Highest And Best Use And The Property Rights €“ Does It Make A Difference?

Fee simple property rights application in tax appraisal is a continuing debate in the courts and taxing jurisdictions and among appraisers. The debate centers on the valuation assumption of fee simple interest in the appraisal of single-tenant properties like big-box retail. One side of this debate is that the property should be appraised considering its current use, while the other viewpoint is that the property should be appraised with the assumption that it is vacant and available for a secondary use. This article addresses the question of how highest and best use fits in this definitional debate and suggests that a supported and reasoned highest and best use analysis should dictate the methods and approaches applied in the valuation analysis - and not just definitional interpretation that assumes the property is vacant and available for a use. Big-box retail property is used as the example for this article, but other property types, such as drug stores, manufacturing facilities, or any property type that was built for use by the owner-operator, will have similar issues in tax court disputes.