ORDERS:
FINAL ORDER AND DECISION
STATEMENT
OF THE CASE
This
is a contested case brought by the Petitioner concerning a property tax valuation
matter. Rather than disputing the fair market value, Petitioners assert their
property is not equitably valued in relation to other properties in the
surrounding area. Accordingly, Petitioners seek a reduction of the Assessor’s
valuation of $793,000 to $583,000 so as to place it in parity with the
Assessor’s appraised values of other allegedly similar properties in the area for
the 2004 tax year. The Assessor argues that all properties in the County have
been valued fairly and that no reduction is warranted. After notice of the
date, time, place, and nature of the hearing was timely given to all parties, a
hearing was held at the Administrative Law Court on April 13, 2006.
ISSUE
Whether
the assessor properly equitably appraised the taxpayers’ property with
comparable properties for the 2004 tax year? If not, what is the value of the
taxpayer’s property for the 2004 tax year?
FINDINGS
OF FACT
Having observed the
witnesses and exhibits presented at the hearing and taking into consideration
the burden of persuasion and the credibility of the witnesses, I make the
following findings of fact by a preponderance of evidence:
Background
Petitioners own real
property located at 93 Shelmore Boulevard in Mount Pleasant, Charleston County,
South Carolina, identified as tax map number 535-06-00-268. The property is
an owner occupied, three story single family residence built in 2003 on a .28
acre lot in an upscale neighborhood known as I’on. Based upon a field review
of Petitioners’ property, the Charleston County Assessor determined that
Petitioners’ home’s total square footage was 5,022 square feet. The Assessor
also rated Petitioners’ residence as “special” quality which is the highest
designation above the ratings of excellent, very good, fair and poor. The
Assessor determined that Petitioners’ property was worth $851,000 for the 2004
tax year
Petitioners appealed
the assessment to the Charleston County Board of Assessment Appeals (Board) on
the grounds that the property’s equity value is not equally appraised when
compared to like surrounding properties. They contended that the value of
their property should be $607,000. Prior to the hearing before the Board,
Petitioners provided a blueprint of their residence to the Assessor showing its
exact square footage. Subsequently, the Assessor adjusted the total amount of
square feet down 369 square feet from 5,022 to 4,653 square feet, and reduced
the value to $803,000. After a hearing on August 17, 2005, the Board affirmed
the Assessor’s value of $803,000 for tax year 2004.
The Petitioners’ now
contend that the value of their property should be $583,800 because the
Assessor did not properly measure the total square footage of their property
and did not equitably appraise the property with comparable properties for the
2004 tax year.
Square
Feet of Residence
Petitioners argue that
the value for their home should be appraised as having only 4,170 square feet
because that is the square footage that is considered habitable by the
International Building Code that Charleston County has adopted. In other
words, Petitioners contend that the total amount of square feet of the third
floor should not be considered at all in the valuation of the property because
it does not qualify as habitable space based on the regulations of the
International Building Code.[1]
Section R304 of the
International Building Code, Minimum Room Areas provides: “Portions of a room
with sloping ceiling measuring less than 5 feet (1524 mm) or a furred ceiling
measuring less than 7 feet (2134 mm) from the finished floor to the finished
ceiling shall not be considered as contributing to the minimum required
habitable area for that room.” The Code further provides that “habitable rooms
shall not be less than 7 feet (2134 mm) in any horizontal dimension.”
Petitioners argued that none of the rooms on the third floor fall within the
requirement of having at least seven feet for habitable space because the width
of the ceiling at the seven foot height is five feet six inches.
The Assessor calculated
the square footage of Petitioners’ third floor based upon a measurement
beginning at a height of five feet from the knee-walls. At the hearing, the
Assessor conceded that he should have measured the square footage of the third
floor based upon a measurement beginning at seven feet from the knee-walls.
Measuring the square footage of the third floor at a height of seven feet from
the knee-walls rather than five feet from the knee-walls results in a reduction
of 106 square feet from Petitioners’ home. That reduction changes the total
square footage of the home from 4,653 to 4,547 square feet.
Nevertheless, the
evidence did not establish that the Assessor must assess properties and arrive
at values in accordance with the definition of “habitable area” of the
International Building Code. Rather, general principles of appraising provide
that when appraising the value of Petitioners’ home, the square footage of the
third floor should be considered in determining the value of the property. Moreover,
even if it was not listed in the square footage, the third floor includes
finished hardwood floors, painted ceiling and walls, electrical outlets, and a
bathroom. Accordingly, the third floor obviously adds value to the house and
thus, at a minimum, it is an amenity that adds value to the Petitioners’
property. In fact, if the third floor was considered as a separate amenity
rather than generally in the square footage, it would add even greater value to
the property.
Equity
Analysis
Petitioners also argue
that the property should be valued at $140 per square foot. In arriving at the
amount of dollars per square foot, Petitioners relied upon a comparison of
their property with seventeen lake front properties located in the I’on
subdivision and five properties located in the Olde Park subdivision, which is
adjacent to I’on.
However, Petitioners’
comparables are not special quality properties such as those cited by the
Assessor in his equity analysis. Instead, evidence shows the comparables in
I’on are rated a lower quality of excellent or very good. Five of the
seventeen comparables in I’on contained no photographs of the house. The twelve
houses that had photographs showed that the houses are built quite close
together along the lake front. The lots are smaller than Petitioners’ lot and
do not afford the privacy that the taxpayers’ lot offers because it is
completely buffered on one side. The comparables in Olde Park are not similar
to Petitioners’ property either. The community itself does not offer the prestige
or amenities of I’on. Furthermore, again none of those comparables are special
properties or have the amenities that Petitioners’ house and lot offer. Three
of the five comparables were built of wooden siding with attached garages, and
only one of the two was built of brick with a detached garage. Therefore, the
comparables selected by Petitioners do not have the quality of construction and
amenities of the Petitioners’ house and lot; therefore, I do not find them
pertinent.
On the other hand, the
equity analysis performed by the Assessor was of similar properties in the I’on
subdivision. Moreover, his approach was consistent with the best practices for
valuation methods under the equitable analysis technique. The Assessor examined
eighteen houses rated special quality as of 2004. Thirteen of those houses
were in I’on and the remaining five were in Olde Park. The six most comparable
houses were located in I’on; all had square footage in excess of 3,000 square
feet and all were built from the year 2000 to the present. The total dollars
per square foot of those six comparables and Petitioners’ property varied from
$168, $171, $173, $177, $185, $258, and $261 per square foot. Petitioners’
property is assessed at $173 per square foot which is at the lower end of the
array. The median is $185 per square foot and the average is $212 dollars per
square foot. Petitioners’ property was significantly below both the median and
average.
Furthermore, in
evaluating his appraisal the Assessor also valued Petitioners’ lot independently.
There were several home sites that were available in 1999 in the I’on
subdivision. That list included the six comparable properties noted above and
Petitioners’ property, which was shown in the Shelmore Home sites section as a
park view lot. That section revealed sale prices ranging from $55,000 to
$88,250, and showed Petitioners’ home site at a list price of $87,750. The
Assessor made further adjustments to the dollars per square foot analysis of
the six comparable properties by making adjustments due to the various lot
influences, i.e., deepwater, lakefront, marsh view, interior, etc. The lot
adjustments lowered the dollars per square foot range from $168-$261 per square
foot to $164-$255 per square foot.
Sales
Ratio Analysis
In addition to
analyzing the value of square feet of Petitioners’ residence, the Assessor also
submitted evidence of a sales ratio analysis of the I’on subdivision and five
surrounding subdivisions in Mount Pleasant using sales that occurred in 2003
compared to the appraised values in the County’s data base since the 2001
reassessment. The sales ratio resulted from a comparison of ultimate sales
prices in the market to the value the Assessor placed upon the property. This
is another tool the Assessor uses to determine if the properties in the County
are equitably appraised or how close the properties are to the actual market
value.
Seventy-four sales
occurred in I’on, four sales in Hobcaw; sixteen sales in Hobcaw Creek
Plantation; nine sales in Hobcaw Point; six sales in Molasses Creek
subdivision; and nine in Olde Park subdivision. The average sales ratio for
I’on was 68%; Hobcaw was 84%; Hobcaw Creek Plantation was 77%; Hobcaw Point was
78%; Molasses Creek was 79%; and Olde Park was 77%. The assessed values in
I’on were thus on average less than the reported sales prices in any other
comparable subdivision. Therefore, the properties in the I’on subdivision not
only were reasonably valued, but were, in fact, undervalued and below equity
when compared to the surrounding subdivisions. Furthermore, the increase in
the I’on subdivision’s sale prices in 2003 is another indication that the
properties in I’on offer more in value such as high quality construction and
amenities.
Conclusion
The
Assessor’s comparables possess similar characteristics to Petitioners’ property
and, with the adjustments made by the Assessor, provide an accurate reflection
of the equitable value of Petitioners’ property in relation to similar properties
in the surrounding area. Moreover, Petitioners’ property is aptly rated as
special quality in light of its quality of construction, materials, amenities
and location. The residence has ornamental brick veneer, a copper roof,
hardwood floors, top of the line cabinetry, an interior wall and archway in the
kitchen with exposed brick, eight foot high solid wood panel doors, extensive
moldings, chair rails and wainscoting, iron handrails, copper gutters, one
masonry fireplace and one pre-fabricated fireplace, four bedrooms, several bath
rooms and a large screened porch of 632 square feet. It is located on
desirable buffered, corner lot offering additional privacy. It has a two-door,
detached garage of ornamental brick veneer. Consequently, Petitioners’ did not
establish that their property was wrongfully assessed. I therefore find that a
value of $173 per square foot is proper. Furthermore, in light of the Assessors
concession to adjust the total amount of square feet down to 4,547 square feet,
I find that the property should be valued at $793,000.
CONCLUSIONS
OF LAW
Based upon the above
findings of fact, I conclude the following as a matter of law:
1. A taxpayer
may appeal a property tax assessment determination of a county board of
assessment by requesting a contested case hearing before the ALC. S.C. Code
Ann. § 12-60-2540(A) (Supp. 2005). As the party contesting the assessing
authority's valuation, the Petitioner has the burden of proving the actual
value of the property at issue. See Reliance Ins. Co. v. Smith,
327 S.C. 528, 537, 489 S.E.2d 674, 679 (Ct. App. 1997). Thus, in this case,
the Taxpayer has the burden of proving the value of their property should be
$583,800.
2. The taxable
status of real property for a given year is to be determined as of December 31
of the preceding tax year. S.C. Code Ann. § 12-37-900 (2000); Atkinson
Dredging Company v. Thomas, 266 S.C. 361, 223 S.E. 2d 592 (1976).
3. “Appraisal
is, of course, not an exact science and the precise weight to be given to any
factor is necessarily a matter of judgment, for the court, in the light of the
circumstances reflected by the evidence in the individual case.” Santee Oil
Co. v. Cox, 265 S.C. 270, 277, 217 S.E.2d 789, 793 (1975). Nevertheless, S.C.
Code Ann. § 12-37-930 (Supp. 2005) sets forth how real property must be valued:
All property must be valued for taxation at its true value in
money which in all cases is the price which the property would bring following
reasonable exposure to the market, where both the seller and the buyer are
willing, are not acting under compulsion, and are reasonably well informed of
the uses and purposes for which it is adapted and for which it is capable of
being used.
See also S.C. Const.
Art. III § 29 (“All taxes upon property, real and personal, shall be laid upon
the actual value of the property taxed.”). Therefore, fair market value is the
measure of true value for taxation purposes. Lindsay v. S.C. Tax Comm’n,
302 S.C. 504, 397 S.E. 2d 95 (1990). “The taxpayer may, however, show by other
evidence that the assessing authority's valuation is incorrect. If he does so,
the presumption of correctness is then removed and the taxpayer is entitled to
appropriate relief.” Cloyd v. Mabry, 295 S.C. 86, 367 S.E. 2d 171, 173
(Ct. App. 1988).
3. Petitioners
contend that the square footage of the third floor should not be considered in
the valuation of their property because it is not habitable space pursuant to
the regulations of the International Building Code. To the contrary, the
Assessor testified that the tenets of the International Building Code are not
controlling when appraising the value of a property. Furthermore, 84 C.J.S. Taxation § 511, at 554 (2001) sets forth that “[i]n estimating the value of land, an
assessor should take into consideration all of its elements or incidents. . .
.” Thus, Petitioners’ argument that the total amount of square feet of the
third floor space should be eliminated from consideration by the Assessor in
arriving at the value of Petitioners’ property is unjust and contravenes case
law. Moreover, even if it was not listed in the square footage, the third
floor is an amenity that has value.
4. Petitioners
also argue that the Assessor did not equitably appraise the properties in the
I’on subdivision with comparable properties for the 2004 tax year. S.C. Code
Ann. § 12-43-210(A) (Supp. 2005) requires that all property “must be assessed
uniformly and equitably.” However, neither the South Carolina Constitution nor
the United States Constitution requires absolute accuracy in property tax matters. Allied Stores of Ohio v. Bowers, 358 U.S. 522 (1959; Reliance Ins.
Co. v. Smith, 327 S.C. 528, 489 S.E.2d 674 (Ct. App. 1997). “While our
constitution requires equality and uniformity in tax assessments, ‘[a]bsolute
accuracy with respect to valuation and complete equality and uniformity are not
practically attainable.’” 489 S.E.2d at 679 (quoting Wasson v. Mayes,
252 S.C. 497, 167 S.E.2d 304 (1969)). Rather, what is proscribed is the
intentional and systematic undervaluation of certain properties while other
properties in the same class are valued at fair market value. Sunday Lake Iron Co. v. Wakerfield Tp, 247 U.S. 350 (1918). To meet that burden,
more than a mere showing that other properties are undervalued must be shown. Owen
Steel Co., Inc. supra. “[A]s in any median figure, there are some
properties taxed at a higher figure than the median and some at a lower.” Owen
Steel, 337 S.E.2d at 882. Accordingly, the Taxpayer bears the burden of
proving that the undervaluation is not the result of a mere judgment call but
rather that the undervaluation is the result of an intentional and systematic
undervaluation.
In the instant case,
the Taxpayers failed to meet their burden of proof by showing that the
Assessor’s valuation is incorrect. More specifically, Petitioners failed to
prove that the “fair market value” of their residence was not $173 per square
foot. To the contrary, though the Assessor failed to present a traditional
market sales analysis, the Assessor established that its initial valuation was
made using a computerized mass appraisal analysis. An Assessor is allowed to
use mass appraisal techniques to estimate a property’s value for taxation
purposes. 84 C.J.S. Taxation § 510 (2001). In that regard, the Assessor
properly used a per square foot basis for measuring the value of Petitioners’
property with the value adjusted due to various factors such as quality of
construction and amenities, and lot influences. Furthermore, the evidence
established that the Petitioners’ residence has at least 4,653 square feet of
livable space. In addition, the Assessor’s comparables were most similar to
Petitioners’ property in quality of construction, design, amenities, and lot
influence. Those comparables reflected a value of at least $173 per square foot
valuation.
The
evidence also did not establish that other properties in the surrounding area
of Petitioners’ property were intentionally and systematically undervalued by the
Assessor. The Assessor performed an equity analysis comparing Petitioners’ property
to six other similar properties to ensure that the value assigned to the
property was in line with values assessed on similar properties in Charleston County. The Assessor also performed a sales ratio analysis of I’on and five
other subdivisions comparing the properties’ final values on the County’s books
for the 2001 reassessment to what the properties sold for in 2003. That
evidence established that the properties in I’on subdivision were, in fact,
undervalued and below equity when compared to the surrounding subdivisions.
Therefore, after making an adjustment lowering the amount of total square feet
of the property, Petitioners’ residence should be valued at $793,000.
ORDER
Based upon the above
Findings of Fact and Conclusions of Law:
IT IS HEREBY ORDERED that the Assessor value the Petitioners’ property for the tax year 2004 at
$793,000.
AND IT IS SO
ORDERED.
____________________________
Ralph King Anderson, III
Administrative Law Judge
July 12, 2006
Columbia, South Carolina
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