Patience LLC v. Salt Lake County Board of Equalization, 011421 UTCA, 20190623-CA

Docket Nº20190623-CA
Opinion JudgePOHLMAN, JUDGE
Party NamePatience LLC, Petitioner, v. Salt Lake County Board of Equalization and State Tax Commission, Respondents.
AttorneyJaryl L. Rencher and Michael J. Collins, Attorneys for Petitioner Simarjit S. Gill, Timothy A. Bodily, and LaShel Shaw, Attorneys for Respondent Salt Lake County Board of Equalization Sean D. Reyes, Laron J. Lind, and Stanford E. Purser, Attorneys for Respondent State Tax Commission
Judge PanelJudge Jill M. Pohlman authored this Opinion, in which Judges David N. Mortensen and Ryan M. Harris concurred.
Case DateJanuary 14, 2021
CourtCourt of Appeals of Utah

2021 UT App 4

Patience LLC, Petitioner,

v.

Salt Lake County Board of Equalization and State Tax Commission, Respondents.

No. 20190623-CA

Court of Appeals of Utah

January 14, 2021

Original Proceeding in this Court

Jaryl L. Rencher and Michael J. Collins, Attorneys for Petitioner

Simarjit S. Gill, Timothy A. Bodily, and LaShel Shaw, Attorneys for Respondent Salt Lake County Board of Equalization

Sean D. Reyes, Laron J. Lind, and Stanford E. Purser, Attorneys for Respondent State Tax Commission

Judge Jill M. Pohlman authored this Opinion, in which Judges David N. Mortensen and Ryan M. Harris concurred.

POHLMAN, JUDGE

¶1 Patience LLC seeks review of a final decision of the State Tax Commission denying Patience an adjustment of the fair market valuation of its property. The Salt Lake County Assessor's Office (the County) valued the subject property at $885, 890. Patience appealed the County's assessment, arguing for a lower valuation based on the sales prices and valuations of properties it believed were comparable. After a formal hearing, the Commission sustained the original valuation. Upon review, we decline to disturb the Commission's decision.

BACKGROUND

¶2 In 2017, a local law firm was in search of new downtown office space after a recent downsize. In addition to needing less space, the firm's existing office lease was expiring, and a renewal would mean an increase in rent.

¶3 A principal of the law firm hired a commercial real estate agent to help the firm find a suitable property. According to the agent, "there were not a lot of listings at the time . . . near downtown that were suitable," but the firm found one that met its needs-the subject property located at 460-462 South 400 East in Salt Lake City. On May 31, 2017, Patience, a related entity, purchased the property for the law firm's use. It paid $1, 242, 824.[1]

¶4 The property is 0.23 acres of land improved with a building originally constructed as a residence in 1905. The residence was subsequently converted to office space, a remodel known as an "office conversion." The County considered the building to "be of good grade and in good condition." County records showed that it has 4, 484 square feet above grade area, 1, 394 square feet of office area finished in the basement, and 639 square feet of basement storage area. The finished office area on the County's records totaled 5, 878 square feet.

¶5 With a lien date of January 1, 2017, the County valued the property for tax purposes at $885, 890. Unhappy with this valuation, Patience appealed the assessment to the Salt Lake County Board of Equalization (the Board). Patience submitted sales data of four other properties that it deemed comparable and argued for a valuation of $550, 000. The Board was not persuaded, finding that the properties Patience identified were different "in size, location, year built and use type when compared to the subject" property and "would require significant adjustments to" the sales data to draw any reliable comparisons. The Board thus concluded that the evidence Patience submitted was "insufficient to provide a sound evidentiary basis for an alternative value" and sustained the original valuation.

¶6 Patience appealed the Board's determination to the Commission, again arguing for a valuation of $550, 000 and offering two primary reasons why it believed the County's valuation of $885, 890 was too high.

¶7 First, Patience contended that the County overvalued the property based on a faulty assessment of its fair market value. In addition to claiming that the County used the wrong square footage, Patience urged the Commission to disregard the 2017 transaction in which it had paid $1.2 million for the property, and it asked the Commission to instead rely on the sales data of three other properties that it claimed were comparable. Patience argued that its purchase price was artificially high because it purchased the property under duress. Patience also argued that the value of the property had been diminished by issues arising out of the displacement of the homeless population from other areas in the city as part of Operation Rio Grande.2 Finally, Patience provided the sales data of three other properties in the downtown area to support a lower market value for the subject property. The sale prices of the other three properties were substantially lower than the price Patience paid for the subject property.

¶8 Second, Patience argued for an equalization adjustment to the County's valuation of the property, claiming that the valuation deviated more than 5% from the assessed value of comparable properties. Patience identified seven different properties that it believed were comparable to the subject property. Each assessed value of the other properties deviated more than 5% from the subject property's valuation.

¶9 At the hearing before the Commission, three witnesses testified for Patience. The first, a commercial real estate agent (Realtor), testified that she believed the seven properties Patience identified in support of its equalization argument were "sufficiently comparable" to the subject property. She also opined that the County's valuation of the subject property "[s]eems to be very high."

¶10 The second witness, a law firm employee, testified that beginning about August 2017, employees "would come to work in the morning and find individuals camping on their property with tents or tarps and sleeping on the back porch of the building." She explained that they "started to see almost daily problems with homeless individuals and their possessions on the property."

¶11 The third witness for Patience, the law firm's office manager, testified that the firm had to find new office space "in a quick manner" because the firm's rent was going to increase if it renewed the lease in its prior location.

¶12 The Board, for its part, supported its position with the expert testimony of a real estate appraiser (Appraiser).3 Appraiser testified that the properties identified by Patience were not truly comparable to the subject property. A few of the properties were office conversions, which Appraiser explained are assessed at a higher value because buyers are "attract[ed] to older buildings," "[t]hey tend to be more unique," and they "tend to be very well constructed." The Board further argued that the properties Patience identified were not comparable because they were in poorer condition and of a lower grade than the subject property.

¶13 The Board also offered nine comparison properties of its own to rebut Patience's contentions that the original valuation was too high and that it should be equalized to a lower value. The comparables the Board submitted had valuations "right in line" with the property's valuation. On cross-examination, Appraiser conceded that two of the Board's comparables contained inaccurate basement square footage but had accurate above-grade square footage.

¶14 After taking the matter under advisement, the Commission issued a written decision sustaining the County's original valuation of $885, 890. Ultimately, the Commission found that the properties Patience identified were not "actually comparable" to the subject property because they were either "not in as good of condition," "were considered to be of a lower grade," or were not office conversions. Additionally, the Commission did not credit Patience's claim that the subject property's purchase price exceeded its fair market value, stating that "insufficient evidence of duress was offered to support the argument that a law firm would pay twice the market value rather than enter into a new lease or find an office building to purchase in a different location." The Commission also noted that the homeless activity on and around the property "appears to be a post lien date issue" and thus could not affect the assessment of fair market value from an earlier time.

¶15 Patience sought reconsideration of the Commission's decision, arguing that there was no support for its finding that office conversion properties are valued at higher rates and that Patience "provided much more accurate comparable properties" than the Board provided. Patience also submitted "newly discovered evidence" of seven other allegedly comparable properties, all of which were office conversions.

¶16 The Commission denied Patience's motion. The Commission was unpersuaded by Patience's arguments and declined to consider the additional properties because Patience "should have submitted [them] in the first place."4

ISSUES AND STANDARDS OF REVIEW

¶17 On review, Patience largely repeats the arguments it made before the Commission. First, Patience contends that the Commission erred in sustaining the subject property's assessed value based on market value evidence. "The Commission's determination of the fair market value of real estate is a factual question." Mallinckrodt v. Salt Lake County, 1999 UT 66, ¶ 7, 983 P.2d 566. "We grant the Commission's valuation deference and affirm the valuation if there is substantial evidence to support it and the Commission has applied correct standards." Id.; see also Utah Code Ann. § 59-1-610(1)(a) (LexisNexis 2018). "Moreover, we conduct our review in light of the burdens the taxpayer carries before the Commission, where the protesting taxpayer is required not only to show substantial error or impropriety in the assessment, but also to provide a sound evidentiary basis upon which the Commission could adopt a lower valuation." Utah Ry. Co. v. Utah State Tax Comm'n, 2000 UT 49, ¶ 6, 5 P.3d 652 (cleaned up).

¶18 Second, Patience contends that the Commission erred by not adjusting the valuation of the property "to reflect a value equalized with the assessed value of other...

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