Defining Residential Land for Property Taxes

In its October arguments, the Colorado Supreme Court took up a group of property tax cases that are key to differentiating residential land from vacant land. Interpreting residential land’s definition has significant implications for landowners and counties collecting the property tax revenue: Residential land is taxed on an assessment rate of 7.15%, while the assessment rate for vacant land is 29%.

Colorado law defines residential land as “a parcel or contiguous parcels of land under common ownership upon which residential improvements are located and that is used as a unit in conjunction with the residential improvements located thereon.”

The three appeals the Colorado Supreme Court heard each address how to interpret a phrase in the law: Whether “contiguous” parcels have to physically touch, the meaning of “used as a unit” requirement and whether record title of properties have to be held by the same person or entity to satisfy the “common ownership” requirement.

The court chose the appeals out of more than 300 similar property tax disputes that have gone to the Board of Assessment Appeals, one option in addition to filing a claim in district court or going to arbitration.

All three cases originated in Summit County. Brad Schacht, a shareholder at Otten Johnson Robinson Neff + Ragonetti who practices commercial litigation, said these types of cases are most likely to come out of Colorado’s sparsely populated areas, where there’s more vacant land to buy for personal use.

Schacht said even though the ambiguity of the terms in these cases isn’t a new issue, interpretation likely hasn’t made it to the high court until now because the individual cases don’t make economic sense. If the difference to an individual landowner’s tax bill is a few hundred or thousand dollars a year, it’s unlikely they’ll pursue a case through the court system. But the hundreds of appeals brought to the BAA have likely helped with economies of scale.

“I think this is an issue that has been building up for a number of years,” he said. “That is largely why you are seeing the scrutiny that these are now receiving, is because there were enough of them where the issue existed that it was economically possible to take it through the legal channels.”

In oral arguments for Mook v. Board of County Commissioners of Summit County, the case over the law’s “contiguous” requirement, the petitioning landowners’ arguing attorney Brittin Clayton made “contiguous is ambiguous” a slogan of sorts, repeating it several times. The landowners in the case own three acres of land about 14 to 17 feet apart.

He said the interpretation of each of the three phrases at issue — contiguous, used as a unit and common ownership — should inform each other. For example, if separate property plots are used as a unit and have common ownership, they are probably contiguous.

The justices expressed skepticism about the argument that contiguous can mean something other than “touching,” such as if a road interrupts the continuity. Justice Melissa Hart pointed to Section 30-28-302, which defines a “parcel” as a “contiguous land area except for intervening easements and rights of way.” She pointed out the absence of any exceptions included to the “contiguous” requirement in the property tax statute.

During arguments by Franklin Celico for the Summit County Board of Commissioners, Justice Carlos Samour pressed him on whether two parcels wouldn’t be considered contiguous if an inch-wide boundary separates them. Celico said that’s correct, and several times said he didn’t write the law and is just doing his duty to argue for it as it is.

In Board of County Commissioners of Summit County v. Hogan, the Board of Assessment Appeals as an amicus argued that the “used as a unit” phrase requires looking at how a landowner uses a land parcel. Attorney Emmy Langley from the Office of the Attorney General said interpretation calls for reconciling the Gallagher Amendment’s intent to narrowly define residential property with the definition of vacant land.

“Valuation depends on classification,” she said. “You can’t have a valuation of vacant land that’s been classified as something else.”

But Justice Richard Gabriel said he has concerns about putting the BAA in a position to make judgments about what types of personal use of a parcel mean it’s “used as a unit” with the plot the landowner has their main residence on. It requires consideration of uses such as dog walking or putting a hammock on an otherwise empty parcel.

“How does the Board of Assessment get to decide that’s not good enough use if you’re using the whole property that way?” Gabriel asked.

The final case, Board of Assessment Appeals and Board of County Commissioners of Summit County, interprets the definition of “common ownership.” Evan Brennan of the Office of the Attorney General, who argued for the BAA, said the term assumes the parcels are contiguous and used as a unit. The Court of Appeals ruled common ownership should depend on who has the right to use, profit from and control the properties, not on who is listed as the owner of each parcel in property tax record, Brennan said. The Supreme Court now has to decide the criteria for common ownership of parcels.

Brennan argued property tax records should dictate whether there is common ownership between parcels.

“I don’t think it’s consistent with the property tax scheme as a whole or with administrability issues to say ownership for valuation purposes looks to the records, but common ownership” looks at other unrecorded documents and inquiries, he said.

Justice Monica Márquez pushed back on Brennan’s argument, asking about a situation in which spouses own a parcel of land that has both their names in the property records, but only one spouse’s name is on an adjacent plot they also own. “It seems that the real debate turns on how we understands the word ‘common,’ and whether that means ‘identical’ or whether we think it means potentially ‘overlapping,’” she said.

Speaking for all the cases at the beginning of the morning’s arguments, Clayton agreed that the terms at issue in all three appeals are relevant for classifying property as residential. “The general assembly did a very thoughtful job in this statute of identifying the circumstances that make a multi-parcel residential assemblage functionally the same as a single-parcel residence,” he said. “When all three of these circumstances are present, we can be confident that the assemblage is a legitimate residential homestead.”•

—Julia Cardi

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