Present: Koontz, Kinser, Lemons, Goodwyn, Millette, and Mims,
JJ., and Russell, S.J.
TB VENTURE, LLC
OPINION BY
v. Record No. 091621 JUSTICE CYNTHIA D. KINSER
November 4, 2010
ARLINGTON COUNTY
FROM THE CIRCUIT COURT OF ARLINGTON COUNTY
William T. Newman, Jr., Judge
In this appeal involving a taxpayer's petition to correct
erroneous tax assessments, the dispositive issue is whether the
taxpayer carried its burden to present evidence establishing the
fair market value of certain condominium units. Because the
taxpayer failed to establish the fair market value of each
individual unit, we will affirm the judgment of the circuit
court striking the taxpayer's evidence.
RELEVANT FACTS AND PROCEEDINGS 1
The real property at issue consists of 21 condominium units
owned by TB Venture, LLC (TB Venture) and located in Arlington
County (the County). TB Venture acquired the units in 2006-2007
for the purchase price of $2,000,000. The units are part of a
condominium development known as "The Odyssey Condominium
Project" (The Odyssey), which consists of residential units and
1
We will recite only those facts relevant to the
dispositive issue.
ground-level retail space. 2 Pursuant to a "Community Benefit
Housing Program Agreement" (the Agreement) between the developer
of the project and the County, 21 units in The Odyssey are
designated as community benefit units, or CBUs. The Agreement
specified that the 21 units would consist of 6 three-bedroom
townhouses and 15 two-bedroom flats. The Agreement requires the
CBUs to be rented to qualifying, low-income households for a
period of 40 years and specifies limitations on rental amounts
and occupancy. The Agreement further requires that a
"Declaration of Covenants" be recorded "among the land records
of [the] County."
For the 2007 tax year, the County assessed the 21 units as
having a fair market value of $8,370,400. The County's
Department of Real Estate Assessments reduced the assessment to
$5,364,864, and the Board of Equalization (BOE) further lowered
the assessed value to $3,248,100. The BOE assessed the 6
townhouses as having a fair market value of either $187,300 or
$187,400 each, and the 15 flats as having a fair market value of
$141,600 each. For the 2008 tax year, the County assessed the
2
Prior to TB Venture's acquisition, the developer
transferred the units to another entity, and the development
plans were altered, changing the units from rental apartments to
condominiums pursuant to the provisions of the Condominium Act,
Code §§ 55-79.39 through –79.103.
2
townhouses at $210,900 each and the flats at $186,200 each, for
a total fair market value of $4,058,400 for the 21 units.
Pursuant to Code § 58.1-3984, TB Venture filed a complaint
to correct erroneous tax assessments, alleging that the County's
assessments for the 2007 and 2008 tax years were "greatly in
excess of 100 [percent] of the fair market value of each of the
[u]nits," and thus violated the provisions of Code § 58.1-3201
requiring real property to be assessed at 100 percent of its
fair market value. TB Venture asked the circuit court to reduce
the assessments to amounts representing the 21 units' fair
market value.
At trial, TB Venture presented testimony from, among
others, Thomas J. Shields, who qualified as an expert in real
estate appraisal. Shields testified that to appraise the
subject property, he utilized a "direct capitalization
methodology, which projected . . . a stabilized year of income
and expenses to derive . . . a net operating income." He then
capitalized the net operating income "at an appropriate
capitalization rate to determine the market value." Shields
stated that he assessed the units on a "leased fee" rather than
a fee simple basis. According to Shields, that methodology
enabled him to take into account the 40-year rental restrictions
encumbering the units. Using his methodology, Shields opined
3
that the fair market value of the 21 units was $2,160,000 as of
January 1, 2007, and $2,000,500 as of January 1, 2008.
Based on those figures, Shields then allocated a value to
each unit "based on the pro rata share of the income of each of
the units derived by the overall income." Shields admitted that
his valuation considered "all 21 units as a whole." He
explained that he did not determine the fair market value of
each unit because "the units [could not] be sold individually as
condominiums" but are "basically tied together through this
covenant." In his opinion, there is no market for "one rent-
restricted unit as an investment." 3
On cross-examination, Shields stated that TB Venture's
purchase of the property was a bulk sale, i.e., "[n]o individual
prices were negotiated." Similarly, Shields admitted that his
valuation was a "bulk valuation," which he believed was "the
only way to look at it in this particular case." Shields
reaffirmed that he had "appraised the entirety of 21 units and
then allocated values to each individual condominium." When
asked whether his allocation of value was based on market value,
Shields replied it was "purely an allocation based on the income
in place."
3
The Agreement required that the CBUs be rented.
4
At the close of TB Venture's evidence, the County moved to
strike the evidence, arguing, in part, that TB Venture failed to
present evidence showing the fair market value of each
individual unit. According to the County, TB Venture thus
failed to carry its burden not only to show manifest error, but
also to establish the fair market value of the real property.
The circuit court granted the motion to strike. In its final
order, the court held that TB Venture "failed to prove the value
of the subject properties, and . . . failed to show either
manifest error or total disregard of controlling evidence in the
making of the assessments at issue and therefore failed to
overcome the presumption of correctness which applies to the
assessments." We awarded TB Venture this appeal.
ANALYSIS
On appeal, TB Venture challenges the circuit court's
judgment striking its evidence. When ruling on a motion to
strike a plaintiff's evidence, a trial court "is required to
accept as true all evidence favorable to a plaintiff and any
reasonable inferences that may be drawn from such evidence."
James v. City of Falls Church, 280 Va. 31, 38, 694 S.E.2d 568,
572 (2010) (citing Austin v. Shoney's, Inc., 254 Va. 134, 138,
486 S.E.2d 285, 287 (1997)). "The trial court is not to judge
the weight and credibility of the evidence, and may not reject
any inference from the evidence favorable to the plaintiff
5
unless it would defy logic and common sense." Austin, 254 Va.
at 138, 486 S.E.2d at 287; see also Meador v. Lawson, 214 Va.
759, 761, 204 S.E.2d 285, 287 (1974). On appeal, when this
Court reviews a trial court's decision to strike a plaintiff's
evidence, we likewise view the evidence in the light most
favorable to the plaintiff. Lee v. Nationwide Mut. Ins. Co.,
255 Va. 279, 284, 497 S.E.2d 328, 330 (1998); James, 280 Va. at
38 n.4, 694 S.E.2d at 572 n.4.
"All assessments of real estate . . . shall be at their
fair market value." Va. Const. art. X, §§ 1, 2; see also Code
§ 58.1-3201. "A taxing authority's assessment is presumed to be
correct," and a taxpayer challenging the assessment of his or
her real property "has the burden to rebut that presumption by
establishing that the real property in question is assessed at
more than fair market value or that the assessment is not
uniform in its application." West Creek Assocs., LLC v. County
of Goochland, 276 Va. 393, 409, 665 S.E.2d 834, 842 (2008)
(citing Code § 58.1-3984(A)). Even if the taxing authority is
unable to present evidence proving the correctness of its
assessment, "this does not impeach it since the taxpayer has the
burden of proving the assessment erroneous." Id. at 409, 665
S.E.2d at 843 (internal quotation marks omitted). To rebut the
presumption of correctness, "a taxpayer must show by a clear
preponderance of the evidence that the taxing authority
6
committed manifest error or totally disregarded controlling
evidence in making the assessment." Id.; accord Tidewater
Psychiatric Inst., Inc. v. City of Virginia Beach, 256 Va. 136,
141, 501 S.E.2d 761, 763 (1998). Manifest error may be shown by
proving that the taxing authority employed an improper
methodology in arriving at a property's assessed value or by
establishing "a significant disparity between fair market value
and assessed value . . . 'so long as the assessment [does not
come] within the range of a reasonable difference of opinion,
. . . when considered in light of the presumption in its
favor.' " West Creek, 276 Va. at 414, 655 S.E.2d at 845
(quoting City of Norfolk v. Synder, 161 Va. 288, 293, 170 S.E.
721, 723 (1933)).
In every instance, however,
to satisfy the statutory requirement of showing that
real property is assessed at more than its fair market
value, a taxpayer must necessarily establish the
property's fair market value. This is so irrespective
of whether a taxpayer is attempting to show manifest
error or disregard of controlling evidence by proving
a significant disparity between fair market value and
assessed value, or by establishing a flawed
methodology by the taxing authority in setting the
assessed value.
Id. at 417, 665 S.E.2d at 847 (citation omitted). This Court
generally has defined the term fair market value as real
property's "sale price when offered for sale 'by one who
desires, but is not obliged, to sell it, and is bought by one
7
who is under no necessity of having it.' " Keswick Club, L.P.
v. County of Albemarle, 273 Va. 128, 136, 639 S.E.2d 243, 247
(2007) (quoting Tuckahoe Woman’s Club v. City of Richmond, 199
Va. 734, 737, 101 S.E.2d 571, 574 (1958)); see also West Creek,
276 Va. at 416, 665 S.E.2d at 846 ("[F]air market value 'is the
present actual value of the land with all its adaptations to
general and special uses, and not its prospective, speculative
or possible value, based on future expenditures and
improvements.' " (quoting Fruit Growers Express Co. v. City of
Alexandria, 216 Va. 602, 609, 221 S.E.2d 157, 162 (1976))).
Viewing the evidence in the light most favorable to TB
Venture, we conclude that the circuit court did not err in
striking TB Venture's evidence. As we have already noted, the
taxpayer's burden to prove that real property is assessed at
more than its fair market value necessarily requires that the
taxpayer establish the property's fair market value. West
Creek, 276 Va. at 417, 665 S.E.2d at 847. Here, because the
real property at issue consists of condominium units, TB Venture
was required to produce evidence to show the fair market value
of each individual unit.
The provisions of Code § 55-79.42 state that "each
condominium unit constitutes for all purposes a separate parcel
of real estate." Additionally, "[i]f there is any unit owner
other than the declarant, each unit, together with its common
8
element interest . . . shall be separately assessed and taxed."
Code § 55-79.42. TB Venture, the current owner of the 21 units,
was not the "declarant" of The Odyssey. 4 In fact, the 21 units
at issue here had been registered as condominiums prior to being
acquired by TB Venture. Thus, just as the County was required
to separately assess each unit, TB Venture was required to
establish the fair market value of each unit. See Orchard Glen
East, Inc. v. Board of Supervisors of Prince William County, 254
Va. 307, 312, 492 S.E.2d 150, 153 (1997) (holding that Code
§ 55-79.42 requires individual assessment of condominiums
regardless of ownership); West Creek, 276 Va. at 414 n.8, 665
S.E.2d at 846 n.8 (listing statutes that require parcels of real
property to be assessed individually); see also Code § 58.1-
3290.
But, TB Venture's expert witness admitted that he did not
separately appraise the units at issue. Instead, Shields valued
the 21 units as a whole and then allocated an amount to each
unit based on the unit's pro rata share of the overall income.
Shields used such methodology because, in his opinion, there is
no market for "one rent-restricted" condominium. Similarly, TB
Venture argues on appeal that allocating each unit's fair market
value pro rata based on income is warranted "because income is
4
The "declarant" is, among other things, the entity that
"applies for registration of the condominium." Code § 55-79.41.
9
the only distinguishing feature that separates these units."
According to TB Venture, each unit's location in the complex,
its amenities, and even its view are irrelevant because of the
restrictions contained in the Agreement.
To the extent there are market-driven impediments to
selling the units individually and limitations on the rental
income that can be realized, such factors may affect each unit's
fair market value. See West Creek, 276 Va. at 416, 665 S.E.2d
at 846 ("[F]air market value is the present actual value of the
land with all its adaptations to general and special uses.")
(internal quotation marks omitted). But, they do not alter the
statutory requirement that condominiums be treated as separate
parcels of real estate and separately assessed. Code § 55-
79.42. Nor do such factors alter TB Venture's burden to
establish each unit's fair market value in order to show that
its real property is assessed at more than fair market value as
required by Code § 58.1-3984(A). See West Creek, 276 Va. at
417, 665 S.E.2d at 847. TB Venture failed to carry that burden,
and the circuit court properly struck its evidence.
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CONCLUSION
For these reasons, we will affirm the circuit court's
judgment. 5
Affirmed.
5
In light of the Court's decision, it is not necessary to
address TB Venture's other assignments of error.
11