In re Appeal of Marple Springfield Center, Inc

In In re Appeal of Marple Springfield Center, Inc., 654 A.2d 635 (Pa.Cmwlth.1995), the taxpayer was the owner of land on which a shopping center was built in 1964. In 1968, the taxpayer's predecessor in title entered a long-term lease for the entire property which, with renewals, expired in 2044, and had values that were well below market rates which would not change during the term of the lease. There was no mention that the lessee was responsible for real estate taxes. The property was assessed based on the market rent that lessee received from its subtenants, not the contract amount the lessee paid to the taxpayer/landowner. The taxpayer challenged its real estate tax assessments contending that property should be valued based on the rent that it received, not the fair market rent. Our Supreme Court agreed, holding that "the economic realities of commercial real estate transactions" had to be taken into consideration when valuing property and stating: The capitalization-of-income approach to tax appraisals is the most appropriate if not the only valid means of establishing fair market value of real estate when the rental income is below what would otherwise be the current market level but for a long-term commercial lease, because such long-term leases are an accepted aspect of commercial real estate transactions and their effects have a decisive impact on the price a buyer would pay for the affected property. To interpret the tax assessment statute as requiring valuation of property in hypothetical unencumbered form, . . . . , is to ignore the economic realities of commercial real estate transactions. Marple Springfield, 530 Pa. at 126-127, 607 A.2d at 710. See also In re Assid, 842 A.2d 995 (Pa. Cmwlth. 2004).