Developers stand to lose no matter which way the state Supreme Court rules in a case prompted by a condominium project in the town of Pacific.
The outcome of the lawsuit, which the court accepted Monday, will affect multiphase or incomplete condominium developments. The court will decide who pays property taxes on vacant land in a partially completed project — the developer or the people who have bought condos in the development.
The lawsuit is based on The Saddle Ridge Corp., Portage, suing the town of Pacific for charging Saddle Ridge property taxes for 42 undeveloped parcels in a condominium development. Two of three Wisconsin Court of Appeals District IV judges sided with Saddle Ridge that condo owners are responsible for the property taxes on the vacant land.
The town appealed to the Supreme Court, arguing the developer, not owners of completed condos in Saddle Ridge, should get the bill. Amie Trupke, attorney representing the town, said the appeals court decision could cripple development.
“That’s what I’ve heard from quite a few people — that it could severely affect the condo market,” said Trupke, an attorney with Madison-based Stafford Rosenbaum LLP. “And who would want to buy into a condo project that is not 100 percent built?”
Condo buyers, as part of their purchase, get partial ownership of undeveloped land in the same development to use until the vacant land is developed. In the past, the responsibility for paying taxes on the vacant land has fallen to developers.
Trupke said the Saddle Ridge developer is disputing that precedent.
It’s a precedent that should be challenged, said Tom Larson, director of regulatory and legislative affairs for the Wisconsin Realtors Association.
“There could be an increase in expenses,” he said, “costs for a developer that has plotted this property and dedicated it as a common element.”
But it is the developer, not the property owner, who reaps the benefit of any increased property value when selling condos, she said.
“They can’t stop the developments,” Trupke said of property owners. “They can’t control when it happens, and they certainly don’t benefit from the sales.”
Larson said there is an undecided question overshadowing this case: How should municipalities assess the value of vacant land that is slated for future developments? Developers will continue to have problems such as those raised in this case if the value of vacant land increases because it will one day be developed, he said.
“What’s the proper way to assess this property?” Larson said, “and then you should get to who should pay for it.”
If the Supreme Court supports the appeals court decision, developers will respond by not proposing condominium developments until developers are ready to build, Larson said. If the court swings against the appeals court, developers will request municipal approval for multiphase, multiyear developments all at once, giving municipal officials the opportunity, for example, to plan ahead for new utilities to serve the people moving to the developments, he said.
“(Municipalities) may take that into consideration when approving other developments,” he said, “so they don’t have a flood of condo units on the market.”