First City Corp. v. City of Lansing
| Decision Date | 19 April 1988 |
| Docket Number | Docket No. 97878 |
| Citation | 421 N.W.2d 651,167 Mich.App. 248 |
| Parties | FIRST CITY CORPORATION, Petitioner-Appellant, v. CITY OF LANSING, Respondent-Appellee. 167 Mich.App. 248, 421 N.W.2d 651 |
| Court | Court of Appeal of Michigan — District of US |
[167 MICHAPP 249] Thrun, Maatsch & Nordberg, P.C. by Patrick J. Berardo and Gordon W. VanWieren, Lansing, for petitioner-appellant.
Alvan P. Knot, Lansing, for respondent-appellee.
Before CYNAR, P.J., and BEASLEY and GLASER, * JJ.
Petitioner appeals as of right from the Michigan Tax Tribunal's judgment on remand from the Court of Appeals affirming respondent's [167 MICHAPP 250] 1982 and 1983 tax assessments of petitioner's twenty-eight-unit apartment building. We affirm.
This action arose out of a dispute concerning the 1982 and 1983 assessments of petitioner's apartment building located at 1302 East Miller Road in the City of Lansing, Michigan, known as Southwind Apartments. The property was assessed at $210,800 for the 1982 and 1983 tax years, representing fifty percent of the true cash value (TCV). Petitioner contended that the TCV for the property should be $290,000 for each year, meaning that the assessment should have been based on $145,000 rather than the $210,800 figure.
At the hearing, petitioner offered the testimony of Kenneth Fowler, who purchased the property for petitioner in 1974 for approximately $267,000. Although the location of the building was not bad, Fowler stated that it had numerous deficiencies which decreased the property's value. The property was built in 1973 on a very small lot with virtually no green area. The parking lot was in poor condition and the apartments were small. The heating system made the apartments difficult to heat, they had very little or no insulation, and the sewer clogged continuously and backed up into the apartments. The appliances were worn out, particularly the dishwashers, which leaked and caused severe problems. In 1979, the last year in which petitioner was directly involved in rentals at the building, there was a strong rental market, but the building had less than ninety percent average occupancy rate. Fowler called the property "a classic example of a building that is functionally obsolescent," the "bottom of the barrel" in relation to neighboring apartment buildings.
In December, 1979, petitioner sold the property to Paul and Gloria Robbins under a land contract for $355,000. The amount of the down payment, [167 MICHAPP 251] $35,000, was low because petitioner encountered a difficult time in selling the property. The contract required monthly payments and periodic principal payments. The Robbinses made monthly payments until December, 1982, but failed to make two periodic payments of $8,200 on January 15, 1981, and January 15, 1982. The Robbinses and petitioner tried selling the property in 1981 and 1982. An offer of $250,000 was rejected by both.
In January, 1983, petitioner foreclosed on the property. A receiver was appointed to manage the property. The receiver listed the property with various real estate brokers. On July 31, 1983, the property was sold on a land contract for $305,000 to William Lockwood. Fowler regarded both land contract prices as having been too high, but the buyers presumably paid those prices because they thought they could "turn the property around" through good management.
On April 15, 1983, the city's board of review assessed the property for tax year 1982 at $210,800, representing fifty percent of the TCV. This was also the assessed value for the 1983 tax year. On June 3, 1984, petitioner filed a petition with the Tax Tribunal for a review of the assessments. Petitioner requested that the assessments be reduced to reflect fifty percent of the property's TCV.
At the hearing, petitioner contended that the city's assessment level exceeded fifty percent of the TCV because it failed to consider the actual income of the property and other appropriate market data. Robbins had provided petitioner with an unverified 1981 total income from the building of $60,950, a figure which appeared reasonable to Fowler. Fowler, however, did not verify this figure. Robbins had written this figure on a legal pad and sent it to petitioner. Petitioner determined the [167 MICHAPP 252] present value of the property to be $230,766, utilizing the income method of valuation with a capitalization rate of twelve percent and net income of $27,692. Petitioner ultimately conceded that the TCV was $290,000.
The Lansing City Assessor appraised the property for 1982, and indicated the same value also applied to the 1983 tax year based on his subsequent appraisal. He considered all three traditional approaches to valuation, i.e., market, cost and income, but thought the market approach was the most useful, given a strong market for similar properties in Lansing.
The cost approach to valuation, made using the Marshall Valuation Service Manual, resulted in a value of $499,000 when land value was added. The assessor took this as an upper limit. He never used the cost approach alone to value a property.
In using the income approach, the assessor considered "economic rent," essentially the rent that comparable units produced elsewhere in Lansing at the same time. He had no idea what rents were actually charged at Southwind Apartments, but based on his market assumptions, including a five percent allowance for vacancy and operating expenses lower than those testified to by petitioner, the assessor determined a net economic income value of $50,754. Applying a twelve percent capitalization rate, he valued the property at $423,000.
The assessor also considered the market approach. He examined several comparable sales to determine selling price per unit. He felt that the property is located in the Lansing "hot spot," the only area of rapid development in the city. He visited all the comparables, and regarded most as very similar to Southwind Apartments in terms of their lack of amenities. After making the necessary adjustments to five comparables, the assessor [167 MICHAPP 253] concluded that the property's value was $440,000. He made no adjustments for unit size, apparently concluding that the comparable apartments were the same. Two of the comparable sales were not within Lansing city limits.
The assessor visited the property in the summer of 1982, but did not look at the inside of the property until December 29, 1982, after he completed his appraisal report. He examined a one-bedroom and a two-bedroom apartment, both vacant. They appeared to be in a "little better condition" than the building's exterior, which he described as "in need of attention." He did not examine the appliances. Both units were smaller than the average equivalent apartment in Lansing.
The assessor's visit did not change his mind about the TCV he had determined. The assessor knew of the 1979 land contract sale. He suggested that, as far as he knew, the $355,000 may have been fair market value at the time the property was first sold in 1979.
The Tax Tribunal ruled that the second land contract sale, which occurred seven months after the 1982 tax day, should be considered to support the tribunal's valuation conclusion. On February 6, 1985, the tribunal issued an opinion and judgment in which it affirmed the 1982 and 1983 assessments and the TCV of $421,600.
Subsequently, petitioner appealed from the tribunal's decision to this Court. This Court issued an opinion in which it reversed and remanded to the tribunal for further consideration in light of this Court's opinion. First City Corp v. Lansing, 153 Mich.App. 106, 395 N.W.2d 26 (1986). The Court held that remand was necessary because the tribunal failed to set forth the basis for its conclusions[167 MICHAPP 254] of law which precluded this Court from determining whether the tribunal's decision was supported by competent, material and substantial evidence and free of error of law or the adoption of wrong principles. This Court directed the following matters to be addressed on remand:
(1) What evidence has been reviewed?
(2) A finding as to the most appropriate method of valuation under the circumstances. The tribunal must make its own finding of true cash value in arriving at its determination of a lawful property assessment.
(3) Specifically, what weight, if any, was given to the two land contract sales?
(4) Whether the income approach is more suitable than the market approach under the facts of this case.
(5) What effect, if any, the city assessor's post-inspection appraisal had upon his true cash value determination under the...
To continue reading
Request your trial
-
Great Lakes Div. of Nat. Steel Corp. v. City of Ecorse
...of facts and conclusions. See M.C.L. § 205.751; M.S.A. § 7.650(51), M.C.L. § 24.285; M.S.A. § 3.560(185); First City Corp. v. Lansing, 167 Mich.App. 248, 255, 421 N.W.2d 651 (1988). Although we do not find that the graphic analysis was necessary to review the Tax Tribunal's determination of......