Citations
- 553 So. 2d 1203
Full opinion text
LEHAN, Acting Chief Judge.
The Property Appraiser of Pinellas County contends on appeal that the trial court was without authority to enter its final judgment reducing the property appraiser's assessment of the value of property leased for a shopping center. The basic argument for reversal of the final judgment appears to be that a property appraiser’s assessment is presumed to be correct, that section 193.011, Florida Statutes (1985) requires only a property appraiser’s consideration of various specified factors affecting the value of property, including its income which in this case is rental income at a level below that obtainable on the current market, and that the evidence established that the property appraiser considered all of those factors.
We affirm. There was substantial competent evidence that the property appraiser, by not actually using the rental income as a factor weighed in arriving at his assessment, assessed ⅛¾ property at a figure in excess of its fair market value. He therefore did not give proper consideration to the income factor specified in section 193.011, as did in effect the trial court in arriving at its reduced assessment.
Our analysis will begin by summarizing in section (1) of this opinion basic facts of this case and reasons under pertinent case law why the final judgment must be affirmed. The remaining sections will then: (2) explain the evidence supporting the trial court’s result, notwithstanding its orally indicated reasoning, and (3) analyze how prior Florida case law which is relied upon by the property appraiser or the dissenting opinion, or both, is materially distinguishable or is authority for this affirmance.
The analysis in section (3) is intended to be in some depth to dispel any question that our holding conflicts with prior Florida case law. This is notwithstanding the facial appearances of cases discussed in that section which, in materially different contexts not emphasized in those cases, approved property appraisers’ assessments arrived at without the use of the income factor. For reasons explained in section (3), the income from the leases involved in or referred to in those cases was, in contrast to the income from the lease involved in this case, not shown to have affected the fair market value of the leased property.
Because the relationships between some of the different aspects of the subject matter of section (3) are fairly intricate, the analysis in section (3) is in some respects fairly intricate. But we will first, in sections (1) and (2), undertake to show fairly simply the fundamental reasons why we conclude that the result in the trial court was correct.
Much of the Florida case law in this area does not address squarely, and fully explain, the basic issues involved, which doubtless explains the trial court in this case not having put its finger precisely upon the right reason for its right result. Cases in this area should receive analyses centered upon factors governing the “just” valuation of property, as required by section 193.011 and article VII, section 4 of the Florida Constitution which call for fairness to taxpayers, as well as, and not only, addressing how increases in tax assessments may be justified under general legal principles. That is the kind of analysis undertaken in this opinion.
(1) Summary of Facts and Reasons Under Pertinent Case Law Why the Final Judgment Must Be Affirmed.
The final judgment declared null and void the portion of the property appraiser’s assessment of appellee’s shopping center property which exceeded $2,950,000. The property appraiser had assessed the property at $3,981,400. As noted above, in arriving at his assessment he had not used in any way the factor of the income receivable by appellee under the lease to which the property is subject, as did in effect the trial court.
What the trial court did not do, as well as what it did, should be recognized. Previous to the property appraiser’s assessment in issue in this case, the property had been assessed at $2,105,400. Thus, the trial court did not prevent, but approved the imposition of, an increased assessment. The trial court approved an increase in that previous assessment by $844,600, i.e., by 40.1 percent. The property appraiser’s increase was reduced by the trial court in such an amount that the assessment did not exceed the fair market value of the property. Also, the trial court, by adopting the reduced assessment figure testified to by appellee’s expert, did not base the amount of the reduced increase only upon the income approach to property assessment through using the income factor but, as further explained in section (2) below, used a combination of factors, including primarily income, provided for under section 193.011. This was in contrast to the property appraiser’s assessment which, by using only the replacement cost factor, increased the previous assessment by 89.1 percent to a level which was over one million dollars in excess of the property’s fair market value.
Our conclusion that the property appraiser did not give proper consideration to the income factor is, as we have said, based upon his having assessed the property in excess of its fair market value as a result of not having used that factor, as did in effect the trial court in arriving at its reduced assessment. We will now explain that basis for that conclusion which requires that we find invalid the property appraiser’s assessment and uphold the trial court’s reduced assessment.
(a) Basic Reasons Why the Property Appraiser’s Assessment Was Invalid and the Trial Court’s Reduced Assessment Must Be Upheld.
(i) The Property Appraiser’s Assessment Was Invalid Because It Exceeded Fair Market Value.
It appears clear that the property appraiser’s $3,981,400 assessment exceeded the property’s fair market value. Appel-lee’s expert testified that the fair market value of the property was $2,950,000, and the property appraiser acknowledges that his own assessment ‘appears to have exceeded fair market value. A tax assessment of real property must not exceed the property’s fair market value. See Valencia Center, Inc. v. Bystrom, 543 So.2d 214 (Fla.1989) (hereafter “Valencia Center ///”); Walter v. Schuler, 176 So.2d 81, 85-86 (Fla.1965). Therefore it appears established that the property appraiser’s assessment was invalid.
(ii) The Trial Court’s Reduced Assessment Must be Upheld Because Under the Circumstances of this Case Use of the Income Factor Produced, and Was Necessary to Produce, Fair Market Value.
While the fact that the property appraiser’s $3,981,400 assessment exceeded fair market value establishes that his assessment was wrong, that in itself does not establish that the trial court’s $2,950,000 reduced assessment corresponded to the property’s fair market value and therefore was right. While the property appraiser acknowledges that his assessment appears to have exceeded fair market value, he has not acknowledged that the trial court’s reduced assessment corresponded to the property’s fair market value.
To show why we uphold the trial court’s reduced assessment figure under these circumstances, we need only examine and find valid the method used by appellee’s expert to arrive at that figure. That method was to use principally the income factor. In examining that method, as we do below, we will, at the same time, necessarily examine and find invalid the method used by the property appraiser in arriving at his assessment, which was unnecessary to do in (i) above due to the property appraiser’s ac-knowledgement that his assessment appears to have exceeded fair market value. Accordingly, in showing the reasons for our affirmance, we need only show, as is done below, that a proper assessment, i.e., a fair market value figure, under the particular circumstances of this case not only did not result from the property appraiser’s assessment method, but cannot have resulted unless the assessment method used the income factor, as did that of appellee’s expert. That is the crux of this case.
The property is subject to a long-term lease for a K-Mart store which yields rental income which is “submarket,” i.e., less than that obtainable from a lease negotiated on the current market. (The term “long-term lease,” as used in this opinion, means, in contrast to the meaning of that term as used in other opinions discussed in section (3) below, a lease which is not to expire until many years after the date of the assessment in issue; that a lease prior to that date may have run for a long term, as did the lease involved in those other opinions, is irrelevant for the purpose of determining the effect of the lease upon the leased property’s assessed value.) Since at the time of the assessment the lease had a remaining term, with extensions, of twenty-six years, its submarket rent could not be renegotiated and raised for twenty-six years. The level of the rental income resulted in a reduction of the property’s fair market value because, since that level was submarket and could not be renegotiated for twenty-six years after the date of the assessment, a willing purchaser of the property on that date would have reduced his offering price on account of the lease. The longer property is locked into a lease calling for submarket rent, the longer the owner of the property must wait to receive from a willing buyer a price for the property not reduced by the submarket rent.
How short the term of a submarket rent lease of property should be after the date of a tax assessment in order to permit the proper disregard of the rental income from the lease in arriving at the assessment can be considered to be a question of fact, to be determined on a case-by-case basis, as to whether a willing buyer would disregard a particular lease in buying the property for its highest and best use. The uncontro-verted — and, indeed, seemingly uncontro-vertible — evidence in this ease was that a willing buyer would not have disregarded the lease.
(b) Further Grounds Under the Law for Our Affirmance.
By substantially exceeding fair market value and for other related reasons under the evidence as described in section (2) below, the property appraiser’s assessment contravened the further requirement contained in Valencia Center III that an assessment be within the range of reasonable appraisals. In fact, the trial court found that the level of the assessment “shocks the conscience of the court” and is “unconscionable.”
When, as in this case for the reasons we have explained, the presumption of correctness of a property appraiser’s assessment which had failed to take the income approach into account has been rebutted, a trial court is justified in overturning the assessment. See Schultz v. Lurie, 512 So.2d 1003 (Fla. 2d DCA 1987), rev. denied, 520 So.2d 586 (1988). Compare Daniel v. Canterbury Towers, Inc., 462 So.2d 497, 500 (Fla. 2d DCA 1984) (trial court not justified in overturning property appraiser’s assessment on basis of appraiser’s failure to take income approach into account where that approach was inappropriate due to “complications caused by attempting to accurately predict any stability in the income ... over the years_”). We do not agree with the property appraiser’s argument, for which Blake v. Xerox, 447 So.2d 1348 (Fla.1984) is cited, that a reasonable hypothesis for the property appraiser’s assessment calls for a reversal. For reasons including those explained above, we conclude there was no such hypothesis.
Palm Corp. v. Homer, 261 So.2d 822 (Fla.1972), provides emphatic support for our affirmance. That case affirmed a trial court’s ruling reducing a tax assessment of a shopping center because the assessor’s failure to use the income approach was not excused by the refusal of the shopping center owner to produce income data. The requirement that the income approach be used even under those circumstances emphasizes the importance of using that approach when to disregard it would result in a higher valuation. That is, a particular significance of Palm Corp. v. Homer for present purposes lies in its requirement that the income approach be used even though there had been, as Justice Ervin’s dissent stressed, 261 So.2d at 824-26, a seemingly valid reason not to use it. As the supreme court said in that case concerning income, “This is a factor which is particularly applicable to business properties such as shopping centers.... ” Id. at 823. Also notable relative to the case at hand is that the District Court of Appeal’s reversal, which the supreme court quashed in that case, had been grounded upon the presumption of correctness of the assessment and the principle that “such assessments must be overcome by appropriate and sufficient allegations and proof which exclude every reasonable hypothesis of a legal assessment.” Homer v. Palm Corp., 243 So.2d 641 (Fla. 3d DCA 1971), quashed, 261 So.2d 822 (1972). That presumption and principle, relied upon by the dissenting opinion and by the property appraiser in this case, also do not require a reversal here. See also Bystrom v. Hotelerama Associates, Ltd., 431 So.2d 176 (Fla. 3d DCA), rev. denied, 441 So.2d 631 (1983); Bystrom v. Equitable Life Assurance Society, 416 So.2d 1133, 1138 (Fla. 3d DCA 1982), rev. denied, 429 So.2d 5 (1983) (“As substantive evidence, the actual income of the [shopping center-hotel complex] property is clearly relevant in reaching a valuation that conforms to [fair market value, i.e., to] the willing buyer-willing seller concept.”); Exchange Realty Corp. v. Hillsborough County, 272 So.2d 534, 536 (Fla. 2d DCA 1972) (“In ... Palm Corporation v. Homer ... our Supreme Court held that the failure by the assessor to use the criterion of income did not satisfy legal requirements and, therefore, was not a proper assessment.”).
Palm Corp. v. Homer is also specific authority for our foregoing conclusion that the failure of the property appraiser to use in any way the income factor in this context was a failure to properly consider that factor as required by section 193.011. The opinion in that case notes that a tax assessor’s failure to “apply” and to “use[ ]” the income factor was contrary to the requirement of section 193.011 that that factor be “considered.” 261 So.2d at 823. See also Walter v. Schuler, 176 So.2d at 85 (“Sec. 193.021 [the predecessor to section 193.011] was not intended to give assessors an almost unbridled discretion in the performance of their duty to establish just valuation. Rather, we regard the Act as an attempt by the legislature to pin the assessors more firmly to the Constitutional mandate [of just valuation].”).
The requirement of Palm Corp. v. Homer that the income approach be used in an assessment of property like that in this case is, of course, complementary to the requirement of Valencia Center III and Walter v. Schuler that an assessment not exceed fair market value. That is, as explained above, the income approach to the valuation of property like that involved here could not be disregarded without also disregarding the fair market value requirement.
We therefore conclude that an affirmance is required by pertinent Florida case law. There is case law to the contrary in other jurisdictions, but the apparent majority view is consistent with our view that submarket rental income from a long-term léase on real property should be weighed in arriving at a proper valuation of the property for ad valorem tax purposes. See Annotation, Income or Rental Value as a Factor in Evaluation of Real Property for Purposes of Taxation, 96 A.L.R.2d 666, 700-02 (1964).
The position of the Michigan Supreme Court in C.A.F. Investment Co. v. Township of Saginaw, 410 Mich. 428, 302 N.W.2d 164 (1981), is representative of cases from other jurisdictions consistent with our affirmance. Not only did C.A.F. Investment require the weighing of the income approach for the valuation of shopping center property, as did Palm Corp. v. Homer, but C.A.F. Investment also specifically required such weighing of rental income like that in this case, i.e., income from a long-term lease for a K-Mart store calling for rent less than that obtainable on the current market. In that case, which involved a remaining lease term of nineteen years, the Michigan Supreme Court disapproved disregarding the actual rental income and substituting therefor consideration of the amount of rent which could be obtained on the current market. The court said:
To the extent that the tax commission permitted actual income to be ignored, the ... valuation was clearly in error.
[T]rue cash value must equal the fair market value of the property to the owner.... [T]o equate economic income with hypothetical income [a rental income figure chosen by tax assessment authorities to represent prevailing market rent] in every situation where actual rent under a long-term lease is less than the prevailing market rental would be to ignore the effect of the lease on a prospective investor’s judgment regarding the fair market value of the property.
410 Mich, at 449-450, 302 N.W.2d at 167, 171. And in Townsend v. Town of Middlebury, 134 Vt. 438, 440, 365 A.2d 515, 517 (1976), the Vermont Supreme Court, in deciding that a valuation of commercial property should give weight to income received under a renewable, long-term lease and purchase option on the property, said: “It is obvious that the presence of a lease/option agreement concerning a parcel of property is an element which enters into giving a saleable or market value to the property.”
Folsom v. County of Spokane, 106 Wash.2d 760, 725 P.2d 987 (1986), appeal after remand, 111 Wash.2d 256, 759 P.2d 1196 (1988), is further representative of cases consistent with an affirmance. That case involved the valuation of shopping center property subject to a lease for a K-Mart store calling for rent less than that obtainable on the current market for a potential remaining lease term of fifteen years. The Washington Supreme Court, in an in-depth analysis, unequivocally required the use of the income approach to the valuation of the property through the weighing of the actual rental income to be received by the property owner under the lease. The fundamental basis was the Washington requirement, like that in Florida, that the assessed value of the property must be its fair market value. As the Washington court said in that regard,
[A] purchaser clearly would be unwilling to pay the capitalized value of fair market rent for property, such as the Owners’, encumbered by a long-term lease at below-market rates. To disregard this lease “would be to disregard a factor which plainly would affect the price negotiations between a willing buyer and a willing seller.” Duwamish Warehouse Co. v. Hoppe, 102 Wash.2d 249, 256, 684 P.2d 703 (1984). As stated in Duwamish, such a “result is a nonuniform valuation much higher than the true and fair market value in money which the statute commands.”
106 Wash.2d at 769, 725 P.2d at 992. The Washington court’s rationale was further explained as follows:
Even if a disadvantageous lease can be attributed to imprudence, the property’s value must reflect what a willing buyer would pay; a willing buyer would not pay full market value for property burdened by a long-term lease at below-market rates.
Furthermore, [any argument that the property owner should bear, through a tax assessment based upon market rent, the onus of actually receiving less than market rent under an existing lease on the property] does not satisfactorily account for discrepancies between lower contract rates set with prudence under past market conditions and higher fair market rates resulting from subsequent inflation and changed business conditions. Such discrepancies frequently arise in connection with the leasing of shopping center space to large national tenants, as such tenants frequently demand long-term gross leases, without escalation clauses, and many times at discounted rates. These anchor tenants in turn attract smaller tenants and other satellite shopping areas in close proximity. These subsequent commercial leases in the surrounding area may be predicated on favorable economic conditions largely resulting from the effort and capital expenditure of the original lessor.
As the fair market value of the areas’s commercial space rises, property assessors will increase their assessments accordingly. Nevertheless, the original lessor will be bound by the terms of his now below-market lease, facing the prospect of a fixed income in a climate of rising taxes. Failure to take notice of his plight would unduly penalize the entrepreneur whose efforts have created the business environment from which communities derive greater property tax revenues.
Id. at 768, 725 P.2d at 991 (citation omitted).
Also particularly on point is Ancel, Determining Fair Market Value of a Shopping Center for Purposes of Property Tax Assessment, 1965 U.Ill.L.F. 253. The following excerpts from that article illustrate its consistency with our affirmance:
In order for the assessor to find the market value of a [shopping] center, ... capitalization of net rental income should be the controlling, if not the exclusive, basis of valuation.
Id. at 254.
Certainly in terms of the market place, as expressed in the reported cases involving valuation of an entire [shopping] center, the item determining value will be the capitalized net income from rentals.
Id. at 255.
In short, capitalization of net income from rentals should be relied upon because the earning potential of property is the most accurate indication of its market value. In those instances where the courts have not followed the income approach, either there has not been enough data available to obtain an accurate picture of the value of the property in question by use of the income approach [see Canterbury Towers, supra ], or the capitalization has resulted in a value exceeding that based upon replacement.
Id. at 256-57 (footnotes omitted).
The income approach ... has a particular application to the shopping center situation.
Id. at 257.
Because the assessor in most taxing jurisdictions is required ... to find the fair market value of property ... and because there are few if any sales of comparable [shopping] centers, and because the replacement cost is meaningless in the market place, text writers and reasoned court opinions support measurement of the market value by means of the income approach. Under such circumstance, the assessor should also use the income approach to value.
Id. at 262.
See also, e.g., Board of Supervisors of Fairfax County v. Nassif 223 Va. 400, 290 S.E.2d 822 (1982), appeal after remand, 231 Va. 472, 345 S.E.2d 520 (1986); Brickman v. Manchester, 119 N.H. 919, 409 A.2d 1328 (1979); Merrick Holding Corp. v. Board of Assessors of Nassau County, 45 N.Y.2d 538, 410 N.Y.S.2d 565, 382 N.E.2d 1341 (1978); State ex rel. Park Plaza Shopping Center, Inc. v. Board of Review, 61 Wis.2d 469, 213 N.W.2d 27 (1973); F.W. Woolworth Co. v. Comm’n of Taxation & Assessment, 26 A.D.2d 759, 272 N.Y.S.2d 257 (N.Y.App.Div.1966); McCrory Stores Corp. v. City of Asbury Park, 89 N.J.Super. 234, 214 A.2d 526 (N.J.Super.Ct.App.Div.1965).
(2) The Final Judgment Should be Affirmed on the Basis of Substantial Evidence Supporting the Trial Court’s Result, Notwithstanding Its Orally Indicated Reasoning.
A basis orally indicated by the trial court in this case for determining that the property appraiser’s total rejection of the income approach was not justified was that the property appraiser had not rejected that approach for many years in the past, thus lulling the property owner into having leased the property for a long term at a rental which had not, of course, taken into account taxes based upon the new assessment. In that regard the property appraiser (with which the dissenting opinion appears to agree), citing State Dept. of Revenue v. Anderson, 403 So.2d 397 (Fla.1981), argues that the trial court applied estoppel against the property appraiser which was improper because estoppel cannot so apply absent exceptional circumstances which did not exist here.
While the trial court’s oral statements that the amount of the increased assessment is “unconscionable” and “shocks the conscience of the court” might be taken to be a finding that there were such exceptional circumstances, the court did not say that estoppel applied. In fact, the court said estoppel “almost” applied. In any event, it is not necessary to address whether estoppel could and did apply. Suffice it to say that the trial court did not lack a basis from the law and the evidence to conclude under the circumstances of this ease that the income approach should have received at least some application and that “submarket rent” was not a valid foundation for totally rejecting that approach, as the property appraiser acknowledges he did. The basis from the law is represented by Palm Corp. v. Homer, Valencia Center III, and Walter v. Schuler, as discussed in section (1) above. The basis from the evidence was the below-described expert testimony on appellee’s behalf to which brief reference has been made in section (1).
Appellee’s expert testimony specifically dealt with each of the factors to be considered under section 193.011. In arriving at a valuation, that testimony employed a combination of what were characterized as the main approaches generally used, in real property appraisals — “sales comparison,” “cost,” and “income,” with emphasis upon income. The $2,950,000 valuation placed upon the property by the trial court was the figure testified to by that expert to be the property’s fair market value. The testimony of appellee’s expert reflected that no purchaser of the property would, in deciding upon the price he would pay, ignore the submarket rentals to be received under the long-term lease to which the property is subject.
Furthermore, there was before the trial court testimony of appellee’s expert which can be taken to have been to the effect that no appraisal of the property involved in this case using proper methodology would fail to apply an allowance for the submarket rental income under the long-term lease, as the property appraiser’s assessment failed to do. In addition and against the background of the above-described testimony, that expert testimony can be taken to have provided grounds stated in Florida East Coast Railway Co. v. Green, 178 So.2d 355, 360-61 (Fla. 1st DCA 1965), quoting Louisville & N. Railroad Co. v. Amos, 98 Fla. 350, 123 So. 745 (1929), for invalidating a property assessment, i.e., that the property appraiser’s assessment was “arbitrary” (using, as the expert did, a definition of “arbitrary” as being without a substantial basis), as well as without “practical regard to existing conditions and circumstances.”
In his reply brief the property appraiser, as indicated above, acknowledged that it appears that the amount of his assessment exceeded present cash value, i.e., fair market value. The reason why his assessment exceeded fair market value lies not only in the approach based upon the income factor he did not use but in the only approach he did use in arriving at his assessment, the cost approach. Ancel, supra at 262, characterizes cost as an approach to the valuation of shopping center property which is “meaningless in the market place” (presumably if it is the only approach used). The cost approach was the primary basis for the tax assessor’s assessment in Palm Corp. v. Homer which, as is pointed out above, was overturned because the income approach had not been used. 261 So.2d at 823. The dissenting opinion states that the property appraiser simply “weighed the cost factor most heavily.” Any inference from that statement that in arriving at his assessment the property appraiser used any factor other than cost would be erroneous.
That, as the property appraiser and the dissenting opinion point out, the trial court incongruously commented at the hearing that the property appraiser's method of appraisal was not “erroneous or improper” and that the trial court found “no problem” with the property-appraiser’s methodology is not at all determinative. See Chase v. Cowart, 102 So.2d 147, 150 (Fla.1958) (result in trial court must be affirmed if right, even if right for wrong reason). Nor under all the circumstances does it seem that those comments should be taken to have the meaning which their words appear to reflect. The court might have been referring only to the application of the method which the property appraiser did use or might have been indicating evolving thought processes. Because the court’s adjustment to the property appraiser’s assessment increase was based upon the testimony of appellee’s expert which gave substantial application to the income approach, the final judgment did not mean the property appraiser had used proper methodology in giving no application to that approach.
(3) The Case Law Relied Upon by the Property Appraiser and By the Dissenting Opinion Is Materially Distinguishable or Is Authority for This Af-firmance.
For the reasons explained in this section, none of the cases relied upon by the dissenting opinion and by the property appraiser is shown to be factually in point. While the dissenting opinion characterizes Century Village v. Walker, 449 So.2d 378 (Fla. 4th DCA), rev. denied, 458 So.2d 271 (Fla.1984), as being “strikingly similar to the instant matter,” we conclude that that case, in significant contrast to this case, is not shown to have involved a long-term lease and, for the reasons indicated above and further explained below, cannot have soundly reached the result it did unless it involved a short-term lease.
Also, neither the dissenting opinion nor the property appraiser refers to Bystrom v. Valencia Center, Inc., 432 So.2d 108 (Fla. 3d DCA 1983), rev. denied, 444 So.2d 418 (1984) (hereafter Valencia Center I ”), and the dissenting opinion does not refer to Valencia Center, Inc. v. Bystrom, 526 So.2d 707 (Fla. 3d DCA 1988) (which was affirmed by Valencia Center III and is called hereafter “Valencia Center II”). Valencia Center I and Valencia Center II are highly relevant to an analysis of Florida law in this area. Valencia Center I was principal authority for Century Village, upon which the dissenting opinion and the property appraiser principally rely, and illustrates, as we will explain, why not only Valencia Center I, but also Century Vil lage, are materially distinguishable from the case now before us. Valencia Center II dealt, as did Valencia Center III in a different way, with the statute enacted in 1986 by the Florida legislature to reverse the results in Valencia Center I and Century Village, thereby illustrating Florida legislative intent to call for an affirmance in this case, as we will explain.
The property appraiser and the dissenting opinion cite Century Village for the position that the existence of the submark-et rent from the long-term lease of the property was a proper reason for the property appraiser to reject the income approach and not take into account rentals receivable under the lease. (The dissenting opinion’s endorsement in this case of using for the assessment the combined values of both the lessor’s and the lessee’s interests is in effect an endorsement of rejecting the income approach. The reason is that that would effectively eliminate from the valuation of the property the lowering effect of the submarket rental income upon the value of the lessor’s interest because that lowering effect would be offset by adding to the valuation the increased value of the lessee’s interest resulting from submarket rental expense.) We do not agree. The narrow holding of Century Village in response to the property owner’s contention on appeal was that the income approach based upon actual, submarket rental income may not be the only basis for the valuation of leased property for which sub-market rent is being received. 449 So.2d at 379. With that we do not disagree. And, as the trial court in this case noted, Century Village quotes Dept. of Revenue v. Morganwoods Greentree, Inc., 341 So.2d 756, 758 (Fla.1977), for the proposition that the existence of an encumbrance (a term used in Century Village to include a lease) is a factor to be considered in the valuation of property. 449 So.2d at 381.
The property appraiser’s position, which relies upon other language in Century Village and Morganwoods Greentree, and the position of the dissenting opinion which discusses Century Village but does not discuss Morganwoods Greentree, are, stated in another way, each to the effect that property which is subject to a submarket-rent lease may be valued as though there were no lease. While there is language to that effect in Century Village and Mor-ganwoods Greentree, none of the leases involved in Century Village, in .contrast to' the lease in this case, was shown to have been a long-term lease (and it may be concluded that none was a long-term lease), nor was such a lease involved in Morgan-woods Greentree. Thus, as will be further explained in the succeeding paragraphs, we do not conclude that that language calls for a reversal of the final judgment in this case. And, Morganwoods Greentree is authority for our affirmance, as will also be further explained.
The submarket rents involved in Century Village under leases which were not shown to be long term, in contrast to the submarket rent in this case, could presumably have been renegotiated upward within a relatively short time to take into account, and shift to the lessees, the burden of the increased taxes. There would thus have been no unfairness to the property owner in that case like that from the property appraiser’s assessment in this case, and the fair market value of the property in that case can be taken to have been unaffected by the submarket rents. Accordingly, it is going too far, as the property appraiser has done here, to take the position that under Century Village it is proper to not at all use the income approach for the valuation of property subject to a lease calling for submarket rent regardless of the length of the lease. In any event, that is going too far in our view for such property with a lease the length of that in this case. This .is not to take issue with, because it is unnecessary to address, that position as to property under short-term leases, as we conclude was the property in Century Village. See footnote 10 infra.
Morganwoods Greentree did not involve a lease. It involved the assessed value of a common area within a townhouse complex. It is relied upon by the property appraiser in this case (as well as by Century Village ) but actually may be taken to support our affirmance. Because its real import in that regard may well not be immediately apparent from a quick reading of the opinion and is actually obscured by reliance upon only part of its language, as does the property appraiser in this case, we will undertake to fully explain that case.
The common area in Morganwoods Greentree was owned by a corporation which, pursuant to a declaration, was entitled to assess against the surrounding townhouse properties maintenance costs, including taxes, of the common area. The common area was subject to encumbrances, such as that of easements of ingress and egress owned by the townhouse owners. The supreme court’s opinion in that case specifically notes that it does not authorize “an assessment ... without regard to the effect of an encumbrance on the value of the land. The encumbrance becomes one factor among many the assessor must consider in determining the just value of the property to be taxed.” 341 So.2d at 758. While that opinion also states as dictum “the general rule” of assessing the value of leased property as though there were no lease, that statement is then qualified by the further statement that the existence of an encumbrance will not “per se” reduce the amount of the assessment and by the above-quoted statement that there may be no assessment of encumbered land without regard to the effect of the encumbrance on the land’s value. Id. The general rule to which reference was made no doubt applies to leases calling for market rent, as contrasted with the submarket rent involved in this ease, which presumably is provided for in most leases and the encumbrance of which would not depress the fair market value of the property. See footnote 10 infra.
The holding of the Morganwoods Green-tree opinion appears to call for including the value of the encumbrances on the common area in the valuation of the townhouses and reducing the valuation of the common area by that value of the encumbrances so that the total assessed value of the common area and the townhouses will equal the total value of the entire project. But the opinion also notes (as a seeming paradox but apparently referring to the extent to which the common area might nonetheless be valued as though there were no encumbrances against it) that the owner of the common area could shift to the townhouse owners the burden of the taxes bn the common area.
Accordingly, Morganwoods Greentree involved the apportionment of taxes among various taxpaying property owners and also how the burden of the taxes imposed upon one of them could be shifted to the others. In either respect that case supports our affirmance. To the extent it authorizes reducing the valuation of the common area due to encumbrances, that is the effect of the final judgment in this case which reduced the property appraiser’s valuation of long-term leased property due to submarket rent which had not been taken into account in that valuation. To the extent it indicates that no unfairness would result from valuing the common area without regard to the encumbrances, it points up the distinction between that case and Century Village, which, as we have said, is not shown to have involved long-term leases (as well as the below-described opinion in Valencia Center I), on the one hand, and this case, on the other. That is, the situations in those cases appear in contrast to that in this case in which the appellee cannot shift the burden of the increased property taxes to the holder of the encumbrance against the property, i.e., to the submarket-rent lessee who benefits for many years from the underlying cause of the increased taxes. Accomplishing fairness was the clear objective of Morgan-woods Greentree through the balancing of the interests of the various taxpayers involved as well as those of government.
Thus, Morganwoods Greentree points up particular reasons for weighing the income approach in the valuation of property which is subject to a lease calling for submarket rent. (And, even if those reasons did not exist, Palm Corp. v. Homer, as explained above, appears to call for the use of the income approach in the valuation of property like that in this case — a shopping center — whether or not the rental income from the property is submarket. However, the rentals considered in Palm Corp. v. Homer may well have been submarket, the valuation in that case having been lowered through use of the income approach.)
Regarding the property appraiser’s position that property which is subject to a submarket rent lease may be valued as though there were no lease, the property appraiser and the dissenting opinion also call attention to a statement by the appel-lee’s expert that the property appraiser’s assessment would not be excessive if the law requires assessments to reflect the value of the unencumbered fee. However, that statement is not significant under our view that the law does not call for that method of appraisal in this case but calls for taking into account the encumbrance represented by the long-term, submarket-rent lease, as well as other factors, as did appellee’s expert.
Valencia Center I, upon which Century Village relies, does not call for valuing as though there were no lease property which is subject to a long-term lease calling for submarket rent like the lease in this case. Valencia Center I does concern the valuation of property subject to a lease calling for submarket rent and approves an assessment without the use of the income approach. But that case, in contrast to this ease, was shown to have involved a lease extending no more than “several years into the future,” 432 So.2d at 110 (and also the property appraiser’s assessment which Valencia Center I upheld was only 14.7 percent above the assessment fixed by the Property Appraisal Adjustment Board which the trial court in that case had approved, id. at 109). Thus, in Valencia Center I, as, we conclude, in Century Village, and in contrast to the case at hand, the burden of taxes based upon an assessed valuation of property without reduction by reason of its being encumbered by a submarket-rent lease apparently could, within a relatively short period of time, have been shifted to the party receiving the benefit of the encumbrance. See also Mor-ganwoods Greentree. On the same basis the submarket rents in Valencia Center I can be taken to have not affected fair market value.
None of the cases cited in Valencia Center I for the proposition that the assessed valuation in that case must be of the property as though there were no lease, 432 So.2d at 111, involved the consideration of income, much less submarket rental income, from a long-term lease, i.e., a lease having a term shown not to expire until many years after the valuation. Also, all of those cited cases antedated Morgan-woods Greentree. Carried to its logical end, the position of the property appraiser and the dissenting opinion in this case would, if valid, justify assessing as though unencumbered property which is subject to a submarket rent lease having a remaining term of 100 years, even though the fair market value of the property could not rise to the level of that assessment for another century. The dissenting opinion of Judge Beranek in Century Village, citing Mor-ganwoods Greentree, did not agree with Valencia Center I that even the lease in that case could be ignored in valuing the property. 449 So.2d at 382.
The provision in section 193.011(2) requiring the consideration of “[t]he highest and best use to which the property can be expected to be put in the immediate future” further indicates the material difference between a case involving a long-term lease like that here and cases involving short-term leases. That is, to value property subject to a short-term lease as though there were no lease may be argued to properly take into consideration the forthcoming expiration of the lease and thereby the use to which the property can be put in the at least relatively immediate future. But to value the property in this case as though it were not encumbered by a long-term lease would seem to contravene, that statutory provision by basing the property’s value upon its potential use at a time in the future which could not even arguably be “immediate.” That the requirement of section 193.011(2) was totally discounted in Valencia Center I with respect to the effect of the lease on the property, 432 So.2d at 110-11, may be taken to support this point and to further illustrate the material distinction between Valencia Center I and this case.
Our conclusion that the property appraiser’s failure to use the income approach was not consistent with section 193.011 is borne out by the legislative intent evidenced in the 1986 enactment of a much more specific provision in section 193.023(6). Section 193.023(6) provides:
In making his assessment of improved property which is subject to a lease entered into prior to 1965 in an arm’s length, legally binding transaction, not designed to avoid ad valorem taxation, and which has been determined by the courts of this state to restrict the use of the property, the property appraiser shall assess the property on the basis of the highest and best use permitted by the lease and not on the basis of a use not permitted by the lease or of income which could be derived from a use not permitted by the lease.
Section 193.023(6) is not applicable to this case since the lease involved here was entered into after 1965, and, in any event, that section was held unconstitutional in Valencia Center II which was affirmed by Valencia Center III. Nonetheless, section 193.023(6) does evidence legislative intent contrary to the results in Century Village and Valencia Center I which, as we will explain, is relevant to this case. See Valencia Center II, 526 So.2d at 708 (“It is undisputed that the new statute effectively overrules our holding in the earlier case.”); 51 Fla.Jur.2d Taxation § 17:416 (Supp. 1989) (“The amendment is obviously intended to reverse Century Village v. Walker ... and Bystrom v. Valencia Center, Inc. ...”).
Valencia Center II held section 193.-023(6) unconstitutional on the stated basis that that section “fixes an assessed value below the fair market value because use of the property is restricted by terms of a lease,” 526 So.2d at 708. The rationale was apparently that section 193.023(6) improperly so “fixes” an assessed value less than fair market value because it calls for using only the income approach to the valuation of property which, like that in the Valencia Center cases, is subject to a lease calling for submarket rent. Although section 193.-023(6) does not in terms refer to the required use of the income approach, it appears to require that approach by requiring that the assessment be based upon “the highest and best use permitted by the lease.” (The above-quoted, stated basis for the holding in that case does not appear to have taken into consideration the fact that a lease’s restriction of the use of property does not necessarily mean that using the income approach to the valuation of that property would result in a valuation below fair market value; see footnote 10 of this opinion as to leases calling for market and over-market rent.) The Valencia Center II holding does not require a result different from that which we would reach in this case and, in fact, supports an affirmance for a number of reasons:
First, the trial court in this case did not, as would be required by section 193.023(6), arrive at an adjusted valuation of the property only based upon the income approach. As pointed out above, the income approach which took into account in this case sub-market rent was not the only approach used by appellee’s expert. All section 193.-011 factors were considered, and the income approach was among several approaches used in the valuation adopted by the trial court. Second, the trial court’s adjusted valuation in this case, in contrast to Valencia Center ITs perception of the effect of section 193.023(6), is not shown to have been in an amount less than the property’s fair market value. In fact, appel-lee’s expert, as we have said, testified that the $2,950,000 adjusted valuation figure was the property’s fair market value.
Third, as pointed out above — and as Valencia Center II pointed out — the legislature evidenced its intent in enacting section 193.011 to have been contrary to the result in Valencia Center I. The legislative intent was thereby shown to have been that the income approach should be weighed in the valuation of property subject to a lease and should not be totally excluded in that regard as did Valencia Center I. That is, even though pursuant to Valencia Center II the legislature under section 193.023(6) could not constitutionally have an enforceable intent that the income approach shall be the only approach to the valuation of property subject to a lease calling for sub-market rent, an implicit legislative intent which is constitutional and enforceable was shown by section 193.023(6) to be at least that the income approach should under those circumstances be an approach used. (This intent, which was shown by section 193.023(6) to apply regarding property subject to “a lease,” was not limited to property like that in this case which is subject to a long-term lease; that section thus provided after the fact support for Judge Bera-nek’s dissent in Century Village; however, again, we need not and do not take issue in this long-term lease case with the results reached in Valencia Center and Century Village.) Fourth, the above described rationale of Valencia Center II is consistent with the observation further above that we do not disagree with the narrow holding of Century Village that the income approach may not be the only approach used to arrive at a valuation of property which is subject to a lease calling for submarket rent.
That narrow holding of Century Village (which relied upon Valencia Center I) was the same as the above-described rationale for the Valencia Center II holding that section 193.023(6) is unconstitutional. But the Century Village opinion expanded further, as had Valencia Center I, to indicate that the income approach should be totally disregarded, an expansion with which we do not agree under the long-term lease circumstances of this case and with which the legislature at least implicitly disagreed by enacting section 193.023(6) concerning any lease, whether long or short term.
Thus, section 193.023(6), as interpreted by Valencia Center II, went to one extreme (as had the rejected contention of appellant in Century Village), i.e., that the income approach should be the only approach to valuing property subject to a lease calling for submarket rent, and Valencia Center I and Century Village went to the other extreme, i.e., that the income approach should be totally disregarded in valuing such property. Our opinion takes the middle ground, as did in effect the trial court’s final judgment, i.e., that in valuing property like that in this case the income approach should be one of the approaches. The apparent error of the property appraiser in this long-term lease case was in his going to the extreme represented by Century Village and Valencia Center I which, whether or not valid in those cases, was not in the context of a long-term lease as is this case.
The Florida Supreme Court affirmed Valencia Center II in Valencia Center III. The supreme court affirmed the determination that section 193.023(6) is unconstitutional (although on a different ground) as well as the property appraiser's assessment in that case which, as noted above, had not taken into account the submarket rent lease on the property. Language in Valencia Center III, including citations to and quotations from Xerox and Morganwoods Greentree, are argued by the dissenting opinion to support the arguments in this case of the property appraiser which are addressed above and which, for the reasons explained, we conclude are not controlling under the circumstances of this case. At the heart of those reasons is that Valencia Center III, while involving property subject to a lease calling for submarket rent, as does this case, did not involve a long-term lease, as does this case and as did, e.g., C.A.F. Investment and Folsom. Valencia Center III implicitly recognizes that the lease in that case was not for a long term by stating that the “present” market value of the property properly reflected the potential higher and more valuable use of the property for purposes other than its use under the lease, 543 So.2d at 27 (especially since section 193.011(2) provides that only the “immediate” future use of property may be considered).
That Justice McDonald’s dissent in Valencia Center III refers to the “long-term lease,” id. at 217, on the Valencia Center property and that the majority opinion in that case refers to the lease as “pre-1965,” id. at 216, do not alter our views in this regard. In fact, the Third District Court of Appeal in Valencia Center I had also referred to a “long-term lease.” 432 So.2d at 110. As pointed out above, we use the term “long-term lease” to mean, in contrast to the lease in the Valencia Center cases which at its inception had been for a long term but at the time of the tax assessment in issue was to run for only “several years,” 432 So.2d at 110, a lease having a term shown not to expire until many years after the property appraiser’s assessment of the property.
As explained in section (1) of this opinion, the supreme court’s opinion in Valencia Center III calls for our affirmance in this case by stressing, and citing Walter v. Schuler for the proposition, that “the just valuation at which property must be assessed under the constitution and section 193.011 is synonymous with fair market value, i.e., the amount a purchaser, willing but not obliged to buy, would pay a seller who is willing but not obliged to sell.” 543 So.2d at 216. As we have also explained, the amount of the property appraiser’s assessment in this case far exceeded fair market value by wholly ignoring the aspect of the submarket rent under the long-term lease.
Furthermore, while the dissenting opinion quotes Valencia Center III (which relies upon Xerox) for the proposition that the weight to be given to a particular section 193.011 factor is “left to the discretion of the assessor, and his determination will not be disturbed on review,” that proposition is then qualified by the words: “as long as ... the assessed value is within the range of reasonable appraisals.” Id. at 217. As we have explained in section (1), as appellee’s expert testified (including his uncontradicted testimony that the property appraiser’s assessment exceeded fair market value by over one million dollars), and as the trial court in this case can be taken to have in effect found by declaring that the amount of the property appraiser’s assessment was “unconscionable” and “shocks the conscience of the court,” the property appraiser’s assessment here was clearly shown by competent evidence to be not “within the range of reasonable appraisals.” Also, that, as Valencia Center III states, a property appraiser need not necessarily “use” in all cases all section 193.011 factors in arriving at his assessment, id., does not derogate from our af-firmance for the reasons explained above.
Nor, for the same reasons, should it be concluded that Valencia Center Ills reference (referred to in the dissenting opinion and also referred to in Century Village as quoted in the dissenting opinion) to an assessment of the value of “both the lessor’s and lessee’s interests,” id. at 217, so derogates. A failure to include in the amount of an assessment of property leased for submarket rent the value of the lessee’s, as well as the lessor’s, interest in the property may, as Valencia Center III indicates, result in a valuation below fair market value, but that would be for property which is subject to a lease which is not long term. The reason, again, is that a purchaser of property in that situation (as contrasted with a situation involving a long-term lease) could, in deciding upon his offering price, very well virtually ignore the only temporarily depressing effect of submarket rent upon the value of the property to the property owner. By so doing the purchaser would in effect base his offering price upon the value of the entire unencumbered fee which would presumably be the same as the combined value of the lessor’s and the lessee’s interests. As the Washington Supreme Court in Folsom pointed out in this regard, “[I]f a disadvantageous lease will expire by its terms within such a short period of time that a willing buyer reasonably can be expected to ignore the short-term burden on the property’s income-producing capabilities, the assessor may [ignore the terms of the lease and] rely solely on market rent.” 106 Wash.2d at 769, 725 P.2d at 992.
Folsom also refers to adding to the assessed value arrived at through the valuation of the ownership interest pursuant to the income approach a value for the lessee’s interest. 106 Wash.2d at 767-769, 725 P.2d at 990, 992. That was to try to avoid running afoul of the concept of evaluating all interests in property in assessing its value for tax purposes, 106 Wash.2d at 770, 725 P.2d at 993, which is the concept involved in Valencia Center Ills above-noted reference to an assessment of the value of both the lessor’s and lessee’s interests. -That concept, which ensures that the assessment is not based only upon valuing the property owner’s interest under the income approach, may be taken to have been in effect accommodated in this case through the method used by ap-pellees’s expert whose approach to valuation was not limited to the income approach and whose valuation can be taken to have exceeded the valuation which would have resulted from using only that approach. Thus, even if there were thought to be error in this case from the trial court not assigning a separate value to the lessee’s interest and adding that value to the adjusted assessment (which we do not view as error), that would appear to be harmless. The trial court’s valuation in this case, which followed that of appellee’s expert, was consistent with the admonition of the Washington Supreme Court in Folsom that
we do not suggest that the assessor, in applying the income capitalization approach to valuation, is limited to the actual contract rent as the sole measure of valuation. Property valuation is a very complicated, subjective process, and there may be considerations which suggest that the value of the property is greater than the figure generated by capitalizing contract rent.
106 Wash.2d at 769, 725 P.2d at 992.
Our affirmance under the circumstances of this case is, as explained above, not inconsistent with, and is supported by, the majority opinion in Valencia Center III — and is at the same time consistent with the dissenting opinion of Justice McDonald in that case, with which Justices Overton and Kogan concurred, which relied upon Folsom. 543 So.2d at 217.
Finally, contrary to the implicit argument of the property appraiser and the explicit position of the dissenting opinion, we do not conclude from the case law that fairness to a taxpayer is irrelevant. Certainly fair market value must be fair. And as pointed out above, Morganwoods Green-tree was aimed at accomplishing fairness. See also Palm Corp. v. Homer; footnote 7 supra. It should therefore be concluded, as we do, that the trial court did not commit reversible error in not permitting the property appraiser to in effect substantially penalize the appellee for many future years for the property producing from a long-term lease rental income less than that which the property appraiser would want to use in arriving at his assessment in this case in which there was substantial, competent evidence that the property appraiser was wrong. See also the last sentence quoted from Folsom in section (1) above, 106 Wash.2d at 768, 725 P.2d at 991 (“Failure to take notice of his plight would unduly penalize the entrepreneur whose efforts have created the business environment from which communities derive greater property tax revenues.”). There is a strong presumption of the validity of an ad valorem tax assessment, Lurie, 512 So.2d at 1004, but section 193.011 and article VII, section 4 of the Florida Constitution require that there be a “just” valuation.
In conclusion, the view could well be taken that if a court, having an evidentiary as well as legal and equitable basis for its ruling like that of the trial court in this case, is powerless to adjust a property appraiser’s assessment increase, the courts would be powerless to adjust property appraisers’ assessments in virtually all cases, absent clear mathematical error by a property appraiser. We do not conclude that the legislature, in enacting the statutory requisites for property assessments, intended, or the case law allows, giving property appraisers such absolute power.
Contrary to the conclusion which the dissenting opinion attributes to this