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Assessments must consider impact of long-term lease on property value.

The Commonwealth Court of Pennsylvania ruled in an assessment appeals case that the trial court erred in failing to consider the impact of a long-term lease on the taxpayers' property.

Dr. Edwin and Jane Assid own a 339-acre tract of land in Armstrong County, Pennsylvania. The tract has been in Jane Assid's family since the 1930s and was previously used for farming. In April 1999, the Assids leased the entire tract to a Pennsylvania limited partnership known as Spring Church, L.E The initial term of the lease was five years, with an option to extend that term for four consecutive five-year periods. Spring Church constructed an 18-hole golf course and clubhouse on about 100 acres of the property. The remainder of the leased land consists of farmland, forestland, pasture, and several outbuildings. In April 2001, the Assids received a Notice of Appraisal from the Board of Assessment Appeals of Armstrong County (Board) assessing the property at $1,346,390; they filed an appeal. The trial court rejected expert testimony on the impact of the long-term lease and upheld the appraisal. The Assids appealed the decision of the trial court.

The appellate court said that to determine the fair market value of the property, the trial court was required to consider the impact of the lease, which it failed to do. According to the court, once the Assids raised the issue of the lease, it was incumbent upon the trial court to consider it. The appellate court emphasized that the trial court had erroneously rejected expert testimony that followed the capitalization of income approach to valuation. The court noted that this method is required where, as in this case, a long-term commercial lease encumbers a property. The trial court decision was vacated and the case sent back for further proceedings.

In Re Assid

Commonwealth Court of Pennsylvania

February 13, 2004

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Title Annotation:cases in brief
Publication:Appraisal Journal
Article Type:Brief Article
Geographic Code:1U2PA
Date:Sep 22, 2004
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