Court Opinion

ID: 4579118
Source: CourtListenerOpinion
Date Created: 2020-10-21 16:06:14.964782+00
Date Added: 2024-06-11T08:46:35.754941
License: Public Domain

SECOND DIVISION
                                 MILLER, P. J.,
                            MERCIER and COOMER, JJ.

                      NOTICE: Motions for reconsideration must be
                      physically received in our clerk’s office within ten
                      days of the date of decision to be deemed timely filed.
                                  http://www.gaappeals.us/rules

                                                                       October 7, 2020

In the Court of Appeals of Georgia
 A20A0867. CHATHAM COUNTY BOARD OF ASSESSORS v.
     JAY LALAJI, INC., AIRPORT HOTELS.

      COOMER, Judge.

      The Chatham County Board of Assessors (the “BOA”) appeals from the trial

court’s grant of summary judgment in favor of Jay Lalaji, Inc., Airport Hotels (“Jay

Lalaji”). At issue is whether a lease agreement (the “Agreement”) between the

Savannah Airport Commission (the “Commission”) and Jay Lalaji created a non

taxable usufruct or a taxable estate for years. The trial court determined that the

Agreement conveyed a non taxable usufruct, and the BOA challenges this conclusion,

arguing that the Agreement amounted to a taxable estate for years. For the following

reasons, we affirm.
      “A de novo standard of review applies to an appeal from a grant of summary

judgment, and we view the evidence and all reasonable conclusions and inferences

drawn from it, in the light most favorable to the nonmovant.” Griffiths v. Rowe

Properties, 271 Ga. App. 344, 344 (1) (609 SE2d 690) (2005).

      On August 23, 2006, Jay Lalaji entered a 50 year lease agreement with the

Commission which allowed for the construction and operation of a hotel on land

owned by the Commission. The BOA assigned the property an identification number

and attempted to assess ad valorem taxes against Jay Lalaji under the theory that the

interest created by the Agreement with the Commission was a taxable estate for years.

Pursuant to OCGA § 48-5-311 (g), Jay Lalaji filed an appeal of the value assessed by

the BOA to Chatham County Superior Court.

      Jay Lalaji filed a motion for summary judgment arguing that its interest in the

property was limited to a nontaxable usufruct. The BOA responded and filed a cross

motion for summary judgment claiming that Jay Lalaji’s interest was a taxable estate

for years. After a hearing, the trial court granted summary judgment to Jay Lalaji.

This appeal followed.

      The BOA argues that the trial court erred by granting Jay Lalaji’s motion for

summary judgment, and by denying its cross motion for summary judgment.

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Specifically, the BOA argues that the trial court erred in determining that Jay Lalaji’s

interest in the land was a usufruct. We disagree.

      Under Georgia law, a usufruct is a lesser interest in real estate than an estate

for years. See Richmond County Bd. of Tax Assessors v. Richmond Bonded

Warehouse Corp., 173 Ga. App. 278, 279 (325 SE2d 891) (1985).

      A usufruct is created when the owner of real estate grants to another
      person the right simply to possess and enjoy the use of such real estate
      either for a fixed time or at the will of the grantor. In such a case, no
      estate passes out of the landlord and the usufruct may not be conveyed
      except by the landlord’s consent, nor is it subject to levy and sale. A
      usufruct has been referred to as merely a license in real property, which
      is defined as authority to do a particular act or series of acts on land of
      another without possessing any estate or interest therein. By way of
      contrast, an estate for years, which does not involve the landlord-tenant
      relationship, carries with it the right to use the property in as absolute a
      manner as may be done with a greater estate and is subject to ad valorem
      taxation.

Love v. Fulton County Bd. of Tax Assessors, 348 Ga. App. 309, 311, n. 3 (821 SE2d

575) (2018) (citation omitted). A mere usufruct is not subject to ad valorem taxation.

Eastern Air Lines, Inc. v. Joint City-County. Bd. of Tax Assessors, 253 Ga. 18, 19 (5)

(315 SE2d 890) (1984).

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      Where “the term of a lease is for a period greater than five years, a rebuttable

presumption arises that the parties intended to create an estate for years rather than

a usufruct. To resolve whether the presumption has been overcome in this case, we

must examine the terms of the lease agreements and determine what interests the

parties intended to convey.” Eastern Air Lines, 253 Ga. at 19 (1) (citations omitted).

      Factors to be considered in determining whether the parties intended to
      create a usufruct include: (i) the terms used in the instrument of
      conveyance to describe the grantee’s rights; (ii) any provisions in the
      instrument addressing the parties’ understanding as to liability for ad
      valorem taxes; (iii) the grantor’s retention of dominion or control over
      the leased property; (iv) which party has retained the duties to keep and
      maintain the premises and appurtenances; and (v) whether the grantee
      may assign the lease or allow any part of the leased premises to be used
      by others without the grantor’s consent. Although an estate for years
      may be encumbered or somewhat limited without being reduced to a
      usufruct, if the lease imposes sufficient conditions and limitations upon
      the use of the premises to negate the conveyance of an estate for years
      the interest passed is reduced to a mere usufruct.

City of College Park v. Paradies-Atlanta, LLC, 346 Ga. App. 63, 66 (2) (815 SE2d

246) (2018) (citations and punctuation omitted).

      Here, the 50 year agreement creates a rebuttable presumption of an estate for

years. See Diversified Golf, LLC v. Hart County Bd. of Tax Assessors, 267 Ga. App.

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8, 10 (598 SE2d 791) (2004); Jekyll Dev. Assocs., L.P. v. Glynn County Bd. of Tax

Assessors, 240 Ga. App. 273, 275 (3) (523 SE2d 370) (1999). That presumption is

sufficiently rebutted in the specific terms of the Agreement which when read together

make clear that Jay Lalaji may not use the land “in as absolute a manner as may be

done with” an estate for years. OCGA § 44-6-103; City of College Park, 346 Ga.

App. at 67 (2).

      A consideration of the five factors identified above must be undertaken to

determine whether the parties intended to create a usufruct or an estate for years.

First, we look to the terms of the conveyance itself. The terms of the Agreement

establish a limited series of rights in Jay Lalaji and an implicit retention of all other

rights in the Commission. Within the Agreement, Jay Lalaji’s rights are described as

“specified rights and privileges”. The Agreement also says that “[a]ll other uses of the

Premises not expressly authorized by [the] Agreement are prohibited”; and “subject

to the terms and provisions hereof, Lessee shall have the right to possess the Leased

Premises under the provision of this Agreement.” These phrases suggest a usufruct.

See Diversified Golf, 267 Ga. App. at 11 (lessee’s rights described as “possession, use

or occupancy” suggested a usufruct.).

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      Concerning the second factor, designation of liability for ad valorem taxes,

section 19 of the Agreement states that “[t]he Lessee shall pay all expenses in

connection with the use of the Leased Premises . . . including without limitation by

reason of enumeration, taxes, including ad valorem taxes, permit fees, license fees,

including tap fees and pure water fees, and assessments lawfully levied or assessed

upon the Leased Premises[.]” This clause however, is not dispositive of an intent to

create an estate for years. See Clayton County. Bd. of Tax Assessors v. City of Atlanta,

164 Ga. App. 864, 865 (1) (298 SE2d 544) (1982) (usufruct created despite provision

in lease that lessee was liable for any taxes and any assessment levied on the

property), superseded by statute on other grounds as recognized in Clayton County.

Bd. of Tax Assessors v. Aldeasa Atlanta Joint Venture, 304 Ga. 15, 19-20 (2) (b) (815

SE2d 870) (2018). The Agreement clarifies that Jay Lalajai will pay any taxes that are

“lawfully levied or assessed upon the Leased Premises,” but it does not express an

expectation by the parties that the Agreement is therefore an estate for years. Rather,

it merely expresses the parties’ intention that if ad valorem taxes are lawfully assessed

upon the Leased Premises, Jay Lalajai is liable for their payment.

      As to the third factor, the Agreement demonstrates that the Commission retains

significant dominion and control over the property. Specifically, the Agreement only

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allows Jay Lalaji to “construct and operate a hotel and restaurant and related facilities

upon the Savannah/Hilton Head International Airport.”

       In addition to restricting the use of the land, the Agreement also contains the

following restrictions: Jay Lalajai must maintain the property in accordance with a

franchise agreement approved by the Commission; Jay Lalaji is prohibited from

maintaining or repairing the leased premises without approval by the Commission;

Jay Lalji is required to provide trash disposal and janitorial services; all proposed

improvement must be approved in detail by the Commission; and the Commission has

the right to enter the properties “at all reasonable times” to perform various

inspections, maintenance, and repairs. Further, the Commission retains the right to

utility easements and the right to use all utilities on the property it deems necessary

to supply utility service to other portions of the airport. Finally, at the end of the lease

term, title to all property or improvements erected or constructed by Jay Lalaji vests

in the Commission. If Jay Lalaji fails to comply with any of the terms of the

Agreement, the Commission has the right to terminate the Agreement “if such failure

shall continue for a period of sixty (60) days after written notice from the

Commission[.]” These usage restrictions placed upon Jay Lalaji show that it does not

hold the property subject only to minor limitations, but instead, only has a license to

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use the Commission’s property for a limited purpose and subject to the Commission’s

continuing oversight.

        Concerning the fourth factor, which party has the duty to keep and maintain the

premises, the Commission retains control over the manner in which the property is

maintained and any improvements that are made. The Agreement provides that Jay

Lalaji shall not undertake any maintenance or repair that involves structural change,

alteration, or rebuilding unless first approved by the Commission. Jay Lalaji is also

prohibited from undertaking any initial landscaping without prior written approval

from the Commission. Upon taking control of the premises “as is,” Jay Lalaji was

required to spend a minimum of $2,750,000 in improvements which will vest in the

Commission at the expiration of the Agreement. Although Jay Lalaji has a duty to

maintain the premises, the Commission has significant authority to govern the

maintenance, landscaping, and to control how any improvements are made upon the

land.

        With regard to the fifth and final factor, authority to assign the lease or sublet

the premises, the Agreement expressly prohibits Jay Lalaji from subletting the

premises, or assigning or transferring any of its rights under the Agreement without

the Commission’s consent. This language indicates a usufruct. See Macon-Bibb

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County Bd. of Tax Assessors v. Atlantic Southeast Airlines, Inc., 262 Ga. 119, 121

(414 SE2d 635) (1992) (restrictions on lessee’s ability “to sublet or assign . . . without

permission of the city or Authority, indicate a usufruct.”).

      Weighing these factors, we conclude that the restrictions imposed upon Jay

Lalaji’s use of the premises “are so pervasive as to be fundamentally inconsistent with

the concept of an estate for years.” Allright Parking of Ga. v. Joint City-County. Bd.

of Tax Assessors, 244 Ga. 378, 386 (3) (260 SE2d 315) (1979). Because Jay Lalaji

has only a circumscribed interest and limited use of the premises, the Agreement

amounts to a usufruct. We therefore affirm the trial court’s judgment.

      Judgment affirmed. Miller, P. J., and Mercier, J., concur.

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