Rancho Cincinnati Rivers, L.L.C. v. Warren Cty. Bd. of Revision (Slip Opinion), 177 N.E.3d 256

Background

Rancho Cincinnati Rivers purchased a Lowe’s-occupied commercial property in 2011 subject to a 20‑year ground lease; Lowe’s paid substantial annual rent.
Warren County Auditor assessed the property at $8,493,150 for tax year 2016; Rancho protested and presented a lower appraisal by Richard Racek.
The Warren County Board of Revision kept the auditor’s valuation; Rancho appealed to the common pleas court and presented Racek’s appraisal ($5.8M reconciled).
The Kings Local School District submitted a competing appraisal by James Burt ($8.48M) that treated leased comparables as reflecting market rents and made no reduction for lease encumbrances.
A magistrate adopted Racek’s valuation; the common pleas court rejected that approach, adopted Burt’s appraisal, and found Racek’s “vacant‑at‑transfer” treatment improper. The court of appeals affirmed.
The Supreme Court resolved the statutory question: R.C. 5713.03’s phrase “fee simple estate, as if unencumbered” requires valuing property as free of encumbrances (i.e., accounting for their market effect), not assuming the property would be vacant at transfer; leased‑fee sale prices and market‑rent appraisals are competent and admissible evidence.

Issues

Issue	Plaintiff's Argument (Rancho)	Defendant's Argument (County/School)	Held
Does R.C. 5713.03 require valuing an occupied, leased property as if vacant at transfer (the "vacant‑at‑transfer" rule)?	R.C. 5713.03’s “as if unencumbered” means the hypothetical transfer must assume the tenant vacates so the buyer takes immediate possession.	The statute requires valuing the fee simple free of encumbrances (i.e., adjust for encumbrances’ effects), not assuming vacancy at transfer.	Rejected the vacant‑at‑transfer rule; "as if unencumbered" means free of encumbrance effects, not necessarily vacant.
Must leased‑fee comparable sales always be adjusted to remove lease effects when used in sales‑comparison analyses?	Yes; comparable sales encumbered by leases must receive a property‑rights adjustment to reflect vacancy at transfer.	No categorical rule; adjustments depend on market analysis—if leases reflect market rents, no mandatory property‑rights adjustment required.	No fixed legal requirement to adjust leased comparables; adjustments are an appraiser fact‑driven judgment and for the trier of fact to weigh.
Is a leased‑fee sale price (or appraisal reflecting leases at market rent) admissible/competent evidence of value under amended R.C. 5713.03?	Argued that such evidence is improper if it assumes encumbrances persist at transfer.	The leased‑fee sale price is presumptively best evidence but rebuttable; appraisals using hypothetical market leases are admissible.	Adopted the market‑lease rule: leased‑fee sale price is presumptive but rebuttable; market‑rent appraisals are admissible.
Was Burt’s appraisal (which accounted for market leases and did not apply Racek’s vacancy‑at‑transfer adjustment) competent and entitled to adoption?	Racek: Burt erred by failing to remove lease encumbrance effects; his valuation is thus incompetent under R.C. 5713.03.	Burt: his approach reflected market rents and comparable analysis; competent appraisal evidence for trier of fact to adopt.	Court upheld the common pleas court: Burt’s appraisal was competent and more probative; trial court acted within discretion in adopting it.

Key Cases Cited

Alliance Towers, Ltd. v. Stark Cty. Bd. of Revision, 37 Ohio St.3d 16 (1988) (stating fee simple should be valued “as if unencumbered” and endorsing use of market/economic rent over contract rent)
Wynwood Apartments, Inc. v. Cuyahoga Cty. Bd. of Revision, 59 Ohio St.2d 34 (1979) (distinguishes economic/market rent from contract rent in income‑producing property valuations)
Berea City School Dist. Bd. of Edn. v. Cuyahoga Cty. Bd. of Revision, 106 Ohio St.3d 269 (2005) (held recent arm’s‑length leased‑fee sale price controls valuation absent statutory amendment)
Terraza 8, L.L.C. v. Franklin Cty. Bd. of Revision, 150 Ohio St.3d 527 (2017) (clarified H.B. 487’s effect—codified market‑lease approach and made appraisals generally admissible even when a sale exists)
Harrah’s Ohio Acquisition Co., L.L.C. v. Cuyahoga Cty. Bd. of Revision, 154 Ohio St.3d 340 (2018) (held BTA erred in excluding a hypothetical leased‑fee appraisal premised on market lease rates)
Westerville City Schools Bd. of Edn. v. Franklin Cty. Bd. of Revision, 154 Ohio St.3d 308 (2018) (explained that H.B. 487 restored pre‑Berea approach permitting appraisal evidence even when a sale price exists)
Lowe’s Home Ctrs., Inc. v. Washington Cty. Bd. of Revision, 154 Ohio St.3d 463 (2018) (addressed proper treatment of leases as encumbrances under amended R.C. 5713.03 and rejected BTA’s ‘‘unadjusted sale‑price’’ approach)