Orchard Glen East, Inc. v. Board of Supervisors ( 1997 )

Present: Carrico, C.J., Compton, Stephenson, 1 Lacy, Keenan, and
Koontz, JJ., and Poff, Senior Justice
ORCHARD GLEN EAST, INC.
OPINION BY JUSTICE LAWRENCE L. KOONTZ, JR.
v. Record No. 961603 September 12, 1997
BOARD OF SUPERVISORS OF
PRINCE WILLIAM COUNTY
FROM THE CIRCUIT COURT OF PRINCE WILLIAM COUNTY
LeRoy F. Millette, Jr., Judge
In this appeal, we consider whether a condominium
development, in which no individual units were sold or offered
for sale by the developer, was properly assessed for real estate
taxes based on the value of the individual units as separate
parcels, rather than on the value of the development as a single
parcel actually used as an apartment complex.
The essential facts are not in dispute. Orchard Glen East,
Inc. (Orchard Glen) planned, designed, and constructed the
development in question on its property in Prince William County
(the County). Orchard Glen recorded the appropriate condominium
declaration, or condominium instruments, in the land records of
the County, subjecting the development to the provisions of the
Condominium Act, Code §§ 55-79.39 through -79.103. Thereafter,
beginning in 1988, it constructed 243 individual condominium
units in a three-phase project.
As a result of an ongoing evaluation of the local housing
market during an early stage of the construction, Orchard Glen
1
Justice Stephenson participated in the hearing and decision
of this case prior to the effective date of his retirement on
July 1, 1997.
decided to lease the individual units as apartments rather than
to market them as condominium units. Consequently, as each phase
of construction was completed, the units in that phase were
leased as apartments. Orchard Glen has never sold or offered for
sale as a condominium any of the individual units within its
development even though, at all times relevant to the tax
assessments at issue, it could have done so pursuant to the
recorded declaration.
On December 28, 1994, Orchard Glen filed an application in
the trial court, as authorized by Code § 58.1-3984, to correct
alleged erroneous tax assessments by the County on the project
for the years 1991, 1992, 1993, and 1994. Orchard Glen asserted
that overassessments ranging from 2.8 to 6.8 million dollars had
been made for those years. On May 4, 1995, Orchard Glen filed an
application to reduce the assessment for 1995 by 5.7 million
dollars. In each instance, Orchard Glen asserted that the
assessments were erroneous because, rather than being made on its
property as a single apartment complex, the assessments were made
on the individual units as separate parcels. The trial court
2
consolidated the two cases for trial.
Ruling on pre-trial motions, the trial court granted partial
2
Prior to filing these applications, Orchard Glen had
applied to the Prince William County Board of Equalization to
have its property assessed for each of the years in question as a
unitary apartment complex. The Board rejected Orchard Glen's
request but reduced the County's assessment of all or some of the
individual units for each of the years in question. The trial
court ultimately vacated these reductions and adopted the fair
market value assessments originally set by the County. The
action of the trial court vacating the reductions granted by the
Board is not an issue in this appeal.
summary judgment for the County, finding that Code § 55-79.42
permitted a taxing authority "to assess a condominium project as
individual condominium units even if no individual unit has been
sold," and further finding that Code § 58.1-3202, requiring local
taxing authorities to assess multi-unit real estate leased to
residential tenants without regard to the property's potential
value as a condominium, had no application to a property already
subject to condominium instruments.
At the subsequent evidentiary hearing, the principal
evidence presented by the parties consisted of expert testimony
concerning the method of assessing the property to determine its
fair market value for tax purposes. Orchard Glen's position was
that the property should be assessed as an apartment complex and
in comparison to other properties being similarly used because
this was its highest and best use under market conditions. The
County maintained that, so long as the condominium declaration
remained in force, the highest and best use of the property was
as a condominium and, thus, the individual units were to be
assessed according to their value as separate parcels of real
3
estate.
The trial court entered judgment for the County, finding
that the assessment of the property as a unitary apartment
complex "would result in the property being assessed at its 'use
3
At trial and on appeal the County has conceded that Orchard
Glen merely had to terminate the condominium instruments in order
for the project to be appraised as a unitary apartment complex.
Code § 55-79.72:1(A). The parties agree that since the trial of
this case this has been done, and the project is now assessed as
a single parcel.
value' which, in this case, is different and less than the
property's 'fair market value'" as individual condominium units,
for which the trial court found that there was an active market
in the County. The trial court further found that the parties
had stipulated to the presumption of correctness in the County's
assessment of the individual units and that Orchard Glen "failed
to produce sufficient evidence that the County's original
assessments . . . were the result of manifest error." We awarded
Orchard Glen this appeal.
DISCUSSION
We begin our analysis of the issues presented in this appeal
with a focus on the primary assertion of Orchard Glen. The
essence of that assertion is that during the tax years in
question its project was an apartment complex and not a
condominium and, thus, its project was erroneously taxed as a
condominium.
Although Orchard Glen had recorded the appropriate
condominium instruments, it asserts that because it leased rather
than sold the individual condominium units it had not created
"statutorily complete" condominium units in its project. In
support of this assertion, Orchard Glen relies upon the statutory
definition of condominium found in Code § 55-79.41 which provides
that:
"[c]ondominium" means real property . . . lawfully
submitted to this chapter by the recordation of
condominium instruments . . . . No project shall be
deemed a condominium within the meaning of this chapter
unless the undivided interests in the common elements
are vested in the unit owners.
(Emphasis added).
Orchard Glen contends that the emphasized language in this
statutory definition means that no condominium exists until at
least one individual unit is sold. This is so, it reasons,
because, under common law principles, it cannot be a tenant in
common with itself in the common elements of the project. Thus,
Orchard Glen concludes that, as the owner of all the individual
units which it leased to individual tenants, it owned an
apartment complex and not a condominium complex. We disagree.
As estates in land, condominiums are creatures of statute
wholly unknown at common law, see Cooper v. Kolberg, 247 Va. 341,
348, 442 S.E.2d 639, 643 (1994), and the creation of a
condominium is controlled by the Condominium Act. Code
§ 55-79.45 specifically addresses the creation of a condominium
and provides that "[n]o condominium shall come into existence
except by the recordation of condominium instruments pursuant to
the provisions of this chapter." Code § 55-79.72:1(A) provides
that "[i]f there is no unit owner other than the declarant, the
declarant may unilaterally terminate the condominium." We have
previously held that the rights and liabilities afforded to a
condominium under the Condominium Act accrue at the time the
master deed, now the condominium instruments, is recorded. See
United Masonry, Inc. v. Jefferson Mews, Inc., 218 Va. 360, 377,
237 S.E.2d 171, 182 (1977). Accordingly, we hold that a
condominium is created upon the recordation of the appropriate
condominium instruments and is not dependent upon the subsequent
sale of one of the individual condominium units within the
condominium project. For these reasons, we reject Orchard Glen's
assertion that its project was an apartment complex and not a
condominium complex for purposes of the issues presented in this
appeal.
For similar reasons, we reject Orchard Glen's contention
that Code § 55-79.42 requires a taxing authority to treat a
condominium in which no units have been transferred as a single
parcel. Orchard Glen relies on language in that statute which
directs that the unit of "any unit owner other than the declarant
. . . shall be separately assessed and taxed." Id. However,
nothing in Code § 55-79.42 prohibits the taxing authority from
treating as separate parcels of real estate any completed units
still in the possession of the declarant. To the contrary, the
statute expressly states that once a unit is completed, it
"constitutes for all purposes a separate parcel of real estate."
Id. (emphasis added.)
Read in its full context, Code § 55-79.42 permits the taxing
authority to assess individually each completed unit in a
condominium project without regard to ownership, and to include
in that assessment a proportional share of the assessment of
common areas of the project which are not subject to withdrawal
or conversion by the declarant. Common areas which remain
subject to withdrawal or conversion by the declarant are to be
assessed separately as the sole property of the declarant.
Orchard Glen's project was fully developed, with no common areas
subject to withdrawal or conversion. Accordingly, each unit was
subject to assessment as an individual parcel.
We also find no merit in Orchard Glen's assertion that Code
§ 58.1-3202 bars the County from assessing its property as a
condominium rather than as a unitary apartment complex.
Code § 58.1-3202, in pertinent part, reads:
. . . the fair market value of multi-unit real estate
leased primarily to residential tenants shall be
determined without regard to its potential for
conversion to condominium or cooperative ownership. A
sale of apartment property shall not be presumed to be
for such conversion unless overt action which is a
prerequisite to conversion by the buyer has been taken
within three months from the recordation of the deed.
The express language of the statute demonstrates that it applies
to property which has not been made the subject of recorded
condominium instruments. Accordingly, the trial court correctly
determined that this statute had no application to Orchard
Glen's property because at all times relevant to the assessments
that property was a condominium and no "conversion to
condominium" was involved.
We next consider Orchard Glen's contention that the amount
of the assessments of the property was disproportionate to that
of other properties in the County which were assessed as unitary
apartment complexes. Orchard Glen contends that since its
property was also being used as a unitary apartment complex, the
assessment of the property as a condominium complex violated the
constitutionally mandated requirement of uniformity in tax
assessments. See Va. Const. art. X, §§ 1 & 2. We disagree.
"The constitutional mandate requires uniformity in the
assessment of 'properties having like characteristics and
qualities, located in the same area.'" Lee Gardens Arlington
Limited Partnership v. Arlington County Board, 250 Va. 534, 538,
463 S.E.2d 646, 648 (1995)(quoting Smith v. City of Covington,
205 Va. 104, 108, 135 S.E.2d 220, 223 (1964)). Article X, § 1
expressly provides that "[a]ll taxes shall be levied and
collected under general laws and shall be uniform upon the same
class of subjects within the territorial limits of the authority
levying the tax." (Emphasis added.)
The class within which Orchard Glen's property fell during
the assessments at issue was that of property subject to recorded
condominium instruments in which the individual units were
capable of being offered for immediate sale at the owner's
option. The properties to which Orchard Glen would have the
County compare its assessment for uniformity purposes were not
subject to condominium instruments and, thus, were not capable of
being sold as individual units. Accordingly, these properties
were not of "like characteristics and qualities" to Orchard
Glen's property, and they do not present an appropriate
comparison for determining the uniformity of the County's
assessment of the property in question.
Finally, we consider whether the trial court correctly
determined that Orchard Glen failed to carry its burden of
rebutting the presumption of correctness afforded to the County's
assessment. As noted above, Orchard Glen does not dispute this
standard, and at trial relied primarily on its assertions that
its project was not a condominium complex or that, even if it
was, market conditions dictated that its highest and best use was
as an apartment complex. The County's position, supported by the
testimony of its expert witnesses, showed that a market existed
for condominiums and that the fair market value of the project if
marketed as a condominium complex exceeded the fair market value
of the project used as an apartment complex. The trial court
considered this evidence and determined that Orchard Glen had not
met its burden. We agree.
Although there was a conflict in the expert evidence, that
conflict alone was insufficient to overcome the presumption
favoring the County. "Courts should be reluctant, within
reasonable bounds, to change assessors' judgments because courts
are not duly constituted tax authorities." Board of Supervisors
of Fairfax County v. Telecommunications Industries, Inc., 246 Va.
472, 476, 436 S.E.2d 442, 444 (1993). Here, there was sufficient
evidence supporting the County's original assessment of the
project's fair market value at its highest and best use as a
condominium complex. The evidence presented by Orchard Glen
placed the issue, at best, in equipoise, and, thus, was
insufficient to overcome the presumption in favor of the taxing
authority's judgment. See id. at 475, 436 S.E.2d at 444; Board
of Supervisors of Fairfax County v. Donatelli & Klein, 228 Va.
620, 627, 325 S.E.2d 342, 345 (1985).
For these reasons, we will affirm the judgment of the
circuit court.
Affirmed.