Depth: 1
Heading Rank: 1

Heading: Valuation of the Common Areas

Text: The first issue, essentially, is whether the circuit court erred in holding that the LFPOA was properly taxed for the value of the common areas of Lake Forest and that the assessor properly determined the value. There is no dispute that record title to the common areas in Lake Forest is held by LFPOA. However, LFPOA contends that the encumbrances upon the common areas reduce the value of the property to zero, or to some nominal amount. LFPOA also argues that the value of the common areas is already reflected in the value of each individual lot and that to tax the individual lots and also tax the common areas results in double taxation. It is well settled that all property, except that specifically excluded by statute, is to be taxed to its owner at its fair market value. Ala.Code 1975, §§ 40-7-1, 40-7-15, and 40-11-1. Thus, because LFPOA is the holder of record title to the common areas of Lake Forest, it is responsible for paying the ad valorem tax on the fair market value of the common areas. Therefore, the question is whether the trial court erred in holding that the common areas of Lake Forest had a value independent of the alleged increased value of the surrounding lots. LFPOA asserts that the present case is very similar to Twin Lakes Golf & Country Club v. King County, 87 Wash.2d 1, 548 P.2d 538 (1976), Tualatin Development Co. v. Department of Revenue, 256 Or. 323, 473 P.2d 660 (1970), and Department of Revenue v. Morganwoods Greentree, Inc., 341 So.2d 756 (Fla.1976). LFPOA asks this Court to hold that, because the common areas are encumbered by the easements granted to the lot owners in Lake Forest, the common areas have no independent value. Twin Lakes, Tualatin Development, and Morganwoods Greentree are factually somewhat similar to the present case. The Twin Lakes court held that when the use of land is so restricted that its ownership is of no benefit or value, the assessment for tax purposes should be nothing. 548 P.2d at 540 (citing Tualatin Development ). We have no quarrel with this rationale. However, we believe the proper statement of the appropriate standard for determining value is found in the Florida Supreme Court's decision in Department of Revenue v. Morganwoods Greentree, Inc., 341 So.2d 756 (Fla. 1976). In Morganwoods Greentree, the court stated: An encumbrance or restriction such as an easement will not per se reduce the assessment value of land simply because the owner has been divested of some proprietary interest. This does not mean, however, that an assessment may be made without regard to the effect of an encumbrance on the value of the land. The encumbrance becomes one factor among many the assessor must consider in determining the just value of the property to be taxed.  341 So.2d at 758 (emphasis added). Upon our review of the record, we cannot say that the Court of Civil Appeals erred in affirming the circuit court's holding that the tax assessor properly took into account the effect of the encumbrances in his valuation of the common areas of Lake Forest. The circuit court specifically found: (a) The evidence as presented to this Court does not support the contention of LFPOA that the value of the amenities is reflected in the lots of Lake Forest Subdivision. (b) The value of the encumbrances, i.e. the right to use the amenities by the property owners, does not decrease the value of the amenities. There was conflicting evidence as to the value of the common areas and the effect of the encumbrances on that value. Furthermore, Tualatin Development and Twin Lakes were appeals by the states from determinations that the subject properties had no value. In the present case, the circuit court, after hearing ore tenus evidence, determined that the value attributed to the common areas of the Lake Forest development by the tax assessor took into account the effect of the encumbrances on the property. [T]he ascertainment of market value of property is a factual matter, State v. West Point Mfg. Co., [236 Ala. 467, 183 So. 449 (1938)], and where the trial court sits without a jury, its decision is entitled to the weight of a jury verdict and is entitled to be confirmed absent a showing that the verdict is contrary to the great preponderance of the evidence. Dixie Auto Ins. Co. v. Lee, 288 Ala. 185, 258 So.2d 892 [(1972)]. State v. Great Valley Land & Investment Co., 53 Ala.App. 49, 54, 297 So.2d 375 (1974). The circuit court's determination that the value of the common areas reflected the impact of the encumbrances upon the land is supported by substantial evidence and it is not contrary to the great preponderance of the evidence. In support of its holding, the circuit court made the following observations: 9. Board experts testified that lots in Lake Forest generally sell for about $4,000 less than comparable lots outside Lake Forest. 10. LFPOA is depreciating its improvements based upon an approximate value of $8,000,000. 11. The tax assessor for Baldwin County valued the amenities at $6,031,000 for 1991. LFPOA does not disagree with this valuation. The argument by LFPOA that the present system of taxing both the lots and the common areas results in double taxation is not well taken. The burden of the restrictive covenants and easements on the common areas reduces their marketability and thereby, presumably, reduces their market value to some extent, but we are unable to say that the tax assessor's valuation is so clearly wrong as to require us to overturn the judgments of the circuit court and the Court of Civil Appeals. Section 40-11-1(b)(1) provides that The subjects of ad valorem taxation, except as exempted by law, shall be as follows: (1) Every piece, parcel, tract, or lot of land in this state.... If we were to allow these parcels of land owned by LFPOA to escape taxation, then valuable tracts of land could be removed from the tax roles of this state by carefully drafted restrictive covenants. We agree that a tax assessor must take into account the effect of encumbrances upon the value of parcels of land. However, we reiterate what the Court of Civil Appeals stated in the first appeal involving these parties: `The encumbrance becomes one factor among many the assessor must consider in determining the just value of the property to be taxed.' Lake Forest I, 587 So.2d at 394 (quoting Department of Revenue v. Morganwoods Greentree, Inc., 341 So.2d 756, 758 (Fla.1976)). We find no question of first impression incorrectly decided by the Court of Civil Appeals in its affirmance of the circuit court's holding that the tax assessor had properly considered the encumbrances upon the common areas of Lake Forest among the many applicable factors to be considered in making a just valuation of the property.