                                      IN THE DISTRICT COURT OF APPEAL
                                      FIRST DISTRICT, STATE OF FLORIDA

BEACH CLUB TOWERS                     NOT FINAL UNTIL TIME EXPIRES TO
HOMEOWNERS                            FILE MOTION FOR REHEARING AND
ASSOCIATION, INC.,                    DISPOSITION THEREOF IF FILED

      Appellant,                      CASE NO. 1D15-5886

v.

CHRIS JONES, Property
Appraiser for Escambia County,
Florida; JANET HOLLEY, Tax
Collector for Escambia County,
Florida,

      Appellees.

_____________________________/

Opinion filed October 11, 2017.

An appeal from the Circuit Court for Escambia County.
Edward P. Nickinson, Judge.

Edward P. Fleming and R. Todd Harris of McDonald, Fleming, Moorhead,
Pensacola, for Appellant.

Thomas M. Findley and Robert J. Telfer, III of Messer Caparello, P.A., Tallahassee,
for Appellees.

Loren E. Levy and Jon F. Morris of the Levy Law Firm, Tallahassee, for Amicus
Curiae The Property Appraisers’ Association of Florida, Inc., in support of
Appellees.
WINOKUR, J.

      Beach Club Towers Homeowners Association, Inc. (“the Association”), as

authorized representative of its individual members, appeals the trial court’s order

granting summary judgment in favor of the Property Appraiser and Tax Collector of

Escambia County (“the County”). The Association challenges the trial court’s

conclusion that the Association’s members (“the unit owners”) are required to pay

ad valorem property taxes on the land underlying Beach Club Towers because they

are equitable owners of the land. Because we agree with the Association that the unit

owners are not equitable owners of the underlying land, and reject the County’s

alternate arguments under chapter 718, we reverse.

                                          I.

      Santa Rosa Island is a forty-mile barrier island located off the coast of

northwest Florida, the western part of which lies in Escambia County. Beach Club

Towers is a condominium located on Santa Rosa Island in Escambia County. For

purposes of property taxation, the County for a period of time drew a distinction

between the land underlying Beach Club Towers and the condominium structures

themselves. The County treated the former as exempt from ad valorem property

taxes and the latter as taxable. The history behind this distinction has been recounted

elsewhere 1 and need not be repeated here.


      1
          State v. Escambia Cty., 52 So. 2d 125 (Fla. 1951); Straughn v. Camp, 293
                                          2
        It is enough here to state that decades ago the United States conveyed the land

making up Santa Rosa Island to Escambia County, on the condition that it forever

retain legal title. Since then, Escambia County has leased portions of the land to

various entities and individuals, who, in turn, have subleased, and further subleased,

the land. Possession of the land underlying Beach Club Towers changed hands a

number of times before Beach Club Development, Inc., built Beach Club Towers

and, as sublessor, subleased a “condominium parcel” to each of Beach Club Towers’

ninety-two unit owners. Each condominium parcel included a leasehold interest in

the condominium unit itself, and an undivided leasehold interest in the underlying

land.

        In 2011, the County stopped distinguishing between land and improvements,

and began treating the condominium structures of Beach Club Towers and the

underlying land the same for purposes of taxation; that is, it began assessing ad

valorem property taxes on both. The County based its policy shift on this Court’s

opinion in Accardo v. Brown, 63 So. 3d 798 (Fla. 1st DCA 2011), which was

approved in Accardo v. Brown, 139 So. 3d 848 (Fla. 2014). In Accardo, as in this

case, a group of condominium owners on Santa Rosa Island contended that the land

underlying their condominiums was not subject to ad valorem property taxation


So. 2d 689 (Fla. 1974); Williams v. Jones, 326 So. 2d 425 (Fla. 1975); Am Fi Inv.
Corp. v. Kinney, 360 So. 2d 415 (Fla. 1978); Bell v. Bryan, 505 So. 2d 690 (Fla. 1st
DCA 1987); Ward v. Brown, 919 So. 2d 462 (Fla. 1st DCA 2005).
                                        3
because Escambia County owned the land. Id. at 849. Relying on the doctrine of

equitable ownership, the supreme court held that, because their leases in the land

were “perpetually renewable,” the condominium owners owned equitable title to the

land and were liable to pay ad valorem property taxes. Id. at 856.

      In light of Accardo, the County began assessing ad valorem property taxes on

the land underlying Beach Club Towers. In response, the Association filed a

complaint seeking, among other things, a declaratory judgment that the land

underlying Beach Club Towers is government-owned and not subject to ad valorem

taxation, and injunctive relief enjoining the County from treating it differently. The

Association alleged that, unlike the lessees in Accardo, its unit owners did not have

perpetually-renewable leases. The Association also alleged that the County could

not subject the condominium structures to ad valorem property taxation, but

concedes on appeal that the structures are taxable. The Association and the County

filed cross-motions for summary judgment. The trial court granted summary

judgment in favor of the County.

                                         II.

      The outcome of this case turns on who owns the land underlying Beach Club

Towers. If Escambia County owns it, then it is exempt from ad valorem taxation

under section 196.199(1), Florida Statutes. In that event, the unit owners would

merely be lessees of the land, and the County could tax the unit owners’ leasehold

                                          4
interests only as intangible personal property. § 196.199(2)(b), Fla. Stat. If the unit

owners own the land, then it is subject to ad valorem property taxes, payable by the

unit owners.

      A person may be deemed the owner of property for taxation purposes even

without legal title, based on the doctrine of equitable ownership. See Accardo, 139

So. 3d at 856 (“Our case law regarding the application of the equitable ownership

doctrine makes clear that the person or entity holding equitable title to real property

will be deemed the owner of the property for ad valorem tax purposes.”). “The lessee

is deemed to be the leased property’s equitable owner if the lessee holds ‘virtually

all the benefits and burdens of ownership’ of the leased property.” Robbins v. Mt.

Sinai Med. Ctr., Inc., 748 So. 2d 349, 351 (Fla. 3d DCA 1999) (quoting Leon Cty.

Educ. Facilities Auth. v. Hartsfield, 698 So. 2d 526, 530 (Fla. 1997)).

      The County interpreted Accardo broadly to expand the doctrine of equitable

ownership with regard to the property on Santa Rosa Island, taking the position that

lessees equitably own property even under those leases that are not perpetually

renewable. Like the Third District recently held, we conclude this interpretation of

Accardo “overreached.” Garcia v. Dadeland Station Assocs. Ltd., 218 So. 3d 474,

475 (Fla. 3d DCA 2017).

      In 1108 Ariola, LLC v. Jones, 139 So. 3d 857 (Fla. 2014), decided the same

day as Accardo, the supreme court emphasized that its holding in Accardo was based

                                          5
on the fact that the leases were automatically renewable, stating, “[o]ur holding in

Accardo that the taxpayers in that case are the equitable owners of both the

improvements and the underlying land, turns on the fact that the leases are

perpetually renewable.” 2 Id. at 859. The subleases involved in this case are not

perpetually renewable. Rather, each unit owner’s sublease flows from a ninety-nine

year master lease with an option to renew “for an additional ninety-nine (99) years,

terms and conditions to be renegotiated at such time.” Because renewal of each

sublease is not automatic, but instead must be renegotiated, Accardo is inapplicable.

The unit owners’ subleases do not bear the primary hallmarks of equitable ownership

described in Accardo, namely, the right to perpetually renew the lease, to purchase

the underlying land for nominal consideration at the end of their sublease, or to

otherwise exercise perpetual dominion over the property. 3 See Island Resorts Invs.,

Inc. v. Jones, 189 So. 3d 917 (Fla. 1st DCA 2016).

      The dissent points out that in Island Resorts, where this Court decided that a


      2
         The supreme court held in 1108 Ariola that lessees may have equitable
ownership of improvements on the leased property even if the leases are not
perpetually renewable. Because the lessees there did not present any evidence
regarding the useful life of the improvements, the County was justified in treating
the lessees as the equitable owners of the improvements, regardless of whether the
leases were perpetually renewable. 1108 Ariola, LLC v. Jones, 139 So. 3d 857, 859-
60 (Fla. 2014).
       3
         We do not analyze other factors generally relevant to equitable ownership
because, as the dissent acknowledges, the parties properly agreed that the terms of
the master lease are substantively the same as the lease involved in Island Resorts.
See Island Resorts Invs., Inc. v. Jones, 189 So. 3d 917 (Fla. 1st DCA 2016).
                                           6
lessee was not the equitable owner of land on Santa Rosa Island, the land at issue

did not contain improvements. Because the land at issue here is improved, the dissent

concludes that Island Resorts is distinguishable. We disagree. The fact that the land

at issue in Island Resorts was unimproved was not why the lessee was not the

equitable owner. The reason the Court in Island Resorts noted that the land was

undeveloped was to show that 1108 Ariola did not apply. Again, 1108 Ariola holds

that a lessee was the equitable owner of improvements made to real property—

despite having no right to perpetually renew the lease—because the lessee presented

no evidence that the probable useful life of the improvements would survive the

initial lease term. See 1108 Ariola, 139 So. 3d at 860. Of course, the rationale

employed in 1108 Ariola is inapplicable to land because, unlike buildings, land does

not generally have a probable useful life. The issue presented does not turn on

whether the land is improved.

                                        III.

      The County also makes two related but different arguments under chapter 718,

Florida Statutes, the Condominium Act. First, the County argues that chapter 718

compels the conclusion that the unit owners own the underlying land because each

unit owner owns a “condominium parcel” and “condominium parcel” is a parcel of

real estate that necessarily includes a proportionate ownership interest in the




                                         7
underlying land. 4 Second, the County argues that all of each unit owner’s

condominium parcel—the unit and proportionate interest in the underlying land—

must be subject to ad valorem taxation as real estate because section 718.120(1)

mandates “that the land interest is not to be assessed separately by the Property

Appraiser.” We conclude that both arguments are without merit.

      Under chapter 718, “condominium parcel” is the name given to property that

each condominium buyer acquires upon purchasing a condominium, and

encompasses all rights associated with condominium ownership. It is a separate

parcel of real property defined as “a unit, together with the undivided share in the

common elements appurtenant to the unit.” § 718.103(12), Fla. Stat. The common

elements of a condominium parcel include only what is subjected to condominium

ownership. The “common elements” of a condominium parcel are defined as “the

portions of the condominium property not included in the units,” and “condominium



      4
         The County states in its brief that, “[b]y statute, the condominium parcel that
must be assessed includes a proportionate interest in the common elements,
including the underlying land, whether such land is leased or owned.” While true
as far as it goes, this statement does not specify the type of land interest the County
maintains each condominium parcel includes. Even a lessee is regarded as having an
interest in land. Williams, 326 So. 2d at 433 (“[I]t is well established that a valid
lease for a term of years is a conveyance of an interest in land.”). Because this case
hinges on who owns the land, it seems the County is arguing that a condominium
parcel necessarily includes a proportionate ownership interest in the underlying land,
as opposed to a possessory, leasehold interest. We have not found the “multiple legal
authorities” that support this proposition, and conclude that it is irrelevant to the
ultimate issue in any event.
                                             8
property” is defined as “the lands, leaseholds, and personal property that are

subjected to condominium ownership, whether or not contiguous, and all

improvements thereon and all easements and rights appurtenant thereto intended for

use in connection with the condominium.” § 718.103(8), (13), Fla. Stat. (emphasis

added). As such, if the land underlying a condominium is not subjected to

condominium ownership, it is, by definition, not part of the condominium parcel.

      Section 718.104, Florida Statutes, describes the process by which a

condominium is created and how property is submitted to condominium ownership.

In short, a condominium is created by executing a declaration of condominium

complying with the requirements of chapter 718. Property is submitted to

condominium ownership by including in the declaration a description of the property

to be submitted and a statement submitting the property to condominium ownership.

§ 718.104(4)(a), (c), Fla. Stat. It is not necessary that the land underlying a

condominium be submitted to condominium ownership; a leasehold estate in the

underlying land may be submitted instead. § 718.104(1), Fla. Stat. (“A condominium

may be created on land owned in fee simple or held under a lease complying with

the provisions of s. 718.401.”).

      Here, the declaration of condominium states that a leasehold estate in the

underlying land was submitted to condominium ownership, not Escambia County’s

fee simple estate. Indeed, Escambia County’s deed to the land restricted it from

                                        9
conveying its fee simple estate. Therefore, each unit owner’s condominium parcel

includes an undivided interest in a leasehold estate in the underlying land, which is

exempted from ad valorem property taxation pursuant to section 196.199(1), Florida

Statutes. We reject the County’s contention that a condominium parcel must, by

definition, include a proportionate ownership interest in the land underlying the

condominium. The common elements of a condominium parcel include only the

land, leaseholds, and personal property subjected to condominium ownership. If a

fee simple estate in land is subjected to condominium ownership, then the unit

owners acquire a proportionate ownership interest in the land. If a leasehold estate

in land is subjected to condominium ownership, then the unit owners acquire a

proportionate possessory interest in the land. The latter occurred here.

      We also reject the County’s second argument under chapter 718. Counties

have the authority to tax improvements upon real property separate from the land

itself. See Broward Cty. v. Eller Drive Ltd. P’ship, 939 So. 2d 130, 132 (Fla. 4th

DCA 2006). Indeed, as noted above, the County for a number of years did just that,

treating condominium structures as subject to ad valorem property taxation and the

land underlying those same structures as subject only to taxation as intangible

personal property. Nevertheless, the County now argues that chapter 718 prohibits

such taxation in this case. In support of its position, the County points to section

718.120(1), which provides in pertinent part as follows:

                                         10
      Ad valorem taxes, benefit taxes, and special assessments by taxing
      authorities shall be assessed against the condominium parcels and not
      upon the condominium property as a whole. . . . Each condominium
      parcel shall be separately assessed for ad valorem taxes and special
      assessments as a single parcel.

However, chapter 718 does not change whether the Property Appraiser treats

portions of property as being exempt. The definitional section of chapter 192, which

governs taxation and finance, provides that ad valorem tax “means a tax based upon

the assessed value of property.” § 192.001(1), Fla. Stat. The assessed value of

property means an annual determination of the just or fair market value.

§ 192.001(2), Fla. Stat. The Property Appraiser is charged with “determining the

value of all property within the county . . . and with determining the tax on taxable

property after taxes have been levied.” § 192.001(3), Fla. Stat. The statute provides

that “taxable value” means “the assessed value of property minus the amount of any

applicable exemption provided under s. 3 or s. 6, Art. VII of the State Constitution

and chapter 196.” § 192.001(16), Fla. Stat. We cannot conclude that

section 718.120(1) eliminates any exemption that should otherwise be subtracted

from the assessed value to reach the taxable value. Section 718.120(1) merely means

that the County must assess each condominium parcel separately from other

condominium parcels. See Calypso Developers I, LLC v. Pelican Props. of S.

Walton, LLC, 109 So. 3d 1214, 1217 (Fla. 1st DCA 2013).

                                        IV.

                                         11
      Because the unit owners are not equitable owners of the underlying land, they

are exempt from ad valorem property taxation. Accordingly, we REVERSE the trial

court’s Final Judgment and REMAND for further proceedings consistent with this

opinion.

      REVERSED and REMANDED.

OSTERHAUS, J., CONCURS. BOYER, TYRIE, ASSOCIATE JUDGE,
DISSENTS WITH OPINION.




                                        12
BOYER, TYRIE, Associate Judge, dissenting.

      I respectfully dissent. I would find that the trial court correctly applied the

doctrine of equitable ownership to find that Appellant’s leasehold interests in

properties on Santa Rosa Island are subject to ad valorem taxation as real property.

That conclusion is compelled by the Florida Supreme Court’s decisions in Accardo

v. Brown, 139 So. 3d 848 (Fla. 2014) and 1108 Ariola, LLC v. Jones, 139 So. 3d

857 (Fla. 2014).

      In Accardo, the Supreme Court held that lessees of property leased from Santa

Rosa County under perpetually-renewable leases were the equitable owners of both

land and improvements, so that both were subject to ad valorem taxation. Accardo,

139 So. 3d at 855-56 (approving Ward v. Brown, 919 So. 2d 462, 463 (Fla. 1st DCA

2005)). In Ward, this Court, after noting the perpetually-renewable nature of the

leases at issue, supported its conclusion that the lessees were equitable owners by

noting that they

      have the right to use or rent the improvements, encumber their interests,
      transfer their property rights, and realize any appreciation in value from
      sale or rental income. They must insure and maintain the improvements
      and are responsible for the payment of any taxes. Therefore, appellants
      are equitable owners of the property.

Ward, 919 So. 2d at 463 (footnote omitted).

      As the majority notes, Appellant argued below that, “unlike the lessees

in Accardo, its unit owners did not have perpetually-renewable leases.” (Majority

                                         13
Op. at 4.) However, perpetual renewability of a lease is not the only hallmark of

equitable ownership.    In 1108 Ariola, the Supreme Court held that equitable

ownership does not depend on a right to acquire title for nominal consideration nor

on a lease’s being perpetually renewable. 1108 Ariola, 139 So. 3d 857, 859 (Fla.

2014). Instead, the court focused on whether the lessees held “‘virtually all the

benefits and burdens of ownership’ of the improvements at issue.” Id. at 860

(quoting Leon Cnty. Educ. Facilities Auth. v. Hartsfield, 698 So. 2d 526, 530 (Fla.

1997)).

      Valid “burdens and benefits” considered by Florida courts include the
      lessee’s obligation to insure, maintain and pay taxes on the leased
      property, as well as the lessee’s option to purchase the leased property
      at the end of the lease term. None of these factors, including an option
      to purchase, convey to a lessee equitable title to leased property when
      considered individually. However, when these factors are considered
      in relation to one another, the courts may determine that a lessee is the
      equitable owner of leased property.

Robbins v. Mt Sinai Med. Ctr., Inc., 748 So. 2d 349, 351 (Fla. 3d DCA

1999)(internal citations omitted). The proper analysis, then, does not focus on

individual factors, but considers all factors in relation to one another. At oral

argument, the parties agreed that the leases at issue in this case are substantially

identical to those at issue in Island Resorts Investments, Inc. v. Jones, 189 So. 3d




                                         14
917 (Fla. 1st DCA 2016).5 Those lease terms were summarized in Island Resorts as

follows:

      [the leaseholder] must pay lease fees; maintain liability, flood,
      windstorm, fire, and casualty insurance; pay all future ad valorem real
      property taxes, if any, and all other future taxes and assessments
      imposed on the subleased property; repair or rebuild any building or
      improvement in the event of damage or destruction; and pay for all its
      utilities. Appellant shall also have the right to assign, sublease, or
      otherwise convey or to mortgage all or portions of the subleased
      property. Title to any buildings or improvements on the leased property
      vests in Escambia County, and Appellant is required to deliver and
      surrender possession of the subleased property upon the expiration or
      termination of the lease.

Island Resorts, 189 So. 3d at 918.

      As in Accardo, 1108 Ariola, and Ward, the leases in this case are not

perpetually renewable. However, in this case, the leases are renewable once the

terms are re-negotiated. It is difficult to imagine why the unit owners would not

want to re-negotiate the terms of the leases for another 99 years, since the unit

owners have ownership interests in their condominiums. Perhaps the most plausible

impediment to renewal of the leases, from Escambia County’s perspective, would

be if the county were unable to collect ad valorem taxes from these unit owners.

      Appellant conceded in the trial court its ownership of, and liability for ad

valorem taxes on, the improvements made to the properties at issue.             That



5
  While the lease terms are substantially identical, Island Resorts differs from the
instant case in that the real property in Island Resorts was unimproved.
                                            15
concession, however, does not render irrelevant those indicia of ownership—the

burdens and benefits—which apply only to the improvements. The proper analysis

remains the same—consideration of all factors in relation to one another. The indicia

of ownership in the leases at issue here are similar to those present in Ward:

“Appellants have the right to use or rent the improvements, encumber their interests,

transfer their property rights, and realize any appreciation in value from sale or rental

income. They must insure and maintain the improvements and are responsible for

the payment of any taxes.” Ward, 919 So. 2d at 463. And while, as noted, these

leases are not perpetually renewable, they bear a more compelling similarity to those

in Ward: their initial term of 99 years makes them eligible for homestead exemption

under Article VII, section 6(a) of the Florida Constitution, which this Court in Ward

characterized as an “express[] contemplat[ion]” of equitable ownership. Id. at 465.6

      The Appellant’s reliance on Island Resorts is misplaced and that case is

distinguishable   because    the   property at      issue   in   Island   Resorts   was

unimproved. Island Resorts, 189 So. 3d at 922 (“Neither does this case involve the

taxation of improvements.”).        Therefore, terms of the lease applicable to



6
  The Constitutional provision of homestead exemption and, therefore, equitable
ownership, for leaseholds initially in excess of 98 years negates any reliance on
Garcia v. Dadeland Station Associates, Ltd., 218 So. 3d 474 (Fla. 3d DCA 2017).
Garcia does not analyze benefits and burdens of ownership, but the court there
concluded that a lease without perpetual renewability or a nominal purchase option,
and an initial term of 90 years, was not equitable ownership.
                                          16
improvements, since none existed, did not enter into the analysis. In Ward, this

Court stated that the Florida Constitution “expressly contemplates equitable

ownership for leases with initial terms of 99 years . . . .” Ward, 919 So. 2d at 464.

Consistent with Accardo, 1108 Ariola, and Ward, I would affirm the judgment under

review.




                                         17
