Evelyn J. Maher, Trustee of North Country Realty Trust v. Board of Assessors of the City of Quincy (September 19, 2007)

COMMONWEALTH OF MASSACHUSETTS

APPELLATE TAX BOARD


EVELYN J. MAHER, TRUSTEE OF	 v.	   BOARD OF ASSESSORS OF
NORTH COUNTRY REALTY TRUST 		   THE CITY OF QUINCY


Docket No.: F280866	 			   Promulgated:
							   September 19, 2007 


	This is an appeal under the formal procedure, pursuant to G.L. c. 58A, § 7 and G.L. c. 59, §§ 64 and 65, from the refusal of the appellee to abate taxes on certain real estate in the City of Quincy owned by and assessed to the appellant under G.L. c. 59, §§ 11 and 38, for fiscal year 2005.
	Chairman Hammond heard the appeal and was joined in the decision for the appellant by Commissioners Scharaffa, Egan, Rose and Mulhern.
	These findings of fact and report are made pursuant to a request by the appellant under G.L. c. 58A, § 13, and 831 CMR 1.32.

	Kenneth J. Mickiewicz, Esq. and Robert J. Diettrich Esq., for the appellant.

Marion A. Fantucchio, Assessor, for the appellee.

FINDINGS OF FACT AND REPORT

A.	JURISDICTION
On January 1, 2004, appellant Evelyn J. Maher, Trustee of the North Country Realty Trust ("appellant") was the assessed owner of a parcel of land containing approximately 0.63 acres of land (27,298 square feet) and a dwelling located at 124 Gardiner Road in the City of Quincy ("subject property").  For fiscal year 2005, the appellee Quincy Board of Assessors ("appellee" or "assessors") valued the subject property at $1,285,200 and assessed a real estate tax, at the rate of $10.84 per thousand, in the amount of $13,931.57.  The appellant timely paid the tax assessed without incurring interest.  
	The appellant timely filed its fiscal year 2005 application for abatement with the assessors on January 28, 2005. The assessors denied the application on April 1, 2005 and sent a notice of denial to the appellant on April 4, 2005.  The appellant timely filed its fiscal year 2005 appeal with the Appellate Tax Board ("Board") on June 28, 2005.
	On the basis of these facts, the Board found and ruled that it had jurisdiction to hear and decide this appeal.
	B.	INTRODUCTION
	At the hearing of the appeal, the appellant offered the testimony of Neal J. Goldberg, a certified residential real estate appraiser.  The assessors offered the testimony of Marion A. Fantucchio, one of three board members of the assessors. In addition, the appellant recalled Mr. Goldberg as a rebuttal witness.
On the basis of the testimony and the exhibits introduced into evidence at the hearing, the Board made the following findings of fact.
	The primary issue raised in this appeal is overvaluation, although the appellant also claimed in its petition, but did not pursue at the hearing, that the property was disproportionately assessed. 
PROPERTY DESCRIPTION
	The subject property is located in a residential neighborhood comprised primarily of single-family residences. The subject dwelling, which was constructed for the appellant in 1996, is a two-story, wood-frame residence that has four bedrooms, four and one-half bathrooms, four fireplaces, and 5394 square feet of living area.  The dwelling has heat and hot water by gas as well as central air-conditioning.  The subject property also has garage space that can accommodate five cars, including a three-car attached garage and a two-car detached garage that also includes a finished living area.  
The detached garage is in effect a carriage house, and was so labeled by Mr. Golberg in his sketch of this space that he included in his appraisal report.  The carriage house has two bedrooms, one and one-half bathrooms, a kitchen and living room for a total living area of over 1400 square feet, including a living area of 1041 square feet located over the garage.  The parties agreed that this living area constituted an illegal apartment. 
D.	VALUATION EVIDENCE
Mr. Goldberg testified concerning his appraisal of the subject property and his report was introduced into evidence without objection.  Mr. Goldberg did not rely on the cost or income approach in reaching his opinion of the fair cash value of the subject property for fiscal year 2005, but instead relied exclusively on the sales-comparison approach.  He relied on five sales of properties, located within a mile of the subject property that he determined to be comparable to the subject property: 201 Gardiner Road, which is located on the same street as the subject property; 388 Adams Street; 71 Mount Ararat Road; 46 Malvesti Way; and 10 Sturtevant Road.  Mr. Goldberg also adjusted the sale prices for his comparables for a number of factors, including time of sale, lot size, living area, view and condition.
	Mr. Goldberg testified that, in his opinion, the subject property was significantly overvalued.  He particularly relied on the July 25, 2003 sale of 201 Gardiner Road for $865,000.  He claimed that 201 Gardiner Road, which was located on the same street as the subject property and also had an illegal apartment, but was smaller and had a distant view of the ocean, supported his opinion that the subject property was overvalued.  Based on his review of the subject property and the sales of properties that he determined to be comparable, his opinion of value of the subject property as of the January 1, 2004 assessment date was $975,000.  
In addition, the appellant claimed that the assessors reneged on a settlement agreement with the appellant and offered the case of Vasconcellos v. Arabella Mutual Insurance Company, 67 Mass. App. Ct. 277 (2006) to support its argument that the assessors were bound to the terms of their purported settlement agreement.  The Board found, however, that no settlement was ever reached.  Ms. Fantuccio testified that any discussions were subject to the approval of the third member of the Board of Assessors, who did not agree to the settlement.  Further, this Board is not an appropriate forum in which to seek specific performance of a contract.  Accordingly, the alleged settlement agreement is of no consequence in this appeal.  
In defense of the subject assessment, Ms. Fantucchio testified that the subject property was superior in size, location and amenities to any of the comparable properties on which Mr. Goldberg relied.  She did not believe that the sales offered by Mr. Goldberg were comparable, as they were much smaller houses, had much less land and did not have the stature of the subject property.  She also offered a spreadsheet that included information concerning the land area, date of construction, assessed value, building area, and condition for all of the properties on Gardiner Road, as well as property record cards for all Gardiner Road properties. 
Ms. Fantucchio also testified that she used a website called "Zillow.com" to check on information concerning the subject property and neighboring properties.  She testified that she and other Quincy assessors had used the website in the past, not in connection with the establishing of values for assessment purposes, but to check on the accuracy of data concerning subject and comparable properties that they intended to present, as well as data which taxpayers intended to present, at Board hearings.  Ms. Fantucchio testified that she generally found Zillow.com data to be accurate and, in her opinion, the data that she reviewed for this hearing supported the subject assessment.
The appellant challenged the reliability of Zillow.com data and objected to its introduction on hearsay and other grounds.  In addition, the appellant recalled Mr. Goldberg to testify that, in his experience, information on Zillow.com was not reliable.  The Board did not rely on the information from Zillow.com in its determination of the fair cash value of the subject property in this appeal.
E.	CONCLUSION
On the basis of the testimony and evidence of record, the Board found that the subject property was a premier residential property that was significantly larger and in better condition than all of the properties on Gardiner Road and all of the comparable properties relied on by Mr. Goldberg.  The Board further found that the subject property is clearly in a class by itself in terms of size, style, age and condition.  The Board determined that the sales and other evidence helped to establish a base line from which to value the subject property, but principally served to establish that the subject property contained "superadequate" improvements in comparison to the relevant market.  In a market where the subject property was so clearly superior to other properties in the vicinity in terms of size and living space, the Board considered the issue of whether a willing buyer would pay for all of the amenities included in the subject property, which was constructed to meet the appellant's individual tastes and desires.  
On this record, the Board found that, after properly adjusting the sales data offered by the appellant's witness, and giving consideration to the living area in the detached garage and the superadequacy of the subject property in comparison to the relevant market, the fair cash value of the subject property for fiscal year 2005 was $1,125,000.  Accordingly, the Board issued a decision for the appellant in this appeal and granted an abatement in the amount of $1736.56.
OPINION
	The assessors have a statutory and constitutional obligation to assess all real property at its full and fair cash value.  Part II, c. 1, § 1, art. 4, of the Constitution of the Commonwealth; art. 10 of the Declaration of Rights; G.L. c. 59, §§ 38, 52.  See Coomey v. Assessors of Sandwich, 367 Mass. 836, 837 (1975) (citations omitted).  Fair cash value means fair market value, which is defined as the price on which a willing seller and a willing buyer will agree if both of them are fully informed and under no compulsion.  Boston Gas Co. v. Assessors of Boston, 334 Mass. 549, 566 (1956).
	The burden of proof is upon the taxpayer to make out its right as a matter of law to an abatement of the tax.  Schlaiker v. Board of Assessors of Great Barrington, 365 Mass. 243, 245 (1974).  The taxpayer must show that the assessed valuation of its property was improper.  See Foxboro Associates v. Board of Assessors of Foxborough, 385 Mass. 679, 691 (1982).  The assessment is presumed valid until the taxpayer sustains its burden of proving otherwise.  Schlaiker, 365 Mass. at 245.  
In appeals before this Board, a taxpayer "may present persuasive evidence of overvaluation either by exposing flaws or errors in the assessors' method of valuation, or by introducing affirmative evidence of value which undermines the assessors' valuation."  General Electric Co. v. Assessors of Lynn, 393 Mass. 591, 600 (1984), quoting Donlon v. Assessors of Holliston, 389 Mass. 848, 855 (1983).  Generally, real estate valuation experts, the Massachusetts courts, and this Board rely upon three approaches to determine the fair cash value of property: income capitalization, sales comparison, and the cost to replace or reproduce the property less depreciation.  Correia v. New Bedford Redevelopment Authority, 375 Mass. 360, 362 (1978).  
Massachusetts courts and this Board have "generally viewed with disfavor" the use of the depreciated cost approach "except where the special character of the property makes it substantially impossible to arrive at value on the basis of capitalized net earnings or on the basis of comparable sales."  Blakeley v. Assessors of Boston, 391 Mass. 473, 477 (1984); see, e.g., Fairview Group Investments v. Assessors of Boston, Mass. ATB Findings of Fact and Reports, 1997-93.  Accordingly, where dependable market rental and expense data is not available and there is "no indication of market value from comparable sales," and the property is "essentially special purpose, a cost analysis may be utilized."  O'Brien v. Assessors of Berlin, Mass. ATB Findings of Fact and Reports, 2000-190, 202.  
The primary prerequisites for use of the cost approach are not present in this appeal; there is market data available and the subject property is not special purpose property.  However, the present appeal raises the issue of whether comparable sales data alone, adjusted only for time of sale, condition and location, are an accurate measure of value where the subject property is markedly superior to other properties in the relevant market.  Of particular relevance in this appeal is the concept of "functional obsolescence," which is defined as a flaw in the structure, materials, or design of the improvement when compared with the highest and best use and the most cost-effective functional design requirements as of the relevant assessment date.  See Appraisal Institute, the appraisal of real estate (12th Ed., 2001) at 363, 403.  
One type of functional obsolescence is referred to as "superadequacy," which is a type of functional obsolescence caused by something in the subject property that "exceeds market requirements but does not contribute to value an amount equal to its cost."  Id. at 404.  For the reasons detailed in the Board's Findings of Fact above, the Board found that the subject residence was "superadequate," because the subject property was greatly superior to other properties in the relevant market.  See Boch v. Assessors of Edgartown, Mass. ATB Findings of Fact and Reports, 1996-641, 666 (Board found that a potential buyer of a residence in the area of the subject property would be unlikely to offer more for the "excessive luxury" of the appellant's property than for a more modest home in the area).  
Consideration of superadequacy is particularly appropriate when valuing high-end residential properties that, like the subject property, were built to the particular specifications of an owner; an individual who has a residence built for his or her occupancy, with special amenities reflecting the owner's particular wants and desires, will often be motivated by considerations other than whether the expense of those amenities add a value commensurate with their costs.  See, e.g., Harbor Dreams, LLC v. Assessors of Hingham, Mass. ATB Findings of Fact and Reports, 2004-56.  Accordingly, to arrive at the
fair cash value of the subject property, the Board gave consideration to the subject property's functional obsolescence due to superadequacy.  
In addition, the subject property's land and building values should be less, on a per-square-foot basis, than those of the comparable properties because smaller improvements and lot areas generally have higher unit values.  See Appraisal Institute, The Appraisal of Real Estate, (12th Ed., 2001) at 196; Lussier v. Assessors of Douglas, Mass. ATB Findings of Fact and Reports 2006-635, 641.  
In the present appeal, the Board found that properties selected by the appellant's valuation witness for his comparable sales analysis were sufficiently comparable to the subject property to allow the board to make appropriate adjustments for superadequacy and the size disparity between the subject and the comparable sale properties.  The Board also found that, after reviewing the evidence pertaining to these comparable sales, they established, after adjustment, a range of values into which the subject property could property appropriately fall.  By reviewing this sales data as appropriately adjusted for factors
including size, age, location, amenities, and condition, the Board found that the appellant demonstrated that the assessment placed by the assessors on the subject property was excessive.  Accordingly, the Board ruled that the appellant met its burden of proving that the assessors overvalued the subject property during the fiscal year at issue in this appeal. 
In evaluating the evidence before it, the Board selected among the various elements of value and formed its own independent judgment of fair cash value.  General Electric, 393 Mass. at 605; North American Philips Lighting Corp. v. Assessors of Lynn, 392 Mass. 296, 300 (1984).  The fair cash value of property cannot be proven with "mathematical certainty and must ultimately rest in the realm of opinion, estimate and judgment."  Assessors of Quincy v. Boston Consolidated Gas Co., 309 Mass. 60, 72 (1941).  "The credibility of witnesses, the weight of the evidence, and inferences to be drawn from evidence are matters for the board."  Cummington School of the Arts, Inc. v. Assessors of Cummington, 373 Mass. 597. 605 (1977).

On this basis, the Board found and ruled that the fair cash value of the subject property was $1,125,000 for fiscal year 2005 and granted an abatement in the amount of $1,736.56.

	 APPELLATE TAX BOARD


				By: _____________________________________
				    Thomas W. Hammond, Jr., Chairman




A true copy,


Attest: _____________________________
	        Clerk of the Board

 Because the appellant did not present evidence at the hearing on the issue of disproportionate assessment, the Board did not consider that issue and deemed it waived by the appellant.

ATB 2007-1022