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Ohio Property Tax Updates

UPDATED december 2018

The Supreme Court of Ohio (SCO) affirmed in its recent Westerville [1] and GC Net Lease [2] 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.[3]  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.[4] 

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 Tax Year 2018 Property Tax Assessment Review Period Approaching 

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.

Siegel Jennings Co. L.P.A.
American Property Tax Counsel (APTC)

[1] Westerville City Schools Bd. of Edn. v. Franklin Cty. Bd. of Revision, Slip Opinion No. 2018-Ohio-3855
[2] GC Net Lease @ (3) (Westerville) Investors, L.L.C. v. Franklin Cty. Bd. of Revision, 154 Ohio St.3d 121, 2018-Ohio-3856
[3] Terraza 8, L.L.C. v. Franklin Cty. Bd. of Revision, 150 Ohio St.3d 527, 2017-Ohio-4415
[4] Bronx Park S. III Lancaster, L.L.C. v. Fairfield Cty. Bd. of Revision, 153 Ohio St.3d 550, 2018-Ohio-1589

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