To The Point Blog

Ohio Supreme Court Issues Property Tax Valuation Decision: may affect how Schools assess the Value of a Property

Apr 17, 2014

The Ohio Supreme Court has just issued an opinion that may affect how your School challenges or defends property value in valuation cases.[1]  The opinion creates a bright line rule for when a property’s sale price may be presumed to be the value and also specifies when the sales price is too remote in time such that the sales price will need to be substantiated by evidence.

The case’s history is straight forward. In 2009, the Akron City School District filed a complaint regarding the valuation of an Arby’s Restaurant.  The County auditor valued the property at $902,310 as of 2008.  The School sought a different valuation: $1,407,000 from the property’s 2005 sale.

The property owner asserted that the market had changed in the 28 months since the sale and that the more recent valuation should be adopted.  The Board of Revision agreed, but on appeal the Board of Tax Appeals (BTA) reversed and adopted the 2005 Sales price ($1.4 million).  The BTA held that the Owners had not rebutted the presumption that the $1,407,000 value should not be used, and therefore the Revised Code required the sales price to be used.  The Owners appealed to the Ohio Supreme Court alleging that the sale was too “remote” and that the complaining party had the burden to show the sale was recent to be used. 

The Ohio Supreme Court had to harmonize two conflicting laws that determine a property’s valuation.  First, R.C. 5713.03—as it existed at the time—provided that valuation “shall” be the sales price when an arm’s length sale occurred “within a reasonable time.”[2]   Second, however, the County Auditor is to reappraise a property every six years and is to consider all relevant factors in determining a property’s value.  This creates a potential conflict of determining value when the sales price differs from the reappraisal price.  While the sales price was to be used, it only had to be used when the sale occurred “within a reasonable time.”  The Court had to determine when the “reasonable time” had passed. 

The Court acknowledged no clear line existed for when the “reasonable time” had passed.  To correct this, the Court adopted a bright line rule in determining valuation:

  • [a] sale that occurred more than 24 months before the lien date…should not be presumed recent when a different value has been determined for the lien date as part of the six-year reappraisal. 

In other words, when a sale occurred more than 24 months before the lien date, it will not be presumed recent.  This does not mean the sales price cannot be used for property tax valuation.  The proponent must, however, come forward with evidence showing the value has not changed between the sale date and the lien date. 

This will affect how schools challenge or defend a property’s valuation.  As explained by Justice Pfeifer “[t]he rule that we adopt today prevents a remote sale from controlling over a more recent appraisal.” The 24 month “bright line” test will make it clear when a sales value may be presumed “recent” and when the sale value must be proved by evidence.

If you have any questions about the case, its potential impact, or if you have any other education law questions, please contact Maria L. Markakis, Chair of the Education Law Practice Group




[1] Akron City Sch. Dist. Bd. of Educ. v. Summit County Bd. of Revision, 2014-Ohio-1588.

[2] Note that R.C. 5713.03 has since been amended.  R.C. 5713.03 now states that the valuation “may” be determined by the sales price, whereas the section previously stated that it “shall” be determined by the sales price.  The court did not discuss how the case would affect the amended code section.  

 

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