Wednesday, February 19, 2014

Board Finds that Neither Party When it had the Burden Sufficiently Showed the Value of Rental Properties

Excerpts of the Board's Determination follow:

The GRM is the preferred method for valuing rental properties with fewer than four units. Ind. Code § 6-1.1-1-4-39(b). The Petitioner contends the properties’ values should be lowered based on their current rental rates. The Petitioner wants the GRM for the appropriate areas to be applied to the actual rents.

44. The Petitioner presented the leases for the properties under appeal, but did not provide any calculation or analysis showing the market values of the properties based on GRM. Further, the Petitioner used actual rents, but failed to show those rents are consistent with similar properties. Indiana MCH, LLC v. Scott County Assessor, 987 N.E.2d 1182, 1185-6 (Ind. Tax Ct. 2013). It is necessary to consider data from other comparable properties in order to protect against distortions and inaccurate value estimates that might be caused by extraneous factors (such as bad management or poor business decisions) that have nothing to do with the inherent value of a property. Id. at 1184.

45. The Petitioner questioned the Respondent’s choice of comparable properties and the adjustments she made in her sales comparison analyses. But, the Petitioner failed to offer alternate analyses or submit calculations of their own to establish values. In fact, other than criticize the Respondent’s sales comparison analyses, the Petitioner offered no probative evidence suggesting what the correct assessment should be. A petitioner seeking review of a determination of an assessing official has the burden to establish a prima facie case proving that the current assessment is incorrect, and specifically what the correct assessment would be. See Meridian Towers East & West v. Washington Township Assessor, 805 N.E.2d 475, 478 (Ind. Tax Ct. 2003); see also, Clark v. State Board of Tax Commissioners, 694 N.E.2d 1230 (Ind. Tax Ct. 1998).

46. Based on the lack of probative evidence, the Petitioner failed to establish a prima facie case for a reduction in the assessed values for 1323 Shining Armor Lane, 1418 Shining Armor Lane, 3878 Chenango Place, and 3914 Chenango Place. Therefore, the Respondent’s duty to support these assessments with substantial evidence was not triggered. Lacy Diversified Indus. LTD v. Dep’t of Local Gov’t Fin., 799 N.E.2d 1215, 1221-1222 (Ind. Tax Ct. 2001). The Respondent, however, assumed the burden of proof for the remaining two properties, 3901 Chenango Place and 3922 Chenango Place.

3901 CHENANGO (PARCEL 79-06-02-228-004.000-023)

47. The Respondent had the burden of proof to prove that the assessment for 3901 Place was correct, and failed to meet this burden with probative evidence. The Respondent developed a value based on the income approach using the GRM. Indiana Code section 6-1.1-4-30(b) states “[t]he gross rent multiplier is the preferred method of valuing: (1) real property that has at least one (1) and not more than four (4) rental units; and (2) mobile homes assessed under IC 6-1.1-7.”

48. The Respondent presented a list of properties used to establish the GRM for 2009 and testified that there was no change to the GRM in the area for 2010. Respondent Exhibit C-1. The Respondent also prepared a spreadsheet of rental properties in the subject area showing the 2010 median market rent at $900. Respondent Exhibit C-3. Applying the GRM of 9.63 to the annual market rent of $10,800, the Assessor arrived at an assessed value of $104,000. Respondent Exhibit 3. However, with no explanation, the PTABOA made a determination of $98,100 based on market rent and a GRM of 8.93. Phillips’ testimony.

49. The Assessor relied on the spreadsheet she created of rental properties in the subject area to show the 2010 median market rent at $900. Respondent Exhibit C-3. However, there is no evidence that simply finding a median rent complies with generally accepted accounting principles for determining what market rent is for purposes of determining GRM. To draw any valid conclusions from the spreadsheet of rental properties in Respondent Exhibit C-3, the Assessor needs to have provided a more detailed analysis of the properties.

50. Based on the evidence presented by the Respondent, the Board finds that the Assessor did not met her burden for 3901 Chenango.

51. The Board finds for 2010, the property should be assessed at the original 2009 assessed value of $94,700.

3922 CHENANGO (PARCEL 79-06-02-227-023.000-023)

52. The Respondent had the burden of proof to prove that the assessment for 3922 Chenango Place was correct, but failed to meet this burden with probative evidence. The Respondent presented a sales comparison analysis based on four sales in the same area attempting to show the assessed value for the subject property. Respondent Exhibit 2.

The Respondent purportedly compared the properties by explaining the similarities and the differences. Based on that analysis, the Respondent calculated a median adjusted sale price of $119,250 and noted the subject property is assessed at $119,000. While the attempt to compare the properties was a step in the right direction, it was not sufficiently detailed or complete to form any legitimate conclusions about the relative values of the properties. Furthermore, the Respondent failed to establish that drawing any conclusion about the subject property based on the median values of the purported comparables actually satisfies generally accepted appraisal principles. Therefore, this part of the Respondent’s case is not sufficient to support the existing assessed value of this property.

53. The Respondent also presented a calculation using the GRM. Applying a GRM of 9.63 to the annual market rent of $10,800 resulted in a value of $104,000. Respondent Exhibit 3. The Respondent testified that the PTABOA used a market rent of $1,025 and a GRM of 8.93, resulting in a value of $119,000. The record, however, does not support the conclusion that market rent for this property is $1,025. And it remains unclear whether a correct GRM factor is 9.63 or 8.93. Therefore, the Respondent failed to support the existing assessed value for this property using GRM calculations.

54. The Petitioner’s duty to rebut the evidence was not triggered. The 2010 assessed value must be reduced to the previous year’s assessed value of $109,800. That conclusion, however, does not end the Board’s inquiry. The Petitioner requested an assessment of $96,444 on the Form 131. It has the burden of proving it is entitled to that additional reduction.

55. The Petitioner did not prove a lower value for 3922 Chenango Place. The Board finds for 2010, the property should be assessed at $109,800.