§ 12-63b — Valuations of rental income real property.

Connecticut § 12-63b

• Jurisdiction: Connecticut
• Title 12: Taxation
• Ch. 203: Property Tax Assessment

Text

(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.

Legislative History

(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.