Vill. At Treehouse, Inc. v. Adm'r

• Decision Date: 16 January 2014
• Docket Number: Court of Appeals No. 12CA0988
• Citation: 321 P.3d 624
• Parties: VILLAGE AT TREEHOUSE, INC., Petitioner–Appellant, v. PROPERTY TAX ADMINISTRATOR, Respondent–Appellee, and Board of Assessment Appeals, Appellee.
• Court: Colorado Court of Appeals

321 P.3d 624

VILLAGE AT TREEHOUSE, INC., Petitioner–Appellant,

v. PROPERTY TAX ADMINISTRATOR, Respondent–Appellee,andBoard of Assessment Appeals, Appellee.

Court of Appeals No. 12CA0988

Colorado Court of Appeals, Div. II.

Announced January 16, 2014

Board of Assessment Appeals No. 57632

Letofsky & Dombrowski, Inc., Steven F. Letofsky, Frisco, Colorado, for Petitioner–Appellant.

John W. Suthers, Attorney General, Claudia Brett Goldin, First Assistant Attorney General, Robert H. Dodd, Jr., Senior Assistant Attorney General, Denver, Colorado, for Respondent–Appellee

Opinion by JUDGE TERRY

¶ 1 Petitioner, The Village at Treehouse, Inc. (the Village), appeals an order of the Board of Assessment Appeals (BAA), which found that the development rights the Village had acquired to build new condominium units constituted a taxable interest in real property for ad valorem tax purposes. As an issue of first impression, we decide that such development rights are taxable, and therefore affirm.

I. Background

¶ 2 The material facts in this case are not disputed. The Village paid more than one million dollars to purchase the development rights from the Treehouse Condominium Association, Inc. (the HOA). The development rights gave the Village the right to construct up to nineteen condominium units at the Treehouse Condominiums, a complex that was originally built in the 1970s in the Wildernest subdivision in Summit County, Colorado.

¶ 3 The development rights were created by an amendment to the Treehouse Condominiums' declaration in 2006 and conveyed to the Village by the HOA in 2008 in a document entitled “Warranty and Assignment of Supplemental Development Rights” (the Assignment). Since the date of the Assignment, four units have been constructed, incorporated into the Treehouse Condominiums, and placed on the tax rolls. The Village conveyed a fee interest in those units and kept the proceeds from their sale. It retained the development rights to the remaining fifteen units, and those rights cannot expire.

¶ 4 For the 2009 and 2010 tax years, the Summit County Assessor created a separate tax schedule for the development rights and assessed the Village. After the Village requested an abatement and refund of the tax, the assessment was cancelled, and the Summit County Board of County Commissioners approved the cancellation.

¶ 5 Pursuant to sections 39–1–113 and 39–2–116, C.R.S.2013, the Property Tax Administrator (Administrator) was required to review the abatement and refund of the property taxes because they were in excess of $10,000. After review, the Administrator denied the refund, and the Village petitioned the BAA to reverse the Administrator's decision. The BAA held a hearing and issued a written order upholding the Administrator's decision. The BAA concluded that the development rights were “permanently and irrevocably severed” and constituted taxable interests in real property for ad valorem tax purposes. This appeal followed.

II. Discussion

¶ 6 The Village argues that the development rights conveyed to it by the Assignment are not taxable because (1) they are not interests in real property; (2) they are already included in the value of the Treehouse Condominiums common elements; and (3) taxing them would violate the unit assessment rule, section 39–1–106, C.R.S.2013. We are not persuaded.

A. Standard of Review

¶ 7 It is the function of the BAA to weigh the evidence and resolve any conflicts therein. Marsico Capital Mgmt., LLC v. Denver Bd. of Cnty. Commis., 2013 COA 90, ¶ 7, ––– P.3d ––––. We may set aside the BAA's decision if it is “unsupported by competent evidence or reflects a failure to abide by the statutory scheme for calculating property tax assessments.” Id. The interpretation of a property tax statute is a question of law that we review de novo. Id. at ¶ 8.

B. Analysis

¶ 8 We conclude that the development rights are property interests subject to taxation. And because the Village's remaining arguments are unavailing, we conclude that the BAA did not err in its ruling.

1. The Development Rights Are Taxable Property Interests

¶ 9 The Village argues that the BAA erred in upholding the Administrator's denial of the petition for abatement because the development rights conveyed to the Village by the HOA do not constitute taxable interests in real property. We disagree.

¶ 10 “The Colorado Constitution directs that all real and personal property, as defined by the legislature, must be taxed unless it is exempted in accordance with law.” Bd. of Cnty. Comm'rs v. Vail Assocs., Inc., 19 P.3d 1263, 1275 (Colo.2001) (citing Colo. Const. art. X, §§ 3(1)(a), 6) (emphasis added); see also§ 39–1–102(16), C.R.S.2013 (“ ‘Taxable property’ means all property, real and personal, not expressly exempted from taxation by law.”). The legislature may exempt property from taxation only if that property falls within certain categories specified in the constitution, categories which are not at issue here. Vail Assocs., 19 P.3d at 1275–76.

¶ 11 Under Colorado's property tax statutes, “real property” is defined, in part, as “[a]ll lands or interests in lands to which title or the right of title has been acquired from the government of the United States or from sovereign authority ratified by treaties entered into by the United States, or from the state.” § 39–1–102(14)(a), C.R.S.2013.

¶ 12 “Real property” is synonymous with “real estate.” See Black's Law Dictionary 1378 (9th ed. 2009). Under the Colorado Common Interest Ownership Act (CCIOA), which applies to condominium complexes such as the one at issue here, “real estate” is defined as:

any leasehold or other estate or interest in, over, or under land, including structures, fixtures, and other improvements and interests that, by custom, usage, or law, pass with a conveyance of land though not describedin the contract of sale or instrument of conveyance. “Real estate” includes parcels with or without horizontal boundaries and spaces that may be filled with air or water.

§ 38–33.3–103(25), C.R.S.2013 (emphasis added).

¶ 13 An “interest” means a “legal share in something,” including “all or part of a legal or equitable claim to or right in property.” Black's Law Dictionary 885 (9th ed. 2009).

¶ 14 The Village argues that its development rights cannot be classified as interests in real property because (1) the rights are more accurately classified as future rights, contract rights, or incorporeal hereditaments; and (2) the General Assembly has never defined such interests as “real property” subject to taxation. We reject these contentions.

¶ 15 The Assignment employs strong and definitive language of conveyance of property rights. Under the Assignment, the HOA “bargains, sells, assigns, conveys, transfers[,] and grants to [the Village], forever, all right, title, and interest in and to the [development rights] to nineteen (19) Condominium Units ... to be added to and included as part of the Treehouse Condominiums....” It states that the development rights conveyed to the Village “constitute a real property interest.” Under the Assignment, the Village acquired “the right to create, construct, grant, sell, transfer[,] and assign the [Condominium Units], free and clear of any interest of [the HOA], on or over that portion of the Common Elements” set aside for new construction, as well as the right to further convey the development rights.

¶ 16 The status of the Assignment as a conveyance of property rights is confirmed by the fact that it was recorded with the Summit County clerk and recorder.

¶ 17 We conclude that the Assignment conveyed a taxable interest in real property. The Assignment, in effect, severed the development rights from the Treehouse Condominiums common elements and conveyed them to the Village. Though the Village denies that such a severance occurred, its admission that only the Village—and not the HOA or the unit owners—has the right to exercise the development rights, is a clear demonstration that those rights have been severed from the common elements. Indeed, the Village admits in its briefs that, once it bought the development rights, those rights “no longer represented a component of the value of the Treehouse common elements.” Cf. Radke v. Union Pac. R.R. Co., 138 Colo. 189, 209, 334 P.2d 1077, 1088 (1959) (indicating that severance of surface and mineral estates must be expressed by clear and distinct language of the conveyance).

¶ 18 Because the Village acquired interests in land, taxation of the development rights was required under sections 39–1–102(16) and 39–1–102(14)(a).

¶ 19 We also reject the Village's argument, based on Radke, that the Assignment conveyed something less than a property right. That case is distinguishable. The license in Radke was conditional, conveying the right to remove minerals only if they were found, and the license was “subject to revocation before its exercise by the owner of the fee-simple estate.” 138 Colo. at 211, 334 P.2d at 1089. Unlike the license in Radke, the rights conveyed here were assignable, unconditional, and not subject to revocation.

¶ 20 Moreover, the Village's characterization of the development rights as an incorporeal hereditament does not support its argument that they are not taxable property rights. Incorporeal hereditaments include interests in land. An incorporeal hereditament is a “right issuing out of a thing corporate, whether real or personal.... It ... can exist only in contemplation.” Id. at 206, 334 P.2d at 1086 (emphasis added); see also Bd. of Cnty. Comm'rs v. Park Cnty. Sportsmen's Ranch, LLP, 45 P.3d 693, 719 (Colo.2002) (Kourlis, J., concurring in part and dissenting in part) (“The legislature has specified that ‘land’ should be defined broadly to include a coextensive meaning with ‘the terms “land,” “tenements,” and “hereditaments” and as embracing all mining claims and other claims, and chattels real.’ ” (quoting § 38–30–150, C.R.S.2013)); Black's Law Dictionary 794 (9th ed. 2009...