Real property valuation; Rental restrictions under 26 USC § 142(d) in exchange for tax-exempt bond financing; Consideration of the terms of a land-use restriction agreement (LURA); True cash value (TCV); MCL 211.27(1); Intangible factor; Meadowlanes Ltd Dividend Hous Ass’n v Holland; Res judicata; Collateral estoppel; Tax Tribunal (TT); Continuing senior care retirement center (CCRC)

In this property valuation dispute, the court held that the TT did not err in declining to apply res judicata or collateral estoppel to preclude petitioner’s claim regarding the effect of a LURA with the county as to the property. But it concluded that the TT did err in failing to consider rent restrictions under a federal statute and the LURA in determining the property’s value. The property at issue is a CCRC that was partially financed with tax-exempt bonds. In exchange for that “financing, the CCRC is subject to certain rental restrictions under” a federal statute, § 142(d). The property was also subject to restrictions under the LURA. In challenging respondent’s 2021 tax assessment of the property, petitioner argued that the rent restrictions under § 142 and the LURA impacted the property’s TCV for tax-assessment purposes. Respondent unsuccessfully moved in the TT proceedings “to exclude evidence of the LURA on the basis of res judicata and collateral estoppel[.]” The court noted that for either doctrine to apply, “the prior case must have actually rendered a decision on the merits of petitioner’s LURA argument. But the [TT] in the prior case did not decide petitioner’s LURA claim on the merits; it declined to consider it” due to insufficient evidence. “Because the merits of petitioner’s argument” as to the LURA’s applicability to the TCV were not addressed in that case, neither doctrine applied here. However, the court agreed with petitioner on the issue of consideration of the rent restrictions. It held that, under Meadowlanes, the rent restrictions here “are an intangible factor that would affect the property’s ‘usual selling price’ such that they should be considered in the” assessment of the property’s TCV. “They directly affect the present economic income of the property” and are likely to “affect what a buyer would be willing to pay for the property given its decreased earning capacity. Unlike the prior case, petitioner submitted evidence demonstrating the difference between the market value rents for the units at issue and the adjusted, low-income rents actually charged. Thus, the [TT] made an error of law by failing to consider the rent restrictions” in assessing the property’s TCV. The court affirmed the TT’s denial of respondent’s motion in limine, reversed its valuation of the property, and remanded for the TT “to consider the rental restrictions in its assessment.”