Is a lease always just a lease?

CRE Lit Blog - Is a lease always just a lease_For one Miami-Dade County shopping center owner, the answer is now yes, but only after a ruling from Florida’s Third District Court of Appeal in Garcia v. Dadeland Station Associates, Ltd.  In 2015 that owner found itself getting billed for property taxes on land it does not own, suggesting that a lease is not always just a lease.

The owner of Dadeland Station leases land from Miami-Dade County under a 90-year ground lease since 1994.  The owner built the shopping center and from 1994 to 2014, the County taxed the owner on the owner’s buildings, but not the County’s land.  Starting in 2015, however, the County started taxing the shopping center owner on the land too.  The County made the change based on a 2014 Florida Supreme Court decision called Accardo v. Brown.  The Florida Supreme Court ruled in that case that a tenant may, in certain circumstances, be the “equitable owner” of land for purposes of property taxes.

Miami-Dade County believed the Accardo decision allowed it to tax the Dadeland Station owner on the land.  The appellate court disagreed and said that the County “overreached.”  The Dadeland Station lease does not include a “nominal purchase option or perpetual rights of renewal.”  In other words, the owner of Dadeland Station was not akin to an owner of the land and therefore should not pay property tax on the land it does not own.  The appellate court noted that Escambia County had done something similar to a tenant there, and lost in a different appellate court.

Presumably, counties that wanted to try, based on Accardo, to tax ground tenants as though they own the land may have already done so in 2015 or 2016 (right after the case was decided), but commercial property owners with long-term leases should be on the lookout when initial property tax notices are sent in August.

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