Schultz v. TM Florida-Ohio Realty Ltd., Partnership

• Decision Date: 21 July 1989
• Docket Number: No. 88-00914,FLORIDA-OHIO,88-00914
• Citation: 553 So.2d 1203,14 Fla. L. Weekly 1727
• Parties: 14 Fla. L. Weekly 1727, 14 Fla. L. Weekly 2902 Ronald J. SCHULTZ, as Property Appraiser of Pinellas County, Florida, and Randy Miller, as Executive Director of the Department of Revenue of the State of Florida, Appellants, v. TMREALTY LTD. PARTNERSHIP, an Ohio Limited Partnership, authorized and doing business in Florida, Appellee.
• Court: Florida District Court of Appeals

Page 1203

553 So.2d 1203

14 Fla. L. Weekly 1727, 14 Fla. L. Weekly 2902

Ronald J. SCHULTZ, as Property Appraiser of Pinellas County, Florida, and Randy Miller, as Executive Director of the Department of Revenue of the State of Florida, Appellants, v. TM FLORIDA-OHIO REALTY LTD. PARTNERSHIP, an Ohio Limited Partnership, authorized and doing business in Florida, Appellee.

No. 88-00914.

District Court of Appeal of Florida,

Second District.

July 21, 1989.

On Motion for Rehearing,

Rehearing En Banc and Certification

Dec. 15, 1989.

Susan H. Churuti, County Atty., and Robert E.V. Kelley, Jr., Asst. County Atty., Clearwater, for appellants.

Kent G. Whittemore of Whittemore & Ramsberger, P.A., St. Petersburg, for appellee.

LEHAN, Acting Chief Judge.

The Property Appraiser of Pinellas County contends on appeal that the trial court was without authority to enter its final judgment reducing the property appraiser's assessment of the value of property leased for a shopping center. ¹ The basic argument for reversal of the final judgment appears to be that a property appraiser's assessment is presumed to be correct, that section 193.011, Florida Statutes (1985) requires only a property appraiser's consideration of various specified factors affecting the value of property, including its income which in this case is rental income at a level below that obtainable on the current market, and that the evidence established that the property appraiser considered all of those factors.

We affirm. There was substantial competent evidence that the property appraiser, by not actually using the rental income as a factor weighed in arriving at his assessment, assessed the property at a figure in excess of its fair market value. He therefore did not give proper consideration to the income factor specified in section 193.011, as did in effect the trial court in arriving at its reduced assessment.

Our analysis will begin by summarizing in section (1) of this opinion basic facts of this case and reasons under pertinent case law why the final judgment must be affirmed. The remaining sections will then: (2) explain the evidence supporting the trial court's result, notwithstanding its orally indicated reasoning, and (3) analyze how prior Florida case law which is relied upon by the property appraiser or the dissenting opinion, or both, is materially distinguishable or is authority for this affirmance.

The analysis in section (3) is intended to be in some depth to dispel any question that our holding conflicts with prior Florida case law. This is notwithstanding the facial appearances of cases discussed in that section which, in materially different contexts not emphasized in those cases, approved property appraisers' assessments arrived at without the use of the income factor. For reasons explained in section (3), the income from the leases involved in or referred to in those cases was, in contrast to the income from the lease involved in this case, not shown to have affected the fair market value of the leased property.

Because the relationships between some of the different aspects of the subject matter of section (3) are fairly intricate, the analysis in section (3) is in some respects fairly intricate. But we will first, in sections (1) and (2), undertake to show fairly simply the fundamental reasons why we conclude that the result in the trial court was correct.

Much of the Florida case law in this area does not address squarely, and fully explain, the basic issues involved, which doubtless explains the trial court in this case not having put its finger precisely upon the right reason for its right result. Cases in this area should receive analyses centered upon factors governing the "just" valuation of property, as required by section 193.011 and article VII, section 4 of the Florida Constitution which call for fairness to taxpayers, as well as, and not only, addressing how increases in tax assessments may be justified under general legal principles. That is the kind of analysis undertaken in this opinion.

(1) Summary of Facts and Reasons Under Pertinent Case Law Why the Final Judgment Must Be Affirmed.

The final judgment declared null and void the portion of the property appraiser's assessment of appellee's shopping center property which exceeded $2,950,000. The property appraiser had assessed the property at $3,981,400. As noted above, in arriving at his assessment he had not used in any way the factor of the income receivable by appellee under the lease to which the property is subject, ² as did in effect the trial court.

What the trial court did not do, as well as what it did, should be recognized. Previous to the property appraiser's assessment in issue in this case, the property had been assessed at $2,105,400. Thus, the trial court did not prevent, but approved the imposition of, an increased assessment. The trial court approved an increase in that previous assessment by $844,600, i.e., by 40.1 percent. The property appraiser's increase was reduced by the trial court in such an amount that the assessment did not exceed the fair market value of the property. Also, the trial court, by adopting the reduced assessment figure testified to by appellee's expert, did not base the amount of the reduced increase only upon the income approach to property assessment through using the income factor but, as further explained in section (2) below, used a combination of factors, including primarily income, provided for under section 193.011. This was in contrast to the property appraiser's assessment which, by using only the replacement cost factor, increased the previous assessment by 89.1 percent to a level which was over one million dollars in excess of the property's fair market value.

Our conclusion that the property appraiser did not give proper consideration to the income factor is, as we have said, based upon his having assessed the property in excess of its fair market value as a result of not having used that factor, as did in effect the trial court in arriving at its reduced assessment. We will now explain that basis for that conclusion which requires that we find invalid the property appraiser's assessment and uphold the trial court's reduced assessment.

(a) Basic Reasons Why the Property Appraiser's Assessment Was Invalid and the Trial Court's Reduced Assessment Must Be Upheld.

(i) The Property Appraiser's Assessment Was Invalid Because It Exceeded Fair Market Value.

It appears clear that the property appraiser's $3,981,400 assessment exceeded the property's fair market value. Appellee's expert testified that the fair market value of the property was $2,950,000, and the property appraiser acknowledges that his own assessment appears to have exceeded fair market value. A tax assessment of real property must not exceed the property's fair market value. See Valencia Center, Inc. v. Bystrom, 543 So.2d 214 (Fla.1989) (hereafter "Valencia Center III "); Walter v. Schuler, 176 So.2d 81, 85-86 (Fla.1965). ³ Therefore it appears established that the property appraiser's assessment was invalid.

(ii) The Trial Court's Reduced Assessment Must be Upheld Because Under the Circumstances of this Case Use of the Income Factor Produced, and Was Necessary to Produce, Fair Market Value.

While the fact that the property appraiser's $3,981,400 assessment exceeded fair market value establishes that his assessment was wrong, that in itself does not establish that the trial court's $2,950,000 reduced assessment corresponded to the property's fair market value and therefore was right. While the property appraiser acknowledges that his assessment appears to have exceeded fair market value, he has not acknowledged that the trial court's reduced assessment corresponded to the property's fair market value.

To show why we uphold the trial court's reduced assessment figure under these circumstances, we need only examine and find valid the method used by appellee's expert to arrive at that figure. That method was to use principally the income factor. In examining that method, as we do below, we will, at the same time, necessarily examine and find invalid the method used by the property appraiser in arriving at his assessment, which was unnecessary to do in (i) above due to the property appraiser's acknowledgement that his assessment appears to have exceeded fair market value. Accordingly, in showing the reasons for our affirmance, we need only show, as is done below, that a proper assessment, i.e., a fair market value figure, under the particular circumstances of this case not only did not result from the property appraiser's assessment method, but cannot have resulted unless the assessment method used the income factor, as did that of appellee's expert. That is the crux of this case.

The property is subject to a long-term lease for a K-Mart store which yields rental income which is "submarket," i.e., less than that obtainable from a lease negotiated on the current market. (The term "long-term lease," as used in this opinion, means, in contrast to the meaning of that term as used in other opinions discussed in section (3) below, a lease which is not to expire until many years after the date of the assessment in issue; that a lease prior to that date may have run for a long term, as did the lease involved in those other opinions, is irrelevant for the purpose of determining the effect of the lease upon the leased property's assessed value.) Since at the time of the assessment the lease had a remaining term, with extensions, of twenty-six years, its submarket rent could not be renegotiated and raised for twenty-six years. The level of the rental income resulted in a reduction of the property's fair market value because, since that level was submarket and could not be renegotiated for twenty-six years after the date of the assessment, a willing purchaser of the property on that date would have reduced his offering price on account of the lease....