Condominium Unit Owner Must Still Pay Taxes on “Uninhabitable” Unit

Condominium Unit Owner Must Still Pay Taxes on “Uninhabitable” Unit

George Sutherland, former Associate Justice of the U.S. Supreme Court, once wrote that “[t]he legal right of a taxpayer to decrease the amount of what otherwise would be his taxes, or altogether to avoid them, by means which the law permits, cannot be doubted.” Tax abatements provide one such way for a homeowner to legally decrease his taxes. However, it is highly unlikely that a homeowner will be able to altogether avoid paying his real estate taxes – even when the owner claims that his condominium unit is uninhabitable.

His zero-sum argument – that his oceanfront Marblehead home was completely worthless – ultimately held about as much water as his leaky roof.

In a relatively recent decision, the Appellate Tax Board (“ATB”) rejected a homeowner’s claim that his uninhabitable property was worthless. Mango v. Board of Assessors of the Town of Marblehead, Appellate Tax Board, Docket Nos. F339722 & F342517. The ATB found that the condominium unit owner failed to present reliable evidence establishing that safety and water intrusion issues rendered the subject unit uninhabitable or otherwise proved that the fair cash value of the unit was lower than its assessed value.

Real estate property taxes are based upon the assessed value of the home, which assessment is made by the municipality in which the home is located. Taxpayers aggrieved by a municipality’s valuation of their home can seek an abatement – which is a reduction in property tax granted by the assessors or, on appeal, by the Appellate Tax Board. Abatements are generally granted when taxpayers are able to prove that the fair market value of their property is less than its assessed value.

Nicholas Mango and his wife, Elizabeth Garthe, own a two-story condominium unit at a community known as Glover Landing, which is located in the coastal town of Marblehead. Glover Landing is a waterfront property that boasts endless views of the Atlantic Ocean and Lady Cove. The residents of the community have beach rights and are within walking distance of the shops and restaurants located in downtown Marblehead. The unit owned by Mr. Mango and Ms. Garthe has an ocean view and 1,800 square feet of living area. Despite this seemingly picturesque setting, Mr. Mango contended that his Glover Landing unit was worthless.

Mr. Mango contended that the fair cash value of his condominium unit was zero dollars. He based his opinion on his belief that the unit was “uninhabitable, unsafe and dangerous to occupy” due to two defective conditions: (1) a lack of a second legal means of egress from the subject unit, and (2) leaks resulting in water infiltration from the roof of the building into his unit. Notably, the attic, as well as the exterior of the building, including the fire escape and the roof, are common areas of the condominium, under the control of the condominium board. In support of his claims, Mr. Mango proffered the expert testimony of a structural engineer and a residential appraiser.

Mr. Mango contented that the fire escape that was in place in his building was not code compliant. The condominium board at Glover Landing, however, had made efforts to rectify the issue. The board implemented a redesigned fire escape system that was found to have deficiencies. The Massachusetts Building Code Appeals Board issued an order suggesting optimism that a solution was expected through the condominium board’s engagement of a professional design consultant.

In the winter of 2015, a frozen roof drain caused water infiltration that resulted in ceiling damage to the interior of Mr. Mango’s unit. The condominium board had previously attempted to improve water flow on the roof by relocating the drain that ultimately froze. Mr. Mango and Ms. Garthe vacated the unit after the 2015 roof leak. As such, Mr. Mango could not state whether there was continuing water infiltration in his unit – as he did not inhabit the subject unit for the subsequent seven years. He contended that mold had developed in the attic of the building due to the water infiltration, but did not introduce any evidence demonstrating that mold testing had been performed.

The assessor acknowledged defects in the fire escape system and water leakage at the time of the valuation for the fiscal years at issue. While the unit was valued at $900,000 for fiscal year 2016, the assessor – taking note of the deficiencies – significantly reduced the assessed value in subsequent years, providing assessed values ranging from $458,100 to $408,000 in fiscal years 2018 through 2021. The assessor agreed that the issues with the fire escape and the roof leaks diminished the value of the unit, but did not render the property worthless.

The ATB found that there was no reason to believe that the condominium board would not continue to work toward an effective solution of the fire escape issue. The ATB similarly noted the proactive efforts of the condominium board with respect to the roof drain and believed that the board would continue to address such issues as they arose. The ATB noted that Mr. Mango presented no reliable evidence to establish that the issues with the fire escape or the roof leaks were incurable or cost prohibitive.

The ATB ruled that Mr. Mango failed to establish that the subject unit had no value. Mr. Mango contended that the unit was neither rentable nor saleable due to the two defects, but failed to substantiate his opinion with any evidence. The expert appraiser retained by Mr. Mango offered the opinion that the unit was uninhabitable, but was unwilling to provide an actual appraisal for the unit. The ATB found that the defects associated with the fire escape and the roof leaks did not rise to the level that the unit should be deemed uninhabitable or that the issues were irreparable. The ATB further found that the assessor reasonably accounted for the deficiencies by reducing the assessed value of the unit.

The ATB did not credit Mr. Mango’s conclusory assertions that his unit was worthless. The ATB noted that even if the unit were deemed uninhabitable – which wasn’t the case with Mr. Mango’s unit – it wouldn’t be unsalvageable and some value could still be attributed to the property so long as the assessors accounted for the damage.

Given the current real estate market, it is difficult to imagine a case where the ATB would agree that a residential property has no value. However, had Mr. Mango employed a more reasonable approach – based on expert testimony demonstrating the cost of remediating the subject defects and the related impact on the value of his unit – he may have received a more favorable decision that provided some tax relief. His zero-sum argument – that his oceanfront Marblehead home was completely worthless – ultimately held about as much water as his leaky roof.

Condo Law Blog

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David M. Rogers