2020 Ohio 6938
Ohio Ct. App.2020Background
- Subject: a ten-parcel shopping center (anchor: Giant Eagle) sold on December 23, 2015 for $16,095,000. Sale recorded; no witness at hearings with direct knowledge of the sale.
- Tax year at issue: 2017. County auditor valued the property ≈ $13.7M; Sheffield Crossing sought a reduction and submitted an appraisal(s).
- Sheffield Crossing's appraiser (Racek, MAI) produced an appraisal valuing the property as of the tax-lien date (Jan. 1, 2017) at $11,250,000 (Racek earlier had offered a 2015-date appraisal). The county/BOR appraiser (Sprout, MAI) opined $17,655,000 as of Jan. 1, 2017.
- The Lorain County Board of Revision adopted the 2015 sale price as true value; the Ohio Board of Tax Appeals (BTA) affirmed, finding the arm's-length sale was the best evidence of value and rejecting Racek's assumption that the property should be valued "available to be leased."
- On appeal to the Tenth District, the court concluded the BTA improperly rejected Racek's appraisal methodology (which is permitted under Ohio Supreme Court precedent when it reflects market leases) and reversed and remanded for further proceedings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a lease-encumbered arm's-length sale can be adopted as true value without adjustment under R.C. 5713.03 | Sheffield: statute requires valuation "as if unencumbered"; sale encumbered by leases cannot control unadjusted | BTA/board: sale was arm's-length and leases were at market so sale price reflects market value | Court: BTA erred to treat the sale as dispositive without properly considering appraisal evidence; sale may be persuasive but appraisal evidence must be fully considered |
| Whether an appraisal that values property "available to be leased" (i.e., assumes market leases) is lawful and must be considered | Sheffield: appraisal properly values unencumbered fee by assuming market leasing; Harrah’s and Terraza 8 permit such adjustments | BTA: rejected Racek’s assumption as inconsistent with R.C. 5713.03 (per its reading of precedent) | Court: Harrah’s permits appraisals that assume market leases; BTA should not discard Racek’s appraisal on that basis and must analyze it on the merits |
| Whether the BTA properly gave dispositive weight to the 2015 sale despite competing appraisals and lack of sale-witness testimony | Sheffield: competing appraisal evidence rebutted sale price and required full consideration | BTA/board: sale was market-driven and both appraisals contained data corroborating the sale | Court: BTA failed to "fully consider" the appraisal evidence and gave insufficient reason for rejecting Racek’s conclusions; legal error requiring remand |
| Whether the BTA should have independently derived an unencumbered value from record data rather than adopting the sale price | Sheffield: BTA must use available unencumbered data and appraisals to determine true value | BTA/board: sale best reflects market and needs no adjustment | Court: remanded for further proceedings because BTA improperly dismissed appraisal methodology; did not mandate a specific independent valuation but required proper consideration and legal analysis |
Key Cases Cited
- Terraza 8, L.L.C. v. Franklin Cty. Bd. of Revision, 83 N.E.3d 916 (Ohio 2017) (recent arm's-length sale is best evidence but is rebuttable under amended R.C. 5713.03)
- Lowe's Home Ctrs., Inc. v. Washington Cty. Bd. of Revision, 116 N.E.3d 79 (Ohio 2018) (discusses permissible appraisal adjustments and interpretation of "as if unencumbered")