Marion Vendituoli, Trustee v. Board of Assessors of the Town of Westport (February 22, 2008)

COMMONWEALTH OF MASSACHUSETTS

APPELLATE TAX BOARD


MARION VENDITUOLI, TRUSTEE	v.	BOARD OF ASSESSORS OF
							THE TOWN OF WESTPORT

Docket No. F283070				Promulgated:
							February 22, 2008

	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 Town of Westport owned by and assessed to the appellant under G.L. c. 59, §§ 11 and 38, for fiscal year 2006 (the "fiscal year at issue").
	Commissioner Egan heard this appeal and was joined in the decision for the appellee by Chairman Hammond and Commissioners Scharaffa, 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.

	Daniel C. Perry, Esq. for the appellant.
	Paul Matheson, assessor, for the appellee.



FINDINGS OF FACT AND REPORT
	On the basis of testimony and exhibits introduced at the hearing of this appeal, the Appellate Tax Board ("Board") made the following findings of fact.
	On January 1, 2005, Marion Vendituoli ("appellant") was the assessed owner of an approximately 1.5-acre parcel of real estate located at 686 River Road in the Town of Westport, adjacent to the Westport River ("subject property").  Approximately one-half acre of the subject property contained a marsh; the remainder was upland.  According to the Town of Westport's subdivision plan, which was recorded in the Bristol County Registry of Deeds on  May 15, 1958, ninety feet of the southern border of the subject property abutted Redwing Lane.     
The subject property was improved with two small single-family cottages, each containing about four hundred square feet of finished living area.  One of the cottages, called the Boat House, was constructed of tongue-and-groove bead board.  It had two bedrooms and no insulation, and was therefore uninhabitable during the winter.  It was rented in the summer.  The other cottage, called the Hurricane House, had one large room and a bathroom.  It was winterized, and was rented year-round to the appellant's brother for $500 per month.  The subject property also contained a separate small shed for storage.
For the fiscal year at issue, the Board of Assessors of the Town of Westport ("assessors") valued the subject property at $1,275,800.  The appellant timely paid the tax without incurring interest.  On January 6, 2006, the appellant timely filed an application for abatement with the assessors.  On February 13, 2006, the assessors denied the application, sending notice to the appellant on February 15, 2006.  The appellant seasonably filed a petition with the Board on April 3, 2006.  On the basis of these facts, the Board found that it had jurisdiction to hear and decide this appeal.
In the appellant's opinion, the subject property's value for the fiscal year at issue was $300,000.  She testified that the highest and best use of the subject property was as rental property, by renting both cottages in the summer and potentially the Hurricane House in the winter as well.  The appellant used the income capitalization method to support her opinion of value.  She projected that the Boathouse could only be rented for a maximum of eight weeks in the summer, since it was not winterized.  The last actual rent received for the Boathouse was in 2005, when a tenant rented it for $1,400 per week for seven weeks.  The Hurricane House was rented year-round to the appellant's brother for $500 per month, but the appellant testified that its fair rental value in the summer would be $1,000 per week.  She concluded that, based on the current condition of the cottages, renting the cottages would likely generate an income of approximately $28,000 per year.
The appellant also submitted a valuation performed by an independent appraiser in 2003, in conjunction with the sale between the appellant and the bankruptcy trustee of Stafford Sheehan, the appellant's brother, who had owned a one-fifth share in the subject property at that time.  This appraisal valued the subject property at $266,000.  The appellant argued that this appraisal was a reasonable estimate of the property's value, since the bankruptcy court "wanted to get it as high as they could get it."  She further contended that the value of the property had not increased substantially between the time of the appraisal and January 1, 2005.  The appellant relied on this appraisal, combined with her calculation of the income that could potentially be generated by renting the existing cottages, to arrive at her opinion of value of $300,000.
The appellant challenged the assessors' method of valuing the subject property.  The assessment of $1,275,800 was based on the premise that the highest and best use of the subject property would be to build a luxury-style, single-family home to be used for residential purposes.  The appellant argued that this use of the property would be impossible for several reasons.
First, the appellant cited a local zoning bylaw that required at least 100 feet of road frontage before a building permit could be issued.  The appellant argued that the subject property only had 90 feet of frontage along Redwing Lane, which would not satisfy the zoning bylaw. 
Second, the appellant contended that the property would be unlikely to sell because a buyer would be unable to secure road access to the property.  The appellant introduced a deed from 1979 between the appellant's mother, the seller, and an unrelated third-party buyer.  The deed purported to transfer exclusive title to Redwing Lane to the buyer, with no rights to the road retained by the owner of the subject property.  The appellant contended that this deed eliminated any rights of access in the subject property via Redwing Lane.  She further claimed that the only access to the property was via a path across an adjacent parcel to the north ("Lot 12"), which was owned by the appellant's sister.  The appellant testified that her sister would not grant access to anybody outside of the family, because she believed that allowing permanent access across her property would diminish its value.  
Finally, the appellant cited issues with water access.  The only source of water for the subject property was from a well on another adjacent lot.  Since there was neither a well on the property nor access to municipal water, the appellant claimed that G.L. c. 40, § 54 would prohibit the construction of a luxury home unless a source of water could be secured.  She argued that a well most likely could not be built on the property because of potential salinity problems caused by the adjacent Westport River and the location of the septic tank on the property. 
The assessors' witness, assessor Paul Matheson, challenged the appellant's contentions.  First, he questioned the validity of the clause in the 1979 deed which purportedly transferred exclusive rights to Redwing Lane.  While he did not offer a detailed argument on this point, he testified that it was his understanding that the clause in the deed regarding Redwing Lane would not withstand a legal challenge.  
Mr. Matheson next explained that the subject property could be built upon despite the zoning bylaw regarding frontage.  He submitted a letter from the town planning board from May 15, 1996, written when the appellant's sister, the owner of Lot 12, petitioned the planning board for permission to build her home.  This letter reflected the planning board's unanimous decision that Lot 12 was buildable under grandfather rights. 
Mr. Matheson contended that the planning board decision would also apply to the subject property, because both parcels belonged to the same approved subdivision known as Redwing Farm on a subdivision plan recorded with the Bristol County Registry of Deeds in 1958, which the appellant entered into evidence.  Mr. Matheson also submitted a letter from the town building inspector dated October 25, 2006, specifically addressing the subject property, which stated that the subject property "is a buildable lot which presently has two dwellings already on the property."
Mr. Matheson then challenged the contention that a well could not be constructed on the subject property.  He claimed that the appellant's claim of salinity problems was too speculative; the appellant did not substantiate her opinion with any actual evidence indicating that water would be unavailable to the subject property.  He further contended that water could likely be secured for the subject property, since potable water was apparently available for the adjacent Lot 12, where a house had been built in 1996.
Mr. Matheson contended that, because the highest and best use of the subject property was residential, the income capitalization method was an inappropriate method of valuation.  He then offered evidence of the sales of two vacant, buildable lots near the subject, which sold for $900,000 and $975,000, respectively.  Mr. Matheson argued that these lots were comparable to the subject.  In fact, he contended, since the subject property was adjacent to the water, the subject property, if buildable, would have a greater value.
On the basis of the above evidence, the Board found that the appellant failed to meet her burden of proving that the subject property was over valued.  Specifically, the appellant failed to prove that the assessors erred in their determination that the property's highest and best use was as residential property with the construction of a luxury-style, single-family residence.  
First, as explained in the following Opinion, any subdivision plan must provide a means of access for all subdivision lots within the plan to obtain approval by the planning board.  A clause in a deed cannot alter an approved subdivision plan by denying access to a property within a subdivision.  Therefore, the Board found that the deed clause purporting to deny access over Redwing Lane to the subject property was invalid.  At the very least, the appellant presented no evidence that the Subdivision Plan of Redwing Farm, as approved and recorded in 1958, had been altered to render the subject property legally land-locked.  The Board thus found and ruled that the appellant failed to meet her burden of proving that the subject property was legally land-locked.   
Moreover, the Board found that the letters from the town planning board and the town building inspector sufficiently established that the subject property was actually buildable, despite the bylaw concerning frontage.  First, while the letter from the town planning board specifically addressed Lot 12, it reflected the planning board's opinion of the entire Redwing Farm subdivision; the opinion was, therefore, applicable to the subject property as well, because it was part of the same subdivision.  For the reasons stated in the Opinion, the Board found and ruled that the letters from the planning board and building inspector sufficiently established that the subject property was a buildable lot notwithstanding existing zoning requirements, including frontage.
Finally, the appellant failed to substantiate her claim that the property lacked a source of potable water.  The appellant merely suggested that the nearby river and the location of the property's septic tank might create salinity and other problems, but she offered no credible evidence to support her theory.  The Board thus found and ruled that the appellant's bare assertion that the subject property lacked a source of potable water was merely speculative.   
On the basis of all this evidence, the Board found and ruled that the appellant failed to prove that the subject property was not a buildable lot which could be altered to contain a luxury single-family residence.  Therefore, the Board found and ruled that the appellant failed to meet her burden of proving that the highest and best use of the property was to retain the two existing small rental cottages and rent one on a seasonal basis and the other year-round.  Accordingly, because the appellant's income analysis was premised on this highest and best use, the Board gave little weight to the appellant's analysis.  
Even assuming that the income capitalization method was appropriate, the appellant's calculation lacked many critical factors.  Income capitalization requires a determination of the property's annual rental income and expenses based on market values, a vacancy factor , and an appropriate capitalization rate.  The appellant merely estimated the amount of rental income that the property could potentially generate based on one instance of actual rent of a non-winterized cottage.  Then utilizing the 2003 bankruptcy court appraisal of $266,000, she somehow arrived at her opinion of value.  As explained in the Opinion, the appellant's loose calculation of value under the income capitalization approach lacked critical calculations for expenses, vacancy, and capitalization rates, and was, therefore, unreliable.  
The appellant's calculation also did not accurately consider the subject property's market value.  The 2003 bankruptcy appraisal did not accurately reflect the property's fair cash value for the fiscal year at issue.  First, the appraisal was not contemporaneous to the fiscal year at issue, and it was not adjusted to reflect the property's market value in that year.  Second, the appraisal was not made to assess the fair cash value of the property for real estate tax purposes.  The appraisal apparently did not correctly consider the property's highest and best use; it only reflected its value at that time as a rental property with the seasonal rental of a non-winterized cottage.  The Board thus found and ruled that the appellant's valuation under the capitalization approach was fatally flawed.
Based on all of the evidence, and for the reasons explained in the following Opinion, the Board found and ruled that the appellant failed to meet her burden of proving that the subject property was overvalued for the fiscal year at issue.  In contrast, the Board found and ruled that the assessors' comparable sales evidence supported the subject assessments.  Accordingly, the Board issued a decision for the appellee in this appeal.

OPINION
The assessors are required to assess real estate at its fair cash value determined as of the first day of January each year.  G.L. c. 59, § 38.  Fair cash value is the price on which a willing buyer and seller in a free and open market will agree if both 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 a right as a matter of law to an abatement of property tax.  Schlaiker v. Board of Assessors of Great Barrington,     365 Mass. 243, 245 (1974).  The assessment is presumed to be valid until the taxpayer sustains his or her burden of proving otherwise.  Id.  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).  
Generally, real estate valuation experts, Massachusetts courts, and this Board rely upon three approaches to ascertain the fair cash value of property: income capitalization; sales comparison; and cost of reproduction.  Correia v. New Bedford Redevelopment Authority, 375 Mass. 360, 362 (1978).  Regardless of which method is employed to determine fair cash value, the Board must determine the highest price which a hypothetical willing buyer would pay to a hypothetical willing seller in an assumed free and open market.  Irving Saunders Trust v. Board of Assessors of Boston, 26 Mass. App. Ct. 838,     845 (1989).  The validity of a final estimate of market value depends largely on how  well it can be supported by market data.  The Appraisal Institute, The Appraisal Of Real Estate 134 (12th Ed. 2001). 
"Prior to valuing the subject property, its highest and best use must be ascertained, which has been defined as the use for which the property would bring the most."  Tennessee Gas Pipeline Co. v. Assessors of Agawam, ATB Findings of Fact and Reports 2000-859, 874 (citing Conness v. Commonwealth, 184 Mass. 541, 542-43 (1903) and  Irving Saunders Trust, 26 Mass. App. Ct. at 843).  "[T]he phrase 'highest and best use' implies the selection of a single use for a single property and . . . the Board is required to make its best judgment as to what that use is likely to be, considering all the evidence presented."  New England Telephone and Telegraph Co. v. Board of Assessors of the Town of Framingham, ATB Findings of Fact and Reports 1988-95, 150.  In determining the property's highest and best use, consideration should be given to the purpose for which the property is adapted.  See Leen v. Board of Assessors of Boston, 345 Mass. 494, 504 (1963); Boston Gas, 334 Mass. at 566.  A property's highest and best use must be legally permissible, physically possible, financially feasible, and maximally productive. The Appraisal Of Real Estate at 305-308; see also Skyline Homes, Inc. v. Commonwealth, 362 Mass. 684, 687 (1972);  DiBaise v. Town of Rowley, 33 Mass. App. Ct. 928 (1992).  Property cannot be valued on the basis of hypothetical or future uses that are remote or speculative.  See Skyline Homes, 362 Mass. at 687; Tigar v. Mystic River Bridge Authority, 329 Mass. 514, 518 (1952); Salem Country Club, Inc. v. Peabody Redevelopment Authority, 21 Mass. App. Ct. 433, 435 (1986).  
In the instant appeal, the assessors determined that the highest and best use of the subject property would be for residential rather than rental purposes.  The appellant claimed that this use would be impossible, because of problems with frontage, water source availability, and access.  However, as explained, the Board found that the appellant failed to meet her burden of proving each of these supposed obstacles.  
First, the appellant claimed that the subject property lacked the requisite amount of frontage because it had no rights to Redwing Lane.  General Laws c. 41, § 81O provides that no subdivision plan shall be approved unless all lots under the plan have a means of access in existence or a plan for furnishing such access.  According to the subdivision plan submitted into evidence, the Town of Westport had approved and recorded a plan in 1958 by which the subject property had access rights over Redwing Lane.  According to G.L. c. 41, § 81O, after approval of a subdivision plan, no changes to that plan will be allowed unless "every lot so changed still has frontage on a public way or way shown on a plan approved in accordance with the subdivision control law."  Every lot's access to a way is a prime condition for approval of a subdivision plan.  See, e.g., Rettig v. Planning Board of Rowley, 332 Mass. 476, 481 (ruling that, where it appeared that existing ways did not provide adequate access for vehicular traffic under a proposed subdivision plan, that plan required approval of the town's planning board).  The appellant offered no evidence of a subdivision plan approved after the 1958 subdivision plan.  The Board thus found and ruled that the appellant failed to meet her burden of proving that the deed restriction, which violated the provisions of G.L.   c. 41, § 81O, was a valid restriction which would legally restrict access in the subject property over Redwing Lane.    
Moreover, the letters from the planning board and the building inspector reflected their consistent opinions that the subject property was buildable under grandfather rights with respect to zoning requirements.  The appellant's vague assertions regarding legal impediments to developing the lot did not successfully rebut this evidence.  See Hinds v. Assessors of Manchester-by-the-Sea, Mass. ATB Findings of Fact and Reports, 2006-771, 780 (ruling that the letter from the building inspector, "successfully refuted the appellants' argument that they were prohibited from altering or expanding their home").  The Board thus found and ruled that the letters from the planning board and building inspector sufficiently established that the subject property was buildable.
With respect to her argument that the subject property lacked a source of potable water, the appellant merely offered a bare assertion of salinity issues, but she offered no data or facts to support her assertion.  The Board found and ruled that the appellant's bare assertion, without more, failed to provide the Board with the evidence necessary to determine that the subject property was, in fact, not buildable because of water issues.  See General Electric Co., 393 Mass. at 600 (quoting Donlon v. Assessors of Holliston, 389 Mass. 848, 855 (1983)).  
The Board found and ruled that the appellant failed to meet her burden of proving that the use of the subject property for a luxury-style, single-family home was not the highest and best use because it was not legally permissible.  The Board also found and ruled that the appellant failed to meet her burden of proving that the highest and best use of the subject property would be as rental property, with the rental of the existing, small, cottages, one of which was not winterized and thus could only be rented during the summer months.     
The appellant attempted to establish the fair cash value of the subject property by utilizing the income capitalization method.  The income capitalization method "is frequently applied with respect to income producing property."  Taunton Redevelopment Associates v. Assessors of Taunton, 393 Mass. 293, 295 (1984).  In applying this method, the income stream used must reflect the property's earning capacity or market rental value.  Pepsi-Cola Bottling Co. v. Assessors of Boston, 397 Mass. 447,      451 (1986).  Imputing rental income to the subject property based on fair market rentals from comparable properties is evidence of value if, once adjusted, they are indicative of the subject property's earning capacity.  See Correia v. New Bedford Redevelopment Authority, 5 Mass. App. Ct. 289, 293-94 (1977), rev'd on other grounds, 375 Mass. 360 (1978); Library Services, Inc. v. Malden Redevelopment Authority, 9 Mass. App. Ct. 877, 878 (1980) (rescript); AVCO Manufacturing Corporation v. Assessors of Wilmington, ATB Findings of Fact and Reports 1990-142.  It is the earning capacity of real estate, rather than its actual income, which is probative of fair market value.  Assessors of Quincy v. Boston Consolidated Gas Co., 309 Mass. 60,   64 (1941).  In order to prove the fair cash value of property through its earning capacity, one must calculate a gross potential income based on market rents, reduce that amount by  vacancy and rent losses, deduct the landlord's approximate market expenses, and then apply a capitalization rate.  See, e.g., Alstores Realty Corp. v. Assessors of Peabody, 391 Mass. 60, 62-71 (1984);    General Electric, 393 Mass. at 610.  
However, the income capitalization approach is only appropriate when the earning capacity of property is competent to show its market value.  General Electric,   393 Mass. at 608 n.11.  Here, the Board found that the appellant failed to meet her burden of proving that the highest and best use of the subject property was to retain the two existing small rental cottages, so the property's earning capacity had little bearing on its fair cash value.  Moreover, even if the income capitalization method was appropriate, the appellant's calculations did not establish the fair cash value of the subject property.  The appellant estimated, without explaining her calculations, that the property would bring in approximately $28,000 per year.  However, this calculation only considered the existing state of the two small cottages; the appellant did not consider the earning capacity of two cottages, both of which would be winterized and thus available for full-year rental.  As explained in the Findings, the Board also found and ruled that the appellant's approach lacked critical  calculations for expenses, vacancy, and capitalization rates, and her fair cash value was based upon an appraisal which did not correctly consider the subject property's highest and best use as residential property.  The Board thus found and ruled that the appellant's calculation under the income capitalization approach was fatally flawed.

Conclusion
Based on the foregoing evidence, the Board found and ruled that the appellant failed to meet her burden of proving that the subject property was overvalued for fiscal 
year 2006.  In contrast, the Board found that the assessors' evidence of comparable sales supported the subject assessment.  Accordingly, the Board issued a decision for the appellee in this appeal.


APPELLATE TAX BOARD

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




	A true copy,



	Attest:____________________________
			Clerk of the Board
				



	

 Ms. Vendituoli was a trustee and beneficiary of a trust which owned the subject property.
 The appellant's brother was one of the beneficiaries of the trust.
 The petition was amended on May 11, 2006 to correct a typographical error.
  Based on the planning board's opinion, the town's zoning board granted a variance to Lot 12 "to allow the construction of a single-family dwelling without meeting frontage requirements." 

ATB 2008-192