Ramesh Patel et al. v. City of New Haven (2011)

MEMORANDUM OF DECISION

The plaintiffs have taken this appeal from the actions of the defendant in assessing certain commercial real property owned by the plaintiffs located at 782 Chapel Street in New Haven, Connecticut (subject property).

The City of New Haven conducted a town-wide revaluation of all real property, effective October 1, 2006, which is the pertinent date with respect to value in this appeal.   The plaintiffs filed an appeal from the assessment of the property made by the assessor of the City to the Board of Assessment Appeals.   The Board found that the subject property had a fair market value of $435,300.00, which resulted in an assessment for tax purposes of $304,710.00.   The plaintiffs then filed this appeal from that assessment, claiming that the property was over assessed on October 1, 2006, and they seek a reduction to seventy percent of its true and actual value.   The plaintiffs have added a second count alleging that any reduction in the assessment on the 2002 Grand List which is ordered by the court shall carry over to all subsequent grand lists until there is a town-wide revaluation.

The court heard this matter on November 8, 2010.   The plaintiffs called Phillip W. Ball, a real estate appraiser, as a witness in their case in chief and in rebuttal.   In addition, one of the plaintiffs, Ramesh Patel, testified.   The defendant called Roger Palmer, the present assistant assessor for the defendant, who explained the procedures by which the defendant appraised the subject property.   Both appraisers used the market value approach in determining fair market value.

“It is undisputed that, in an appeal pursuant to § 12-117a, the trial court ‘tries the matter de novo and the ultimate question is the ascertainment of the true and actual value of the [taxpayer's] property.’  “ (Internal quotation marks omitted.)  Newbury Commons Ltd. Partnership v Stamford, supra, 226 Conn. 104;  O'Brien v. Board of Tax Review, 169 Conn. 129, 130-31, 362 A.2d 914 (1975).   At the de novo proceeding the taxpayer bears the burden of establishing that the assessor has over assessed its property.  New Haven Water Co. v. Board of Tax Review, 166 Conn. 232, 234, 348 A.2d 641 (1974);  see also Stamford Apartments Co. v. Stamford, 203 Conn. 586, 590, 525 A.2d 1327 (1987).  Burritt Mutual Savings Bank v. New Britain, 146 Conn. 669, 675, 154 A.2d 608 (1959).   The trier of fact must arrive “at his own conclusions as to the value of [the taxpayer's property] by weighing the opinion of the appraisers, the claims of the parties in light of all the circumstances in evidence bearing on value, and his own general knowledge of the elements going to establish value ․” (Internal quotation marks omitted.)  Newbury Commons Ltd. Partnership v. Stamford, supra, 105;  O'Brien v. Board of Tax Review, supra, 136 (Footnote omitted).”  Xerox Corp. v. Board of Tax Review, 240 Conn. 192 (1997).

The subject property is a generally rectangular shaped urban parcel with approximately 21 feet of frontage on the south side of Chapel Street located between Orange and State Streets.   It has an average depth of 148 feet and an area of approximately 3,000 square feet.   The lot is level, at street grade and serviced by all utilities.

The building is a one story and basement masonry retail structure with 1722 square feet of retail space on the first floor.   There is a small mezzanine of approximately 462 square feet located at the front of the store above the first floor.   The mezzanine is used for storage and is accessible by a ladder.

The defendant had included in the assessments of 2006 through 2008 a rear section of 21 feet by 58 feet which had been torn down at same time prior to 1997 when the plaintiffs purchased the property.   The defendant claims that no building permit was ever issued in connection with the removal of the rear section, and that the defendant was unaware the defendant had assessed the subject property as having 2,940 square feet on the first floor.   When the fact that the rear section was no longer there was brought to the attention of the defendant in 2009, and that there was only 1722 square feet on the first floor, the fair market value was reduced to $407,800.

Mr. Ball came up with three properties which he felt could be used as comparables in determining the fair market value of the subject property.   Using these properties he opined that the subject property has a fair market value of $220,000.00.   Mr. Palmer testified that the defendant also had three properties that it felt were valid comparables that it used to reach the fair market value and the assessment that was levied.

Mr. Ball's comparable # 1 was located at 808 Chapel Street, which sold on March 18, 2005 for $385,000.00.   It is a four story and basement brick building with a building size of 6,765 square feet.   Based on the sale in March 2005 it sold for $56.91 per square feet.   However, the property was sold on November 30, 2006, two months after the assessment day in this case, for $640,000.00.   Mr. Ball did not use the second sale because he was concerned that it was not an arm's length transaction.   The court finds that the second sale was an arm's length sale and it should be considered in determining the fair market value of the subject property.

Mr. Ball's comparable # 2 was located at 800 Chapel Street.   It sold over two years before October 1, 2006 for $390,000 and contains 6,708 square feet in the building which equals to a rate per square foot of $58.14.   The size of the building, the fact that the sale was 26 months before October 1, 2006, and during a time of increasing real property values greatly affects the weight to be given this comparable.

Mr. Ball's third comparable was property located on Grand Avenue in New Haven.   This location is substantially out of the downtown New Haven area and is not a valid comparable.

The defendant also came up with three properties which it claims are valid comparables which support the fair market value and the assessment levied in this case.   These properties were located at 808 Chapel Street, 754 Chapel Street, and 809 Chapel Street.   All three are located in the immediate area of the subject property.   Sale # 1 is the same property included by Mr. Ball, but the defendant is using the $640,000.00 sale shortly after the assessment date, and it is claimed to have sold for $302.60 per square foot.   Sale # 2 is claimed to have 1764 square feet of first floor retail area, sold for $490,000.00 on February 17, 2006, and equates to $277.78 per square foot.   Sale # 3 has 3,472 square feet of first floor retail space, sold on October 29, 2004 for $710,000.00, and equates to $204.49 per square foot.   The defendant notes that the three sales average $261.62 per square foot which it claims supports the assessment of the subject property of $236.82 per square foot.

With respect to all three of the defendant's comparables the evidence disclosed that to arrive at the per square foot value of the properties the defendant divided the sale price of each property by only the first floor area of the comparable sales, even though all of the comparable sales properties were multi-story buildings, and the subject property is a one-story building.

The defendants comparable sales property # 1 is a three-story building with the first floor used for retail, the second floor for storage, and the third floor is used as an office.   Sale # 2 has the first floor used as a post office and the second floor used as a lounge for postal employees.   Sale # 3 was a bank building.   It has a vault and inside elevator, a fully functioning second floor and a fully functioning mezzanine.   When the entire building area, as reflected on the defendant's field cards, is divided into the selling price of the defendant's three comparable sales, the respective per square foot value is $96.00, $124.00, and $75.00.

If one is going to use the comparables that the defendant has used in this case the proper approach would be to come up with a per square foot value by dividing the selling price by the entire building area, and then adjust the values of each of the floors by considering the function and use of each floor.   Depending on the function and the use of the various floors one would expect that a first floor utilized for retail sales usually would have a higher per square foot value than the average of all the floors of the same building.

As indicated above, at the time the October 1, 2006 assessment was being set the defendant believed that there was a total of 2940 square feet on the first floor, with 1722 square feet in front being used for sales, and 1218 square feet located on the first floor behind the sales area.   At a value of $435,300.00 for 2940 square feet the overall per square foot value was $148.00.   In 2009 the defendant discovered that the 1218 square foot section had been torn down prior to 1997.   It was removed from the assessment, leaving only 1722 square feet of retail space.   The value was reduced to $407,800.00 and with only 1722 square feet, the per square foot value was $236.00.

After a consideration of all the evidence in the record including the location of the subject property, the lot size, the amount of retail space, the various comparable sales, the opinion of the appraisers, the amount of first floor areas in relation to the overall size of the comparables, the per square foot value placed on the subject property by the defendant prior to 2009, and the court's general knowledge of the elements going to establish value, the court finds that the subject property has a per square foot value of $190.00 which results in a fair market value of $327,180.00.

The court finds that the plaintiffs are aggrieved by the action of the Board of Assessment Appeals, and further finds that the fair market value of the subject property on October 1, 2006 was $327,180.00 and that the assessment should be reduced to $229,000.00 on that and all subsequent grand lists until there is a town-wide revaluation, or a substantial change in the subject property which would justify a revaluation.

If the plaintiffs are entitled to any refunds of taxes paid as a result of the reduction in the assessment for 2006 and subsequent years, they shall be entitled to interest on said refunds at the rate of 6 percent per annum.

The plaintiffs are awarded $1,000.00 in costs with respect to the testimony of their expert plus appropriate taxable costs.

William L. Hadden, Jr.

Judge Trial Referee

Hadden, William L., J.T.R.