decided: October 29, 1987.
IN RE: APPEAL OF ANTON W. BIGMAN AND IN-GRID E. BIGMAN FROM ACTION OF THE BOARD OF PROPERTY ASSESSMENT, APPEALS AND REVIEW OF ALLEGHENY COUNTY, PENNSYLVANIA, ON PROPERTY SITUATE IN THE CITY OF PITTSBURGH. COUNTY OF ALLEGHENY, APPELLANT
Appeals from the order of the Court of Common Pleas of Allegheny County, in case of Appeal of Anton W. Bigman and In-grid E. Bigman from action of the Board of Property Assessment, Appeals and Review of Allegheny County, Pennsylvania, on property situate in the City of Pittsburgh, Nos. G.D. 83-13509 and G.D. 83-13510.
D. R. Pellegrini, with him, Ira Weiss, Deputy County Solicitor, and James H. McLean, County Solicitor, for appellants.
Anton W. Bigman, for appellees.
Judges Rogers and Palladino, and Senior Judge Kalish, sitting as a panel of three. President Judge Crumlish, Jr., Judges MacPhail, Doyle, Colins and Palladino. Opinion by Judge Palladino. Judge Craig and Judge Barry did not participate in the decision in this case. Dissenting Opinion by President Judge Crumlish, Jr.
[ 110 Pa. Commw. Page 541]
The County of Allegheny (Appellant) appeals from a decision of the Court of Common Pleas of Allegheny County which held that condominiums and their included air rights are to be taxed as buildings and not as land.
The facts are not in dispute. Anton W. Bigman and In-grid E. Bigman (Taxpayers) own two condominiums in the city of Pittsburgh. The units are part of a nineteen story complex known as The Tower A Condominium at Chatham Center. The land which underlies the condominium is separately owned by another entity,*fn1 is assessed to the Prudential Insurance Company, and Prudential pays the taxes on the land at the millage rate applicable to land in the City of Pittsburgh.*fn2 As shall
[ 110 Pa. Commw. Page 542]
become clear, the millage rates in force in the City of Pittsburgh play an important role in the present case. In order to understand the reasons for this appeal, one must bear in mind that the City of Pittsburgh applies a much higher millage rate to land assessments than to building assessments, pursuant to the act of March 7, 1901, P.L. 20, art. VI, as amended, 53 P.S. § 25894 (hereinafter § 25894 of the Second Class City Act).*fn3
The horizontal split in ownership described above forms the foundation for the dispute in the present case. The parties stipulated at trial that only air rights were conveyed with the condominium units, and that no surface rights were transferred.*fn4 However, the parties
[ 110 Pa. Commw. Page 543]
disagree as to how the air rights are to be classified for taxation purposes.*fn5
Section 1 of the Act of June 15, 1939 (Second Class City Act), P.L. 346, as amended, 53 P.S. § 25891 mandates that county assessing authorities distinguish between buildings on land and the land exclusive of the
[ 110 Pa. Commw. Page 544]
buildings. Section 1 of the Second Class City Act further provides that the assessment made for county tax purposes shall be used to assess taxes in cities of the second class. (Pittsburgh is a city of the second class.) Thus, in the present case the taxing authority of Allegheny County was charged with determining whether the air rights owned by Taxpayers are to be classified as land or buildings. Allegheny County adopted the position that air rights are taxable as land and, therefore, assessed Taxpayers' units for both land and buildings.*fn6 On appeal, the Board of Property Assessment, Appeals and Review, sustained the assessment. Taxpayers appealed the Board's determination to the Court of Common Pleas. Wekselman, J., held that air rights are not properly taxable as land and entered non-jury decisions fixing the fair market value at the total assessed value, as to which there is no dispute, but allocating the entire assessment to buildings.*fn7
Appellant presents five issues on appeal. The majority of these issues revolve around the question of whether air rights are to be taxed as land or as buildings. Appellant argues: 1) that once air rights are occupied by a structure they become taxable as land; 2) that the presence or absence of a structure in the air space is immaterial; 3) that whether an entity other than the unit owner [the owner of the air rights] pays or will be paying
[ 110 Pa. Commw. Page 545]
tax on the land under the condominium is also immaterial; and 4) that the method for assessing the valuation of air rights is proper and legal.*fn8 We will specifically address these issues, but first must determine how air rights are to be classified for assessment purposes. For the reasons set forth below, we affirm the decision of the lower court and hold that air rights are to be assessed as buildings and not as land.
Our analysis begins with examination of Chapter 19 of Title 68 -- Air Space -- Estates, Rights and Interests, 68 Pa. C.S. §§ 801-803. These sections set forth the framework for treatment of air rights. Section 801 provides that air rights may be validly conveyed and transferred to one other than the owner(s) of the surface below. Thus, § 801 specifically authorizes the sort of horizontal split in ownership present in this case.
Section 802 provides, inter alia, that "[e]states, rights and interests in air space above the surface of the ground" are to be "dealt with for all purposes and in all respects as estates, rights and interests in real property." Section 803 provides, in full:
Estates, rights and interests in air space or parcels thereof above the surface of the ground,
[ 110 Pa. Commw. Page 546]
whether or not contiguous to the surface of the ground, shall if separately owned be separately assessed for taxation by each assessing unit in the Commonwealth for all types of taxes authorized by law to be assessed against real property.
While these sections make it clear that air rights are properly taxable, they do not answer the fundamental question of how air rights pertinent to a condominium are to be classified. The statute mandates that air rights are in all cases, and particularly with regard to taxation, to be treated as real property. However, the traditional definition of real property includes both land and buildings. Specifically, real property is defined as: "Land, and generally whatever is erected or growing upon or affixed to land. Also rights issuing out of, annexed to and exercisable within or about land." Black's Law Dictionary 1096 (5th ed. 1979). This definition, of course, takes us back to our starting point. We can now conclude without a doubt that air rights are real property, but we have not answered the question of whether those rights are to be assessed as land or as buildings.
The statute requiring county assessing authorities to distinguish between buildings and land, § 1 of the Second Class City Act, does not define the two terms in question and offers no guidance on the issue. According to principles of statutory construction, therefore, we must look to the common and approved usage of these words. 1 Pa. C.S. § 1903.
"Land" is defined as "the solid part of the surface of the earth in contrast to the water of oceans and seas . . . or to the air." Webster's Third New International Dictionary 1268 (3rd ed. 1986). "Building" is defined as "a constructed edifice designed to stand more or less permanently, covering a space of land, usually covered by a roof and more or less completely enclosed by walls,
[ 110 Pa. Commw. Page 547]
and serving as a dwelling, storehouse, factory, shelter for animals, or other useful structure . . ." Id. at 292.
Although air space does not fit squarely within either of these definitions, we conclude that it is more closely aligned with "buildings" than with "land." Air space is certainly not the solid part of the earth's surface, and the dictionary specifically contrasts "land" and "air." Air space is, however, contained within a constructed edifice which is used as a dwelling or for another useful purpose.
This conclusion comports with the Uniform Condominium Act (UCA), 68 Pa. C.S. § 3101-3414. As noted above, air rights are real property. Real estate and real property are generally considered synonymous. See Black's Law Dictionary 1137 (5th ed. 1979). The UCA provides a definition of real estate which, in accordance with the common usage construction set forth above, supports the conclusion that air rights cannot properly be taxed as land. Section 3103 of the UCA provides:
'Real estate.' Any fee, leasehold or other estate or interest in, over or under land, including structures, fixtures and other improvements and interests which by custom, usage or law pass with a conveyance of land though not described in the contract of sale or instrument of conveyance. 'Real estate' includes parcels with or without upper or lower boundaries, and spaces that may be filled with air or water. (Emphasis added.)
The language of the UCA mandates two conclusions: (1) air rights are properly classified as real estate, and (2) with regard to condominiums, it is proper to make a distinction between real estate and land. Although the Act's definition of real estate is very similar to the earlier noted definition of real property, it is clear that land, while included in the definition of real property, is nonetheless to be accorded a more narrow definition in
[ 110 Pa. Commw. Page 548]
some circumstances. One can have an interest in land and one can have an interest over land, but one cannot have an interest in land above the ground.*fn9 Air rights are not land and, therefore, cannot be assessed as land.
We note also that the objective in assessing real property is to determine its market value.*fn10 The air space, in and of itself, is of little or no value. It is the utilization of the air space which is determinative of its value. The air space in question in this case is being used for a building. Its value, therefore, is derived from the value of the building, and the air space should be assessed as part of the building.
[ 110 Pa. Commw. Page 549]
Having answered the fundamental question of this appeal, we now turn to the specific issues raised by Appellant.*fn11 Appellant first argues that air rights are taxable as land. However, Appellant's argument on this issue is based on the assumption that the terms real estate and land are synonymous. Appellant refers us to 73 C.J.S. Property § 16c to support the proposition that the terms real property, real estate and lands are synonymous. However, even the relied upon section does not provide a great deal of support for Appellant's position. Section 16c merely states:
As the corpus of estates or interests, the terms 'real estate' and 'real property' may be construed like the term 'lands'; in this sense, these terms include the surface of the earth, and things of a permanent nature attached thereto, improvements of a permanent character placed on it, the space above the surface of the earth, and minerals, oils, and gases found below the surface.
We note first that we are not dealing with "lands" but with land. Secondly, general definitions regarding the "corpus of estates" are of little help, and, finally, the definition of "lands" offered would include not only air rights, but buildings as well. Furthermore, Appellant's argument fails in light of our conclusion that land and real estate are not synonymous.
Appellant next argues that the presence or absence of a structure in the air space is immaterial. We agree. As noted above, and as Appellant points out, air space is properly taxable as real estate. 68 Pa. C.S. § 803. Thus, air space is taxable without regard to the presence of buildings, so long as the air is owned by an entity other than the owner of the land. The legislature has not authorized
[ 110 Pa. Commw. Page 550]
blanket assessment of air rights, but provides for such assessment when the air rights are separately owned. 68 Pa. C.S. § 803. Appellant is free to tax separately owned vacant air space,*fn12 or separately owned air space with buildings in it, but Appellant is not free to classify the air space as land.
Appellant's contention regarding the immateriality of the presence of structures obviously springs from an illustration offered by the lower court. Judge Wekselman set forth the example of a home owner in Pittsburgh (owner of both the land and a home built on the land) and noted that this hypothetical taxpayer is not
[ 110 Pa. Commw. Page 551]
assessed for air rights. Likewise, Judge Wekselman concluded that the owners of the condominiums "whose air rights are completely filled by the structures which they own" should not be charged with an additional assessment for air rights. Trial Court Op. at 4. Judge Wekselman's ultimate conclusion was that the intent of the statutes is to provide for the taxation of separately owned, unimproved air rights. While we tend to agree with Judge Wekselman's ultimate conclusion, we note that Taxpayers have not questioned the total assessment of their property; in fact, the parties stipulated to the assessed valuation for the entire property. N.T. at 5. Taxpayers' contention throughout this proceeding has been that they cannot be assessed at the millage rate for land because they own no land. Taxpayers have not asserted the existence of or impropriety of any sort of additional assessment.
Thus, this case does not present the question of whether an additional assessment for air rights is proper. Nonetheless, we note in passing that Judge Wekselman's decision would not have purged any improper additional assessment. The decision would merely have lowered the taxes payable on the additional assessment by allocating the assessment to buildings rather than land.
To reiterate, we agree with Appellant that the presence or absence of a structure within the air space is immaterial. Air space without a structure can have value*fn13 and the legislature has not distinguished between improved air space and unimproved air space. However, our agreement with Appellant on this issue does not affect our conclusion that air rights are not properly taxable as land.
[ 110 Pa. Commw. Page 552]
Appellant next contends that whether an entity other than the Taxpayers pays or will be paying taxes on the land under the condominium is also immaterial.*fn14 As presented by Appellant, this argument boils down to the assertion that the air rights have to be taxed as land because it is possible to convey mere air rights without a building to occupy them. If there is no building, Appellant argues, the land millage must apply because there will be no improvements to which assessed value can be allocated. This seems a somewhat plausible argument, but ignores the very important point that the owner of the land will be assessed at the land millage rate and pay taxes based on the value of the land. Furthermore, our holding does not preclude the valuation of air rights. If vacant air space in Allegheny County has value, then Appellant is free to value it for assessment purposes. But the lack of improvements does not transform air rights into land.*fn15
Appellant next asserts that the method for assessing the valuation of air rights pertinent to condominiums is proper and legal. This is not an issue. No one has suggested that the valuation and assessment are improper.*fn16 The issue is whether air rights can be classified as land, not whether the assessment itself was improper.
Accordingly, we affirm the decision of the trial court.
[ 110 Pa. Commw. Page 553]
And Now, October 29, 1987, the order of the Court of Common Pleas of Allegheny County in the above-captioned matter is affirmed.
Judge Craig and Judge Barry did not participate in the decision in this case.
Dissenting Opinion by President Judge Crumlish, Jr.:
I respectfully dissent.
I disagree with the majority's conclusion that air rights are to be assessed as buildings rather than land.
Undoubtedly, air rights are real property and may be conveyed. 68 Pa. C.S. § 801. However, as real property, the right to convey air space is a "right issuing out of, annexed to and exercisable within or about land." Black's Law Dictionary 1096 (5th ed. 1979) (emphasis added).
Section 801 provides that rights and interests in "air space above the ground . . . whether or not contiguous to the surface . . . may be validly conveyed or otherwise transferred to a person or other than the owner or owners of the surface below." The right to convey air space belongs to the surface owner -- whether he conveys air rights to space immediately or many stories above the surface below.
Thus, the right to or interest in air space -- and the right to convey it -- is derived from the subadjacent land, not from the building thereon. Landowners, especially in large cities, regularly convey air rights while retaining ownership of the land. The air space to which the right attaches may be unimproved and has a value separate and distinct from any building. (It need not be contained within a constructed edifice, as the majority states. In Macht, the taxpayer conveyed air space above
[ 110 Pa. Commw. Page 554]
an existing building to assure an open space through which air and light would pass to a neighboring property.)
The value of air rights is based on the value of the location from which the rights are transferred. See generally Note, 7 Cardozo L. Rev. 489, 508 n. 130 and n. 135. This value has been alternatively described as the residue of the complete land value when costs and capitalized losses are deducted or as the value of the entire fee less the costs of construction and loss in value due to loss of rentable space. Note, 64 Colum. L. Rev. 338, 353-354.
If a landowner conveys air rights, those rights relate directly to the parcel of land to which they were once "affixed." The air space to which the right attaches, when described in three dimensions, has reference to a specific locus on the land, Id., no matter how many times conveyed.
Unquestionably, air space is not land. Nor can one have an interest in "land above the ground," as the majority notes, p. 548, and n. 9. However, the property interest to be taxed is one which issues from the land. For this reason, I conclude that air rights should be assessed as land.
Accordingly, I would affirm the common pleas court.