The Law

Property Valuation Appeal Successful by Ron Davis A lengthy struggle to lower the tax value of a North Carolina shopping center has paid off big for the center’s owners. The shopping center is Blue Ridge Mall in Hendersonville. And a controversy over the center’s value began four years ago. That’s when the county in which the center is located ruled that the property’s worth for tax purposes is $11,496,000. The center’s owners objected to that valuation as too high and appealed to the local review commission, but without success. Another appeal followed, this time to the North Carolina Property Tax Commission. There, the center’s owners found a more sympathetic audience. Of special significance in that appeal were the findings of a highly qualified real estate appraiser. He explained to the Tax Commission that he uses a method known as “income capitalization” to determine the tax value of a retail property. For Blue Ridge Mall, he said, that method “is by far the most applicable and reliable way of valuing the property.” He therefore concluded that the property’s market value is $7,735,000. The county objected to that valuation, contending that the center’s owners failed to show that the county used an arbitrary or illegal estimation. Nor, added the county, did the center’s owners show that the county assessment substantially exceeded the “true value,” in money terms, of the property. Added the county, “There is no evidence that supports the use of a capitalization rate.” That’s because, the county explained, its valuation methods are superior and uphold an assessment of $11,496,600. Moreover, the county charged that the Tax Commission exceeded its authority in reducing the appraised value of the shopping center and was not even the most competent authority to assess the shopping center’s value. Finally, the county explained, the Commission used a calculation that was “arbitrary and capricious.” A North Carolina appellate court disagreed with the county, explaining, “The Tax Commission has full authority to reduce the appraised value of property, and there is no merit to the county’s suggestion to the contrary.” The court therefore concluded, “The direct capitalization method is the method commonly used by investors in the region where the subject property is located…. The appraisal valuing the property at $7,735,000 was competent and material, and substantial evidence tended to show that the county’s assessment was substantially in excess of the true value in money terms of the property…. The Tax Commission—unlike the courts—has the staff, the specialized knowledge and experience necessary to make informed decisions upon questions relating to the valuation and assessment of property.” (The Matter of the Appeal of Blue Ridge Mall, LLC, 2011 WL 3276713 [N.C.App.]) Decision: August 2011 Published: September 2011