Waterville Estates Assoc. v. Town of Campton
122 N.H. 506 (1982)
Rule of Law:
A property interest that runs with the land for the benefit of dominant estates, and is only revocable by a supermajority vote of the interest holders themselves, is treated as an easement for tax valuation purposes, thereby diminishing the taxable value of the servient estate.
Facts:
- Waterville Estates Association, a nonprofit homeowners' association, holds title to several parcels of common property containing recreational facilities.
- The Association is comprised of all property owners within the Waterville Estates development.
- A recorded declaration grants each property owner a right, described in their deed as an "exclusive easement," to use the common property.
- This right is intended to run with the land and is attached to each individual owner's property.
- The declaration provides that these rights can be revoked upon an affirmative vote of two-thirds of the Association's members (the homeowners).
Procedural Posture:
- In 1979, the Town of Campton assessed the common property owned by Waterville Estates Association at a valuation of $76,000 for tax purposes.
- The Waterville Estates Association filed a petition in the Superior Court (a trial court) for an abatement of the property taxes.
- The Superior Court found in favor of the Association, ruling that the homeowners' rights were easements that diminished the property's value, and abated the valuation to $100.
- The Town of Campton, as the appellant, appealed the Superior Court's decision to the Supreme Court of New Hampshire (the state's highest court).
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Issue:
Does a homeowners' association members' right to use common property, which is revocable only by a two-thirds vote of the members, constitute an easement that diminishes the taxable value of that common property?
Opinions:
Majority - Bois, J.
Yes. A right to use common property that is revocable only by a supermajority vote of the homeowners who benefit from it is sufficiently akin to an easement to diminish the property's taxable value. The court reasoned that while a true easement is typically not revocable, this interest shares more characteristics with an easement than a license. A license is a revocable personal privilege that is terminable at the will of the servient estate's owner. In contrast, the rights here were created in writing, run with the land, and benefit the dominant estates (the individual homes). Critically, the power of revocation does not lie with the owner of the servient estate (the Association) but with the owners of the dominant estates (the homeowners). The court found this revocation mechanism analogous to dominant estate owners collectively releasing their easement, a recognized method for terminating an easement. Therefore, the encumbrance on the common property is substantial and justifies a reduction in its assessed value for tax purposes.
Analysis:
This decision clarifies that the substance of a property right, rather than its formal label or a specific feature like revocability, determines its legal classification for tax purposes. It establishes that a right's revocability does not automatically classify it as a license, especially when the power of revocation rests with the beneficiaries of the right. This holding is significant for the tax assessment of common areas in condominiums and planned unit developments, affirming that such properties have minimal fair market value because their use is severely restricted by the rights of the homeowners, whose individual properties' values already reflect the benefit of access to these amenities.
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