In urban areas, office buildings, apartments, retail, and other such uses often lack sufficient on-site parking. In many situations, owners are permitted to fulfill their parking requirements with a nearby parking solution. The off-site parking lot and the subject property may have the same ownership, or the subject property may be permitted to use an off-site parking option through a lease, easement, reciprocal easement agreement, or other right of use. When parking for the subject property is provided by another property, the tax court has been clear that an appraiser should not discount the subject property for lack of parking. However, the Tax Court is not always clear as to how the parking should be valued or how any income resulting from the parking should be treated.
Recently, the Tax Court provided some guidance in 444 Lafayette, LLC and Meritex Enterprises, Inc., v. County of Ramsey, (April 7, 2011). In this case, although there are no parking spaces on the subject property, the subject property is benefitted by a reciprocal easement agreement that was entered into in August of 2004. This reciprocal easement agreement provides 966 employee parking spaces and 13 visitor/delivery parking spaces. In addressing how to handle these parking spaces the Court said, “it is appropriate to include parking income from adjacent parcels since there is an easement which benefits the Subject Property with not only the parking, but also the income from that parking.” This ruling certainly does not address how to value all parking arrangements. However, in situations where there is an easement, the Tax Court makes it clear that the easement adds value to the subject property; it not only satisfies the parking requirements, it also generates income, to which the property owner is entitled. These benefits are transferred to the subject property and the value of the benefits must be taken into account. In a tax appeal, the issue of how to handle parking arrangements not directly tied to the subject property is very complex. In such cases, the fee simple valuation of the subject property must include the consideration of easement and leasehold rights, as well as the larger parcel, and how it should be handled.