Mola Development Corp. v. Orange County Assessment Appeals Board No. 2

I. Introduction

The question before us is whether the assessment appeals board erred in its methodology in valuing certain contaminated commercial real property in Irvine in the early 1990’s. The board took what it determined to be the fair market value of the property if unpolluted, then deducted the cost of cleanup, but next added back in expected contributions toward the cleanup from two former owners. The taxpayer then successfully petitioned the trial court for an order mandating the board to subtract the amount that it had added back in, and the board has now appealed to this court.

As we explain below, it is not accurate to say that the assessed value of contaminated property is ipso facto the fair market value of the property uncontaminated, minus the cost of cleanup (or, as the board approached the problem, minus the net cost of cleanup to the seller). To be totally accurate, the assessed valuation is the price at which a willing buyer and a willing seller would consummate an open market sale of the property considering the polluted condition of the property. (See De Luz Homes, Inc. v. County of San Diego (1955) 45 Cal.2d 546, 561-562 [ 290 P.2d 544 ] (De Luz…