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Sale to government entity considered a market value transaction.

Nova Tube owned 29.1 acres of land with rail spurs that provided access to the nearby railroad and a 109,443-square-foot industrial warehouse. In 2010, the property was assessed at $2,245,900, but in 2011 the property's assessment was increased by over 50% to $4,653,100. The assessment increased to $4,767,200 in 2012, and in 2013 the assessment increased to $4,767,300.

Nova Tube appealed the 2012 and 2013 assessments, but during the pendency of the appeal, Nova Tube sold the property to the Port of Indiana for $6,125,000. The board of review subsequently affirmed all of Nova Tube's assessments. Nova Tube appealed to the Indiana Board.

The Indiana Board determined that the assessor met her burden of proving the assessments were correct because the evidence showed the property was sold in a "market value" transaction in May 2014 and that the market was relatively stable during the years at issue. The burden of proof then shifted to Nova Tube to rebut the assessor's case.

Nova Tube asserted that the sale was not a market value transaction because the buyer, the Port of Indiana, is a government entity that already owned "the vast majority of the land in that area" (including land adjacent to Nova Tube's property) and had unique motivation for the acquisition. Nova Tube also presented appraisals that valued the property at $2,900,000 in 2011, $3,000,000 in 2012, and $3,100,000 for 2013.

The Indiana Board upheld the assessor's values. Nova Tube subsequently filed an appeal with the tax court.

The tax court noted that during the years at issue, Indiana defined market value for purposes of its property tax assessment system as,
   The most probable price, as of a specified date, in cash,
   or in terms equivalent to cash, or in other precisely
   revealed terms, for which the specified property rights
   should sell after reasonable exposure in a competitive
   market under all conditions requisite to a fair sale, with
   the buyer and seller each acting prudently, knowledgeably,
   and for self-interest, and assuming that neither is
   under undue duress.

At the appeal Nova Tube argued that to establish that a sale is a market value transaction, the parties to the transaction must possess typical motivation. Nova Tube claimed that the Port of Indiana, was atypically motivated, given its status as both a government entity and adjacent landowner, and thus the May 2014 sale could not constitute a market value transaction.

The tax court found Nova Tube's arguments unpersuasive. First, the certified administrative record revealed that both parties' expert witnesses stated that the mere fact that one of the parties to a transaction is a government entity or adjacent landowner does not in itself demonstrate that the party is atypically motivated.

Also, the parties offered conflicting evidence on the issue of whether the property's May 2014 sale constituted a market value transaction. Nova Tube presented evidence that the May 2014 sale was not a market value transaction because the Port of Indiana was the sole party interested in purchasing the property and that its business model was to purchase all nearby land to control its use. The assessor presented evidence that (1) the property's asking price of $6,950,000 was based on an independent appraisal, (2) the property sold to the Port of Indiana after being on the market for 373 days, (3) there were "a number of lookers," (3) the property ultimately sold for $825,000 less than the asking price, and (4) personal property (i.e., cranes) advertised as part of the sale were not actually included in the sale.

The tax court found that the Indiana Board did not abuse its discretion in finding Nova Tube's property sold in a market value transaction. The tax court additionally found, however, that the assessor's evidence failed to show that the May 2014 sale price was directly related to any of the appropriate valuation dates for the years at issue. The tax court therefore concluded that the property should be assessed at the values indicated by Nova Tube's 2011, 2012, and 2013 appraisals.

by Scott B. Mueller, JD

Nova Tube Indiana II LLC v.

Clark County Assessor

Tax Court of Indiana

May 18, 2018

101 N.E.3d 887
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Title Annotation:Cases in Brief; Nova Tube Indiana II LLC v. Clark County Assessor
Author:Mueller, Scott B.
Publication:Appraisal Journal
Geographic Code:1U3IN
Date:Sep 22, 2018
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