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Md. high court rules ‘date of finality’ not final date for assessing property

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Saying the “date of finality” is not necessarily a final date, Maryland’s top court ruled Tuesday that property-tax assessments may be made based on the sales price of nearby, comparable homes bought after the state tax assessor’s Jan. 1 deadline for setting the assessment.

In its 5-2 decision, the Court of Appeals said the Maryland Tax Court has broad authority to consider assessments made after Jan. 1, despite the state tax law’s reference to New Year’s Day as the “date of finality” for property tax assessments, which are made every three years.

Jan. 1 is not the final date for assessing but the reference date for the assessment, the court said, citing Section 8-104(b)(2) of the state Tax Property Article. Thus, the assessor determines what the value of the property was as of Jan. 1 and may, in making that calculation, include the sales of nearby, comparable properties made within a “reasonable time” after that date, the court added.

“Sales of comparable properties occurring reasonably soon after the date of finality are relevant to an accurate assessment of the valuation of property as of that [Jan. 1] date; there is, therefore, no good reason why such probative evidence should not be considered,” Chief Judge Mary Ellen Barbera wrote for the majority. “Moreover, nothing in the Tax Property Article, the legislative history of TP Section 8-104(b)(2), or cases construing it suggests a contrary conclusion.”

Barbera’s opinion drew a strong dissent from Judge Shirley M. Watts, who assailed the court’s decision as “contrary to TP Section 8-104(b)(2)’s plain language, common sense, and the goal of giving property owners finality with respect to property assessments.”

Benefits in down market

The Court of Appeals rendered its decision in affirming the Tax Court’s approval of a $2.08 million assessment for 2011 of Ann Lane’s Chevy Chase condominium — though a 10 percent increase was based on comparable sales made after Jan. 1, 2011.

The tax assessor relied on the late sales because no comparable property was sold in 2010 at the Parc Somerset building on Wisconsin Avenue, the opinion stated. The assessor had valued Lane’s property at $2.13 million based on the sale of three comparable condominium sales at the complex in May 2011.

The Tax Court accepted the assessor’s methodology but reduced the valuation.

Montgomery County Circuit Court vacated and remanded the Tax Court’s decision, saying it could not rely on evidence of sales made after the Jan. 1 date of finality. However, the Court of Special Appeals last year reinstated the Tax Court’s decision, prompting Lane’s appeal to the high court.

The Court of Appeals, in ruling against Lane, held that “sales of comparable properties occurring reasonably soon after the date of finality can be considered relevant by the Tax Court when called upon to assess the value of the property on the date of finality.”

Barbera’s opinion was joined by Judges Clayton Greene Jr., Sally D. Adkins, Robert N. McDonald and Irma S. Raker, a retired jurist sitting by special assignment.

Property-law professor Audrey McFarlane agreed with the court’s decision, saying it reflects the statute and enables assessors to calculate the market price accurately when they have imprecise data as of Jan. 1.

The condominium owner disadvantaged in this case could benefit from the next triennial assessment if the condominium’s value is deemed to have declined based on a calculation that considers post-Jan. 1 sales in a depressed market, McFarlane said.

“It’s easier to see the issue if you see it not only in an up market,” said McFarlane, who teaches at the University of Baltimore School of Law. “In a down market, the property owner would not be asking to be insulated [from late sales].”

‘Relevant sales’

Watts, in her dissent, cited dictionary definitions of “finality” in concluding that assessments are to be “complete, final and finished” as of Jan. 1 of the assessment year and not extended for an undefined “reasonable time.”

“If something is to be final as of a certain date, that does not mean that something is somewhat final as of that date, and that events that occur months after that date can somehow be used to justify a different result or to change what otherwise is meant to be final,” Watts wrote.

“By holding as the majority does, however, property owners are placed in the difficult position of spinning the wheel and gambling on appeal, as property values could go up or down depending on the ‘the sales of comparable properties occurring within a reasonable time after the date of finality,’” Watts added. “In my view, the majority’s holding will chill property owners’ willingness and ability to appeal the … initial valuation because the property owners will not know what the valuation is based on or what evidence will be used after the date of finality. In some instances, a property owner will accept whatever the initial valuation is, rather than risk an appeal that could result in higher valuation in light of the sale of comparable properties occurring after the date of finality.”

Watts was joined in the dissent by Judge Lynne A. Battaglia a retired jurist who participated in the decision by special assignment.

Lane’s attorney, Rand L. Gelber of Rockville, did not return a telephone message Tuesday seeking comment on the decision.

The Court of Appeals rendered its decision in Ann Lane v. Supervisor of Assessments of Montgomery County, No. 41, September Term 2015.