Lowe's Home Ctrs., Inc. v. Washington Cty. Bd. of Revision (Slip Opinion)
116 N.E.3d 79
Ohio
2018

Background

  • Lowe's owns a 142,446 sq. ft. owner-occupied home-improvement store on ~16 acres in Marietta; auditor valued it $9,595,570 for tax year 2013; Lowe's sought a reduction.
  • Lowe's submitted an appraisal (Racek) valuing the fee-simple interest at $5,700,000 using sales-comparison and income approaches, relying heavily on second-generation comparables.
  • The county presented an appraisal (Sprout) valuing the unencumbered fee-simple at $8,800,000, using sales- and income-based approaches and several lease-encumbered comparables with adjustments.
  • The BOR (with its technical adviser) retained the auditor’s valuation; the BTA found Sprout’s appraisal "most competent and probative" and adopted it, rejecting Lowe's challenge that reliance on leased comparables violated R.C. 5713.03 (as amended by H.B. 487).
  • After the BTA decision, Ohio Supreme Court decisions in Steak ’N Shake, Rite Aid, and a prior Lowe’s decision clarified that sales of lease-encumbered comparables generally must be adjusted when valuing an unencumbered property; the BTA did not expressly analyze Sprout’s adjustments under that trilogy.
  • The Supreme Court vacated and remanded for the BTA to evaluate and weigh Sprout’s property-rights/leased-comparable adjustments under the controlling precedents; it also held collateral estoppel barred relitigation of the special-purpose issue.

Issues

Issue Plaintiff's Argument Defendant's Argument Held
Whether BTA erred in relying on Sprout’s appraisal because he used leased comparables without proper adjustment Lowe’s: Sprout effectively valued a leased-fee by relying on leased sales and did not properly adjust for encumbrances, violating R.C. 5713.03 and controlling case law County: Sprout valued the unencumbered fee-simple and made appropriate adjustments for property rights conveyed and rents; his methodology was proper and probative Court: Vacated and remanded — BTA must expressly evaluate Sprout’s property-rights/adjustments under Steak ’N Shake, Rite Aid, and Lowe’s precedents before affirming weight/competence of appraisal
Whether a lease is an "encumbrance" under H.B. 487 amendment to R.C. 5713.03 Lowe’s: A lease is an encumbrance and comparables with leases must be adjusted to reflect unencumbered fee-simple value County: Argued leases are not the same kind of encumbrance as liens/easements (disputed) Court: Agreed a lease is an encumbrance; statute requires valuing the unencumbered fee-simple, but the statute does not prescribe how to use comparables — adjustments may be required and must be analyzed under case law
Whether the subject property qualifies as a special-purpose property (and whether that issue is relitigable) Lowe’s: Contended property is not special-purpose; preserved argument to prevent BTA from ruling otherwise County: Opposed special-purpose treatment Court: Collateral estoppel bars relitigation — prior BTA remand proceeding already determined the property is not special-purpose; court need not reach the constitutional equal-protection claim
Whether the BTA performed an unconstitutional present-use valuation Lowe’s: Argued BTA used present-use valuation, excluding locational/speculative value, violating Ohio Constitution County: Sprout considered location and market factors; any present-use consideration was noncontrolling Court: BTA did not perform constitutionally invalid present-use valuation; discussion of location shows present use was not sole criterion

Key Cases Cited

  • Steak ’N Shake, Inc. v. Warren Cty. Bd. of Revision, 48 N.E.3d 535 (Ohio 2015) (leased comparables generally must be adjusted when valuing an unencumbered property)
  • Rite Aid of Ohio, Inc. v. Washington Cty. Bd. of Revision, 54 N.E.3d 1177 (Ohio 2016) (reaffirming need to adjust leased-fee comparables when subject is unencumbered)
  • Lowe's Home Centers, Inc. v. Washington Cty. Bd. of Revision, 49 N.E.3d 1266 (Ohio 2016) (applies Steak ’N Shake principles; remand to assess special-purpose doctrine applicability)
  • Terraza 8, L.L.C. v. Franklin Cty. Bd. of Revision, 83 N.E.3d 916 (Ohio 2017) (H.B. 487 version of R.C. 5713.03 requires valuing the unencumbered fee-simple estate)
  • Johnston Coca‑Cola Bottling Co. v. Hamilton Cty. Bd. of Revision, 73 N.E.3d 503 (Ohio 2017) (present-use valuation generally invalid but present use may be considered as a noncontrolling factor)
  • Cummins Property Servs., L.L.C. v. Franklin Cty. Bd. of Revision, 885 N.E.2d 222 (Ohio 2008) (pre‑H.B. 487 authority on comparables and build‑to‑suit sales)
  • AEI Net Lease Income & Growth Fund v. Erie Cty. Bd. of Revision, 895 N.E.2d 830 (Ohio 2008) (pre‑H.B. 487 discussion of build‑to‑suit comparables)
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