No Break on Property Tax for Below-Market Rent

An owner rented its property to a national tenant for 20 years with three five-year renewals, which the tenant exercised. After the county board of review assessed the owner's property for tax purposes, the owner requested an “economic obsolescence adjustment—that is, an adjustment because of “a loss of property value due to factors external to the property.” The owner argued that it was entitled to such an adjustment because it was bound to a long-term lease at below-market rent. The board refused, so the owner sued.

An Indiana tax court ruled that the owner wasn't entitled to the economic obsolescence adjustment on its property taxes. The court said the owner had failed to prove a decrease in the property's value. In fact, the court said, the property's value—in terms of its income stream—had remained static. All the owner had proved was that in 1964, “it made a business decision that it would now like to change,” the court said [Sandor Development Co. v. Dept. of Local Govt. Finance].