Lynnelle Jones et al. v. City of Norwalk et al. (2012)

MEMORANDUM OF DECISION

I. Background

Lynnelle Jones and William Lipschutz appeal the valuation of $2,599,200 as of October 1, 2008 placed on their real property located at 10 Point Road by the City of Norwalk Assessor and confirmed by the Norwalk Board of Assessment Appeals.   This appeal to the Superior Court is taken pursuant to General Statutes § 12–117a.   The appeal was heard by the court on June 5, 2012, and the parties submitted post-trial memoranda in early July.

In a tax appeal the Superior Court tries the issues de novo.   The issue to be resolved is the true and actual value of the property subject to taxation.   The taxpayer has the burden of proving that the assessor has over-assessed the property.   If this is established, the taxpayer is aggrieved, and the Superior Court must then make its own conclusion of the value of the property based on the opinions of appraisers, the parties' claims in light of all the circumstances in evidence bearing on value, and the court's general knowledge.  United Technologies Corp. v. East Windsor, 262 Conn. 11, 22–23 (2002).

II. Facts

The property at issue is a brick colonial residence building located on approximately one and three-quarters acres in the Wilson Point area of Norwalk.   The property contains an in-ground swimming pool and clay tennis court.   The minimum lot size where the 10 Point Road property is located is one acre, and all the witnesses agreed the subject property in 2008 was not sub-dividable.

The plaintiffs offered an appraisal to support their appeal which, based on the comparable sales approach, found the property's full market value to be $1,750,000.00 as of October 1, 2008.   Ex. 2. The City of Norwalk submitted an appraisal, also based on comparable sales, estimating the fair market value as of the same date at $2,442,374.   Ex. G.

III. Evidence

It is often the case that the substance and comprehensiveness of the appraisal reports combined with the relative persuasiveness of the appraisers' testimony are key factors in arriving at an appropriate valuation of a piece of property.   In this case the court found both appraisers quite evenly matched.   While there were significant differences in some of their conclusions, each gave thoughtful and careful reasons for his point of view.   The major differences in valuation involved appraising the view of the property which is close to Wilson Cove and Long Island Sound, the topography and size of the property, and, to some extent, the effect on land values of the faltering economy in the fall of 2008.

Guy Rocco, a Connecticut certified real estate appraiser with 22 years of experience, appraised the value of 10 Point Road as of October 1, 2008 after conducting an interior and exterior inspection of the premises, and reviewing other similar properties in the area which sold relatively close to the valuation date and had similar “water influence,” e.g. water view, and other attributes associated with properties on or near the shoreline.   His report, submitted on behalf of the plaintiffs, is Ex. 2. Rocco described the subject property as in “overall fair condition at the time of inspection” (2009) suffering from some deferred maintenance, with very good water views, and some “functional obsolescence” for the pool and tennis court due to the “seasonal” nature of their use.  Id. Rocco noted the lot size was larger than usual, and the residence was sixty years old with some asbestos wrapped pipes in need of “better encapsulation.”

Rocco compared the subject property with three other properties in the Wilson Point area.   The first “comparable” property was located at 16 Point Road about a tenth of a mile in a southerly direction from plaintiffs' property and on the same side of the street.   See Ex. 1. 16 Point Road sold for $1,950,000 on June 4, 2008.   Rocco testified he adjusted that price downward by $295,000 because of the superior design and condition of the 16 Point Road residence, and adjusted the price upward for a smaller lot size and lack of pool or tennis court.¹  The quality of the view was considered the same.   Rocco adjusted the price downward by $32,500 for the sale date of June 2008 indicating he felt prices were generally falling between that date and October 1, 2008.   The adjusted comparable price found by Rocco for 16 Point Road was $1,714,000.

The second house reviewed by Rocco was located at 4 Shagbark Road, maybe a quarter mile north of the plaintiffs' property, which sold for $1,775,000.00 on March 10, 2008.   Rocco made significant downward adjustments in this price to reflect his opinion that the Shagbark property was in better condition ($100,000), had a partly finished basement ($22,500) and was sold six and a half months earlier.   The price was adjusted significantly upward to reflect his opinion that the colonial house owned by plaintiffs was a more valuable style of building than the contemporary styled Shagbark residence.   After all adjustments, the Shagbark property was valued as of October 1, 2008 at $1,774,000.

Rocco's third comparable was a sale of 9 Point Road, located across the street from the plaintiffs' property, which took place on April 12, 2007 for $2,050,000.   He made downward adjustments of $100,000 for the style of the residence and quality of construction, $150,000 for the better condition of the house, and $50,000 for the existence of a guest house on the property.   He also made a downward adjustment of $61,500 to reflect the lower trend of prices since April 2007.   On the other hand, he made an upward adjustment of $200,000 to reflect the better view at 10 Point Road as compared to 9 Point Road which was described as “seasonal.”   After all adjustments, Rocco's comparable price for this property was $1,780,500.

Rocco testified he arrived at his appraised value of $1,750,000 for 10 Point Road by taking the low to middle point of the three comparable sales and giving more weight to the first comparable, 16 Point Road, which had the same view and comparable useable land.   His report also noted that the value of $1,750,000 was supported by the cost approach to appraised value which he estimated to be $1,761,390, but the comparable sale method was felt to be a better approach.

The expert witness for Norwalk was Michael Stewart, the City Assessor for the last five years.   Prior to that he was Assistant Assessor in Norwalk and earlier had been Administrative Assessor for the Borough of Queens, and Deputy Assessor for Manhattan in New York City. Stewart oversaw the revaluation of 10 Point Road, and prepared his analysis of the subject property and four comparable sales in the area chosen because the sales took place within 24 months of October 1, 2008, and involved property between one and two acres in size.   Ex. G. The first comparable used by Stewart was property at 2 Hilltop Road, located north of the subject property, and across the street from Rocco's comparable property on Shagbark Road, which sold for $2,300,000 on July 11, 2007.   Stewart applied an upward adjustment of $300,000 to account for a view that was assessed as “sound influence—fair,” not as good as the subject property's “sound view—avg.”   Other adjustments were made for a lot size, about two-thirds the size as the subject property, and $90,000 for not having a pool or tennis court.   Downward adjustments were made for better construction, better condition and a $161,000 downward adjustment made to account for deteriorating market prices between the date of sale in July 2007 and October 2008.   In all, the adjusted price for 2 Hilltop Road was estimated to be $2,369,550.

The second comparable used by Stewart was the 16 Point Road, also used by Rocco.   The sale price of $1,950,000 was adjusted upward $300,000 for a lesser view, $90,000 for lacking a pool and tennis court, $107,250 for a smaller living area and $93,000 for a smaller lot (0.99 acres).   Stewart noted that his calculation of adjustments for this property contained a mistake by adding $50,000 to the sale price for the house condition rated “average.”   The adjustment should have been downward $50,000.   Net adjustments amounted to almost $550,000 to a comparable price of $2,499,190.   Factoring in the mistaken adjustment, the comparable price should be reduced by $100,000, to $2,399,190.

The third comparable was 25 Point Road, located less than 500 feet away from 10 Point Road as the crow flies, but about a third of a mile traveling on the road, which sold for $3,295,000 on March 6, 2008.   This property was deemed to have view equal to the subject property, but large downward adjustments were made for the residence being better constructed, in better condition and substantially larger and newer (built in 1987, 39 years after the subject premises).   Net adjustments downward were $681,976,000 with a comparable price being estimated at $2,613,024.   On cross examination, Stewart conceded his analysis of 25 Point Road did not include the facts that the property had a swimming pool and a partly finished basement.   See Ex. G. These corrections would result in the comparable price for this property being lowered by $70,000, to $2,543,024.

The last comparable offered by Norwalk is 7 Point Road, a two-acre lot across the street from the plaintiffs' residence which was sold July 13, 2009 for $1,700,000.00.   Stewart evaluated the view from these premises as poorer than from 10 Point Road, and made an upward adjustment of $300,000.00.   Another upward adjustment of over $100,000.00 was made because the residence was smaller and upward adjustments of $136,000.00 and $90,000.00 were made on the basis of a sale date over ten months later than October 1, 2008, and the lack of a tennis court or pool respectively.   The fully adjusted price arrived at by Stewart was $2,287,730.

Stewart's evaluation of the subject property of $2,442,374.00 was arrived at by averaging the adjusted sales prices of the four comparable properties as discussed above.   Ex. G.

Lynelle Jones testified that she and her husband had owned 10 Point Road since 1985.   She testified that the property located between their property and Wilson Cove was subject to a deed restriction requiring the owner of the property described as “Plot A” in the deed (Ex. E) to “cut prune or trim, at the request of the owner of Plot B, any foliage, trees or shrubs growing in the southerly area of Plot A which obscure the water view from Plot B.” Ex. E. Plot B is 10 Point Road. Ex. F. Jones testified that she asked the owners of Plot A to trim and prune, but they refused to do so without being paid.   She further testified that some time in the fairly recent past the owner of Plot A, John Ritchey, with a cash incentive from a real estate broker, had trimmed bushes and shrubs improving the view from 10 Point Road over Wilson Cove. See Ex. 10 (photo taken in 2009 or 2010) and Ex. C (photo taken in 2012).

IV. Discussion

Through the evidence presented by Stewart in his study of comparable sales, Norwalk has effectively conceded that the subject property is over assessed at nearly $2.6 million.   Therefore the plaintiffs have standing to pursue this appeal, and the court is obligated to review the evidence and make its own determination.

Rocco testified that he and the Assessor Stewart appeared to agree on the value of the components and condition of the residence at 10 Point Road and this conclusion seems to be borne out by the records such as the City of Norwalk field card for the property.   Ex. 3. There are distinct differences, however, in the appraisers' valuation opinions respecting the value of the land, its view, and other improvements such as the swimming pool and tennis court.  (Norwalk put a $90,000 value on the two together;  plaintiffs placed little value on their absence from other properties.)

The court begins its analysis by taking into account the effect of Norwalk's recognition of two calculation errors with respect to its comparable sales data involving 16 Point Road and 25 Point Road. Stewart testified that the former's sales price should be adjusted downward $100,000 to $2,399,190 and the latter's price by $70,000 to $2,543,024.   Stewart took the average of the four comparable sales prices and, adjusted as above, that average is $2,399,874.   Essentially then, the difference between the parties' present evaluation of 10 Point Road, as of October 1, 2008, is $650,000.

A. The Real Estate

In arriving at his comparable sales prices, Stewart upwardly adjusted sales prices of all three properties smaller in size than the subject property.   Ex. G. Rocco only made an upward adjustment on one of three such smaller properties, and that property was slightly less than an acre in size.   Rocco testified that 10 Point Road had a lower land value than its one and three-quarters acre size might suggest because of a steep drop-off to wetlands below at the rear of the residence.   Ex. P;  Ex. 4. He pointed out that but for the drop-off, a person on the property could walk fifty feet closer to the water and the southerly view over Long Island Sound—a preferable view—would be improved.   The court found this testimony persuasive, but notes that, for all of this, Rocco classified the view from 10 Point Road to be “very good.”   On the whole, the court concludes the land value is overstated by Norwalk at $2.071 million.   Ex. O (assessment card).   The major reasons the court reaches this conclusion are that (1) a portion of the subject property is unusable as noted above (see Ex. P), (2) Stewart only valued the two-acre plot at 7 Point Road as $29,280 more valuable than the plaintiffs' property even though it is apparently sub-dividable, and (3) the land value of 16 Point Road, property an acre in size with comparable views to the subject property, according to Rocco, is valued just over $1.35 million.   Ex. G. Based on the above, the court determines that the value of the subject property accorded 10 Point Road should be reduced by $150,000 from the amount on the assessment card.

B. The View

Both sides put a high value on the view.   Rocco made an upward value adjustment of $200,000 on 9 Point Road whose view he thought was one grade below that of the subject property.   Ex. 2. Stewart placed a $300,000 difference in value between 10 Point Road's view (rated “Sound View–Average”) and the lesser view of the other comparables (rated “Sound Influence—Fair”).

Following the testimony about the easement on the Ritchey property, Rocco testified that as a matter of policy, he does not put a value on property benefitted by an easement on someone else's land.   The court does not necessarily agree with that policy, but in the circumstances of this case, it is the right approach, because 10 Point Road was not benefitting from the easement at the 2008 date of valuation.   The court concludes that the view valuation given 10 Point Road by Norwalk is higher than the facts justify.   The primary reasons are found in the view evidence.   Exhibit J is a photograph of the water view at 25 Point Road, taken from the roadway.   This shows quite expansive views which are likely even better from the house.   Exhibit L is the water view from the 16 Point Road. The court determines the view from 25 Point Road is superior to that of 10 Point Road (although Norwalk says they are comparable) and that plaintiffs' view is slightly better than the view from 16 Point Road (see Ex. L and compare with Ex. C) which Norwalk rates $300,000 worse.

C. Effect of Recession on Real Estate Prices

The witnesses for the parties agreed that real estate prices declined in 2008 and this decline probably started in 2007.   Stewart made a downward adjustment of $39,000 to the sale price of 16 Point Road which closed almost four months before October 1, 2008.   Rocco made a $32,500 downward adjustment on the same property sale.   On the sale of 7 Point Road, more than nine months after October 1, 2008 Stewart made an upward adjustment of the price of $136,000 to account for the passage of time.   Rocco disagreed with this adjustment on the ground that the real estate market continued to deteriorate after October 2008, and the adjustment should have been negative one.   This disagreement is unjustified.   Both appraisers agreed that real estate market prices continued to fall after October 1, 2008, although Stewart testified that prices in Wilson Point were stronger than elsewhere in Norwalk.   The court agrees with the assessment that prices continued lower at least into 2009, if not longer.   If prices generally fell after the revaluation date, it is appropriate to reflect that in a positive adjustment of a sale price received nine months after that date.

D. Swimming Pool and Tennis Court

The differing valuations put on the swimming pool and tennis court present somewhat of a quandary.   The court concludes that prospective buyers who seek property with such amenities will pay a premium for the subject property while prospective buyers having no interest in those improvements will not, and might not have an interest in the property at all.   Rocco's observation that the pool and tennis court were in “fair” condition seem supported by the evidence.   Exs. A, C, P. Nevertheless, there was no evidence they were not in operable condition or unusable.   Rocco's conclusion that they were “functionally” obsolescent because of seasonal usage seems contrived, as outdoor patios and boat moorings are often considered valuable amenities to residential properties along the coastline, despite their obvious seasonality.

E. 16 Point Road

Both comparable sales analyses used the sale of 16 Point Road at $1,950,000 on June 4, 2008, and Rocco thought it was the most persuasive comparable.   Rocco's adjusted price was $1,714,000 and he considered the property's view equal to that of the subject property, although he considered the design and condition of 16 Point Road almost $300,000 better.   Allowing for a calculation error (see p. 5 supra ) Stewart's adjusted price for 16 Point Road was $2,399,000.   Stewart appraised the view from 16 Point Road as “sound influence—fair” a notch or two less favorable than the “sound view—ave” he accorded to 10 Point Road. This difference increased the comparable price by $300,000 although 16 Point Road appears to have a limited view of Wilson Cove. As noted, this court concludes the valuation difference is not justified.   See Ex. L.

In total, the appraisals on this property differed by $685,000 with the major differences being the values placed on view, larger acreage, larger building size, and the existence of the pool and tennis court by Stewart's analysis of the subject property compared to Rocco's analysis which compared the purportedly poorer condition and less appealing design and construction of the subject residence.   The court determines that while neither appraiser has accurately adjusted the sale price of 16 Point Road to reflect the fair market value of 10 Point Road on October 1, 2008, the differing approaches to valuing the one common comparable sale are useful to the court.

F. 25 Point Road

Norwalk's Stewart used 25 Point Road as a comparable sale.   The court finds the inclusion of this property unsupported.   As compared to the other properties used by both appraisals, this residence is quite new, substantially bigger, and sold for a price almost $1 million more than any other property considered.   While Stewart applied substantial reductions and conceded more should have been applied, the magnitude of these discretionary adjustments only highlights the fact that this is not a comparable sale and should be disregarded.

G. Building Style

Rocco's comparable sales analysis put a significantly higher value on residences described as Tudor/Colonial compared to the subject property's colonial style.   The two residences in his analysis described as Tudor/Colonial were accorded downward adjustments of $100,000 and $195,000.   Ex. 2. Rocco testified such homes had greater appeal, without elaboration.   Conversely, Stewart did not make any value differentiation between Colonial and Tudor/Colonial.   Given these differing approaches and without substantial evidence to support either view, the court determines that the downward adjustments in Rocco's sales comparison should be discounted.

V. Conclusion

Having considered all the evidence presented in this case and made certain determinations on the value of view and property size discussed above, the court turns to the not easy task of adjudicating a fair market value of plaintiffs' property as of the revaluation date.   Eliminating 25 Point Road from the Norwalk comparable sales calculation produces an average comparable price of $2.352 million.   This is about 10% less than Norwalk's assessed value;  therefore, the court reduces the average comparable price by $135,000 (90% of $150,000) which the court previously determined to be the overvaluation of the land area, resulting in a comparable price of $2.217 million, and further applies a reduction of $100,000 for the overvalued view to $2.117 million.

The court determines that the plaintiffs' sales comparison figure of $1.750 million should be increased by $50,000 to account for the value of the tennis court and pool, and another $50,000 to account for about half of the unsupported values accorded to the Tudor elements of styling.   With these adjustments the court finds the two sales comparison valuations are closer:  $1.850 million for the plaintiff and $2.117 million for the City of Norwalk.   Based on its judgment and experience, and in light of the factors and adjustments noted above, the court finds and adjudicates the fair market value of the subject property as of October 1, 2008 to be $2,050,000.

TAGGART D. ADAMS

JUDGE TRIAL REFEREE

FOOTNOTES

FN1. The court understands that in using the comparable sales approach to appraising a property, certain adjustments are made to the sale price to account for the more significant differences in the sold property from the appraised property.   For instance, if the sold property was larger in acreage, had more living space or was in better condition, a downward adjustment in the sales price would be made.   Similarly, if the sold property had a less desirable view or less attractive style than the appraised property, the sale price might be adjusted upward.   These adjustments are made based on the experience and discretion of the trained appraiser as a somewhat arbitrary effort to compare apples to apples..  FN1. The court understands that in using the comparable sales approach to appraising a property, certain adjustments are made to the sale price to account for the more significant differences in the sold property from the appraised property.   For instance, if the sold property was larger in acreage, had more living space or was in better condition, a downward adjustment in the sales price would be made.   Similarly, if the sold property had a less desirable view or less attractive style than the appraised property, the sale price might be adjusted upward.   These adjustments are made based on the experience and discretion of the trained appraiser as a somewhat arbitrary effort to compare apples to apples.

Adams, Taggart D., J.T.R.