“The Board of Review for the Town of Pacific got it right.”

With those words, in a unanimous decision, the Wisconsin Supreme Court overruled both the appeals court and the circuit court and held that the developers of declared but unbuilt condominium “units” should be assessed the property taxes on the unbuuilt units.  In Saddle Ridge Corporation v. the Board of Review of the Town of Pacific, Saddle Ridge argued that unbuilt condominium “units” had “zero value” and didn’t really exist until something was built.  The only thing of value was the land, which was, Saddle Ridge argued, a common element.  The importance of this theory is that the property tax on the common elements is apportioned to the condo units which are built.  Thus in a condominium development, if only a few condos are built, those few condo owners would be responsible for the entire property tax burden for all the unbuilt condo “units.”  And, as the court pointed out, under Saddle Ridge’s argument, if no condo units were built, a declared but unbuilt condominium development would not pay any taxes at all.

 This case hinged on the definition of a “unit.”  The court noted that in order for a condominium to be declared, it must define the “units.”  Thus the “units” exist upon the declaration, no matter when they are built.  Once a unit is declared, it is given a parcel number.  Saddle Ridge argued that a unit does not come into existence until it is built, thus there is nothing to tax..  The court noted that according to Saddle Ridge, through a “clever use of definitions in a condominium declaration a developer could avoid paying taxes on a share of the common elements, or that the developer could avoid taxes altogether by never constructing a unit…”

 The Supreme Court said that Saddle Ridge could not have it both ways – a condominium cannot be declared without creating “units,” and those “units” are taxable to the developer.  The Town got it right.

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