COMMERCE ASSOCIATES, LP and 1000 COMMERCE CENTER, LP, Plaintiffs Below, Appellants,
NEW CASTLE COUNTY OFFICE OF ASSESSMENT and NEW CASTLE COUNTY BOARD OF ASSESSMENT REVIEW, Defendants Below, Appellees.
Submitted: April 5, 2017
Below: Superior Court of the State of Delaware C.A. No.
appeal from the Superior Court. REVERSED.
Richard A. Forsten, Esquire (Argued), Olufunke Fagbami,
Esquire, Saul Ewing LLP, Wilmington, Delaware, for Appellants
Commerce Associates, LP and 1000 Commerce Center, LP.
Singer, Esquire (Argued), Tanisha L. Merced, Esquire, New
Castle County Office of Law, New Castle, Delaware, for
Appellees New Castle County Office of Assessment and New
Castle County Board of Assessment Review.
STRINE, Chief Justice; VALIHURA, VAUGHN, and SEITZ, Justices;
SLIGHTS, Vice Chancellor, [*] constituting the Court en Banc.
STRINE, CHIEF JUSTICE:
case, the New Castle County Office of Assessment ("New
Castle County") valued office condominium units for real
property tax purposes but failed to take into account
depreciation. The Superior Court affirmed the decision of the
New Castle County Board of Assessment Review (the
"Board") upholding New Castle County's
valuation. The property owner appeals, arguing that
its office condominium units were over-assessed because New
Castle County and the Board did not factor in the age and
resulting depreciation of the units. Because Delaware law
requires that all relevant factors bearing on the value of a
property-in its current condition-be considered,
reverse and require that New Castle County reassess the value
of the units, taking into account the influence depreciation
has on their taxable value.
case raises the singular issue of whether depreciation must
be considered in valuing a property for tax assessment
purposes. The appellant, Commerce Associates, LP,
owns four units in One Commerce Center, an eleven-story
condominium office building located at 1201 North Orange
Street, Wilmington, Delaware. One Commerce Center was
constructed in 1983. The current tax assessment value of each
of the units owned by Commerce Associates is $432, 900. New
Castle County uses a "base year" approach in
assessing properties for tax purposes. Two methods for
calculating the base year value are commonly used in the New
Castle County assessment process: i) calculating the current
fair market value of the units and "trending back"
that amount to the 1983 value; and ii) calculating what the
current fair market value of the units would have been in
1983 using data from 1983. Under both methods, a fixed rate
of taxation is then applied to the base year amount to reach
a uniform result. In this case, Commerce Associates used both
methods. New Castle County only used the second.
appeal, Commerce Associates claims that New Castle County did
not appropriately take into account depreciation in assessing
its office condominium units for tax purposes, and that the
proper assessment value is $249, 000. In defense, New Castle
County argues that because it uses 1983 as a base year for
value and the properties in question were brand new in 1983,
it does not need to apply depreciation to the value of the
units as of 1983. But, there is an obvious flaw in that
reasoning. Although New Castle County is permitted to
use the base year approach,  it must then consider what the
value of the units-in their current conditions-would have
been in 1983, and so must the Board. Here, despite the reality
that the units are now more than 34 years old, New Castle
County did not take into account any depreciation, and
neither did the Board when the case was presented to it.
not necessarily the case that depreciation will always result
in a diminution in value-that depends on the
interrelationship of depreciation to other economic
factors-but it must be fairly considered to reach a
valuation. For example, the reality that an older building
does suffer from depreciation does not mean that it
necessarily declines in value. An older building could
appreciate in value, depending on a major known real estate
factor ("location, location, location") or other
factors. In other words, New Castle County and the
Board must consider all relevant factors bearing on what ...