Is Your Commercial Property Value Appraised too High by Your Local Property Appraiser?

August is approaching, and along with everything else that is currently impacting our lives, that means your local property appraiser will be mailing out proposed property taxes (TRIM Notice). Last year, I wrote an article about the process for challenging the property value appraisal of your property before the Value Adjustment Board. Last month, the property value appraisal topic was further highlighted by a court opinion that affected a well-known Florida entertainment company, which will likely impact many resorts, hotels, restaurants and other properties in Florida.

In June 2020, the Fifth District Court of Appeal entered an opinion in Rick Singh, as Property Appraiser v. Walt Disney Parks and Resorts US, Inc., regarding the property value where the Disney Yacht and Beach Club Resort is located. Disney challenged the valuation of the property when the tax assessment increased more than 118% at just under $337 million dollars. Disney argued that the valuation of the property valued intangible property and not only the real property – contrary to Florida law.

Florida law is clear that intangible property cannot be taxed as a property tax by counties, and only the State of Florida has the power to tax intangible personal property. Fla. Stat. 192.001 (11) (b) defined intangible personal property as “money, all evidences of debt owed to the taxpayer, all evidences of ownership in a corporation or other business organization having multiple owners, and all other forms of property where value is based upon that which the property represents rather than its own intrinsic value. Further, Florida Statute 192.001 (12) defines real property as the land, buildings, fixtures, and all other improvements to the land.” Finally, under the Florida Constitution, the real property is to be valued and the taxes to be assessed at just value. In a 2006 case, the Fifth District Court of Appeal stated that the Florida Supreme Court determined that just value is the market value that “a purchaser willing but not obliged to buy, would pay seller who is willing but not obliged to sell.” Holly Ridge Ltd. P’ship v. Pritchett, 936 So. 2d 694, 696 (Fla. 5th DCA 2006).

In the Yacht and Beach Club case, Disney challenged the property appraiser’s use of the “Rushmore method” for valuation. This method deducts franchise and management fees from the property income to remove the intangible business evaluation. The Appellate Court held that the trial court correctly decided that the Rushmore method was improper as it included the value of Disney’s intangible business assets in the assessment. The reason for this holding was that the Rushmore method does not take out the fact that the income stream may itself be a product of the intangible business value and therefore keeps some of the value of the intangible property in the assessment.

However, the case was not a full win for Disney. The Appellate Court decided that the valuation methods used by Disney were not supported by competent substantial evidence, which “is sufficiently relevant and material that a reasonable mind would accept it as adequate to support the conclusion reached.” De Groot v. Sheffield, 95 So. 2d 912, 916 (Fla. 1957). The assessment by Disney also did not include the valuation of the onsite conference center. The Appellate Court ordered the case to be reassessed by the property appraiser.

With TRIM Notices going out next month, it is important to review them carefully. If you have any legal questions about your appraisal, think that your commercial property in Florida was assessed using intangible value, or have other related property issues, please contact me to discuss your options.