June 17, 2019

Frederick Skillern: Real Estate Case Law — Property Taxation and Assessments

Editor’s note: This is Part 15 of a series of posts in which Denver-area real estate attorney Frederick Skillern provides summaries of case law pertinent to real estate practitioners (click here for previous posts). These updates originally appeared as materials for the 32nd Annual Real Estate Symposium in July 2014.

frederick-b-skillernBy Frederick B. Skillern

Roaring Fork Club, LLC v. Pitkin County Board of Equalization
Colorado Court of Appeals, December 5, 2013
2013 COA 167

Valuation of a private golf club property.

The Pitkin County assessor determined the value of the Roaring Fork Club property for tax year 2011, and The Pitkin County Board of Equalization and the Board of Assessment Appeals agrees with the valuation. On appeal, the club asserts that the assessor should not have included the value of sold club memberships in the assessment of the club’s property. The Court of Appeals agrees and reverses.

The club’s property is open only to its members. Membership rights are retained for life unless sold or relinquished or revoked by the club. The club uses membership deposits to improve the property and maintain the improvements. The deposits are treated as a liability for accounting purposes because all or a part of them are refunded if members maintain their membership for at least thirty years or if they resign earlier and replacement members fill their spots.

The club’s amenities were completed in 1999 and the club had sold about 82% of the memberships by 2011. The club argues that the value of the sold memberships should not be considered in determining the actual value of the club’s property for property tax purposes because they are not interests in the real property. The BOE contends that the membership deposits are akin to prepaid rent on leasehold interests and they would escape taxation if not included in the property value.

On appeal, the club and the BOE agree that the income approach is the proper method to value the club’s property. However, the county argues that the memberships are an interest in land, like a leasehold, and should be included in the value under the “unit assessment rule.” The club contends that memberships are licenses, and are not an interest in land. The court agrees, and holds: (1) the membership agreement is not a lease; (2) memberships are not life estates; (3) the membership agreement does not give members any other taxable interest in the club’s property; (4) the membership agreement establishes that memberships are revocable licenses; (5) the unit assessment rule does not apply to these memberships; and (6) the sold memberships are not usufructuary interests. Accordingly, the Board’s order is reversed and the case is remanded to hold a hearing to determine the actual value of the club’s property without taking into account the value of the sold memberships.

 

Village at Treehouse, Inc. v. Property Tax Administrator
Colorado Court of Appeals, January 16, 2014
2014 COA 6.

Property tax; unit assessment rule.

Village paid more than $1 million to purchase certain development rights from the Treehouse Condominium Association (HOA). This supposedly gave Village the right to construct up to nineteen condominium units in the complex. The development rights were created by an amendment to the Treehouse declaration in 2006. The rights were assigned to Village in 2008 in a document entitled “Warranty and Assignment of Supplemental Development Rights”. The question is whether this property right is a taxable interest in real property. The Board of Assessment Appeals found that the right to build new condominium units constituted a taxable interest in real property for ad valorem tax purposes.

On appeal, the court of appeals affirms the BAA, and holds that the assignment, in effect, severed the development rights from the common elements owned by the HOA, creating a new taxable property interest. Because the Village acquired an interest in land, taxation of the development rights was required under C.R.S. § 39-1-102(16) and (14)(a).

Because the Assignment evinced the intent to sever title to the development rights from the common elements, taxing the development rights separately from the common elements did not contravene §§39-1-103(10) or 38-33.3-105. This taxation does not violate the unit assessment rule.

The Assignment created separate interests in real estate as between the interests of the individual unit owners in the common elements and those of the developer. The order was affirmed.

 

Premises Liability, Trespass and Nuisance

S.W. v. Towers Boat Club, Inc.
Colorado Supreme Court, December 23, 2013
2013 CO 72

Attractive nuisance; premises liability statute.

The Supreme Court considers whether, in the context of our premises liability statute, the attractive nuisance doctrine applies to both (a) trespassing children and (b) children who are licensees or invitees. The Court held that the doctrine permits all children, regardless of their classification, to bring a claim for attractive nuisance. C.R.S. § 13-21-115. The court therefore reverses the judgment of the court of appeals, which had found that the doctrine only protects trespassing children.

 

Frederick B. Skillern, Esq., is a director and shareholder with Montgomery Little & Soran, P.C., practicing in real estate and related litigation and appeals. He serves as an expert witness in cases dealing with real estate, professional responsibility and attorney fees, and acts as a mediator and arbitrator in real estate cases. Before joining Montgomery Little in 2003, Fred was in private practice in Denver for 6 years with Carpenter & Klatskin and for 10 years with Isaacson Rosenbaum. He served as a district judge for Colorado’s Eighteenth Judicial District from 2000 through 2002. Fred is a graduate of Dartmouth College, and received his law degree at the University of Colorado in 1976, in another day and time in which the legal job market was simply awful.
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