Property tax assessments, leased property, and comparable sales. (FE)

The Wisconsin Supreme Court decided in 2008 that a property tax assessment of leased retail property using the income approach must be based on “market rents," which is what a person would pay to rent the property, based on rentals of similar property, as opposed to “contract rents," which is the amount that the lessee actually paid to rent the property. See, Walgreen Company v. City of Madison , 2008 WI 80, 752 N.W.2d 689 (2008). This bill changes Wisconsin law to specify that an assessment using the income approach must be based instead on contract rents.

The bill also provides that to determine the value of property using generally accepted appraisal methods, an assessor must consider all of the following as comparable to the property being assessed:

1. Sales or rentals of properties exhibiting the same or a similar highest and best use with placement in the same real estate market segment.

2. Sales or rentals of properties that are similar to the property being assessed with regard to age, condition, use, type of construction, location, design, physical features, and economic characteristics.

The bill defines “real estate market segment” to mean a pool of potential buyers and sellers that typically buy or sell properties similar to the property being assessed, including potential buyers who are investors or owner-occupants.

The bill also provides that a property is not comparable to the property being assessed if the seller has placed restrictions on the highest and best use of the property or if the property is dark property and the property being assessed is not dark property. The bill defines “dark property” as property that is vacant or unoccupied beyond the normal period for property in the same real estate market segment.