            IN THE COMMONWEALTH COURT OF PENNSYLVANIA


Oley Valley Development, Inc.,                   :
                                                 :
                        Appellant                :
                                                 :    No. 1705 C.D. 2014
                        v.                       :    No. 1706 C.D. 2014
                                                 :    No. 1833 C.D. 2014
Berks County Board of Assessment                 :    Argued: May 5, 2015
Appeals and Oley Valley School                   :
District                                         :



BEFORE:          HONORABLE ROBERT SIMPSON, Judge
                 HONORABLE MARY HANNAH LEAVITT, Judge
                 HONORABLE JAMES GARDNER COLINS, Senior Judge

OPINION NOT REPORTED

MEMORANDUM OPINION BY
SENIOR JUDGE COLINS                                                FILED: August 25, 2015


                 Before this Court are the consolidated appeals of Oley Valley
Development, Inc. (Appellant or Taxpayer) from the August 11, 2014 and
September 12, 2014 orders of the Berks County Court of Common Pleas (Trial
Court),1 which dismissed its appeals from two property tax assessments entered by
the Berks County Board of Assessment Appeals (Board).                         The assessments
involved: (i) eighty-three (83) unsold lots of a 117-lot single-family residential
subdivision known as “Meadow View Farms” (Property), and (ii) one additional
lot, also part of the subdivision, which has been designated for common use among



1
    A trial was held before the Honorable Scott. E. Lash on August 5, 2014.
all lot owners of the subdivision (Clubhouse Lot).2 By its September 12, 2014
order, the Trial Court denied Appellant’s Motions for Post-Trial Relief. This
appeal followed.3
               The Property consists of “age restricted” residential lots.4 The current
assessments for the lots were established by court order following an appeal by
Taxpayer filed in August, 2010. In 2012, the Trial Court considered an appeal by
Taxpayer from property tax assessments entered by the Board for tax years 2011
and 2012 for the same subdivision.               At the 2012 trial, each party presented
testimony by an appraiser expressing an opinion of fair market value: Taxpayer’s
expert in 2012, as well as in the matter presently before us, was Michael J.
Samuels (Appraiser), who valued the fair market value of the subdivision as of
July 26, 2010, in the aggregate, to be $2,075,000 or $21,392 per lot. The appraiser
for the Board and the Oley Valley School District opined that the value of each lot



2
  In August 2013, Appellant filed eighty-six (86) assessment appeals for 86 undeveloped lots.
On September 13, 2013, the Board held a hearing and issued a decision on October 11, 2013,
determining that the assessments would remain the same for the 2014 tax year. Appellant filed
its appeal from the decision of the Board on November 8, 2013; however, on June 16, 2014,
Appellant notified the trial court that some of those lots were sold, and the appeal was withdrawn
as to those lots. On June 19, 2014, the Trial Court entered an order consolidating the appeals on
83 lots, identified as No. 13-25217; the Clubhouse Lot remained a separate appeal, identified as
No. 13-25400.
3
 This Court’s review in a tax assessment matter is limited to a determination of whether the trial
court abused its discretion, committed an error of law, or reached a decision not supported by
substantial evidence. Green v. Schuylkill County Board of Assessment Appeals, 772 A.2d 419,
426 (Pa. 2001). While the weight of the evidence is before the appellate court for review, the trial
court’s findings of fact are entitled to great weight and will be reversed only for clear error. Id.
4
  To qualify as an Age Qualified Residential Community (AQRC), at least one member of the
household must be at least 55 years of age, with no more than four (4) individuals residing in the
household, and no residents under the age of 18, except during the summer months or holidays;
any person not related by blood or marriage to the principal owner must also be 55 years of age
or older. (August 11, 2014 Opinion of the Trial Court, Finding of Fact (F.F.) ¶ 6, R.R. at 186a.)
                                                 2
for 2011 was $35,050 and for 2012 was $36,600.5 In its 2012 decision, the Trial
Court stated:

                [T]he gravamen of this appeal is whether to consider the
                assessment of these lots in the context of the subdivision,
                in essence as one whole, thereby including considerations
                relating to the costs of development. In urging [the Trial
                Court] to so find, Taxpayer’s appraiser, Samuels, points
                out that an extensive inventory of lots have not been sold
                and will likely take several years to sell, particularly
                given the current state of the economy. During the
                pendency of sales, Taxpayer would continue to be
                saddled with taxes, maintenance, and other subdivision
                costs. Accordingly, Samuels believes that a form of the
                income approach, known as the development approach, is
                the proper method.
(February 27, 2012 Trial Court Opinion, Reproduced Record (R.R.) at 233a-234a.)
The Trial Court, however, rejected the Taxpayer’s argument in 2012, finding this
Court’s opinion in Penn’s Grant Associates v. Northampton County Board of
Assessment Appeals, 733 A.2d 23 (Pa. Cmwlth. 1999) to be dispositive, and stating:


                 As with Phase I of the Penn’s Grant case, [t]axpayer has
                sold individual lots from the Subdivision, thereby
                conferring authority upon the Assessment office to assess
                each lot on an individual basis. This authority is now set

5
  The appraisal offered by the Board and the School District for the 2012 appeal is not part of the
certified record. The Trial Court refers to this appraisal in its 2012 opinion and order, noting that
it utilized the sales comparison approach, and identified five separate lot sales for comparison.
(February 27, 2012 Trial Court Opinion, R.R. at 238a-239a.) The Trial Court further noted that
Taxpayer’s appraisal for 2012 considered the sales comparison approach, but did not reach a
conclusion of fair market value based on this approach. (Id., R.R. at 237a-238a.) In the appeal
before us, Taxpayer’s appraisal also considers both the sales comparison approach and the
development approach, and reaches the conclusion that the value of the Property is roughly the
same under either approach. (Taxpayer’s appraisal, R.R. at 48a.) However, Taxpayer
acknowledged at the 2014 trial that the comparable sales used for the sales comparison approach
were based on subdivision sales and not on the sale of individual lots. (August 5, 2014 Hearing
Testimony, R.R. at 279a-280a.)
                                                 3
             forth in the new Consolidated County Assessment Law at
             53 Pa. C.S.A. [sic] § 8817, which replaced 72 P.S. §
             5347.1, and states, in pertinent part:

                    (a) General rule. – In addition to other
                    authorization provided in this chapter, the
                    assessors may change the assessed valuation
                    on real property when a parcel of land is
                    subdivided into smaller parcels or when
                    improvement[s] are made to real property or
                    existing improvements are removed from
                    real property or are destroyed.        The
                    recording of a subdivision plan shall not
                    constitute grounds for assessment increases
                    until lots are sold or improvements are
                    installed…
(February 27, 2012 Trial Court Opinion, R.R. at 241a.) The Trial Court in 2012
determined that Taxpayer failed to meet its burden to overcome the presumption of
the validity of the existing assessments, because Appraiser improperly utilized the
development approach6 to valuation and appraised the lots as a subdivision instead
of as individual parcels, and dismissed the appeals.
6
  Our Court explained the development approach to valuation in Penn’s Grant Associates v.
Northampton County Board of Assessment Appeals, 733 A.2d 23, 28 (Pa. Cmwlth. 1999) as
follows:

             The “development approach” is an approach used to value multiple
             unimproved lots in a subdivision or potential subdivision as a unit.
             It has also been referred to as the “cost of development method;”
             the “anticipated use method;” the “lot method;” the “developer’s
             residual approach;” the “developer’s absorption method;” and the
             “subdivision approach.” Under this method of assessment, the
             expected sale prices of the lots are considered and direct and
             indirect development and marketing costs are also considered in
             order to find true market value. Although the development
             approach is most often used to determine market value for raw
             land that is not yet subdivided, where the land’s best use is that of
             a residential subdivision, it is also used when the land is already
             fully subdivided.

                                              4
               The present appeal followed a trial during which only Appraiser
testified, and Appraiser’s report was admitted into evidence. (August 5, 2014
Hearing Testimony (H.T.), R.R. at 271a-291a.) The Trial Court denied the appeal,
noting that Taxpayer previously raised the same issues in the 2012 appeal, and
stated that for the reasons set forth in the 2012 appeal, it was again declining to
employ the development approach; the Trial Court incorporated its decision of
February 27, 2012 into its opinion and order.            (August 11, 2014 Opinion of the
Trial Court (Tr. Ct. Op.), R.R. at 183a-189a.)
               In tax assessment appeals, the initial burden is upon the Board to
establish the prima facie validity of the assessment by placing into evidence the
official assessment record; the burden then shifts to the taxpayer to come forward with
competent, relevant evidence that the assessment was incorrect, arbitrary or otherwise
in disregard of the taxpayer’s rights. Penn’s Grant, 733 A.2d at 23 n.5. Appellant
argues, first, that the Trial Court applied an incorrect legal standard in dismissing
its assessment appeal, and asserts that Appraiser properly established the correct
value for the subdivision lots under the development approach. We do not agree.
In Penn’s Grant, this Court made clear that the development approach to
assessment is properly used for the valuation of multiple unimproved subdivision
lots as a unit, but once there has been a change in the condition of the property,
such as the sale of a lot or improvements made, each individual lot must be
assessed on an individual lot basis. 733 A.2d at 27.
                 Appellant seeks to distinguish itself from the taxpayer in Penn’s
Grant, arguing that in Penn’s Grant, the taxpayer was contending that only sold


733 A.2d at 28 (citing J.D. Eaton, Real Estate Valuation in Litigation 223 (American Inst. of
Real Estate Appraisers 1982)).

                                                5
lots in the first phase of a development were subject to an individualized
assessment, and unsold lots in that phase should be assessed as a whole using the
development approach. Appellant contends that our Court in Penn’s Grant
established that the taxpayer in that case did not offer sufficient evidence to
overcome the board’s assessment because it only presented evidence as to the
value of the entire phase and not for individual lots; here, Appellant argues,
Appraiser has provided individual valuations, but with a deduction for
improvement costs for all lots before determining the individual lot value, as
authorized by the Court in Penn’s Grant.
                   The Trial Court rejected this argument, finding it misleading, and
noted that Taxpayer’s individual lot assessments were “based on uniformly
applying 1/83rd of the continuing subdivision costs to each of the eighty-three (83)
lots.”      (Tr. Ct. Op., R.R. at 188a.)           In addition, the Trial Court noted that
Taxpayer’s method would result in non-uniform assessments, with unsold lots
being assessed at a far lower value than lots already sold, in violation of the
uniformity clause of the Pennsylvania Constitution.7 Id. We agree.
                 In Penn’s Grant, the Court did not reach the issue of the propriety of
applying a standard deduction to each lot to reflect the cost of site improvements
yet to be completed, without accounting for the actual degree of completion of
each lot. We need not do so here. In arguing for the development approach in the
instant matter, Appellant contends that in addition to a deduction for uncompleted
site improvement costs such as curb repairs, sidewalks, landscaping and the
construction of the community clubhouse, the assessment may take into account
ongoing indirect costs such as marketing and taxation, and may factor in a time


7
    Article IX, § 1 of the Pennsylvania Constitution.
                                                   6
allowance for exposure of each lot to the open market. However, the development
approach, which considers both direct and indirect development and marketing
costs, cannot be utilized when individual lot assessments are required; in Penn’s
Grant, we discussed the development approach solely in the context of an
assessment of the value of a phase of development wherein no individual lots had
yet been sold, acknowledging there that indirect costs related to the development of
such lots could be taken into consideration in arriving at an opinion of value used
as a basis of assessment. Penn’s Grant, 733 A.2d at 29. That is not the case here,
where a number of lots have been sold. As such, we affirm the dismissal of the
appeals from assessment of the eighty-three (83) unsold lots.
             With regard to the Clubhouse Lot, Appellant argues that the lot has no
market value where it is designated on the approved subdivision plan as nothing
more than a clubhouse, to be utilized by all of the lot owners as a common area. It
asserts that the lot cannot be sold to anyone, and its value is redundant, based on
the fact that the clubhouse is recognized in the assessment and market value of
each of the remaining residential lots. The Trial Court disagreed, finding that the
Clubhouse Lot has not yet been built, is not distinguishable from any of the other
eighty-three (83) lots and has fair market value; the Trial Court opined that once its
designated use is in place, the Clubhouse Lot can be reassessed. (Tr. Ct. Op., R.R.
at 188a.) Appraiser testified before the Trial Court that the Clubhouse Lot cannot
be sold by a homeowner’s association, and is restricted to use as common area,
with no value in and of itself. (H.T., R.R. at 281a-282a.) Counsel for Appellant
stated that once a subdivision plan that includes a community clubhouse has been
approved by a municipality, Taxpayer is obligated to complete it, unless it seeks
and receives approval for a modification of the subdivision plan. (Id., R.R. at


                                          7
282a.) Here, the certified record does not include the subdivision development
plan, and the Trial Court did not make a factual finding as to whether or not the
Clubhouse Lot is in fact restricted to use as a common area or whether it might be
sold by the developer for some other purpose. As such, the order of the Trial Court
is vacated insofar as it dismissed Appellant’s assessment appeal as to the
Clubhouse Lot, and this matter is remanded to the Trial Court for a determination
as to the designation of the Clubhouse Lot and, based thereon, a determination as
to its fair market value.   The Trial Court’s order, insofar as it dismissed the
Appellant’s assessment appeal as to eighty-three (83) unsold lots of a subdivision,
is affirmed. The Trial Court’s order denying the Motions for Post Trial Relief is
affirmed.




                                    _______________ ______________________
                                    JAMES GARDNER COLINS, Senior Judge




                                        8
        IN THE COMMONWEALTH COURT OF PENNSYLVANIA


Oley Valley Development, Inc.,            :
                                          :
                  Appellant               :
                                          :   No. 1705 C.D. 2014
                  v.                      :   No. 1706 C.D. 2014
                                          :   No. 1833 C.D. 2014
Berks County Board of Assessment          :
Appeals and Oley Valley School            :
District                                  :


                                   ORDER

            AND NOW, this 25th day of August, 2015, the August 11, 2014 order
of the Berks County Court of Common Pleas, insofar as it dismissed the
assessment appeal of Oley Valley Development, Inc., identified as No. 13-25217,
as to eighty-three (83) unsold lots of a subdivision, is AFFIRMED, and insofar as
it dismissed the assessment appeal of Oley Valley Development, Inc., identified as
No. 13-25400, as to an additional lot identified by tax identification number 67-
5348-01-26-5962 and known as the clubhouse lot, is VACATED and this matter is
REMANDED for further proceedings consistent with the attached opinion.
            The September 12, 2014 order of the Berks County Court of Common
Pleas denying the Motions for Post Trial Relief of Oley Valley Development, Inc.
is AFFIRMED.
             Jurisdiction relinquished.



                                   _______________ ______________________
                                   JAMES GARDNER COLINS, Senior Judge
