SAW CREEK COMMUNITY ASSOCIATION, INC., Appellee, v. COUNTY OF PIKE and The Pike County Board of Assessment Appeals, Appellants.
No. 29 MAP 2003.
Supreme Court of Pennsylvania.
Decided Jan. 19, 2005.
866 A.2d 260
Argued Oct. 22, 2003.
Jan J. Stephen Lokuta, Esq., Milford, for Pike County and the Pike County Board of Assessment Appeals.
David Louis Horvath, Esq., Janet K. Marsh Catina, Stroudsburg, for Saw Creek Estates Community Association, Inc.
BEFORE: CAPPY, C.J., and CASTILLE, NIGRO, NEWMAN, SAYLOR, EAKIN and LAMB, JJ.
Justice NIGRO.
Appellants the County of Pike and the Pike County Board of Assessment (the “Board“) appeal from the Commonwealth Court‘s order which reversed the trial court‘s order denying the tax assessment appeal of Appellee Saw Creek Community Association (the “Association“). For the reasons that follow, we affirm.
Prior to the 2000-2001 tax year, the Board reassessed the value of properties within Saw Creek. In doing so, it determined that the roads, ponds, green areas, water tower, and well house, as well as the community building‘s recreational facilities and meeting room, qualified as “common facilities” of Saw Creek pursuant to section 5103 of the Act, which defines common facilities as: “Any real estate within a planned community which is owned by the association or leased to the association. The term does not include a unit.”
The Association then appealed to the trial court, which held a hearing on August 28, 2001. During the hearing, Nicholas Mazzarella, the general manager of the Association, testified that although the Association owned the property on which the restaurant was located, it had leased that property to a private entity for the express purpose of operating a restaurant.3 Mr. Mazzarella explained that this arrangement was financially beneficial to the Association because it would lose money if it operated the restaurant on its own. Mr. Mazzarella further testified that although the restaurant was open to the public, it was considered a benefit to the residents of Saw Creek, as they were the primary patrons of the restaurant and received a 10% discount on their meals there. Moreover, Mr. Mazzarella stated that the rent that the restaurant operator paid to the Association went into a general fund to reduce the dues assessed against the Saw Creek homeowners for the common facilities.4
With regard to the sales office, Mr. Mazzarella testified that the Association leased the single-story building in which the sales office was located to a private real estate company, which used the building for the express and exclusive purpose of managing Saw Creek real estate transactions. Mr. Mazzarella
On November 15, 2001, the trial court entered an opinion and order affirming the Board‘s assessment of the restaurant and sales office. Specifically, the court interpreted the law to state that a facility could not be a common facility if it was designated to be occupied by persons other than the planned community residents.6 Noting that here, the Association had leased the restaurant and sales office to private parties for their “exclusive” occupancy and use instead of maintaining the property for the unfettered occupancy and use of the Saw Creek residents, the court concluded that the restaurant and sales office could not be common facilities of Saw Creek, and thus were properly assessed and taxed by the Board.
The Association subsequently appealed to the Commonwealth Court, which reversed the trial court. See Saw Creek Estates Community Assoc., Inc. v. County of Pike, 808 A.2d 322 (Pa.Commw.2002). Unlike the trial court, the Commonwealth Court determined that the restaurant and sales office were clearly common facilities of Saw Creek, based on the plain and unambiguous definition of that term in section 5103. Turning to that statutory definition, the court explained that property qualifies as a common facility so long as it meets the following two requirements: (1) it is within the planned community; and (2) it is owned by or leased to the homeowners’
In their appeal to this Court, Appellants the County of Pike and the Board do not seem to contest the Commonwealth Court‘s finding that the restaurant and sales office are common facilities, but rather appear to argue solely that the Commonwealth Court erred in determining that these properties are exempt from separate assessment and taxation as common facilities.8 Appellants assert that pursuant to section 5105(b) of the Act, common facilities may only be exempt from separate assessment and taxation to the extent that the planned community homeowners possess an “appurtenant interest” in those facilities, which, according to Appellants, means that the planned community homeowners must have the right to free and unfettered access to those facilities. Applying that premise here, Appellants contend that the restaurant and sales office cannot be exempt from separate assessment and taxation because they have been leased to private parties and, as a result, the planned community residents do not have the right to use these facilities in a free and unfettered manner. After considering Appellants’ argument, however, we cannot agree that the restaurant and sales office must be assessed and taxed under these circumstances.
On December 19, 1996, the General Assembly adopted the Act as a result of an increase in planned community developments in Pennsylvania.9 See e.g., Uniform Planned Communi-
[r]eal estate with respect to which a person, by virtue of ownership of an interest in any portion of the real estate, is or may become obligated by covenant, easement or agreement imposed on the owner‘s interest to pay any amount for real property taxes, insurance, maintenance, repair, improvement, management, administration or regulation of any part of the real estate other than the portion or interest owned solely by the person.
The Act refers to each individually owned home in the planned community as a “unit,” defining that term as “[a] physical portion of the planned community designated for
As an initial matter, Appellants do not appear to contest, and we can independently find no error in, the Commonwealth Court‘s finding that the restaurant and sales office constitute common facilities. Like the Commonwealth Court, we read section 5103 of the Act to clearly require that common facilities be: (1) located within the planned community; and (2) owned or leased by the planned community homeowners’ association. See
Applying the above three requirements to the restaurant and sales office, we conclude that they both qualify as common facilities. As the Commonwealth Court found, the restaurant and sales office indisputably meet the first two requirements because they are located in the planned community and are owned by the Association. Moreover, we find that the restau-
Having assured ourselves that the restaurant and sales office do indeed qualify as common facilities, we must next determine whether the Commonwealth Court properly found that all such common facilities are exempt from separate assessment and taxation pursuant to section 5105(b)(1) of the Act. While Appellants seem to argue otherwise, we find that
In spite of the plain language of section 5105(b)(1), Appellants urge us to find that common facilities may be separately assessed and taxed under certain circumstances, namely, when the homeowners in a planned community do not have an appurtenant interest consisting of the right to use the facilities in a free and unfettered manner. In contending that such an exception exists, Appellants assert that section 5105(b)(1) only exempts common facilities from separate assessment and taxation because the individual homeowners in a planned community are already assessed and taxed for those facilities by means of their “appurtenant interest” in the facilities. See
Thus, we conclude that the Commonwealth Court properly determined that the restaurant and sales office are common facilities and are thereby exempt from separate assessment and taxation pursuant to section 5105(b)(1) of the Act. Moreover, we hold that the Saw Creek homeowners retained appurtenant interests in the restaurant and sales office even though the association leased those facilities to private parties and did not keep them open for the homeowners’ free and unfettered use.
The Commonwealth Court‘s order is affirmed.
Former Justice LAMB did not participate in the decision of this case.
Justice CASTILLE files a dissenting opinion in which Justice NEWMAN joins.
Justice NEWMAN files a dissenting opinion in which Justice CASTILLE joins.
In my view, the trial court was correct in ruling that the restaurant and real estate office operated on property owned by appellee Saw Creek Community Association, Inc. (“Saw Creek” or “Association“), but leased to private, for-profit entities, do not qualify as common facilities such as to exempt them from taxation. Therefore, I respectfully dissent.
The Common Pleas Court looked to general law in the area of tax assessment and properly found that the actual use of the property in this instance is more pertinent to issues of taxation than ownership. Citing this Court‘s decision in In re Township of Moon, 387 Pa. 144, 127 A.2d 361 (1956), the trial court noted that even property that is generally exempt from taxation because it is owned by a public entity may lose that tax exempt status if it is used for commercial purposes or leased to a purely business enterprise and not for a public use. In Moon, the issue before this Court was whether portions of the Greater Pittsburgh Airport, which was a tax exempt municipal property, were subject to taxation because they were rented to private individuals and corporations for the purpose of operating for-profit concessions including a jewelry store, news stand, hotel, night club, women‘s clothing store, barber shop, parking areas, and a number of restaurants, bars and cafes. The lease agreements with the concessionaires provided the Airport with a net minimum rent per month plus a percentage of gross sales. This Court held that the use of the disputed property was of paramount importance in determining its tax status:
[T]here is equally no doubt but that property, even though owned by a body ordinarily tax exempt, is taxable if used by it for commercial purposes, or if rented to a lessee for a purely business enterprise and not a public use; this is true even though the rentals or other proceeds from the proper-
ty are devoted to the tax exempt activities of the lessor.... It was said in the West View Borough Municipal Authority Appeal, [381 Pa. 416, 113 A.2d 307, 309 (1955)]: “The controlling test is, not merely whether the property or part of it has been rented out, but whether the use of the part so leased is for a public or a private purpose. It is the use of the property, and not the use of the proceeds from the property, which determines whether tax exemption may constitutionally be granted.”
Id. at 364 (citations omitted). Applying this principle to the facts in Moon, this Court held that the portions of the Airport devoted to commercial uses not constituting “a reasonably necessary and incidental part of the Airport itself” were subject to taxation. Id. at 365.
I agree with the trial court that the sound and realistic approach set forth in Moon applies here. Indeed, the facts in this appeal are so closely analogous to the facts in Moon as to compel the same tax status conclusion. The property at issue is owned by the Association and, pursuant to
These same businesses, if operated in the very same fashion but located on property owned by an entity other than a planned community‘s association, would undoubtedly be subject to taxation. These businesses do not exist solely for the benefit of Saw Creek‘s residents, nor are they “a reasonably necessary and incidental part” of Saw Creek Estates. Rather, the Association has elected to make its property available to for-profit businesses, in exchange for income. Such being the
I am also persuaded by appellants’ argument that, because Saw Creek‘s residents do not possess an “appurtenant interest,” meaning that they do not have free and unfettered access to the leased property, the restaurant and sales office should not be exempt from taxation because they are leased to private entities who control the use of the premises. As the trial court aptly noted, these for-profit corporations enjoy exclusive control over the leased property, which is therefore not subject to the unfettered use, control or dominion of Saw Creek‘s residents. Instead, the properties are exclusively used, occupied and controlled by these private entities for the purpose of generating a profit. The property should not be deemed tax exempt.
Accordingly, I would reverse the decision of the Commonwealth Court holding that the property is exempt from taxation and reinstate the trial court‘s determination.
Justice NEWMAN joins this dissenting opinion.
Justice NEWMAN, dissenting.
I join the dissent of Mr. Justice Castille, but write separately to address the language of the Uniform Planned Community Act (UPCA).1 Specifically, the crux of the dispute sub judice focuses on the definition of a common facility, as well as the definition of a unit. I believe that the Majority errs in its approach to these definitions.
Initially, it is important to address the UPCA definitions. “Common facilities” are defined as “[a]ny real estate within a planned community which is owned by the association or leased to the association. The term does not include a unit.”
The Majority contends, and Appellants concede, that the requirements for being a common facility and, therefore, exempt from taxation are that: (1) the property is located in Saw Creek; (2) the property is owned by the Saw Creek Community Association (Association); and (3) the property is not a unit.
It is certainly possible to categorize the real estate office and the restaurant as either a unit or a common facility. However, there are several factors militating in favor of the position of Appellants that the real estate office and restaurant are not common facilities by virtue of general statutory construction, the specific non-unit requirement, and the principle that underlies the exemption of common facilities.
First, “[t]he question of entitlement to an exemption is a mixed one of law and fact and absent any abuse of discretion or a lack of supporting evidence the decision of the trial judge is binding on [the Commonwealth] Court.” Appeal of Planned Parenthood Association of Bucks County, 55 Pa.Cmwlth. 195, 423 A.2d 760, 761 (1980) (internal citation omitted); see also
Second, statutory provisions exempting property from taxation are strictly construed and it is the burden of the taxpayer to bring itself within the scope of that exemption. In the Matter of Tax Assessment of Real Estate of Greater Erie Economic Development Corporation, 61 Pa.Cmwlth. 144, 433 A.2d 568, 570 (1981);
Third, and most importantly, the legislative intent leads one to believe that the two parcels should be considered units based on the definition of “limited common facility” contained in the UPCA. Specifically, a “limited common facility” is defined as “[a] portion of the common facilities allocated by or pursuant to the declaration ... for the **exclusive use of one or more** but fewer than all of the units.”
In the case at hand, the trial court noted that the restaurant and real estate office are not for the exclusive use of the members of the Association—they are both open to the general public. This contrasts with the generally accepted examples of a common facility dedicated to the exclusive use of residents and their guests, such as a pool, clubhouse, fitness center, and the like. In each of the preceding examples, the facility is for the exclusive use of all the units within the development and not for the general public. As noted by Mr. Justice Castille‘s well-reasoned dissent, we held in In re Township of Moon, 387 Pa. 144, 127 A.2d 361, 364 (1956)
The Majority approaches the definition of a unit from another angle. Specifically, drawing from the statutory definition, to be considered a unit, a parcel must be: (1) a physical portion of the property; (2) designated for separate ownership or occupancy; and (3) described in the declaration for the planned community.
However, the Majority contends that because a unit is designated for separate ownership or occupancy, the definition of a unit can be satisfied only if the owners or lessees are entitled to use the property for themselves and have no obligation to share the property with others. Such an interpretation reads a requirement into the statute that does not exist. Even if that requirement was read into the statute or was reasonable, no obligation exists on the part of either entity to share the property with others. The fact that the two disputed businesses are commercial enterprises means that by their very nature, they desire to attract patrons. However, the power to exclude rests solely with the business owners, who are non-Saw Creek residents. Moreover, none of the residents have, at any time, free and unfettered access to the property; rather, such control is in the hands of the business operators.
The Majority additionally implies that part of its reasoning concerns the alleged purpose of the restaurant and real estate office; namely to benefit the Saw Creek homeowners. See Majority Opinion at 444 n. 11, 866 A.2d at 265 n. 11. However, the alleged purpose and benefit of the two businesses are not important as to their categorization or definition. Even if the purpose were relevant to the decision, a ten percent discount to residents at the restaurant hardly qualifies as being for the benefit of Saw Creek residents. More important is that non-Saw Creek residents receive the benefit of operat-
Accordingly, the two properties satisfy the plain and clear definition of a unit and, therefore, do not meet the definition of a common facility. Moreover, logically, a restaurant and real estate office do not constitute the traditional type of operations that fall within the scope of a common facility for a planned association. Therefore, I respectfully dissent from the determination of the Majority and conclude that the real estate office and restaurant are not common facilities. Thus, they should not be exempt from taxation pursuant to the UPCA.
Justice CASTILLE joins this dissenting opinion.
Justice NIGRO.