Argued: January 7, 2016
Circuit Court for Montgomery County Case No. 369661-V
Barbera, C.J., [*] Battaglia, Greene Adkins, McDonald Watts, Raker, Irma S. (Retired, Specially Assigned), JJ.
Maryland law requires that, unless exempted, all real property in the State be assessed for property tax purposes. The assessment is calculated by reference to the value on the "date of finality, " which is defined as "January 1, immediately before the 1st taxable year to which the assessment based on the new value is applicable." Md. Code Ann., Tax-Prop. ("TP") § 8-104(b)(1) (2009, 2012 Repl. Vol.). This case presents the question of whether the Tax Property Article prohibits the Maryland Tax Court from taking into account sales of comparable properties that occur after the date of finality in determining the value of a property on the date of finality.
The Tax Court did not believe itself so constrained and, as we shall see, valued the property by relying on sales of comparable properties that occurred several months after the date of finality. The Court of Special Appeals found no error with the Tax Court's reliance on that evidence and neither do we.
Real Property Taxation in Maryland
"Unless otherwise exempted by statute, all property located in the State is subject to assessment and property tax and is taxable to the owner of the property." State Dep't of Assessments & Taxation v. Andrecs, 444 Md. 585, 590 (2015). "Calculation of a property assessment begins with a determination of the property's value[, ]" and, in accordance with the dictates of Article 15 of the Maryland Declaration of Rights, the rules for such calculation must be "uniform." Id. at 591; see also 589-90 (discussing same).
The value of real property is determined by the State Department of Taxation and Assessment or its local Supervisor of Assessments "once in every 3-year cycle based on an exterior physical inspection of the real property." TP § 8-104(b)(1). "[T]he value of the real property shall be its value on the date of finality, " TP § 8-102(a), and, for purposes of real property assessed under TP § 8-104(b)(1), the "date of finality" is the "January 1 immediately before the 1st taxable year to which the assessment based on the new value is applicable, " TP § 8-104(b)(2). See also TP § 1-101(oo) (explaining that the taxable year begins on July 1).
The Tax Property Article does not prescribe a specific methodology for valuation. Respondent Supervisor of Assessments of Montgomery County ("Supervisor") advises us that, since 1992, the State Department of Assessments and Taxation and its local assessors have followed the practice of considering sales after the date of finality to value property as of the date of finality when those sales are reasonably close in time and otherwise comparable to the subject property.
The case before us has its genesis in Petitioner Ann Lane's appeal of her 2011 tax assessment of the condominium she owns and occupies in Parc Somerset, a seventeen-story building located on Wisconsin Avenue in Chevy Chase, Maryland. Parc Somerset is the newest of three condominium buildings, all of which were built over a twenty-year period and together comprise the Somerset House development. Condominiums in Parc Somerset are the most desirable in the development. Certain condominiums in Parc Somerset that are located directly above and below one another form a "stack, " meaning that the units are exactly the same in design, layout, and size. Petitioner's unit is located on the tenth floor in the "03" stack. The "03" stack runs from floors three to twelve and each of the "03" units measures 2, 498 square feet.
On December 28, 2010, the Supervisor notified Petitioner that her condominium ("unit 1003"), would be assessed at a value of $2, 130, 000, representing "the new market value effective January 1, 2011." The Notice stated that the "new market value is based upon market data available prior to this date." The assessment, which was determined by using a computer-assisted mass appraisal technique, was approximately 11 percent higher than the previous assessment of Petitioner's property.
Petitioner, believing the assessment to be incorrect, availed herself of her administrative rights of appeal. She appealed first to the Supervisor, who issued a Final Notice of Assessment in August 2011, making no change to the assessment. Petitioner appealed that decision to the Property Tax Assessment Appeal Board for Montgomery County ("PTAAB"). At that juncture, Petitioner's appeal was consolidated with those of nine other Parc Somerset condominium owners, including the owners of units 803 and 703. The PTAAB reduced the assessment for unit 803 to $1, 840, 000 and the assessment for unit 703 to $1, 830, 000 but left standing the assessment of Petitioner's property.
Petitioner appealed the decision of the PTAAB to the Maryland Tax Court. She presented two arguments in support of a reduction in the assessed value of her condominium. She argued first that the correct value of her condominium was $1, 649, 000 plus a $20, 000 floor premium for a total value of $1, 669, 000. In support of that value, Petitioner relied on two items of evidence: the affidavit of a real estate broker attesting to a $10, 000 floor premium for units in Parc Somerset; and an appraisal of unit 803, which valued that condominium at $1, 649, 000 as of January 3, 2011, and was conducted on behalf of a mortgage company to assist the owners of unit 803 in refinancing their mortgage. Petitioner alternatively argued that, because the PTAAB had valued unit 703 at $1, 830, 000 and unit 803 at $1, 840, 000, her property should be valued, at the most, at $1, 860, 000, accounting for a $10, 000 premium that the PTAAB appeared to have accorded to each additional floor.
Leonard Nichols, a real estate appraiser and hearing specialist, was present at the hearing on behalf of the Supervisor and was accepted by the Tax Court as an expert witness. Mr. Nichols informed the Tax Court that, in his view, the value of Petitioner's property was $2, 130, 000. Mr. Nichols testified that he arrived at that valuation by reliance on the sales of three comparable condominium units in Parc Somerset. All of those units measured 2, 441 square feet and were sold in May 2011. When comparing these sales to unit 1003, Mr. Nichols made adjustments for variations between the subject property and comparable properties.
The first comparable sale was of unit 207, which sold for $2, 200, 000; to that amount Mr. Nichols added $35, 000 for the difference in square footage, $80, 000 as a floor premium,  and $15, 000 for land adjustments. Based on that information, Mr. Nichols concluded that the market value for unit 1003 was $2, 330, 000.
The second comparable sale upon which Mr. Nichols relied was of unit 507, which sold for $2, 075, 000; to that amount he added $35, 000 for the difference in square footage, $50, 000 as a floor premium, and $15, 000 for land adjustments. Based on that information, Mr. Nichols concluded that the market value for unit 1003 was $2, 175, 000.
The third comparable sale was of unit 707 which sold for $1, 995, 000; Mr. Nichols added $35, 000 for the difference in square footage, $30, 000 as a floor premium, and $15, 000 for land adjustments. Based on this third comparable unit, Mr. Nichols valued unit 1003 at $2, 075, 000.
Mr. Nichols further testified that no sales of units in Parc Somerset occurred during 2010. He added that he had chosen not to rely upon sales from the other two buildings in the Somerset House development because those units were in older, less desirable ...