A low occupancy rate alone did not provide the owner of a mobile home community with the evidence it needed to get its property assessment reduced.
The Indiana Tax Court affirmed the final determination by the Indiana Board of Tax Review in Indiana MHC, LLC v. Scott County Assessor, 39T10-1009-TZ-52. The high court ruled because Indiana MHC’s income capitalization approach lacked probative value, the Indiana Board of Tax Review was correct in determining that the property owner failed to prove its 2007 real property assessment was incorrect.
Indiana MHC, owner of Amberly Pointe, a manufactured home community, was successful in getting the Scott County Property Tax Assessment Board of Appeals to lower the original assessment of $5.4 million. However, believing the reduced assessment of $3.38 million was still too high, the property owner appealed to the Indiana board.
At an administrative hearing, Indiana MHC asserted that because only 85 pads of Amberly Pointe’s 205 pads were rented and generating income between 2005 and 2008, only the rented pads had value for purpose of the 2007 assessment. In addition, the property owner also claimed that about 2.6 acres of the community’s 33 acres had no value because the land, as green space, could not generate any income.
Using the income capitalization approach, Indiana MHC contended its property had a value of $1,075,692.
The Indiana board concluded that because the property owner’s income capitalization approach failed to take into account any market data whatsoever, it lacked probative value.
In affirming the board’s determination, the Tax Court explained the requirements for applying the income capitalization approach. Namely, the property owner must not only examine the historical and current income, expenses, and occupancy rates for the subject property but the income, expenses and occupancy rates of comparable properties in the market as well.
The court found that Indiana MHC failed to comply with generally accepted appraisal principle because it did not consider the occupancy rates of comparable properties in the market. In fact, the evidence indicates that Amberly Pointe’s low occupancy rate of 40 percent was actually the anomaly in the market place.
Consequently, the Tax Court ruled that based on Indiana MHC’s failure to examine, analyze and reconcile its low occupancy rate in light of the much higher occupancy rates prevalent in the market place, the Indiana board did not err in finding that the property owner’s income capitalization approach lacked probative value.