Opinion
No. CV 07-4025405 S
June 7, 2010
MEMORANDUM OF DECISION
Pursuant to a town-wide revaluation for the Grand List of October 1, 2004, the October 1, 2006 Grand List (the operative list for purposes of this appeal) set a fair market value for the subject property of $1,015,100 with an assessed value of $710,500. This assessment was appealed to the Branford Board of Assessment Appeals which did not change the valuation. The Board's decision was then appealed to Superior Court pursuant to § 12-117a and the plaintiff requested in the appeal that the valuation be stricken or reduced. The plaintiff claims the valuation placed on her property "was not its true and actual value but substantially exceeded the fair market value thereof and resulted in a property tax assessment that is grossly excessive, disproportionate and unlawful."
1. (a)
The court will first discuss some general principles which it will try to apply to the facts of this case and the three methods of valuation. As Fuller notes in Vol. 9A of Land Use Law and Practice, Connecticut Practice Series there are three accepted methods of valuation used for the assessment of real property (1) comparable sales approach (2) income approach (3) cost approach which involves reproduction cost less depreciation. The dissent in O'Brien v. Board of Tax Review, 169 Conn. 129 (1975), said that "it has been repeatedly stated that the best test for determining value is ordinarily that of market sales," id. page 138. As stated in Powell on Real Property, Vol. 1, Chapter 10B . . . "the market data method is the most widely used method of valuation and for most properties perhaps the most reliable," id. p. 10B-98. In United Technologies v. East Windsor, 262 Conn. 11 (2002), the court, referring to J. Eaton Real Estate Valuation in Litigation (2d ed., 1995), pp. 197-98 said that: "Under the market sales approach, the subject property's appraised value is derived from a comparison to recently sold similar properties in the vicinity, with appropriate value adjustments `based on the elements of comparison,'" id. p. 197.
Before discussing in more detail the comparable sales approach it should be noted that unlike some other jurisdictions the sale or market price in Connecticut and some other states is "strong but not conclusive evidence of market value," citing Thaw v. Town of Fairfield, 132 Conn. 173 (1945); Powell at § 10b.06(4)(c) page 10B-96.
In Gorin's, Inc. v. Board of Tax Review, 178 Conn. 606 (1979), the court upheld the trial judge who said "the market approach to value consists in analyzing and collecting information concerning sales of comparable properties . . . making allowances for any dissimilarities . . ." In footnote 2 the court emphasized the trial judge's inquiries as to whether the sale used for comparison was an arm length's sale. Also the trial judge was quoted as saying in Gorin that "the plaintiff's appraiser relied on one sale which the court finds not to be a comparable sale," id. page 609, cf Uniroyal, Inc. v. Board of Tax Review, 174 Conn. 380, 386 (1978). Common sense would seem to dictate that where there is more than one comparable sale used by an appraiser this would tend to more effectively support his or her conclusion as to market value. The plaintiff's expert testified three comparables is generally "what you have to have."
Likewise instructive, at least to the court, is Powell's comment in Vol. 1, § 10B.06(4)(c) at page 10B-98 where he discusses the "market data approach," which relies on data from recent sales, in determining appraisal for tax purposes. He says:
Relevant characteristics used in identifying comparable property may relate to the location, the land, and the improvements. For residential property, locational characteristics include such items as employment, shopping, schools, and other factors that affect the desirability of a given neighborhood. Land characteristics include the size, shape and slope of the lot, trees, shrubs, and landscaping. Improvement characteristics include the age of the structure, type of building materials, square feet of living space, design, layout and special architectural features. While the sale price of comparable property may be adjusted for dissimilarities with respect to one or more of these characteristics, at some point when the dissimilarities overwhelm the similarities, the property is not comparable to the subject property.
Characteristics regarding the land can include the fact that a portion of the land may be wetland since it can have an effect on value, Ress v. Suffield, 80 Conn.App. 630, 632 (2003). Improvement characteristics, as Powell notes include the age of the structure used for comparison. Id.
The cost approach is discussed by Fuller at § 45:5 subsection (c) where he states: "the reproduction cost approach requires the deduction of a figure attributable to depreciation," see Pepe v. Board of Tax Review, 14 Conn.App. 705, 709 (1988), where Fuller says the following in commenting on Pepe's factual setting: "Where a private road assessed to the owner was subject to an easement which reduced its value to a nominal amount and the owner would not replace the road if it were destroyed, the reproduction cost method of assessment was improper."
The income approach would not be applicable to residential property but as to the three methods the court in Uniroyal, Inc. v. Board of Tax Review, 174 Conn. 380, 386 (1978), quoting from an earlier case said: "As a rule, however, `no one method is controlling; consideration should be given to them all, if they have been utilized, in arriving at the value of property'" . . . The Uniroyal.
(b)
The court will mention some procedural aspects of a case such as this and has relied throughout its discussion on § 45:6 of Fuller's work and the cases that he cites.
Once the taxpayer is found to be aggrieved the matter is tried de novo and the court makes decisions as to the facts and the law independently of those considerations before the municipality and its agencies, Carol Management Corp. v. Board of Tax Review, 228 Conn. 23, 36 (1993). As with the testimony of experts in general, the court as trier of fact can accept the entire testimony of any expert called to testify, reject it, or accept only parts of it and of course can accept the testimony of one expert as opposed to another.
The taxpayer, of course, has the burden of proof as to the claim of overvaluation of the property. Ress v. Suffield, 80 Conn.App. 630, 635 (2003).
2.
The experts for both sides were experienced people with excellent credentials but a difficulty that would seem to be presented in a case such as this is that valuation seems to depend on changing and sometimes not related variables.
The first thing the court would note is that the valuation placed on the property by the plaintiff's expert was $950,000 as of October 1, 2004. The defendant town's expert placed the value of the property at $1,050,000. The town assessed the property's value, as noted, at $1,015,100. The obvious difference in valuation between the assessed value and the value placed on the property by Mr. Esposito, the plaintiff's expert, is approximately $65,000; this is a range of difference between only 6% and 7% of the values put on the property. When one looks at the appraisals and examines the testimony presented by the experts and the several adjustments made, for example, to make a comparable sale analysis with a spread of only 6% to 7% in these valuations, this leads to two conclusions, at least for the court, (1) if a comparable sales approach is used the fact that only one sale is of direct relevance requires close scrutiny to the "comparable" aspect of the test (2) given that, the reproduction cost method may have more relevance than is usually given to it when juxtaposed with a comparative sales analysis.
The comparative sale analysis relied heavily on by the plaintiff's expert concerned the property at 25 High Plains Road. It sold for $690,000. The other two properties were one at 60 Yowaga Avenue which sold for $1,085,000 and another at 8 Gaylea Drive which sold for $1,065,000. But both these properties had locations on or near the water which admittedly affected their relevance for a comparable sales analysis. But how much would this factor affect any analysis — would we have to have had evidence of other home sales of property similarly located — this was not offered.
Concerning the property at 25 High Plains Road, as is the custom in this appraisal industry, adjustments were made for the comparison analysis — the house sold for $690,000 but plus and minus adjustments brought an adjusted sales price for this property to $902,000.
The general instruction to juries when expert testimony is given at trial is that an expert's opinion can be evaluated by the facts he relies upon. Let us examine the Esposito analysis as to "Comparable 1" which is 25 High Plains Road and the facts he relies on suggested in his adjustments.
The homes are only about 1/4 mile apart so one can assume, although more testimony could have been offered concerning road layout and access, that the homes had the same or similar connections to schools, shopping facilities and other amenities that would affect each home's desirability. A glaring difference between the two homes was the fact that the High Plains home was 25 years old whereas the subject property was new as of 2004. Why is that entitled to only an adjustment of $25,000? Is it based on this appraiser's experience with other homes of similar age — what other homes, how many, what was their construction material. The gross living area was over 40% larger in the subject property why was there only a 15% or 16% adjustment to the High Plains home value. The appraisal report lists fairly comparable lot sizes but notes wetlands on the subject property. No adjustment is made for this and that is understandable since apparently the wetland was a dry area not submerged and what else could be placed on the wetland area of the subject property given its size and already existing amenities?
Thus the court cannot ascertain how the $902,000 adjusted sales price of the comparable was arrived at. At least in the court's opinion the cost approach might be more relevant to the value assessment in this case. But again the court has difficulty with the amount Mr. Esposito assigned to functional depreciation which he applied to the "total estimated cost new" of $76,906. The concept he referred to of functional obsolescence is understandable — reference is necessary to the home's large size, the general "over improvement" of the property including decks, patios, in-ground pool, etc., the lot's large size compared to neighboring homes. Mr. Esposito described it as a "charge off in your cost approach and possibly in the sales comparison approach" — in other words the contribution to value of these factors is much less than the amount spent on them due to their excess — a typical buyer would perhaps not want all the features as Mr. Esposito pointed out. The concept is understandable and it is true as the plaintiff points out in her brief that the defendant's expert did not take account of functional obsolescence in his cost based appraisal. But as brought on in cross of Mr. Esposito, how does one arrive at the figure of $76,906 for functional obsolescence. All Mr. Esposito could say is that "it's based on your experience — what experience, experience as regards the comparable sales approach, the cost approach, what are the components of the comparison?
But the main problem the court has with the approach taken by Mr. Esposito as regards to how he arrives at a value of the subject property of $950,000. He gives a value of $675,000 for improvements — the house and everything else. Then he adds to this $275,000 for the site or value of the lot; this is the same site value figure used in the cost approach arriving at the $950,000 figure.
The plaintiff's expert explained how he arrived at a land value of $275,000. He compared it to other land sales but only one was felt by him to be comparable. But this lot, its location, description, and sales price, were neither mentioned in the testimony of Mr. Esposito or in the appraisal report. On the other hand, the defendant's expert was cross-examined concerning the lot comparisons he made. He admitted many of the lot comparisons concerned "unique" lots of one acre. He was presented with a listing for a lot on Northford Road in Branford that sold for $260,000. It was 4.22 acres and was not used for comparison purposes by Mr. Perrelli. Perrelli said if he had been aware of this lot and its sale price it "possibly" would have influenced the site value he put in his report. He was not asked how and to what extent.
But how should it influence the court as the trier of fact? The burden is on the plaintiff to prove her position. Even if the court disregarded Perrelli's site value how can the court use this reference in cross-examination to establish the plaintiff's value. Beyond the acreage the court has no information allowing an evaluation of this lot for comparative purposes, so even if it assumes this Northford Road lot was the one relied on by Esposito the plaintiff's site, value is not established. More to the point the court concludes it must put more weight on the $325,000 lot value of the subject property which the plaintiff paid for it.
The law is clear that a taxpayer, although he or she, is not an expert can testify as to the value of his or her real estate, Misisco v. LaMaita, 150 Conn. 680, 684 (1963), Porter v. Thame, 98 Conn.App. 336, 341 (2006), cf. Lovejoy v. Town of Darien, 131 Conn. 533, 536 (1945). Any property owner can make such a valuation. Here we have the very property owner who brings this appeal placing a value on the property by the very act of purchase concerning of course the same lot that is the subject of the valuation dispute — in that sense it is the perfect comparative "sale." Nothing was offered to indicate the plaintiff was claiming the purchase here was not an arms length transaction or that other factors led her to believe she paid more than the property is worth.
If the $325,000 site value is adopted, the plaintiff's own cost analysis would indicate a value of $1,047,154. If it is applied to value of improvement estimated by Mr. Esposito at $675,000, which apparently is a result of his value of these improvements by using the cost analysis and the comparable sales approach, then the estimated market value by Esposito's own calculations is $1,000,000. The court cannot ascertain a rational method of reconciliation of these separate figures. The plaintiff's appeal is dismissed.