ORDERS:
FINAL ORDER AND DECISION
This matter is before me pursuant to S.C. Code Ann. § 12-60-2540 (Supp. 1998) upon
Petitioner's request for contested case hearing. Petitioner Bunch Realty Company, Inc. ("Taxpayer")
contests the valuation of his property for the 1998 tax year by Respondent Charleston County
Assessor ("Assessor"). The parties exhausted all prehearing remedies with the Assessor and the
Charleston County Board of Assessment Appeals ("Board").
After notice to the parties, a hearing was conducted on June 1, 1999. Based upon the
evidence presented, I find and conclude that the true value of the subject property for the 1998 tax
year is $1,020,000. Any motions or issues raised in the proceedings, but not addressed in this Order
are deemed denied pursuant to ALJD Rule 29(C).
FINDINGS OF FACT
Having carefully considered all testimony, exhibits, and arguments presented at the hearing
of this case, and taking into account the credibility and accuracy of the evidence, I make the
following Findings of Fact by a preponderance of the evidence:
1. The Taxpayer owns an 18.7 acre parcel located at 6819 Rivers Avenue in North
Charleston, South Carolina, which is the subject of this contested case hearing.
2. The subject property is identified as Tax Map No. 475-07-00-017.
3. As of December 31, 1997, improvements to the subject property consisted of a 164-pad mobile home park with utility hook-ups for those pads.
4. As of December 31, 1997, the two acres of the property fronting Rivers Avenue were
zoned for business use ("B-2") and the remaining 16.7 acres were zoned for residential use ("R-3").
The front two acres of the property were used for mobile home sales.
5. Access to the subject property is from Rivers Avenue, a six-lane road which serves
as a major traffic artery in North Charleston. To the rear of the property is Interstate 26.
6. The subject property is well insulated from residential properties.
7. The Assessor originally valued the subject property at $1,079,200 for the 1998 tax
year. This valuation did not attribute any value to the improvements, which had substantially
deteriorated. After the Taxpayer appealed the assessment to the Charleston County Board of
Assessment Appeals, the Assessor adjusted the valuation to $1,020,000.
8. On January 19, 1999, the Charleston County Board of Assessment Appeals
determined the true value of the subject property to be $1,020,000 for the 1998 tax year. The
Taxpayer contends that the value of the subject property as of December 31, 1997 was $500,000.
9. Both parties agree that the market approach to valuation is the only appropriate
method of valuation for the subject property.
10. The Taxpayer's appraiser performed an appraisal of the subject property on February
2, 1998. The expressed function of the appraisal was to estimate market value for asset management
purposes.
11. At the time of the Taxpayer's appraisal, only 50 of the 164 mobile home pads were
occupied.
12. The Assessor appraised the subject property on December 11, 1998 using the market
approach to valuation. The expressed function of the appraisal was to estimate the market value of
the property for ad valorem tax purposes.
13. At the time of the Assessor's December 7, 1998 inspection of the property, there was
only 20% to 30% occupancy of the mobile home park.
14. In determining value under the market approach, the Assessor used three commercial
properties as comparable properties based on his determination that the highest and best use of the
subject property was commercial. All three comparables were mobile home sales lots with no
improvements, and all three of these sales took place in 1996.
15. The Assessor made adjustments to the comparables for variations in size from the size
of the subject property.
16. As a part of his appraisal, the Assessor performed a study of the area immediately
surrounding the subject property to determine the existing land uses in the area. The Assessor
concluded that the area is commercial in nature and that residential use is declining.
17. As of December 31, 1997, the residential use for the rear 16.7 acres of the subject
property was not compatible with the land use of other properties in the surrounding area.
18. Both the Assessor and the Taxpayer's appraiser interviewed the local zoning
administrator in an attempt to assess the probability of a zoning change for the 16.7 acres and its
effect on the determination of the property's highest and best use. The Taxpayer's appraiser
conducted an interview with the Zoning and Planning Administrator for the City of North
Charleston, Mr. William Gore, some time prior to February 2, 1998. The Assessor conducted
interviews with Mr. Gore on or about September 20, 1998 and on December 7, 1998.
19. The Assessor's interviews with Mr. Gore indicated that a change in the subject
property's zoning classification from residential to commercial use would probably be granted upon
the submission of an application for such a change.
20. The Taxpayer's appraiser's interview with Mr. Gore indicated that an upgrade in the
subject property's zoning classification to industrial use was unlikely. The Taxpayer's appraiser did
not inquire into the possibility of a zoning change from residential to commercial use for the subject
property.
21. On October 6, 1998, the Zoning and Planning Administrator for the City of North
Charleston received an application from the Taxpayer requesting an upgrade in zoning classification
to industrial use ("M-2") for the subject property.
22. On December 22, 1998, the City Council for the City of North Charleston approved
the change in zoning classification for the subject property to M-2.
23. As of December 31, 1997, a zoning change for the rear 16.7 acres of the subject
property from residential to commercial use was highly probable.
24. As of December 31, 1997, the highest and best use for the rear 16.7 acres of the
subject property was commercial.
DISCUSSION
"The pertinent date to determine the value of property for a given tax year is December 31st
of the preceding year." Lindsey v. South Carolina Tax Comm'n, 302 S.C. 274, 395 S.E.2d 184, 186
(1990), citing S.C. Code Ann. § 12-37-900 (1976) and Atkinson Dredging Co. v. Thomas, 266 S.C.
361, 223 S.E.2d 592 (1976). The Taxpayer argues that the Assessor's assigned value for the subject
property is greatly overstated under the zoning and existing uses on December 31, 1997 for the 1998
tax year. The Taxpayer reasons that any appraisal of the subject property must be based upon the
zoning existing on December 31, 1997 and not on zoning which may have gone into effect at a later
time. The Taxpayer has the burden of showing that the Assessor's valuation is incorrect. Cloyd v.
Mabry, 295 S.C. 86, 367 S.E.2d 171 (Ct. App. 1988).
In valuing property, an assessor should take into consideration all relevant factors and
circumstances bearing on this determination which are within his knowledge or brought to his
attention. 84 C.J.S. Taxation § 410 at 784-785 (1954). In estimating the value of land, all of its
elements or incidents which affect market value or would influence the mind of a purchaser should
be considered, such as location, quality, condition, and use. See 84 C.J.S. Taxation § 410 at 784;
§ 411 at 794 (1954).
Land value must always be considered in terms of highest and best use. Rule 1-3 of the
Uniform Standards of Professional Appraisal Practice;(1) Appraisal Institute, Appraisal of Real Estate
323 (11th ed. 1996).(2) Highest and best use is the use which will most likely produce the highest
market value, greatest financial return, or most profit from the use of a particular piece of real estate.
State National Bank v. Planning and Zoning Comm'n, 239 A.2d 528 (Conn. 1968). The highest and
best use of land must be legally permissible. Appraisal Institute, Appraisal of Real Estate 303 (11th
ed. 1996). However, the reasonable probability of a zoning change must be considered, and highest
and best use recommendations may rely on the probability of a zoning change. Id. at 227, 304; see
also South Carolina Dept. of Highways & Public Transportation v. Cheston, 278 S.C. 464, 298
S.E.2d 447 (1982) (testimony of appraiser regarding reasonable basis for zoning change was properly
considered by jury in determining market value of property as element of damages); Bonney v.
Granger, 300 S.C. 362, 387 S.E.2d 720 (Ct. App. 1990) (Master properly accepted bid on property
based on contingency that it could be rezoned to commercial classification).
In developing a real property appraisal, an appraiser must . . . consider
the effect on use and value of the following factors: existing land use
regulations, reasonably probable modifications of such land use
regulations, economic demand, the physical adaptability of the real
estate, market area trends, and the highest and best use of the real
estate.
Rule 1-3, Uniform Standards of Professional Appraisal Practice ("USPAP"). Further, in considering
the highest and best use, an appraiser should develop the concept to the extent that is required for
a proper solution of the appraisal problem being considered. Comment to Rule 1-3, USPAP.
In investigating the probability of a zoning change, the appraiser may interview planning and
zoning staff of the local municipality and study patterns of zoning change to assess the likelihood
of a change. Appraisal Institute, Appraisal of Real Estate 228 (11th ed. 1996). Further, the
appraiser can generally eliminate those uses that are clearly not compatible with existing uses in the
area. Id. at 228, 304. The appraiser may also prepare a forecast of land development for the area.
Id. If the zoning of the subject site is not compatible with the probable forecast uses, the likelihood
of a change in the zoning is especially high. Id.
In the instant case, the Taxpayer does not dispute that property should be valued at its highest
and best use. Rather, the Taxpayer argues that the this principle of valuation is limited by the
requirement that the use must be legally permissible. While the highest and best use of the subject
property must be legally permissible, a probability of a zoning change must be considered, as was
implicitly recognized by the Taxpayer's appraiser, Mr. Fred Attaway. Mr. Attaway testified that the
reason he interviewed the local zoning administrator was to assess the probability of a zoning change
in determining the highest and best use of the subject property.
The Assessor's extensive investigation into the probability of a zoning change for the subject
property was proper and necessary: the Assessor explored the possibility of multiple zoning
classifications with Mr. Gore, followed the status of the Taxpayer's application for a zoning upgrade,
and explored in detail the trends of property uses in the surrounding area. While the Gore interviews
conducted by both appraisers took place after the required valuation date of December 31, 1997, the
amount of time between that date and the interview dates was not enough to significantly diminish
the probative value of the resulting information, especially when considered in light of the previously
existing commercial nature of the surrounding area. In any event, the Assessor's determination of
highest and best use is independently supported by his investigation of land uses in the area
immediately surrounding the subject property. The area is commercial and the Taxpayer's
residential use was clearly not compatible with the commercial nature of the area. Therefore, the
Assessor properly eliminated residential use in determining the highest and best use of the subject
property. Appraisal Institute, Appraisal of Real Estate 228, 304 (11th ed. 1996).
CONCLUSIONS OF LAW
Based upon the Findings of Fact, I conclude as a matter of law, the following:
1. Jurisdiction is vested with the Administrative Law Judge Division pursuant to S.C.
Code Ann. § 12-60-2540 (Supp. 1998), S.C. Code Ann. § 1-23-600(B) (Supp. 1998) and S.C. Code
Ann. § 1-23-310 (Supp. 1998).
2. Land is unique, as no parcel is identical to another. Unlike commodities, it does not
have a fixed market price at a given period and its value is determined by the estimate of the person
who values it. 84 C.J.S. Taxation § 411 at 793 (1954). "Generally, the proper valuation of realty
for taxation is a question of fact, to be ascertained in each individual case in the manner prescribed
by statute." Id.
3. S.C. Code Ann. § 12-37-930 (Supp. 1998) provides:
All real property shall be valued for taxation at its true value
in money which in all cases shall be held to be the price which the
property would bring following reasonable exposure to the market,
where both the seller and buyer are willing, are not acting under
compulsion, and are reasonably well informed as to the uses and
purposes of which it is adapted and for which it is capable of being
used.
(emphasis added). Fair market value is the measure of true value for taxation purposes under this
statute. Lindsey v. South Carolina Tax Comm'n, 302 S.C. 504, 397 S.E.2d 95 (1990).
4. "The pertinent date to determine the value of property for a given tax year is
December 31st of the preceding year." Lindsey v. South Carolina Tax Comm'n, 302 S.C. 274, 395
S.E.2d 184, 186 (1990), citing S.C. Code Ann. § 12-37-900 (1976) and Atkinson Dredging Co. v.
Thomas, 266 S.C. 361, 223 S.E.2d 592 (1976).
5. The Taxpayer has the burden of showing that the Assessor's valuation is incorrect.
Cloyd v. Mabry, 295 S.C. 86, 367 S.E.2d 171 (Ct. App. 1988).
6. In valuing property, an assessor should take into consideration all relevant factors and
circumstances bearing on this determination which are within his knowledge or brought to his
attention. 84 C.J.S. Taxation § 410 at 784-785 (1954). In estimating the value of land, all of its
elements or incidents which affect market value or would influence the mind of a purchaser should
be considered, such as location, quality, condition, and use. See 84 C.J.S. Taxation § 410 at 784;
§ 411 at 794 (1954).
7. "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., Inc. v. Cox, 265 S.C. 270, 217
S.E.2d 789 (1975).
8. South Carolina courts, as well as other jurisdictions, have relied on the Appraisal
Institute's standards for valuation as published and updated in several editions of The Appraisal of
Real Estate. See, e.g., South Carolina Tax Commission v. South Carolina Tax Board of Review, 287
S.C. 415, 339 S.E.2d 131 (Ct. App. 1985); Badische Corporation (BASF) v. Town of Kearny, 288
N.J.Super. 171, 672 A.2d 186, 189 (1996).
9. Land value must always be considered in terms of highest and best use. Rule 1-3 of
the Uniform Standards of Professional Appraisal Practice; Appraisal Institute, Appraisal of Real
Estate 323 (11th ed. 1996).
10. Highest and best use is the use which will most likely produce the highest market
value, greatest financial return, or most profit from the use of a particular piece of real estate. State
National Bank v. Planning and Zoning Comm'n, 239 A.2d 528 (Conn. 1968).
11. The highest and best use of land must be legally permissible. Appraisal Institute,
Appraisal of Real Estate 303 (11th ed. 1996). However, the reasonable probability of a zoning
change must be considered, and highest and best use recommendations may rely on the probability
of a zoning change. Id. at 227, 304; see also South Carolina Dept. of Highways & Public
Transportation v. Cheston, 278 S.C. 464, 298 S.E.2d 447 (1982); Bonney v. Granger, 300 S.C. 362,
387 S.E.2d 720 (Ct. App. 1990).
12. In developing a real property appraisal, an appraiser must consider existing land use
regulations, reasonably probable modifications of such land use regulations, economic demand, the
physical adaptability of the real estate, market area trends, and the highest and best use of the real
estate. Rule 1-3, USPAP.
13. In considering the highest and best use, an appraiser should develop the concept to
the extent that is required for a proper solution of the appraisal problem being considered. Comment
to Rule 1-3, USPAP.
14. In investigating the probability of a zoning change, the appraiser can generally
eliminate those uses that are clearly not compatible with existing uses in the area. Appraisal
Institute, Appraisal of Real Estate 228, 304 (11th ed. 1996). If the zoning of the subject site is not
compatible with the probable land development for the area, the likelihood of a change in the zoning
is especially high. Id.
15. To determine a fair market price for the Taxpayer's property, comparisons of the sale
price of other properties of the same character may be utilized. See Appraisal Institute, The
Appraisal of Real Estate at 367 (10th ed. 1992); Cloyd v. Mabry, 295 S.C. 86, 367 S.E.2d 172 (Ct.
App. 1988); 84 C.J.S. Taxation §§ 410-411 at 785, 797 (1954). While it is impossible to predict
with certainty what a particular property will sell for, utilizing comparable sales is a good indicator
of what a potential purchaser will likely pay and it provides probative evidence of the market value
of the subject property, if the comparables are similar in character, location, and physical
characteristics. See 84 C.J.S. Taxation § 411 (1954).
16. Where an expert's testimony is based upon facts sufficient to form the basis for an
opinion, the trier of fact determines its probative weight. Berkeley Elec. Coop. v. S.C. Public Serv.
Comm'n, 304 S.C. 15, 402 S.E.2d 674 (1991); Smoak v. Liebherr-Am., Inc., 281 S.C. 420, 422, 315
S.E.2d 116, 118 (1984).
17. A trier of fact is not compelled to accept an expert's testimony, but may give it the
weight and credibility he determines it deserves and may accept the testimony of one expert over
another. Florence County Dep't of Social Serv. v. Ward, 310 S.C. 69, 425 S.E.2d 61 (1992);
Greyhound Lines v. S.C. Public Serv. Comm'n, 274 S.C. 161, 262 S.E.2d 18 (1980); S.C. Cable
Tel. Assn. v. Southern Bell Tel. and Tel. Co., 308 S.C. 216, 417 S.E.2d 586 (1992).
18. As of December 31, 1997, the highest and best use for the rear 16.7 acres of the
subject property was commercial.
19. The Taxpayer failed to carry his burden of showing that the Assessor's valuation is
incorrect.
20. The true value of the Taxpayer's property as of December 31, 1997 was $1,020,000.
ORDER
Based upon the foregoing Findings of Fact and Conclusions of Law,
IT IS HEREBY ORDERED that the Assessor value the Taxpayer's property, 6819 Rivers
Avenue, North Charleston, South Carolina, for the 1998 tax year at $1,020,000.
AND IT IS SO ORDERED.
____________________________________
JOHN D. GEATHERS
Administrative Law Judge
Post Office Box 11667
Columbia, South Carolina 29211-1667
June 15, 1999
Columbia, South Carolina
1. All appraiser apprentices and state registered, licensed, and certified appraisers are
required to conform their professional conduct to the Uniform Standards of Professional
Appraisal Practice. S.C. Code Ann. § 40-60-145 (Supp. 1998).
2. South Carolina courts, as well as other jurisdictions, have relied on the Appraisal
Institute's standards for valuation as published and updated in several editions of The Appraisal
of Real Estate. See, e.g., South Carolina Tax Commission v. South Carolina Tax Board of
Review, 287 S.C. 415, 339 S.E.2d 131 (Ct. App. 1985); Badische Corporation (BASF) v. Town
of Kearny, 288 N.J.Super. 171, 672 A.2d 186, 189 (1996). |