Submitted April 5, 2017
from the Board of Tax Appeals, Nos. 2015-279, 2015-280.
Sleggs, Danzinger & Gill, Co., L.P.A., and Todd W.
Sleggs, for appellant.
& Gillis Law Group, L.L.C., Mark Gillis, and Kimberly G.
Allison, for appellee Hilliard City Schools Board of
1} At issue in this case is whether a recent
amendment to R.C. 5713.03 applies to real-property valuations
for tax year 2013 and, if so, whether the statutory change
affects how taxing authorities must value lease-encumbered
properties that have been the subject of recent
arm's-length sales. We conclude that the amendment to
R.C. 5713.03 enacted in 2012 Am.Sub.H.B. No. 487 ("H.B.
487") applies here and that the statutory change
requires us to remand this case to the Board of Tax Appeals
("BTA") for further consideration.
and Procedural History
2} The subject property is a 54, 261-square-foot
fitness center situated on 3.41 acres in Franklin County and
owned by appellant, Terraza 8, L.L.C. ("Terraza").
The building was constructed in 2007.
3} The Franklin County auditor assessed the property
at $4, 850, 000 for tax year 2013. Appellee Hilliard City
Schools Board of Education ("BOE") complained to
appellee Franklin County Board of Revision ("BOR")
that the property should have been valued at $15, 403, 200,
based on its assertion that that was the amount Terraza paid
for it in February 2013. Terraza did not defend against the
complaint, and the BOR increased the valuation to $15, 403,
200 for tax years 2013 and 2014. Terraza appealed both
years' valuations to the BTA.
4} At the BTA hearing, Terraza introduced the
testimony and appraisal of Patricia Costello, who concluded
that the sale price did "not represent the fee simple
market value of the property." She used income and
sales-comparison approaches to determine a value that she
referred to as the property's "fee simple"
value. Under the income approach, she concluded that the
existing lease in place when Terraza acquired the property,
which provided for an initial 20-year term ending in 2027 and
two 10-year optional renewal periods, called for monthly
rental payments above the market rate. She testified that the
monthly market-rate rent for comparable properties in 2013
was $11 per square foot while the lease here called for
monthly rental payments of $22 per square foot in 2013. Her
income-approach valuation was $5, 650, 000. Her
sales-comparison valuation was $7, 055, 000. She accorded
greatest weight to the sales-comparison approach, reaching a
final valuation of $7, 055, 000.
5} The BOE objected to the evidence presented by
Costello, arguing that it was inadmissible because Terraza
had not rebutted the recency or arm's-length nature of
the sale. Terraza countered that the evidence was admissible
due to a change in R.C. 5713.03, which, it alleged, required
the county auditor, the BOR, and the BTA to value the
unencumbered fee-simple estate of the property. The BTA
overruled the objection and admitted the evidence.
6} The BTA found that an amended version of R.C.
5713.03 applies in this case but concluded that the change
did not overrule Berea City School Dist. Bd. of Edn. v.
Cuyahoga Cty. Bd. of Revision, 106 Ohio St.3d 269,
2005-Ohio-4979, 834 N.E.2d 782, ¶ 13, which held that
property must be valued according to the sale price of a
recent arm's-length transfer. The BTA, therefore,
disregarded Costello's appraisal and, after making a
slight adjustment to the BOR's valuation, determined a
value of $15, 403, 120 for tax year 2013. It also found that
the BOR lacked jurisdiction to determine value for tax year
2014 and instructed the BOR to vacate its decision for that
year. Terraza appealed the determination for tax year 2013 to
7} We must affirm the BTA's decision if it was
"reasonable and lawful." R.C. 5717.04. In making
this determination, we must consider legal issues de novo,
Akron City School Dist. Bd. of Edn. v. Summit Cty. Bd. of
Revision, 139 Ohio St.3d 92, 2014-Ohio-1588, 9 N.E.3d
1004, ¶ 10-11, and defer to findings concerning the
weight of evidence so long as they are supported by the
record, Olmsted Falls Bd. of Edn. v. Cuyahoga Cty. Bd. of
Revision, 122 Ohio St.3d 134, 2009-Ohio-2461, 909 N.E.2d
597, ¶ 27.
Arm's-Length Sales under Ohio Law
Constitution, Article XII, Section 2, and RC. 5713.01
8} The Ohio Constitution provides that "[l]and
and improvements thereon shall be taxed by uniform rule
according to value." Ohio Constitution, Article XII,
Section 2. In State ex rel. Park Invest. Co. v. Bd. of
Tax Appeals, 175 Ohio St. 410, 195 N.E.2d 908 (1964), we
held that Article XII, Section 2, along with R.C. 5713.01,
establishes the criterion for the assessment of real property
in Ohio. Id. at 411. At that time, R.C. 5713.01
provided that "[t]he auditor shall assess all the real
estate situated in the county at its true value in
money." Am.S.B. No. 370, 128 Ohio Laws 410, 412.
Although the General Assembly has amended R.C. 5713.01 a
number of times since then, the statute still requires county
auditors to appraise real property "at its true value in
money." R.C. 5713.01(B).
9} "[T]he value or true value in money of real
property" refers to "the amount for which that
property would sell on the open market by a willing seller to
a willing buyer * * *, i.e., the sales price."
Park Invest. Co. at 412. We have explained that
"[t]he best method of determining value, when such
information is available, is an actual sale of such property
between one who is willing to sell but not compelled to do so
and one who is willing to buy but not compelled to do
so." Id., citing In re Estate of
Sears, 172 Ohio St. 443, 178 N.E.2d 240 (1961),
paragraph two of the syllabus. "This, without question,
will usually determine the monetary value of the
property." Id. Later, in Conalco, Inc. v.
Monroe Cty. Bd. of Revision, 50 Ohio St.2d 129, 363
N.E.2d 722 (1977), we reiterated that "[t]he best
evidence of the 'true value in money' of real
property is an actual, recent sale of the property in an
arm's-length transaction." Id. at paragraph
one of the syllabus, quoting R.C. 5713.01.