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Ohio Supreme Court Rules on Property Tax Assessment

by Morgan Thomas, Chicago, January 2018

 

The Ohio Supreme Court recently issued opinions on two property tax assessment issues. One case involved the best way to determine a property's value for taxes. The other reaffirmed that sale prices used to set assessments should reflect the price of the real estate only.

 

These cases set legal precedents that may be useful for property owners contesting their 2017 assessments. The appeal deadline is March 31, 2018.

 

Arms-Length Sale Price

 

In Huber Hts. City Schools Board of Education. v. Montgomery County Board of Revision, the court ruled that although a recent arm's-length sale price remains the best evidence of a property's true value, such evidence can be rebutted.

 

The opinion concerns the assessment of an 11 acre commercial retail property that was purchased for $550,000. The county auditor originally valued the property at $1,661,130 for the 2012 tax year. The buyer challenged the valuation arguing it should have been valued at the $550,000 sales price. The parties reached an agreement to value the property at $850,000 for 2012. However, the next year, the county auditor established a new property value of $2,199,700, which is more than two and a half times the agreed value from the prior year.

 

On appeal, the Board of Tax Appeals (BTA) reduced the property value to the $550,000 sales price. The Ohio Supreme Court recognized that the BTA has an independent statutory duty to determine the taxable value of a property, regardless of what the parties may agree to. The BTA considered the 2012 sales price as the best evidence for the 2013 tax year, and this was upheld by the Court.

 

A key consideration in determining an arm’s length sale is when the sale took place. Another issue is expenditures on improvements after the sale, which can be used as evidence for a higher valuation.

 

In Huber Heights the property owner spent $200,000 on post-sale improvements. Nevertheless, the BTA, however, found no evidence that the improvements substantially changed the property, and the 2012 sales price was upheld.

 

Sale Price for Assessment Must Reflect the Real Estate Alone

 

In Orange City School District Board of Education v. Cuyahoga County Board of Revision, the Ohio Supreme Court reaffirmed that sale prices used to set real property tax assessments should not include the value of non-real estate assets.

 

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. However $51,776 of that amount was payment for past due rent including past rent concessions owed by the tenant.

 

Justices ruled that the sale price for tax-valuation purposes is the amount paid for property-title transfer -- not amounts paid for other assets.