In Philadelphia, real estate taxes are based on assessed values set by the Office of Property Assessment (OPA). The OPA sets a land value and improvement value for each property. Since 2003, the City has given owners of new residential property a 10-year tax abatement on the improvements. The abatement was put in place to encourage new construction, and by any measure, much development has occurred since then.
A condominium unit owner owns the unit outright, plus an undivided percentage interest in the land along with every other unit owner. In 2017, the OPA, without notice, changed its valuation methods for land beneath high-rise condominium buildings. Rather than valuing the land itself and assessing each unit owner for his or her share, the OPA allocated a fixed percentage of the total value of the unit to land. In high-rise condos receiving tax abatements, this made the land values artificially high and implied land values higher than, for example, are found on Central Park South in New York City. Almost 300 homeowners, living in three separate high-rise condo buildings, appealed their assessments.
In her opinion of July 16, 2019, Philadelphia Court of Common Pleas President Judge Idee C. Fox ruled in favor of the homeowners and against the City. She found that the homeowners’ methodology of valuing the land using the comparable sales approach “is the most common method to value land under professional appraisal standards.” She found that the homeowners’ expert, Reaves C. Lukens, III, provided the court with a “credible and reliable opinion of the value of the land” at issue. By contrast, the court ruled that the methodology of the City’s expert was “novel and not generally accepted among the community of professional real estate appraisers.”
The court’s ruling means that the City must value land based on recognized approaches of valuation.
The homeowners were represented by Matthew A. White, Philip B. Korb, and Matthew Vahey of Ballard Spahr LLP. Ballard Spahr attorneys regularly represent clients in tax appeals and litigation.
An earlier version of this article was originally published on Ballard Spahr’s Alerts & Publications.
Matthew A. White is a partner in the Litigation Department of national law firm Ballard Spahr. In addition to trying cases in state and federal court, Matt has extensive arbitration and mediation experience. He represents business clients in complex litigation across a wide array of areas, including securities, mergers and acquisitions, commercial real estate, and complex construction, in high-stakes cases that often involve multiple parties and numerous claims and cross-claims.
Philip B. Korb (LAW ’75) is senior counsel in Ballard Spahr’s Real Estate Department. Phil is well-known for his work on major projects in and around Philadelphia, particularly on mixed-use and condominium planning and development. He handles matters involving real estate development, real estate acquisitions and financings, real estate taxation, leasing, planned community development, workouts, and general real estate matters.
Matthew I. Vahey (LAW ’13) is an associate in the firm’s Litigation Department who earned his J.D. from Temple University James E. Beasley School of Law. Matt litigates a variety of commercial disputes and defends white collar cases. He has also served in government as a high-level legislative and administrative adviser.