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

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.