(a) The assessor or board of assessors in any town, at any time, when determining the present true and actual value of real property as provided in section
12-63, which property is used primarily for the purpose of producing rental income, exclusive of such property used solely for residential purposes, containing not more than six dwelling units and in which the owner resides, shall determine such value on the basis of an appraisal which shall include to the extent applicable with respect to such property, consideration of each of the following methods of appraisal: (1) Replacement cost less depreciation, plus the market value of the land, (2) capitalization of net income based on market rent for similar property, and (3) a sales comparison approach based on current bona fide sales of comparable property. The provisions of this section shall not be applicable with respect to any housing assisted by the federal or state government except any such housing for which the federal assistance directly related to rent for each unit in such housing is no less than the difference between the fair market rent for each such unit in the applicable area and the amount of rent payable by the tenant in each such unit, as determined under the federal program providing for such assistance.
(b) In the case of an eligible workforce housing opportunity development project, as defined in section 8-395a, the assessor shall use the capitalization of net income method based on the actual rent received for the property.
(c) For purposes of subdivision (2) of subsection (a) of this section and, generally, in its use as a factor in any appraisal with respect to real property used primarily for the purpose of producing rental income, the term “market rent” means the rental income that such property would most probably command on the open market as indicated by present rentals being paid for comparable space. In determining market rent the assessor shall consider the actual rental income applicable with respect to such real property under the terms of an existing contract of lease at the time of such determination.
(P.A. 77-586, S. 1, 3; P.A. 84-417, S. 1, 2; P.A. 09-196, S. 2; P.A. 23-207, S. 29.)
History: P.A. 84-417 added Subsec. (b) for purposes of defining the term “market rent”; P.A. 09-196 amended Subsec. (a) by adding “at any time” re determining present true and actual value of real property, deleting provision re properties for which there is insufficient data based on current bona fide sales of comparable property, deleting former Subdiv. (2) re use of gross income multiplier method of appraisal, redesignating existing Subdiv. (3) as Subdiv. (2) and adding new Subdiv. (3) re use of sales comparison approach of appraisal, and made a conforming change in Subsec. (b), effective October 1, 2009, and applicable to assessment years commencing on or after October 1, 2009; P.A. 23-207 added new Subsec. (b) re tax assessors to use the net income method to value eligible workforce housing opportunity development projects and redesignated existing Subsec. (b) as Subsec. (c), effective June 1, 2024, and applicable to assessment years commencing on or after June 1, 2024.
Cited. 220 C. 335; 226 C. 92; 228 C. 23; 231 C. 731; 240 C. 192; 242 C. 363. Assessor may require income and expense reports from property owner only when there are insufficient data re current sales of comparable properties. 292 C. 125.
Cited. 11 CA 566; 33 CA 270; Id., 511; 38 CA 158; Id., 165. Statute requires that court give consideration to the replacement cost approach only to the extent applicable in its determination of value and does not mandate that a particular method must be utilized or otherwise serve to limit court's discretion to choose the method that it believes will result in the fairest approximation of the subject property's value. 77 CA 21.
Subsec. (c) (former Subsec. (b)):
Subsec. requires that a valuation based on the income capitalization approach in Subsec. (a)(2) consider both contract rents and market rents; and neither the amount of time passed since the lease was negotiated nor the length of the lease is a factor contemplated by Subsec. 329 C. 484.
Court is required to consider both market rent and actual rent when determining fair market value using income capitalization method. 119 CA 600. The income capitalization approach consists of the following seven steps: (1) estimate gross income, (2) estimate vacancy and collection loss, (3) calculate effective gross income (i.e., deduct vacancy and collection loss from estimated gross income), (4) estimate fixed and operating expenses and reserves for replacement of short-lived items, (5) estimate net income (i.e., deduct expenses from effective gross income), (6) select an applicable capitalization rate and (7) apply the capitalization rate to net income to arrive at an indication of the market value of the property being appraised. 211 CA 559.
Notes of Decisions
First Bethel Assocs. v. Town of Bethel, 651 A.2d 1279 (Conn. 1995).
· cites it 22× “Associates cross appeals, claiming that because the anchor store’s current lease will extend beyond the next townwide revaluation, the trial court was bound by General Statutes § 12-63b (b) to accept, and to base its judgment on, the actual rental income flowing from that lease.”
PJM & Assocs., LC v. City of Bridgeport, 971 A.2d 24 (Conn. 2009).
· cites it 24× “which the statutory penalty may be imposed for a property owner’s failure to submit an income and expense report, (2) the penalty bears no rational relationship to the offense, (3) § 12-63c (a) empowers the assessor to require an income and expense report only when a property is…”
Walgreen E. Co. v. Town of W. Hartford, 187 A.3d 388 (Conn. 2018).
· cites it 30× “Specifically, the plaintiff alleges that the trial court improperly (1) applied General Statutes § 12-63b (b), (2) valued the leased fee interest, rather than the fee simple interest, and (3) selected too narrow a highest and best use for the property.”
Carol Mgmt. Corp. v. Bd. of Tax Review, 633 A.2d 1368 (Conn. 1993).
· cites it 11× “The court also found that the comparable sales method, the preferred method for valuing rental property under General Statutes § 12-63b, 11 was the *29 proper method of appraisal.”
Newbury Commons Ltd. P'ship v. City of Stamford, 626 A.2d 1292 (Conn. 1993).
· cites it 9× “The trial court concluded that the assessments on the plaintiff’s property for the years 1987 through 1990 were excessive and inequitable and that the defendant had failed to follow General Statutes § 12-63b 7 because *97 its assessor had relied on only a cost method to…”
Exec. Square Ltd. P'ship v. Bd. of Tax Review, 528 A.2d 409 (Conn. App. Ct. 1987).
· cites it 14× “It also claims that the court erred in not following the mandate of General Statutes § 12-63b in its determination of fair market value for rental housing.”
United Tech. Corp. v. Town of East Windsor, 807 A.2d 955 (Conn. 2002).
· cites it 5× “On the list of October 1,1995, John Valente, an independent appraiser hired by the town of East Windsor, assessed the property pursuant to General Statutes § 12-63b 5 and *17 12-62a 6 and determined that the total fair market value 7 of the property was $22,236,770, with an…”
Sheridan v. Town of Killingly, 897 A.2d 90 (Conn. 2006).
· cites it 11× “The defendants appealed from the trial court’s judgment claiming that the court could consider only “capitalization of net income based on market rent for similar property”; General Statutes § 12-63b (a) (3); 7 in valuing *262 the plaintiffs rental income property.”
Heather Lyn Ltd. P'ship v. Town of Griswold, 659 A.2d 740 (Conn. App. Ct. 1995).
· cites it 12× “General Statutes § 12-63b (a) 2 provides for the following three methods of appraisal to be considered when *162 determining the present true and actual value of real property for tax assessment in the absence of comparable sales: “(1) Replacement cost less depreciation, plus…”
Pilot's Point Marina, Inc. v. Town of Westbrook, 988 A.2d 897 (Conn. App. Ct. 2010).
· cites it 8× “Using the income capitalization method outlined in General Statutes § 12-63b (a), 3 the court found the fair market value of the property to be $17,127,452.”
Grossomanides v. Town of Wethersfield, 636 A.2d 867 (Conn. App. Ct. 1994).
· cites it 6× “Contrary to the defendant’s assertions, the appraisal report of the plaintiff’s expert did not violate General Statutes § 12-63b (b) 3 by using the value of the actual leases of the office building to determine the net operating income of the subject property.”
— Conn. Gen. Stat. § 12-63b(b) — 1 case
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