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Ohio Supreme Court Clarifies Appraisal Analysis of Owner-Occupied Properties

 In Steak ‘n Shake, Inc. v. Warren Cty. Bd. of Revision, the Ohio Supreme Court explained proper appraisal methodology when using leased properties as comparable sales in valuing unleased, owner-occupied properties. On appeal, Steak ‘n Shake — the owner-occupier — asked the Court to review the County’s appraiser’s failure to adjust his comparable sales to account for the fact that the comparables were all subject to long-term leases.

Reversing the BTA and remanding the case for further proceedings, the Court recognized that leases generally enhance the value of real estate. Thus, “sale prices of leased properties generally must be adjusted when determining the value of comparable unleased properties” like the Steak ‘n Shake property. The Court noted the County’s appraisal failed to “remove the effect that long-term leases would have” and recognized that “[s]ince the property at issue was unencumbered by a lease, it would likely have sold for less.” The Court also rejected the County’s argument that Steak ‘n Shake fell within the special-purpose doctrine, which is generally applied to distinctive yet highly useful structures being used for the unique purpose for which they were built (think Wal-Mart) in order to prevent an owner from escaping full property tax liability.  In other words, buildings such as the Steak ‘n Shake are readily saleable on the open market for other purposes.

If you own unleased property and are seeking a property tax reduction, be cognizant of improper appraisal methodology in competing appraisals. For more information on this and other real estate matters, please contact Mansour Gavin’s Real Estate and Land Use Practice Group.


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