Both parties and the BTA agreed that the income approach was the proper approach to valuation of the subject property. The narrow issue is whether, as appellant, contends, the BTA’s rejection of appellant’s use of reserves for replacements was unreasonable and unlawful. We find that it was.
Appraisal manuals and treatises can help in the valuation of real property.
The BTA acted unreasonably and unlawfully in refusing to consider reserves for replacements. Such reserves are proper items of expense to be utilized when estimating the true value of real property through an income approach. The Appraisal of Real Estate, American Institute of Real Estate Appraisers (9 Ed. 1987) 450-451. “A replacement allowance provides for the periodic replacement of building components that wear out more rapidly than the building itself and must be replaced periodically during the building’s economic life * * *. The annual allowance for each component is usually estimated as the anticipated cost of its replacement prorated over its anticipated remaining economic life, provided this does not exceed the remaining economic life of the structure. * * *” Id. at 450. The BTA should analyze the reserves to determine if they include any inappropriate items, or if they are otherwise excessive, which would warrant a modification in the amount deducted as expenses.
The decision of the BTA is reversed and the cause is remanded for
Decision reversed and cause remanded.