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Category Archives: Property Tax Valuation

St. Clair Township Sues for Property Tax Revenue Payments

Author By Finney Law FirmPosted on

St. Clair Township in Butler County, Ohio has filed suit against the City of Hamilton, the Butler County Commissioners, Butler County Treasurer, and Butler County Auditor to recover lost tax revenue owed to it for properties that were annexed and excluded from the Township into the City of Hamilton.

Ohio Revised Code Section 709.19 provides that when property is annexed and excluded from a township, that township is entitled to be made whole via payments of a portion of the property taxes it would have collected over the next twelve years.

In 2016, the City of Hamilton and County Commissioners acted to exclude from St. Clair Township thousands of parcels that had previously been annexed from the township. This action triggered the obligation to make St. Clair Township whole. The City of Hamilton has thus far refused to comply with its obligations under Ohio law.

The complaint details the missteps along the way in excluding the property as well as the failure to make St. Clair Township whole.

The case has been assigned to Judge Craig Stephens of the Butler County Court of Common Pleas.

St. Clair Township is represented by Chris Finney of Finney Law Firm and Curt Hartman of the Law Firm of Curt C. Hartman. Mr. Hartman is lead counsel in the case.

The Journal News has coverage of the lawsuit here.

Read the complaint below or here.

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Ohio Property Tax Valuation Reduction – Online auctions of bank owned property

Author By Finney Law FirmPosted on

We’ve heard it said a million times (and said it ourselves a million more), “the recent sale price of a piece of real estate is the best evidence of its value.” And the concept of sales price as value is so ingrained in our minds that we sometimes forget that this is just shorthand, that the actual language of the statute is what matters; and, ultimately, what must be proven before the board of revision or the board of tax appeals.

“In determining the true value of any tract, lot, or parcel of real estate under this section, if such tract, lot, or parcel has been the subject of an arm’s length sale between a willing seller and a willing buyer within a reasonable length of time, either before or after the tax lien date, the auditor may consider the sale price of such tract, lot, or parcel to be the true value for taxation purposes.” R.C. 5713.03

 

What is “Arm’s-Length”

What the actual language of the statute means is that the sale has to be arm’s-length: “A transaction between unrelated parties under no duress.” (Appraisal Institute). Boards of Revision and the Board of Tax Appeals look for the following factors when determining whether a sale price should be adopted as the true value:

  1. Buyer and Seller are typically motivated.
  2. Both parties are well informed or well advised and each is acting in his/her own best interest.
  3. A reasonable time is allowed for exposure in the open market.
  4. Payment is made in terms of case in U.S. dollars or financial arrangements comparable thereto and
  5. The price represents normal consideration for the property sold, unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.
The Board of Revision

Recently Ohio’s Ninth District Court of Appeals upheld a decision by the Board of Tax Appeals to reverse the decision of the Summit County Board of Revision to adopt the online auction price as the true value.

In Green Local Schools Board of Education v. Manolakis, et al. 2019-Ohio-4250, the property owners initially filed a complaint with the Summit County Board of Revision seeking to lower the value of their home from $1,498,350.00 to $836,300 – the owners’ purchase price in an online auction. Before the Board of Revision, the owners explained that the property had been subject of a sheriff’s sale and that the foreclosing bank had purchased the property at that sale. A few months later, the bank placed the property for sale via an online auction site, hubzu. The owner’s put in a bid and won.

The Board of Revision accepted the owner’s testimony and adopted the sale price. However, the school board appealed to the Board of Tax Appeals and pointed to a lack of evidence supporting a finding that the auction was “arm’s-length.”

The Board of Tax Appeals

After the property owners prevailed at the Board of Revision, the local school board (which typically receive 60-70% of the property tax collections) filed an appeal arguing that the owners did not meet their burden to show that the sale was “arm’s-length.”

The owners testified at the Board of Revision that they had no relationship with the seller but were unable to provide any information about the bank’s motivation in selling. Notably, the owners were unable to show that the property had been marketed for sale other than via a sign in the yard of the property one week before the auction, or whether there was a minimum bid for the auction, or any other bidders.

Another problem for the owners is that they agreed to let the Board of Tax Appeals decide the case without putting on any additional evidence. So the owners forfeited the right to supplement the evidence to bolster their claim that the sale was arm’s-length.

The Board of Tax Appeals, looking only at what was before the Board of Revision found that there was not enough evidence in the record to show that the sale was arm’s-length. And, once the sale price was disregarded, the only evidence of value was the auditor’s original value. So the Board of Tax Appeals reinstated the auditor’s value $1,498,350.00.

The Court of Appeals affirmed the decision of the Board of Tax Appeals, finding that “we cannot say that the BTA was unreasonable in concluding that the evidence of value presented by Mr. and Mrs. Manolakis to the BOR was not sufficient.”

The Lesson

Don’t take the Board of Revision process lightly. This is a serious endeavor – particularly when you are seeking a substantial  reduction in value. Remember, when you bring a challenge to the Board of Revision it is your burden to prove that your proposed value is right and that the auditor’s value is wrong. Bring everything you can think of to prove your case. And if there is an appeal, take the opportunity to bring in additional evidence to bolster your case.

Your Case

Finney Law Firm has represented commercial and residential property owners (and one school board) before the Boards of Revision throughout Ohio and before the Ohio Board of Tax Appeals in property tax valuation challenges.

Every case should be evaluated based on its own unique set of circumstances. The time to file a challenge begins January 1 of each year and ends March 31. If you have questions about the value of your property, or if you recently purchased property at a price less than the auditor’s value, we can help. More information about the property tax valuation process is available here.

Contact Christopher P. Finney at 513-943-6655 or contact us here.

Another Win for Leased Fee Property Buyers

Author By Finney Law FirmPosted on

The Ohio Supreme Court recently issued decisions in three cases further clarifying the valuation of “leased fee sales” (property that is subject to an existing lease at the time of the sale).

The purchase price of a leased fee interest, particularly when the lease has a many years left, more accurately reflect the value of the cash flow that the lease will generate rather than the value of the underlying real estate. This is why real estate investors had for years sought changes to Ohio’s property valuation law (the legislature  acted in 2013). Since then, the battle has been in the courts to determine how the changes would be implemented.

In recent years, the courts have given life to those changes in decisions ordering the board of tax appeals to disregard the sales in “sale leaseback transactions” and in these most recent cases, in ordering the Board of Tax Appeals to consider appraisal evidence of leased fee sales.

The Court issued decisions on that issue in three cases on May 6, 2019:

Store Master Funding VI, LLC v. Franklin County Board of Revision, 155 Ohio St.3d 253, 2018-Ohio-4301

Spirit Master Funding IX, LLC v. Cuyahoga County Board of Revision, 155 Ohio St.3d 254, 2018-Ohio-4302

Northland-4, LLC v. Franklin County Board of Revision, 155 Ohio St.3d 257, 2018-Ohio-4303

The Court also issued a decision regarding the exclusion of easement rights in determining the value “as if unencumbered.” The Court found that the express language of the statute, ordering that the value of real estate be determined “as if unencumbered” means that the value of an easement benefiting a parcel should be excluded when determining the value of that parcel. Worthington City Schools Bd. of Edn. V. Franklin County Board of Revision, 155 Ohio St.3d 187, 2018-Ohio-2909

The end result for all four of these cases points to a better opportunity for real estate investors to challenge the auditor’s adoption of the recent sale price of properties subject to leases or other encumbrances,

Learn more about Finney Law Firm’s Property Valuation practice here.

Finney Law Firm and Matt Nolan Present: Property Valuation Challenges

Author By Finney Law FirmPosted on

Warren County Auditor Matt Nolan and the Finney Law Firm will give a presentation to the Real Estate Investor’s Association of Greater Cincinnati (REIAGC) covering the property valuation challenge process.

The correct valuation of real property can mean the difference between success and failure for residential and commercial landlords, and their tenants.

On Thursday, March 7, our attorney and Matt Nolan will discuss the procedure for bringing a challenge, issues to consider prior to bringing a challenge, and next steps if the initial challenge is not successful.

Click on this link to the REIAGC’s website for more information or to register to attend. Registration is free for members, $35.00 for non-members.

Learn more about Warren County Auditor Matt Nolan here. Learn more about Finney Law Firm’s Property Valuation practice here.

Ohio Supreme Court Issues Instructive Decision in Property Valuation Case

Author By Finney Law FirmPosted on

In a unanimous per curiam opinion, the Ohio Supreme Court ruled that even when there is a recent arm’s-length sale, appraisal evidence of value should be considered to contradict the sale price.

In Spirit Master Funding IX, L.L.C. v. Cuyahoga Cty. Bd. of Revision, Slip Opinion No. 2018-Ohio-4302, the subject property was sold twice in 2014, one in August for $2,925,880; and again in December for $3,439,0290. The property was not subject to a lease at the time of the first sale, but was subject to a 20 year lease at the time of the second.

The Board of Tax Appeals adopted the August sale price as the true value, disregarding an appraiser’s opinion that the property’s true value as of January 1, 2014 was $1,535,000. The Board of Tax Appeals accepted the school board’s argument that the property owner did not dispute that the August 2014 sale was arm’s length, believing that question to be dispositive.

“The school board’s argument ignores the fact that appraisal evidence can both attack a sale price as evidence of true value and provide affirmative evidence of value in its own right” Spirit Master Funding IX, Slip Opinion No. 2018-Ohio-4302, ¶ 9.

The case has been remanded to the Board of Tax Appeals to give consideration to the testimony and report of the property owner’s appraiser.

This decision continues a trend at the Ohio Supreme Court to give force to the recent changes to Ohio’s property valuation regime.

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PROPERTY TAX VALUATION: Ohio Supreme Court Continues to Enforce Plain Meaning of Recent Amendments

Author By Finney Law FirmPosted on

As has been discussed in numerous posts on our firm’s blog, see here, here, and here, the changes to Ohio’s property valuation law enacted in 2012 are slowly coming into effect as the Ohio Supreme Court has been consistently ruling that the changes made by the legislator mean exactly what they say.

Notably, R.C. 5713.03 was amended specifically to require that real property be valued for taxation purposes, “as if unencumbered.” But auditors and school boards have resisted calls to apply the plain meaning of “as if unencumbered” to include leases, arguing that “as if unencumbered” refers only to liens or easements.

Yesterday (May 22, 2018) the Ohio Supreme Court weighed in again on the question in Lowe’s Home Centers, Inc. et al. v. Washington County Board of Revision, et al., Slip Opinion No. 2018-Ohio-1974, that “it is plain that a lease is an encumbrance and that R.C. 5713.03’s directive to value the realty ‘as if unencumbered’ means to value the realty as if it were free of encumbrances such as leases.” Id. at ¶19.

In Lowe’s, the County’s appraiser compared leased fee properties to the subject property to ascertain the value, and made adjustments to account for the leases. The Board of Tax Appeals adopted the value proposed by the County’s appraiser, but appeared to rely on a case decided prior to the amendments to R.C. 5713.03, thus leaving some question whether the Board of Tax Appeals analyzed the lease adjustments.

Unquestionably, the changes, aimed mostly at commercial property valuation, bring with them new challenges for Ohio’s auditors and school boards (the major recipient of property tax dollars). And there are certain to be calls for new amendments to undo some or all of the recent changes.

The deadline for filing Board of Revision Challenges has passed for this year. To learn about the Board of Revision process in preparation for next year, watch Chris Finney’s presentation here. Contact us here if you have questions about your commercial property valuation.

Proposed Legislation to Clarify Tax Levy Ballot Language

Author By Finney Law FirmPosted on

House Bill 488 sponsored by Ohio State Representatives Becker and Hood will require that the effect of proposed tax levies be more clearly explained on the ballot.

Under current law, information on the effect of a proposed tax levy is expressed based upon the “tax value” of real property (35% of the true value). The proposed law will provide information based on the effect of the tax levy using the fair market of real property, as well as the millage rate against the tax value.

The proposed change will make it easier for voters to understand tax levies and make more informed choices at the ballot box.

You can follow the progress of House Bill 488 here.

Ohio Real Estate Law: Ohio Auditors take aim at “LLC Loophole” transfers

Author By Finney Law FirmPosted on

Ohio imposes fees on the conveyance of real estate, and generally determines the value of real property based upon the sale price when the property is sold. One means of avoiding the conveyance fee and reporting the sale price is the use of a “LLC Loophole.”

The LLC Loophole is a means of conveying title to real property using an LLC as an intermediary, rather than transferring title directly from the seller to the buyer. A property owner transfers title to real estate to an LLC that she owns, and then sells the LLC itself to the buyer. One benefit of  this conveyance is that no conveyance fee is paid, and the auditor is not alerted to the sale price.

Consider this illustration:

Property owner owns a strip mall valued by the auditor at $500,000. She has received an offer to buy the property for $750,000, but the buyer wants to avoid the publicity of reporting the sale through a conveyance form and the automatic increase in tax value that would come by simply buying the property directly from the property owner. So, the property owner sets up a new limited liability company, Strip Mall, LLC; conveys title to the property to Strip Mall, LLC; and then sells her 100% ownership interest in Strip Mall, LLC to the buyer for $750,000. The only filing with the county auditor is the conveyance fee showing a fee exempt transfer from the property owner to the LLC. No one is alerted that the buyer now owns the strip mall or that it was valued at $750,000 in an arm’s length transaction.

Under the proposed law, when the property owner sells her ownership interest in the LLC, she would have to report that sale to the auditor as if she had sold the real estate directly to the buyer. At that point, the auditor would assess a conveyance fee, and the real estate would be taxed at the sale price. The proposed bill would require the reporting and payment of taxes whenever any interest in an LLC or other entity that owns real estate (directly or indirectly) takes place.

To be clear, there is nothing unlawful about using LLCs in property transfers, and it is a perfectly legitimate method for conveying real estate.

We expect that public school boards in particular, as well as other property tax funded organizations will lobby in support of this legislation; and that it will find opposition from real estate investors and small government advocates generally. Whether it is this particular bill or another future proposal, the LLC Loophole will be facing continued scrutiny and efforts to impose conveyance fees and determine the purchase price.

The Legislative Services Commission’s analysis and the bill text are below.

Finney Law Firm will be keeping an eye on this bill as it works through the Ohio Legislature.

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’tis the season for Ohio property tax reduction (along with a free how-to video)

Author By Christopher P. FinneyPosted on 1 Comment on ’tis the season for Ohio property tax reduction (along with a free how-to video)

Tax bills just hit the mailboxes of Hamilton County taxpayers this week, and our phone is ringing with questions about our Ohio property tax valuation reduction services.

Sample calls:

Many of the cases have merit, and we are aiding those taxpayers in getting their taxes reduced.  Others, not so much.  Here’s a sample call:

Client: “Hey, I just got my tax bill and my valuation just went up by 40%.  Can I challenge it?”

Attorney: “It depends.  How does the Auditor’s new valuation of your property compare to the property’s true value?”

Client: “What do you mean ‘true value?'”

Attorney: “I mean, if you put the property on the market and offered it for sale, is the Auditor’s valuation lower than or higher than that value?.”

Client: “Oh, I would never sell it for that number.  I mean, my property is worth a whole lot more than that.”

Attorney:  “Then, don’t bring the case.  The Board of Revision compares the Auditor’s valuation to the true value and adjusts the valuation accordingly.  For single family homes, they use comparable sales of other properties.  Actual sales.”

Client: “But my valuation went up by 40%!  I mean there is no way my property increased in value 40% in three years.”

Attorney: “Well, that may be true, but how do we know the Auditor had not undervalued your property three years ago, and is just getting it right now?”

Client: “But the Auditor has my neighbor’s property valued for less than mine and the houses are the same.”

Attorney: “None of those things matter.  They really don’t.  The Board of Revision can’t even consider those things.  The only question is the comparison of your home’s true worth versus how the Auditor has assessed it and that comparison hinges off of comparable sales in your neighborhood.”

Some basic concepts:

The concepts are hard to swallow sometimes:

  1. The Board of Revision takes a fresh look at valuation when a  challenge is brought.
  2. How the Auditor’s current value compares to the true value of the property (typically as established by comparable sales in your neighborhood) is the only yardstick of value in the current cycle.
  3. The percentage increase of your property valuation from the prior cycle is completely irrelevant to that analysis.  Completely.
  4. The Auditor’s opinion of the value of your neighbor’s property also is completely irrelevant to that question
  5. Both data and arguments relating to those issues are inadmissible before the Board of Revision.  If you try to talk about those things at your hearing, you will be shot down by the panel.  Period.  Just don’t go there.
  6. The Auditor does not have to justify how he came up with his valuation of your property.  In fact, he is completely within his rights and authority under Ohio law to choose any value he wants for your property for absolutely no justification at all.  That’s simply how the law is written.  It is the statutory prerogative of the Auditor.  If you don’t like it, then YOU can run for Auditor.
  7. At a hearing, it is the taxpayer’s burden to prove the correct valuation. The Auditor does not have to prove anything.
  8. NOTE: The result of a Board of Revision challenge to your property’s valuation could well be an increase, rather than a reduction.  Be forewarned.
  9. From 2008 to 2015 — throughout the real estate recession (some would say depression) — it was relatively easy to get valuations reduced for many properties.  However, with the rising tide of real estate prices, those hoping for quick and easy savings should think twice.  They may well get a surprise — an increase rather than a reduction.
  10. If you don’t like the law, don’t be mad at us.  We are not legislators or judges.  We didn’t make these rules.

Free how-to video:

Here is a complete videotaped seminar presented by attorney Christopher P. Finney on property tax valuation reduction with step-by-step instructions.

More help:

For questions (other than those in the sample call, above!), feel free to contact Christopher P. Finney (513-943-6655).

County Auditor Dusty Rhodes and Chris Finney present to REIA on Property Tax Reduction

Author By Christopher P. FinneyPosted on

Tonight, Hamilton County Auditor Dusty Rhodes and attorney Chris Finney presented to the Greater Cincinnati Real Estate Investors Association on the topic of “Property Tax Reduction.”

The presentation went in-depth in instructing property owners on the procedure to reduce the Auditor’s valuation of real property in Ohio to achieve tax savings.

We thank the County Auditor for appearing with us in this important public service!  And we thank REIA founder Vena Jones-Cox and REIA President Scott Ellsworth for making this presentation possible.

Property owners are reminded that March 31 of each year is the deadline in Ohio for tax challenges.  You may call Chris Finney (943-6655) for more information.

 

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