Indiana Law Review


Suggested Adjustments to Indiana Condominium
and Property Tax Laws

I. Introduction

The following discussion analyzes the real property taxation of
condominiums in Indiana. Such an analysis must begin with an
examination of certain sections of the Horizontal Property Act
(HPA)^ and the tax laws dealing with real property assessment
methods and procedures.^ Examination of the HPA reveals that in
certain respects it creates restrictions, requirements, and legal
relations which are not in the best interests of the condominium unit
owners and which contribute unnecessarily to the misconceptions of
condominium ownership now held by the taxing authorities. Exami-
nation of the property tax laws reveals that no special statutes or

regulations were enacted or promulgated in respect to assessing
condominiums and townhouses as individual tax parcels; neverthe-
less, the assessing officials have been compelled to assess such
properties. The results of these assessments indicate widespread lack
of uniformity and inequality from one assessing district to the next
and from one individual living unit to the next in the same project. In
order to eliminate this inequality and to achieve justifiable assess-
ments, it is necessary to reconsider some fundamentals of Indiana
property tax law and amend certain statutory and regulatory
provisions. The following analysis suggests that there should be a
closer relationship among the property rights desired and those
received by condominium homeowners and the adoption of a
standard method for assessing individual living units in multi-unit
buildings.

II. The Need for Greater Flexibility in
THE Horizontal Property Act

Occupant ownership of individual apartments on a large scale is a
relatively recent phenomenon in Indiana.^ In the last few years, the
rate of growth in such ownership has been much more rapid than in
the more traditional forms of housing.^ There are two primary ways

iJnd. Code §§ 32-1-6-1 to -31 (Burns 1973) [hereinafter referred to as the "HPA"].
2/d §§ 6-1.1-1-1 to -37-13 (Burns Supp. 1976).

^The HPA was enacted in 1963. Prior to 1963 townhouses were known, but
generally not popular.

^Particularly in 1972 through 1974 the rate of growth in the construction of

condominiums and townhouses far exceeded the rate of growth of any other form of

housing. With the drastic reduction in construction generally in the United States in

1975 and 1976, condominium and townhouse construction also decreased.



694 INDIANA LAW REVIEW [Vol. 10:693

to own an "apartment" in Indiana: (1) pursuant to common law
property principles, in which case the apartment is commonly
referred to as a "townhouse,"^ and (2) pursuant to the statutory
provisions of the HPA, in which case the apartment is commonly
referred to as a "condominium" unit.

The growth of condominium and townhouse ownership will
probably continue for many years because of the advantages to both
the builder/seller and the buyer. The builder/seller usually views the
construction and sale of condominium and townhouse projects both as
an escape from the long-term landlord problems inherent in a volatile
apartment rental market and as an opportunity to earn his profit in a
comparatively shorter time period.^ The buyer will often be seeking
to avoid the bother of exterior maintenance of a single-family house"^
while taking advantage of the financial benefits of home ownership,
such as federal income tax deductions of mortgage interest and real
property taxes^ and increases in homeowner equity through
inflation and debt amortization.^

While it may be impossible to distinguish a condominium from a
townhouse by appearance alone, there are several important legal
differences. First, while condominiums are created by the filing of a
declaration and by-laws by the declarant-developer pursuant to the
HPA,i^ townhouses are created by the filing of a lengthy "plat," in a

^See generally Note, Organizing the Townhouse in Indiana, 40 Ind. LJ. 419

(1965) [hereinafter cited as Organizing the Townhouse].

^Often the developer of an apartment project will not sell the project for a long

period of time, usually at least five years, during which time the developer hopes to

realize an annual cash flow. When a similar property is developed and sold as
individual condominiums or townhouses the developer hopes to realize his profit in

much fewer than five years,
''One of the strongest selling features of condominiums and townhouses is that, in

most cases, the coowners' association is responsible for all exterior maintenance,

^LR.C. §§ 163(a), 164(a)(1), Condominiums and townhouses are real property. See
Ind, Code § 32-1-6-4 (Burns 1973),

^Most home purchases are partly financed with mortgage loans, thus per-
mitting the buyer to invest less equity in the property than if he had paid cash. As the
buyer makes mortgage payments, typically including principal payments as well as
interest on the loan, his equity in the property increases. At the same time, any
increase in resale value caused by inflation of building costs or neighborhood

improvement will accrue to the property owner upon resale.
loiND. Code § 32-l-6-2(i) (Burns 1973) provides the following definition: " 'Decla-

ration' means the instrument by which the property is submitted to the provisions of
this act, as hereinafter provided, and such declaration as from time to time it may be
lawfully amended," The HPA also requires that the declaration be recorded in the
office of the county recorder and contain the following particulars: land description,

building description, description of common property, description and assignment of
limited common property, the percentages of undivided interest for each unit,
percentage of votes required to rebuild, any covenants and restrictions on use, method



1977] CONDOMINIUM PROPERTY 695

manner similar to that used for creating a subdivision.^^ Thus, the
HPA supplies many parameters within which the condominium
declarant and coowners must operate, whereas the common law
leaves the townhouse developer considerably more flexibility in
determining the terms of townhouse ownership. Further, while the
HPA supplies many statutory legal relations as a matter of law, the
townhouse developer must be careful to create and include all
necessary legal relations in the "plat."

A second major legal difference between condominiums and
townhouses is the manner of ownership of the common property. In
the case of condominiums, the definition of common property differs
from project to project, but almost always includes the land,
recreation facilities, pool, exterior walls, and roofs of the dwelling
buildings. ^2 j^ the case of townhouses, the common property usually
is limited to the community building, recreation facilities, and pool.^^
Under the HPA, common property is owned directly by the coowners
as tenants in common, i'^ each coowner having a percentage of

of amendment, the by-laws, other desired provisions of the declaration, and a
recording reference to the building floor plans. Id. § 32-1-6-12. In addition, the HPA
requires that detailed floor plans, certified by a registered engineer or architect, be

recorded with the declaration prior to the first unit conveyance. Id. § 32-1-6-13.

i^See Organizing the Toumhouse, supra note 5, at 422.
i^In the definitional sections the HPA provides:
"Common areas and facilities," unless otherwise provided in the declaration
or lawful amendments thereto, means and includes:

(1) The land on which the building is located;

(2) The foundations, columns, girders, beams, supports, main walls, roofs,
halls, corridors, lobbies, stairs, stairways, fire escapes, and entrances

and exits of the building;

(3) The basements, yards, gardens, parking areas, storage spaces, swimming
pools and other recreational facilities;

(4) The premises for the lodging of janitors or persons in charge of the
property;

(5) Installations of central services such as power, light, gas, hot and cold
water, heating, refrigeration, air-conditioning and incinerating;

(6) The elevators, tank, pumps, motors, fans, compressors, ducts and in
general all apparatus and installations existing for common use;

(7) Such community and commercial facilities as may be provided for in the
declaration; and

(8) All other parts of the property necessary or convenient to its existence,

maintenance and safety or normally in common use.
IND. Code § 32-l-6-2(f) (Burns 1973).

^^See Organizing the Toumhouse, supra note 5, at 421, 426.
^*In the definitional sections the HPA provides:
"Coo\ ler" means a person, firm, corporation, partnership, association, trust
or other legal entity, or any combination thereof, who owns an apartment
within the building in fee simple and an undivided interest in fee simple
estate of the common areas and facilities in the percentage specified and
established in the declaration.

iND. Code § 32-l-6-2(b) (Burns 1973).



696 INDIANA LAW REVIEW [Vol. 10:693

undivided interest in the common property equal to that percentage
set forth in the declaration. ^^ The manner of determining these
percentages is left to the declarant,i^ and, once determined, may not
be changed without unanimous consent of the coowners.^'^ In
townhouses, the common property is typically owned indirectly by
the coowners as shareholders in a not-for-profit corporation which
holds the legal title. ^^ Each townhouse owner normally receives one
share of the stock in the not-for-profit corporation, regardless of the

size or value of the townhouse relative to the other townhouses in the
project. 1^

A third significant legal difference between condominiums and
townhouses is the extent of physical property acquired in fee simple.
Under the HPA, the purchaser of a condominium unit acquires the
fee simple to an "enclosed" space,^^ generally thought to be the inside

of the apartment being purchased. All other property is common
property and is held in common with all other coowners.^i The
townhouse purchaser generally acquires fee simple title to the
apartment, including exterior walls and half of the common walls, a
designated tract of land, and all physical structures located on the
land.22 The townhouse buyer, therefore, appears to acquire property
rights very similar to those of the purchaser of a typical single-family
residence on a platted lot.

i^M § 32-l-6-7(a), first sentence, provides: "Each apartment owner shall be
entitled to an undivided interest in the common areas and facilities in the percentage
expressed in the declaration."

^^Id. § 32-l-6-7(a), second sentence, provides: "Such percentage, unless the
declaration specifically otherwise provides, shall be computed by taking as a basis the
value of the apartment in relation to the value of the property as a whole."

^''"The percentage of the undivided interest of each apartment owner in the

common areas and facilities as expressed in the declaration shall have a permanent
character and shall not be altered without the consent of all of the coowners expressed

in an amended declaration duly recorded." Id. § 32-l-6-7(b).
^^See Organizing the Townhouse, supra note 5, at 426.

^^See, e.g., the enabling documentation for Chatham Walk, recorded in the Office
of the Recorder of Marion County, Indiana: the Plat is recorded as Instrument No. 72-

2006, and the Declaration of Covenants, Conditions and Restrictions is recorded as

Instrument No. 71-6745.
20

"Apartment" means an enclosed space consisting of one or more rooms
occupying all or part of a floor or floors in a building of one [1] or more floors
or stories regardless of whether it be designed for residence, for office, for the

operation of any industry or business, or for any other type of independent
use, with either a direct exit to a public street or highway or an exit to a
thoroughfare or to a given common space leading to a thoroughfare.

IND. Code § 32-l-6-2(a) (Burns 1973).
21M § 32-l-6-2(f).
^^See note 19 supra.

,



1977] CONDOMINIUM PROPERTY 697

In general, the following discussion will emphasize that the

Indiana HPA is unnecessarily rigid with respect to certain provisions
that require great flexibility and, consequently, is inadequate to deal

with the wide variety of situations which could arise under its

provisions. In focusing on the above second and third major legal

differences between condominiums and townhouses, frequent com-
parisons will be made between the HPA and the Florida condo-
minium laws. While there are obviously many other states with
which Indiana law could be compared, Florida was selected because,
first, while every state now has its own condominium enabling
legislation, most have been patterned after the FHA Model Statute^^
with little significant variety. Second, Florida has experienced the

most rapid and widespread growth of condominiums of any state in
the nation. 24 Third, the Florida Condominium Act undergoes
frequent re-examination and was substantially revised in 1976. ^^

Finally, Florida seems to have solved some of the problems inherent
in the Indiana HPA.

A. Uses and Abitses of the Undivided Percentage Interest

Of particular importance to condominium coowners is the fact
that the percentages of undivided interest in common property are
used for a variety of purposes other than simply determining the

degree of ownership in the common property. There are five
principal uses of the percentage of undivided interest set forth in the

HPA: voting, ownership of common property, release from common
liens, payment of common expenses, and ownership following
termination. As will be demonstrated below, many of the non-
ownership uses of the fixed percentage of undivided interest cannot

be supported when compared to other means of dealing with those
situations.

1. Voting

Under the HPA, the definition of that amount of votes or voters
which constitutes a "majority" or "majority of the coowners" must be
expressed in the total of percentages of undivided interest, rather

23U.S. Dep't of Housing and Urban Development, Model Statute for
Creation of Apartment Ownership, Form No. 3285 (1962) [hereinafter cited as
Model Statute].

2'»For example, in 1973, of 104,241 United States condominium completions,
50,688 were built in Florida and 1,108 were built in Indiana. U.S. Dep't of Housing
and Urban Development, HUD Survey of Unsold New Homes (1973).

251976 Fla. Laws, ch. 76-222, § 1 (eff. Jan. 1, 1977).



698 INDIANA LAW REVIEW [Vol. 10:693

than in the total number of dwelling units.^^ Thus, unless the
percentages of undivided interest are equal, the larger units have a

larger voice in the democratic affairs of the condominium associa-
tion.

Under Florida law the definition of "majority" is simply to be
inserted by the declarant in the by-laws and, in the absence of a

different provision therein, each coowner is to have an equal vote,

unaffected by his percentage of undivided interest.^^

The value which may be ascribed to the more flexible Florida
approach depends upon one's view of the importance of the matters
upon which the coowners must vote. Some Indiana developers have
viewed the matter strongly enough to fix the percentages of each unit

at exactly the same amount, despite the fact that in most cases the
units were not at all similar in size or market value.^^ In the final
analysis, the decision should be left to the individual developers, as in

Florida, rather than to the legislature.

2. Ownership of Common Property

The relative ownership interests in the common property during
the life of the horizontal property regime^^ are determined by the
percentages set forth in the declaration.^^ These percentages may not
be adjusted for any reason without the unanimous consent of the
coowners.31 While the HPA indicates a preference for setting the
percentages in the same proportion as the "values" the individual
units bear to the total of such individual unit values,^^ it is also

expressly provided that the declarant may use any other formula for
determining the percentages. ^^ Having been granted this latitude,

26IND. Code § 32-l-6-2(k) (Burns 1973) provides the following definition:
" ' Majority' or 'majority of coowners' means the coowners with 51% or more of the votes
in accordance with the percentages assigned in the declaration to the apartments for

voting purposes."

27FLA. Stat. Ann. §§ 718.104(4)(i), .112(2)(b) (West Supp. 1977).
^^See, e.g., the Declaration of the Kings Cove Horizontal Property Regime,

recorded in the Office of the Recorder of Marion County, Indiana, as Instrument No.
72-64856, amended by Supplemental Declaration, recorded as Instrument No. 72-
68672.

29A "horizontal property regime" is not a legal entity; rather, it may be treated as
a situation which (1) arises at the time of the recording of a conforming declaration, (2)
terminates only upon the occurrence of certain events, and, (3) during its pendency,

allows the real estate included in the declaration to be owned only in the manner set
forth in the HPA.

30IND. Code § 32-l-6-7(a) (Burns 1973), first sentence, as set forth in note 15 supra.
^Hd. § 32-l-6-7(b), as set forth in note 17 '^upra.

^^Id. § 32-l-6-7(a), second sentence, as set forth in note 16 supra. While the HPA
uses only the word "value," it is clear from the context that "market value" is intended.

^Hd. § 32-l-6-7(a), second sentence, as set forth in note 16 supra.



1977] CONDOMINIUM PROPERTY 699

many declarants have chosen different formulae for determining the
percentages, such as relative actual square feet contained in the

units, ^^ adjusted relative actual square feet contained in the units, -^^

and equal percentages for each unit regardless of size or value. ^^

Several reasons may be advanced for not choosing the preferred
relative market values of the units as the sole determinant of the
percentages of undivided interest. First, the declarant will have no

more than an idea of the anticipated market values of the units at the
time he must record the declaration. ^^ Secondly, variations in value
which occur as a result of location or condition of each individual unit
have little relevance to the sharing of common expenses. Thirdly, the
use of market value at the time of initial sale is particularly
inappropriate when the project is erected in multiple phases covering
a time span of several years, because of inflation of construction costs

and deterioration of older units.^^ Fourthly, the argument has been
advanced that adoption of the statutory language without revision
would leave a portion of the common property unallocated.^^

The Florida Condominium Act is similar to the HPA in not
limiting the declarant to one formula for the assignment of per-
centages of undivided interest.''^ Apparently, the Florida legislature

believed that, because of the wide variety of condominium designs in
Florida, no single formula would be appropriate in all cases.

3. Release from Common Liens

Shortly after passage of the original HPA,^i the Indiana General
Assembly recognized by statutory amendment the possibility that a

^See, e.g., the Declaration and By-Laws of The Villas of Oakbrook Horizontal

Property Regime, recorded in the Office of the Recorder of Marion County, Indiana, as

Instrument No. 73-32536.

35See, e.g., the Declaration and By-Laws of Lake Forest Horizontal Property

Regime, recorded in the Office of the Recorder of Marion County, Indiana, as

Instrument No. 73-80839.

^See, e.g.. The Declaration of the Kings Cove Horizontal Property Regime, supra

note 28.

37IND. Code § 32-1-6-13 (Burns 1973). It is often the case that the original sales

prices of the less poplar units will need adjustment.

^Should the project require four years from the recording of the first phase

declaration to the last, and ten percent annual building cost inflation is assumed, the

units in the last phase would have sales prices of over 40 percent more than those in the

first phase. In addition, changes in the market may cause many models to be replaced
with designs not contemplated in the original declaration; therefore, a workable price

deflator would not be possible.
^Note, Observations on Condominiums in Indiana: The Horizontal Property Act

of 1963, 40 IND. L.J. 57, 60 (1964).

^Fla. Stat. Ann. § 718.104(4)(f) (West Supp. 1977) provides that the declaration

shall contain: "[t]he undivided share in the common elements appurtenant to each unit
stated as percentages or fractions, which, in the aggregate, must equal the whole."

411963 Ind. Acts, ch. 349, §§ 1-32, at 878.



700 INDIANA LAW REVIEW [Vol. 10:693

lien could be valid against two or more coowners for obligations
incurred by said coowners in proportions which were different from
those found in the percentages of undivided interest. This amend-
ment to the HPA permitted each coowner to obtain release "from the
lien" on his portion of the common property "by payment of the
fractional or proportional amounts attributable to each of the
apartments affected. ""^^ xhis would seem to indicate a legislative
recognition that it is not possible to solve all of the allocation,

apportionment, or control problems which may arise in a condo-
minium project simply by applying the percentages of undivided
interest of the individual units to the total obligation.

The lien release provision in Florida is virtually identical to that
now found in Indiana.^^ This represents an understanding that
situations may occur involving fewer than all of the units or involving
expenditures benefiting units in a manner different from their
predetermined percentages of undivided interest.^^

4. Payment of Common Expenses

To the prospective condominium buyer, perhaps the most impor-
tant use of the percentage of undivided interest is to determine the

buyer's share of common expenses and common profits incurred by
the coowners.^^ In many cases the percentage of ownership of the
common facilities in a townhouse will also be used to determine the
share of common expense paid by each owner. "^^ Note that while this
may initially sound fair to all concerned, the declarant is left free to
choose the respective percentages of undivided interest in any
manner he wishes. Furthermore, regardless of the method chosen, it

42IND. Code § 32-l-6-10(b) (Burns 1973), formerly 1963 Ind. Acts, ch. 349, § 10, at

883. Previously the second sentence was: "Such individual payment shall be computed

by references to the percentages appearing in the declaration."

43FLA. Stat. Ann. § 718.121 (West Supp. 1977).
**Any time when two or more coowners become obligated for payments under a

single contract for work to be performed on their premises, for example, repainting

the interiors or recarpeting each unit, the possibility arises for mechanics' liens to be

filed against the coowners and their units jointly. In such event it is unreasonable to

require each coowner to pay an amount on the contract equal to his relative ownership
in the common property in order to obtain release from the lien; rather, the amount to
be paid should bear a close relationship to the relative benefits received under the

contract.

45IND. Code § 32-1-6-11 (Burns 1973) provides: "Profits and expenses.—The
common profits of the property shall be credited to, and the common expenses shall be
charged to, the apartment owners according to the percentage of the undivided

interest in the common areas and facilities."
^^See, e.g., the enabling documentation of Chatham Walk, supra note 19.



1977] CONDOMINIUM PROPERTY 701

will probably bear little relationship to the amounts of common
expense actually expended on particular units. The basic reason for
this disparity is that the common expenses are incurred upon and for
the benefit of the common property, not the individual units;'''^
therefore, any division of a class of expenses incurred upon common
property is likely to bear little direct correlation to the benefits

received by members of a class which is divided upon a basis not
directly related to common area. Such disparity is particularly harsh
upon coowners when, on the one hand, their respective percentages of
undivided interest are determined by reference to the value or size

of their dwelling units, but, on the other hand, the project is designed

in such a manner that a higher proportion of the common expenses
accrue to the benefit of a limited number of coowners. ^^^ Conversely,
the disparity tends to be less when the percentages of undivided
interest are declared to be equal and the common expenses tend to be
more for activities which benefit all coowners equally.'^^

Interestingly, Florida law has been amended to require that the
percentages of undivided interest should apply also to the payment of
common expenses and the ownership of common surplus. ^^ In other
words, although a declarant in Florida had previously been free to
better match the payment of common expenses to the units receiving

"Common expenses" means and includes:

(1) All sums lawfully assessed against the apartment owners by the

association of apartment owners;

(2) Expenses of administration, maintenance, repair or replacement of the

common areas and facilities;
(3) Expenses agreed upon as common expenses by the association of apart-

ment owners;
(4) Expenses declared common expenses by provisions of this act . . . , or by

the declaration or the by-laws.

IND. Code § 32-l-6-2(g) (Burns 1973).
''^This situation will very often arise in low-rise construction where grounds

upkeep will tend to benefit certain units disproportionately.

''^The HPA followed the then prevailing trend of condominium legislation which
commenced in Puerto Rico, an area which knew only high-rise construction. In high-
rise buildings, of course, the problems of support, access, and utilities tend all to be

common and are therefore best handled as common expenses.
soPLA. Stat. Ann. § 718.115(2) (West Supp. 1977), provides that: "Funds for the

payment of common expenses shall be assessed [collected by assessments] against unit
owners in the proportions or percentages provided in the declaration. In a residential

condominium, unit owners' shares of common expenses shall be in the same
proportions as their ownership interest in the common elements." Id. § 718.104(4)(g)
provides that the declaration shall contain "the proportions or percentages of and

manner of sharing common expenses and owning common surplus, which, for a
residential condominium, must be the same as the undivided shares in the common
expenses."



702 INDIANA LAW REVIEW [Vol. 10:693

the benefits, respectively, without affecting the relative ownership

structure, he is now as restricted as Indiana declarants.
Obviously, a flexible method is far superior to one which ties the

common expense payment to the size or value of non-common
property. So important has been the desire to properly distribute

common expenses that some declarants in Indiana have chosen to
disregard in whole or in part the fact that the percentages of

undivided interest are used for other important purposes under the
HPA.^i If, as suggested, the declarant were allowed to provide for
payment of the common expenses in any logical manner befitting
the individual design of the project, he would be able to fix the

percentages of undivided interest in the common property more
nearly on relative values, if that method is preferred, without
burdening the larger units with unjustifiably high common expenses.

5. Ownership Following Termination of the
Horizontal Property Regime

There are three methods by which an Indiana horizontal property
regime may be terminated: voluntary removal by consent of the
coowners,52 involuntary removal because of substantial casualty to
the premises,^^ and involuntary removal through government action.^"
The HPA establishes guidelines for only the first two methods,
leaving the determination of ownership rights in the third instance to
the court's discretion.

a. Voluntary Removal

The HPA provides that the property may be withdrawn from the
provisions of the HPA by approval of all coowners and consent of all
mortgagees and other lien holders. ^-^ The property as a whole,
including the portions formerly owned in fee simple, are then deemed

^^See the Declaration and By-Laws of Lake Forest Horizontal Property Regime,

supra note 35. Other purposes include voting, ownership of the common property
and ownership of the property upon removal or termination.

52IND. Code § 32-1-6-28 (Burns 1973).
f*3M § 32-1-6-21.

^^For example, eminent domain or removal of the property from the provisions of

the HPA by judicial decree in an action to overturn the declaration.
55

All of the apartment owners may remove a property from the provisions of
this act ... by an instrument to that effect, duly recorded, provided that the

holders of all liens affecting any of the apartments consent thereto or agree,

in either case by instruments duly recorded, that their liens be transferred to

the percentage of the undivided interest of the apartment owner in the

property as hereinafter provided.

IND. Code § 32-l-6-28(a) (Burns 1973). 1



1977] CONDOMINIUM PROPERTY 703

as owned in common. Each tenant in common would thereafter own
an undivided interest in the units of all the others, such percentage to

be equal to the former percentage of undivided interest in the
common property. ^^ Such a statutory provision could thus have the
effect of creating executory interests in potentially unknown parties
at an unknown future time,^' and therefore could be in violation of the
Rule Against Perpetuities.^^ Of course, any liens would be deemed to
have been transferred and would attach to whatever interest the
coowner then owned in the property. ^^

The section of the Florida Condominium Act setting forth the
requirements for removal of the property from the provisions of the
Act is similar to that of Indiana.^^ However, the declarant is not
required to compel the coowners to use their original percentages of
undivided interest in the common property as the only means of
allocating the percentage of joint ownership after removal.^^ Liens
would attach to whatever undivided shares of common property

Upon removal of the property from the provisions of this act, the property
shall be deemed to be owned in common by the apartment owners. The
undivided interest in the property owned in common which shall appertain to
each apartment owner shall be the percentage of undivided interest
previously owned by such owner in the common areas and facilities.

Id. § 32-l-6-28(b).

s^Discussed in 4B R. Powell, The Law of Real Property fl 633.12[3], at 814-15
(1977). Each coowner would hold an executory interest in so much of the fee simple
portion of the units of the other coowners as his percentage of undivided interest sets

forth; however, this interest would not be executed until the removal or termination of

the horizontal property regime.

^Ind. Code § 32-1-4-1 (Burns 1973) renders invalid any "interest in property"
unless it vests within 21 years after a life or lives in beings when the supposed interest
is created and, with few exceptions, adopts "the common-law rule against perpe-
tuities."

^9M § 32-l-6-28(a), as set forth in note 55 mpra.
60

Unless otherwise provided in the declaration, the condominium property
may be removed from the provisions of this chapter only by consent of all of
the unit owners, evidenced by a recorded instrument to that effect, and upon

the written consent of all of the holders of recorded liens affecting any of the

condominium parcels.
Fla. Stat. Ann. § 718.117(1) (West Supp. 1977).

61

Unless otherwise provided in the declaration as originally recorded or as

amended pursuant to s. 718.110(5) [Id. § 718.110(5)], upon removal of the
condominium property from the provisions of this chapter, the condominium
property is owned in common by the unit owners in the same undivided
shares as each owner previously owned in the common elements.

Id. § 718.117(2), first sentence.



704 INDIANA LAW REVIEW [Vol. 10:693

are used in the termination.^^ Particularly interesting is the

apparent legislative intent to permit the declarant to place in the

declaration a provision by which fewer than all of the coowners may
select voluntary removal.^^

Clearly, the HPA requirement for ownership in common of the
common property in proportion to the percentages of undivided
interest is too strict. Unless it is the legislative intent to discourage

voluntary removal in all cases, some flexibility should be introduced
into the HPA to permit an equitable division of the property when
division is desirable. A small sample of possible fact situations will
suffice to demonstrate the need for such flexibility. First, where the
original percentages of undivided interest are all equal, despite the

fact that the dwelling units are of varying sizes and values, there is no
chance that time will cause the units to become equal in market
value. Thus, upon sale of the project as a whole the former owners of
the larger units would receive only an equal share of the net sales
proceeds, as opposed to a greater share based on relative market
values of the units. Second, the counterbalancing effects of deterio-

ration and owner maintenance operate to different extents on
different units, thereby substantially reducing the predictability of

future market values. One method to achieve direct correlation
between the market value and percentage of undivided ownership
would be to require professional appraisal of the relative market
values as of the date of the removal, such values being used to

determine the percentage ownership for each tenant in common upon
removal, assuming that the entire property is to be owned jointly.

While the relative ownership problem might be solved by means
of a mandatory appraisal, a somewhat different solution may be
required to resolve potential conflicts among the coowners concern-
ing possession of individual dwelling units following removal.

Apparently, the question of who is entitled to possession of which unit
upon voluntary removal has not been litigated. The general rule is
that no tenant in common may exclude another tenant in common
without accounting for his exclusive use;^^ however, this rule is

modified by the rule that possession by one tenant in common is
deemed to be possession by all.^^ The corollary to the first rule is that

^2/d, second sentence, provides: "All liens shall be transferred to the undivided

share in the condominium property attributable to the unit originally encumbered by

the lien in its same priority."
63M § 718.117(1), as set forth in note 60 supra.
64IND. Code § 34-1-51-1 (Burns 1973); Restatement of Restitution § 125,

Comment b (1937).
^^Because unity of possession is an attribute of tenancy in common, each tenant in

common has an equal right to possession of the whole. See Hare v. Chisman, 230 Ind.

333, 101 N.E.2d 268 (1951); 27 1.L.E., Tenancy in Common 12 (West 1960); 4A Powell,
supra note 57, TF601, at 597, and authorities cited therein.



1977] CONDOMINIUM PROPERTY 705

when the possession by one cotenant of non-income-producing prop-
erty does not constitute exclusion of all other cotenants from the whoie

property, there is no duty to render an accounting or pay rent.^^

Consider, however, an example where several condominium units
are rendered untenantable because of structural defects. In the event

the builder could not be compelled to correct the defects, it would be
natural for the original fee owner of a livable unit to desire to sever
the untenantable units from his own in an effort to save exorbitant
common expenses; however, in the event the coowners elected to
voluntarily remove the property from the HPA, the HPA would then
cause all of the property to be owned as tenants in common. Thus,
only some of the coowners would be occupying livable units but
potentially all of the coowners would be entitled to possession of the
entire property. Thus the questions are whether, in the absence of a
prior agreement among the cotenants, one cotenant may hold
exclusive possession of less than the whole and whether he may do so
without rendering an accounting or paying rent. In the event of

litigation, the court should find that by purchasing the condominium

units the coowners had consented that the terms of the former

declaration represented an agreement to allow continued quiet

enjoyment by the original owners of their respective units to the

complete exclusion of cotenants and determine that there is no need

for an accounting or payment of rent by the remaining resident
coowners.

There are at least three possible modifications to the HPA which
might prevent the need to litigate one's continued quiet possession
after voluntary removal from the HPA. One possible solution would
be to delete those provisions of the HPA which force the conversion of
fee simple estates into estates in common.^"^ Instead of all of the

property being suddenly owned in common, the HPA could provide
that those portions of the property which were owned in fee simple
under the declaration could still be owned in fee simple by the same
respective parties, subject to easements for support, protection, and
reciprocal maintenance. To provide access and utilities to the
dwelling units, the former common area and facilities could be owned
in common. At the same time, the rights of the cotenants could be
limited by greatly restricting the common law rights of exclusive

^See Bowen v. Swander, 121 Ind. 164, 22 N.E. 725 (1889); Price v. Andrew, 104
Ind. App. 619, 10 N.E.2d 436 (1937); 4A Powell, supra note 57, If 604, at 613, and
authorities cited therein.

e^lND. Code § 32-1-6-28 (Burns 1973).



706 INDIANA LAW REVIEW [Vol. 10:693

possessions^ and partition.^^ This method may also have the
advantage of not violating the Rule Against Perpetuities.'^^

A second possible solution is to leave the HPA intact but attack
the problem of possession simply by adding a separate provision

stating that upon removal or other termination each cotenant would

be entitled to exclusive possession and quiet enjoyment of so much of
the whole property as he formerly owned in fee simple or enjoyed as
limited common property. This method would appear neither to
escape the Rule Against Perpetuities'^^ nor be sufficiently flexible to

deal with many diverse fact situations, such as limited insurance
recovery from casualty, discussed below. Similarly, the rights of

exclusive possession and quiet enjoyment might still be subject to
termination in an action for partition. '^^ Lastly, there may be some
small doubt whether or not a tenancy by the entirety in the fee simple

unit would remain such when the fee simple is converted to tenancy
in common 73

A third possible solution would be to require that, before an
election for removal could have any binding effect, the coowners have

obtained a court decree setting forth all necessary guidelines for

ownership and operation of the property. Of course, the court decree
may simply be a ratification of a new agreement among the coowners
to accomplish the above objectives. On the other hand, the court

^^See discussion in note 65 supra.

6^An action for partition is prohibited by the HPA until removal of the property
from its provisions. IND. CODE § 32-l-6-7(c) (Burns 1973).

70M § 32-1-4-1.

^2M § 32-l-6-7(c).
''^Indiana recognizes the tenancy by the entirety for ownership of real property.

Id. § 32-4-2-1. To create and maintain a tenancy by the entirety it has traditionally

been necessary to have five "unities" at the time of conveyance: marriage of the

husband and wife grantees, possession, time, interest, and title. See 4A. Powell,
supra note 57, '^"^'^ 615-624.1, at 663-712.4, and authorities cited therein. Once the
tenancy by the entirety is created it would seem that even following removal from the
HPA and conversion of all fee simple estates into estates in common, that portion of the
real property which is held as tenants in common, as between the entirety and the
other tenants in common, would still be held as tenants by the entirety as between the
husband and wife. The reason for this non-disturbance is that upon removal or
termination none of the traditional unities will have been broken by the simultaneous

conveyance of the fee simple and joint interests originally held by the coowners as
tenants by the entirety to each other. By analogy, joint tenancies, the legal ancestor of
tenancies by the entirety, have been held to have survived involuntary conversions and
attached to the newer property. Russell v. Williams, 58 Cal. 2d 487, 374 P.2d 827, 24
Cal. Rptr. 859 (1962); Fish v. Security-First Nat'l Bank, 31 Cal. 2d 378, 189 P.2d 10

(1948); Goldberg v. Goldberg, 217 Cal. App. 2d 623, 32 Cal. Rptr. 93 (1963); Zaring v.

Glover, 93 Cal. App. 2d 577, 209 P.2d 642 (1958). See also Hewitt v. Biege, 183 Kan.

352, 327 P.2d 872 (1958).



1977] CONDOMINIUM PROPERTY IQl

might need to appoint a trustee with powers to operate and govern
the property according to equitable principles until such time as the

cotenants are able to agree upon a method of self-government or
another form of dissolution. Obviously, thoughtful and creative
legislation is required if an inequitable result is to be avoided.

h. Termination Folloiving Casualty

The HPA provides that, following destruction of more than two-
thirds of the building, reconstruction shall not be required and the

proceeds of the insurance are to be distributed in the manner set
forth in the by-laws."^^ In addition, should the coowners fail for any
reason to commence reconstruction within 120 days following
casualty of any degree, the entire property will be deemed to have
been removed from the HPA. In such event the coowners would own
undivided interests in the total physical property as tenants in

common, the amount of such ownership to be equal to the former
percentages of undivided interest in the common property. '^^ At the
same time, individual liens would attach to the respective interests of
the tenants in common'^^ and the property would become subject to
being partitioned. "^"^ If a partition action were brought, the insurance

^"IND. Code § 32-1-6-19 (Burns 1973).
75

Failure to repair or rebuild—Effect.—If, within one hundred twenty [120]
days of the date of the damage or destruction to all or part of the property, it
is not determined by the association of apartment owners to repair,

reconstruct or rebuild, then and in that event:

(a) The property shall be deemed to be owned in common by the
apartment owners;

(b) The undivided interest in the property owned in common which
shall appertain to each apartment owner shall be the percentage of
undivided interest previously owned by such owner in the common areas and
facilities; ....

Id. § 32-1-6-21.

''^Id. § 32-l-6-21(c) provides that: "Any liens affecting any of the apartments shall
be deemed to be transferred in accordance with the existing priorities to the percentage
of the undivided interest of the apartment owner in the property as provided herein;

The property shall be subject to an action for partition at the suit of any
apartment owner, in which event the net proceeds of sale, together with the

net proceeds of the insurance on the property, if any, shall be considered as
one fund and shall be divided among all the apartment owners in a
percentage equal to the percentage of undivided interest owned by each
owner in the property, after first paying out of the respective shares of the
apartment owners, to the extent sufficient for the purpose, all liens on the
undivided interest in the property owned by each apartment owner.

Id. § 32-l-6-21(d).



708 INDIANA LAW REVIEW [Vol. 10:693

proceeds and the proceeds from the sale of the few remaining units

would be pooled and divided according to the percentages of

undivided interest.'^^ Thus, there is a danger that a coowners'

association could unintentionally allow the property to lose the

benefits of the HPA by failing to settle a property damage insurance
claim within 120 days following its occurrence.

Under the Florida Condominium Act there is a requirement that
the "association" "use its best efforts to obtain and maintain adequate

insurance" on the "association" and "common elements," but not
otherwise."^^ The burden of maintaining, managing and operating
"the condominium" is left with the association of coowners^^ and the

replacement of the common elements is made a common expense.^^

Likewise, there is neither a provision with respect to the parties who
should receive the insurance proceeds nor a provision for mandatory

termination of the horizontal property regime upon destruction or

failure to rebuild. Instead, upon substantial destruction and non-

repair, any owner may sue for equitable relief, whether for termi-
nation, partition, or other relief. ^^

It is recognized that detailed insurance provisions of condo-

minium enabling documents are among the most difficult sections to
draft and administer;^^ clearly, the HPA has proven to be no
exception. However, the tremendous inequity of forcing all coowners
to be tenants in common at a time when only part of the common and
fee simple property remains in its former tenantable condition^^

'^Id.

79FLA. Stat. Ann. § 718.111(9) (West Supp. 1977).
80/d § 718.111(1).

^^Id. § 718.115(1) provides: "Common expenses include the expenses of the
operation, maintenance, repair, or replacement of the common elements, costs of
carrying out the powers and duties of the association, and any other expense
designated as common expense by this chapter, the declaration, the documents
creating the condominium, or the by-laws."

82

In the event of substantial damage to or destruction of all or a substantial
part of the condominium property, and if the property is not repaired,
reconstructed, or rebuilt within a reasonable period of time, any unit owner
may petition a court for equitable relief, which may include a termination of
the condominium and a partition.

Id. § 718.118.

^^No attempt is made herein to suggest remedies to all of the problems which
might arise under the HPA, but much authority is available on the subject. See
generally P. Rohan & M. Reskin, Condominium Law & Practice (1977), and
authorities cited therein; Rohan, Reskin, & Sanchirico, Recent Developments in the
Field of Insurance for Condominium Projects, 48 St. John's L. Rev. 1084 (1974).

s^For purposes of the following discussion it may be helpful to suppose that the
project consists of many units located in several buildings on many acres of land, some
of which are decimated and/or partially destroyed by very high winds.



1977] CONDOMINIUM PROPERTY 709

demands further consideration of the insurance provisions of the
HPA. Two arguments against a forced tenancy in common were
mentioned in the section on voluntary removal,^^ namely, the
significant disparity which is likely to exist between the current

market value of a unit and the value of its percentage of undivided
interest in the whole, and the difficulty of resolving potentially
conflicting possessory interests.

When the termination is caused by a partial casualty to the
premises, at least three other unique problems are caused by the

HPA insurance provisions. First, it may not be a simple matter to
determine whether or not the destruction constitutes two-thirds of
the project,^^ in which case it may not be known if it is mandatory
under the HPA to reconstruct.^^ Even if it is later determined that
the project was only damaged to the extent of sixty percent, it is
entirely possible that the association will not have been able to gather

sufficient information with which to determine whether or not to
reconstruct prior to the end of 120 days from the date of the
casualty.^^ In such event, the property will be deemed to be owned in
common, regardless of the wishes of the coowners.^^

A second problem involving partial destruction can arise when it
is determined that reconstruction shall not occur and the insurance
settlement is being negotiated. If the property insurance policy

included a "replacement cost endorsement"^^ the insurer could be

^^See text following note 67 supra.
86

Application of insurance proceeds in case of disaster.

Reconstruction shall not be compulsory where it comprises the whole or
more than two thirds [2/3] of the building; in such case, and unless otherwise
unanimously agreed upon by the coowners, the indemnity shall be delivered
pro rata to the coowners entitled to it in accordance with provision made
in the by-laws or in accordance with a decision of three fourths [3/4] of the
owners if there is no by-law provision.

Should it be proper to proceed with the reconstruction, the provisions
for such eventuality made in the by-laws shall be observed, or in lieu thereof,
the decision of three fourths [3/4] of the coowners shall prevail.

IND. Code § 32-1-6-19 (Burns 1973).
^Id. § 32-1-6-19 provides: "Application of insurance proceeds in case of

disaster.—In case of fire or any other disaster the insurance indemnity shall, except as
provided in the next succeeding paragraph of this section, be applied to reconstruct the
building." The balance of this section is set forth in note 86 supra.

^Id. § 32-1-6-21 provides that the decision to rebuild must be made within 120
days or the property is removed from the provisions of the HPA, as set forth in notes
75-77 supra.

^^The HPA leaves the coowners no options in the event they fail to elect to rebuild
or reconstruct. Id.

^Such an endorsement prevents the carrier from deducting depreciation of the
property from its settlement.



710 INDIANA LAW REVIEW [Vol. 10:693

forced to rebuild the premises, at least to the extent of the face

amount of the insurance policy;^^ however, when this same insurer is
allowed merely to settle the claim it is typically permitted to deduct
normal depreciation from the value of the improvements.^^ ^g ^
result, the cash received by the association or insurance trustee will
usually be a fraction of the market value of the former living unit,
after reduction for depreciation, land and improvements^^ below
grade level. By forcing termination of the horizontal property
regime the HPA could in many cases force the coowners to accept the
insurance cash settlement in lieu of reconstruction, thereby
untowardly reducing the total cash value of the property.

A third problem involving partial destruction can arise when an
action for partition is litigated after the casualty and termination of
the horizontal property regime. At that time, unless a partition in
kind could be formulated, all the remaining units would be sold,
whether damaged or not,^^ and the proceeds from the sales would be
pooled with the insurance cash settlement.^^ In determining the
respective shares in the cash proceeds the percentages of undivided

interest would be applied to the total fund.^^ In the typical case, such
a partition action would have the effect of forcing each cotenant who
had not lost his unit in the casualty to share in the loss of equity of
those cotenants who had. Whether this result is justifiable would
depend upon the particular fact situations. For instance, it is possible
that the cash settlement could be greater per unit than the actual

sales prices of the remaining tenantable units. This could occur when
it is obvious to potential home buyers that the remaining units do not
constitute a viable horizontal property regime or townhouse project
by reason of the high common expense per unit. In such case, the
market value of the remaining units could be reduced to an amount
less than the insurance settlement would have been in the event of their
destruction.

It is apparent from the above discussion that the only meaningful
solution is to delete those sections of the HPA which force a

^^The by-laws of a typical horizontal property regime will often compel the

damaged property to be rebuilt by the coowners' association instead of placing such
burden on the coowners individually. This duty is then usually passed on to the

insurance carrier.

32Thus, all older buildings would receive substantial penalties upon casualty. This
would force the coowners to carry much more insurance than the market value of the
project. G. Couch, Cyclopedia of Insurance Law § 54:101 (2d ed. 1966).

^^By definition, such items are not destructible by ordinary fire and are therefore

not covered by fire insurance.

»4lND. Code § 32-l-6-21(d) (Burns 1973), as set forth in note 77 supra.

^Id.



1977] CONDOMINIUM PROPERTY 711

termination of the horizontal property regime upon casualty to the
property. ^"^ Such sections could be replaced with a provision that
until the reconstruction of damaged portions of the premises,
voluntary removal may be accomplished with the consent of a
substantial majority of the coowners. To protect the values of the
units for the coowners, the HPA should require that the association
purchase and maintain insurance with a replacement cost endorse-
ment in an amount equal to at least eighty percent of the full
replacement cost of the improvements, the proceeds of which would
be payable to a competent independent insurance trustee. The
trustee would, of course, be obligated to demand that the insurer
commence reconstruction as soon as possible, assuming that the
coowners do not voluntarily remove the property from the provisions
of the HPA. To protect the property of those coowners who are able to
remain on the property following the casualty, the trustee should be
required to use part of the insurance proceeds to completely rebuild

all buildings which contain tenantable units, reconnect all severed
utilities, rebuild all necessary access ways, remove all debris, and
return the balance of the project to at least a stable condition.

If, in the meantime, the coowners have selected voluntary removal,

the trustee should be required to complete the work on the damaged
portions of the property in order to return them to a normal condition
and be permitted to deduct all sums expended from the insurance
settlement before such funds are included in the assets available for

partition.

If the above suggestions were followed in HPA revisions, it would
also be possible to provide that, in any partition action following

partial destruction, the court could, first, partition as a whole the

property of the cotenants whose units have not been reconstructed in
kind from the property of those cotenants whose units are livable;
second, create such easements and covenants as might be necessary to
retain full rights of access and enjoyment for the livable units over
the land partitioned in kind to the other cotenants; and, third, grant

such partition requests as might be equitable and in accord with the
above two provisions, including, at the court's option, a new form of
continued self-government for the remaining coowners. The effect of
these provisions would be to let all of the immediate economic loss

from the casualty and election of non-reconstruction fall on those
coowners who suffered the physical loss. Of course, while the market
value of the remaining units may have been reduced and the common
expenses increased as a result of the casualty and non-reconstruction
of part of the original physical property, the majority of the economic

^Id. § 32-1-6-21.



712 INDIANA LAW REVIEW [Vol. 10:693

impact on the remaining coowners would not be suffered until they
chose to sell their units. Both the state^^ and federal governments^^
have expressed a preference for homeownership in lieu of rental; by
encouraging reconstruction the above suggestions for revisions to the

HPA may cause it to be more in harmony with such public policy.

B. Description of a Condominium Unit

A problem related to both the insurance and taxation aspects of
condominiums is whether a declarant may include within the
description of the fee simple portion of the coowner's estate parts of

the property which are not "enclosed" within the unit walls, floor, and
ceiling. 10^ It has been suggested that to include "external" property

would subject the horizontal property regime to defeat and, if
defeated, the coowners would be left without any statutory and/or
agreed provisions for operation and maintenance of the external and
common property. ^^^ Whether the coowners could adjust to these
problems would depend upon the facts of each case; however, it is
always preferable to avoid needless litigation.

The present definition of "apartment" unit was drawn from prior
statutes designed to deal exclusively with highrise buildings; ^^^

however, virtually all condominium projects in Indiana have fewer
than four stories.^^^ In high-rise construction, almost all of the

common property is involved in the mutual support of other units or
the furnishing of other services common to all of the coowners;
however, in low-rise construction, the emphasis is on individual use of
common and limited common property with almost no need for
support or the furnishing of common services. ^^^ In fact, in low-rise

^^Indiana allows a deduction from real property assessment of up to $1,000.00 in
the event such property is encumbered by a mortgage. Id. § 6-1.1-12-1 (Burns Supp.

1976). Thus, the Indiana General Assembly has increased the ability of persons to own
>'eal property in Indiana.

^^Interest and real property taxes are deductible from the federal income tax of
typical homeowners. I.R.C. §§ 163(a), 164(a)(1).

looSee IND. Code § 32-l-6-2(a) (Burns 1973), as set forth in note 20 supra. An
excellent discussion of this problem can be found in Bruce, Eleven Years Under the
Indiana Horizontal Property Act, 9 Val. U.L. Rev. 1, 17, 21 (1974).

^"^Upon separation from the HPA, the horizontal property regime would have no
existence and much of the documentation upon which the interests of the coowners
depend would be rendered highly ambiguous, most notably the deeds of conveyance

from the declarant.
^°^See Model Statute, supra note 23.
^"^For example, in Indianapolis there are no condominiums containing more than

three stories.

^°^Many units in low-rise construction are of "ranch" design, having no other units

above or below them.



1977] CONDOMINIUM PROPERTY 713

construction many parts of the property which are normally
constructed outside of an ''enclosed" apartment space are designed
and intended solely for the use of one or two units, such as
air conditioning compressors, covered parking, patios and fences,
utility extensions, meters, foundations, roofs, and exterior walls. To
attempt to legally describe each and every physical part of the
"external" property which is to be held in fee simple would obviously
be unreasonably difficult, if not impossible.

The Florida Condominium Act has addressed this very problem
of unit description and adopted a very liberal definition of "unit"^^^
and ''residential condominium."^^^ The emphasis in Florida is placed
on the intended use of the property in determining which parts of the
property not enclosed within the walls of the unit are deemed to be
included within the fee simple estate of the coowner.

The obvious solution to the problem in Indiana is to redefine in

the HPA the permissible extent of the fee simple portion of the
coowner's estate. Definitions of "apartment" which rely on the

intended use of the property have been found in declarations in

Indiana^^"^ and, from the point of view of decreasing the amount of

i'^sFla. Stat. Ann. § 718.103(16) (West Supp. 1977) provides: " 'Unit' means a part
of the condominium property which is subject to exclusive ownership. A unit may be
in improvements, land, or land and improvements together, as specified in the

declaration."
106

"Residential condominium" means a condominium consisting of condo-
minium units, any of which are intended for use as a private temporary or
permanent residence, except that a condominium is not a residential
condominium if the use for which the units are intended is primarily
commercial or industrial and not more than three units are intended to be
used for private residence, and are intended to be used as housing for

maintenance, managerial, janitorial, or other operational staff of the

condominium. If a condominium is a residential condominium but contains
units intended to be used for commercial or industrial purposes, then, with

respect to those units which are not intended for or used as private

residences, the condominium is not a residential condominium.
Id. § 718.103(18).

'^^''See Declaration of Horizontal Property Ownership, The Villas of Oakbrook
Horizontal Property Regime, supra note 34, § 4 (a):

Description of Apartments.

(a) Appurtenances. Each Apartment shall consist of all space within the
boundaries thereof as designated by the unit and building type together with

all space within the garage area . . . and all portions of the Building situated

within such boundaries . . .; provided, however, that all fixtures, equipment
and appliances designed or intended for the exclusive enjoyment, use and

benefit of an Apartment shall constitute a part of such Apartment, whether
or not the same are located within or partly within the boundaries of such
Apartment and shall be maintained by the Owner. Also, the interior surface
of all doors and windows (excluding frames) in the perimeter walls of the
Apartment and garage, whether or not located within or partly within the



714 INDIANA LAW REVIEW [Vol. 10:693

common expenses and increasing the accuracy of the definition of fee
simple property, the "intent" method appears worthy of adoption in
Indiana. If so adopted, it would be desirable to allow the broader
definition to apply retroactively to the date of the original passage of

the HPA in order to permit compliance by those horizontal property
regimes which included more property in the unit description than is
apparently permitted under current law. The present restrictive
definition of "apartment" unit in the HPA also contributes to much of
the misunderstanding in the assessing of condominium units for
purposes of real property taxation.

III. Real Property Taxation of
Condominiums and Townhouses

All real property is, with few exceptions, subject to an ad valorem
tax in Indiana. ^0^ The amount of the tax is calculated by multiplying
the assessment of the property (net of any deductions or exemptions
applicable to the property or the taxpayers)^^^ by the local tax rate,^^^
and subtracting therefrom the appropriate property tax replacement
credit. 1^1 Inasmuch as the tax rate and replacement credit rate are
supposed to be approximately equal for all similarly situated

properties, 112 property tax liability is determined in large part by the
assessed value of the property.

A general reassessment of all real property in Indiana is
scheduled for completion in the near future. ^^^ Although some other

boundaries of an Apartment, and all interior walls within the boundaries of

an Apartment and garage are considered part of the Apartment.
losiND. Code § 6-1.1-2-1 (Burns Supp. 1976) provides: "Property subject to tax.—

Except as otherwise provided by law, all tangible property which is within the

jurisdiction of this state on the assessment date of a year is subject to assessment and
taxation for that year." Id. § 6-1.1-1-19 provides: " ' Tangible property' defined.

—

'Tangible property' means real property and personal property as those terms are
defined in this chapter." Id. § 6-1.1-1-15 provides:

"Real property" defined.—"Real property" means:

(1) land located within this state;

(2) a building or fixture situated on land located within this state;

(3) an appurtenance to land located within this state; and

(4) an estate in land located within this state, or an estate, right or
privilege in mines located on or minerals, including but not limited to oil or

gas, located in the land, if the estate, right, or privilege is distinct from the
ownership of the surface of the land.

109/d §§ 6-1.1-10-1 to -38, -12-1 to -28.

iio/d §§ 6-1.1-17-1 to -19.

^^Ud. §§ 6-1.1-21-1 to -12. Rather than operating as a reduction in assessment, the
replacement credit is a direct reduction in the amount of tax owed by every taxpayer in
the taxing district, e.g., each taxpayer is to receive a twenty percent reduction in the
amount of tax payable.

112IND. Const, art. 10, § 1.

113IND. Code § 6-l.l-4-4(a) (Burns Supp. 1976) provides in part: "A general
reassessment of the real property of all counties of this state shall begin January 1,



1977] CONDOMINIUM PROPERTY 715

states profess to reassess each property at market value every year,
Indiana attempts to assess each property much less frequently. ^'"^ All
real property is assessed at the time of general reassessment^ ^^

according to a set of standardized values promulgated by regulation

and incorporated into the Indiana Real Estate Property Appraisal
Manual by the Indiana State Board of Tax Commissioners. ^^^ After a
complete reassessment has been accomplished for all existing

properties it is theoretically possible to add newer properties to the
tax assessment rolls by assessing them according to the values which
were found in the 1968 Appraisal Manual used for the previous
complete reassessment. The intended effect is to assess new
properties at the values they would have had if they had been erected
at the time of the last general reassessment.

Traditionally, at the commencement of each general reassess-
ment a new manual is prepared in order to realign each type of
property in relation to other types on the basis of "value. "^^'^ In the

past, such manuals have contained a great deal of cost-oriented data
for use by the field assessors, but very little data related to resales of
existing properties or calculation of the economic value of income-
producing property.118 The 1968 Appraisal Manual is very influ-
ential upon the assessing officials and it is unusual for them to assess
anything not described in the 1968 Appraisal Manual or to select

1976. This reassessment shall be completed on or before March 1, 1978 and shall be the
basis for the taxes payable in 1979."

i^'»/d, third sentence, provides: "A similar reassessment of real property shall
begin January 1, 1982, and each sixth [6th] year thereafter."

^^^M, as set forth in note 113 supra.

^^^Id. § 6-1.1-31-1 provides for the prescription and promulgation by the Indiana

State Board of Tax Commissioners [hereinafter referred to as the Board] of various
forms, rules, and regulations, including those "concerning the assessment of tangible

property." Under former law, 1961 Ind. Acts, ch. 319, § 1401 at 927 (amended by 1963
Ind. Acts, ch. 333, § 29 at 824, to substantially the same effect as the above), the Board
adopted on February 29, 1968 an amendment to Regulation No. 17, entitled "Indiana
Real Estate Property Appraisal Manual." 1 Burns' Ind. Admin. Rules and Regs.
Ann. § (6-1. 1-4-26)-l (1976). The full text of the new Regulation No. 17 is reproduced in
a looseleaf binder: State Bd. of Tax Comm'rs, Indiana Real Property Appraisal
Manual (1968) [hereinafter cited as 1968 Appraisal Manual].

ii^The 1968 Appraisal Manual replaced the former manual, adopted as Regulation
No. 17 on May 22, 1961: State Bd. of Tax Comm'rs, Real Estate Assessment Guide
No. 2 (2d ed. 1961).

^^^See, e.g., 1968 Appraisal Manual, supra note 116, which sets forth a few general

ideas about methods of appraising which are different from cost computation, but
stresses very heavily the weight to be given replacement cost in the final assessment:

id. at R57, and R69 (Residential), C1-C2 (Commercial and Apartment), II (Industrial),
and F1-F4 (Agricultural and Rural).



716 INDIANA LAW REVIEW [Vol. 10:693

values contrary to those listed therein.^^^ In fact, the law is quite

strict in its requirements for disclosure by such officials should they

select criteria for valuation other than those available in the 1968

Appraisal Manual.^^o

While the ad valorem tax has been a source of state revenue from

the beginning, 121 it is unremittingly subject to scrutiny and revi-

sion, ^22 gven to the point of constitutional amendment, i^s Recent

changes have placed much responsibility and decision-making power
in the hands of the Board. ^^4 Whether this responsibility can be

fulfilled in respect to condominium and townhouse assessment is not

known at this time because the 1976 Appraisal Manual now being
used for the general reassessment represents a substantial change

from the 1968 Appraisal Manual. ^^s ^p^g discussion below will

ii^lND. Code § 6-1.1-31-5 (Burns Supp. 1976) provides:
Bases for determining true cash value.—

(a) The rules and regulations promulgated by the state board of tax

commissioners are the basis for determining true cash value. Local assessing

officials shall:

(1) comply with the rules, regulations, appraisal manuals, bulletins,

and directives adopted or promulgated by the state board of tax commis-

sioners;

(2) use the property tax forms, property tax returns, and notice forms

prescribed or promulgated by the board; and,

(3) collect and record the data required by the board.

120M § 6-l.l-31-5(b) provides:

In assessing tangible property, the township assessors may consider
factors in addition to those prescribed by the state board of tax commis-

sioners if use of the additional factors is first approved by the board. Each
township assessor shall indicate on his records for each individual assess-

ment whether:

(1) only the factors contained in the board's rules, regulations, forms,

and returns have been considered; or

(2) factors in addition to those contained in the board's rules, regu-

lations, forms and returns have been considered.

121IND. Const, art. 10, § 1.

i22For example. Pub. L. No. 47, § 1, 1975 Ind. Acts 247, recodified the entire

property tax article, current version at iND. Code §§ 6-1.1-1-1 to -37-13 (Burns Supp.
1976), and made many substantive changes.

123A most significant recent constitutional amendment permited for the first time
the exemption from taxation of certain classes of tangible personal property,

intangible personal property, motor vehicles, mobile homes, airplanes, boats, trailers

and similar property. iND. Const, art. 10, § l(a)(2)-(3), (b) (amended 1966).
124IND. Code § 6-1.1-31-5 (Burns Supp. 1976), as set forth in notes 119 and 120

supra.

^25lt will require about two years to reassess all of the real property in Indiana,
during which time it may be possible to analyze whether or not the use of the new
manual has resolved the questions hereinafter raised. The new manual does not,
however, appear to contain any sections dealing only with condominiums. State Bd.
OF Tax Comm'rs, Indiana Real Property Appraisal Manual (1976) [hereinafter
cited as 1976 Appraisal Manual]; but see id. at RF-03, RF-04.



1977] CONDOMINIUM PROPERTY 717

concentrate on the techniques currently used for assessing multi-

family buildings, a comparison of these methods with the current

law, and suggestions for amendments to the applicable statutes and

regulations in order to provide for a more equitable method by which

to assess condominiums.

A. The Effect of Taxation

For many Indiana property owners the amount of real property
tax paid each year is the largest single expense of home owner-
ship. ^-^^ Accordingly, it is not surprising that the relative obligation

for real property taxes payable can significantly affect the market
value of property. ^27 ^he effect of an excessive real property tax
obligation can be financially devastating to an owner of a large parcel
of real property; similarly, the owner of a smaller parcel may find
that unusually high real property taxes may cause his home to have a
lower resale value than would otherwise have been the case. The
Indiana Constitution would appear to have adopted an approach
requiring assessing officials to use their sound judgment in determin-
ing the relative values, and hence the relative assessed value, of
property. ^28 ^ jg difficult to see how an approach utilizing sound
judgment could lead to the conclusion that condominium properties
having significantly different market values should receive similar
or equal assessments merely because such properties also include an
equal percentage of undivided interest in certain common property.
Unfortunately, it is the latter approach which prevails in the current

assessing practices of condominiums in Indiana. ^^g ^g ^ result, to the
extent that the percentages of undivided interest as set forth in the

declaration do not represent the respective fair market values of the
various units, those units with high percentages of undivided interest

i26Mortgage payments may or may not be greater than the property tax; however,
mortgage payments represent a repayment of money borrowed, not an incidence of

home ownership. Utility expenses may foreseeably exceed property tax obligations in
some cases.

i27For instance, at a home mortgage interest rate of nine percent per annum, the

mortgage payment for principal and interest is equal to about ten percent of the

amount borrowed on the mortgage note. If, therefore, a buyer were comparing two

properties of equal size and condition, one property having annual property taxes

equal to an amount $100 greater than the other, the buyer would be justified in paying

$1,000, or ten times the annual difference in real property taxes, more for the property

with the lower taxes. This is an example of a reverse multiplier.

128IND. Const, art. 10, § 1 provides in part: "Assessment and taxation.—(a) The

General Assembly shall provide, by law, for a uniform and equal rate of property

assessment and taxation and shall prescribe regulations to secure a just valuation for

taxation of all property, both real and personal."

i29For example, compare the methods used in Exhibits D and E to Exhibit C
infra.



718 INDIANA LAW REVIEW [Vol. 10:693

and low total market values will bear an inequitably larger share of
the real property tax burden than those with low percentages of
undivided interest and high market values. ^^^

B. Current Methods of Assessing Multi-Family Dwellings

Although the 1968 Appraisal Manual occasionally makes refer-
ences to other methods of appraising, ^^^ the bulk of the 1968
Appraisal Manual deals with estimating the depreciated replace-
ment cost of improvements. ^^2 j^ addition, although taxes are
imposed on the owners of the assessed real property, ^^^ the 1968
Appraisal Manual does not provide a method of separating a given
parcel of real property according to various ownership interests,
particularly where such ownership interests are of the type typically
found in condominiums. The following four examples indicate the
various ways in which the same hypothetical parcel of real property
might have been assessed under current practice, depending on the
manner of ownership.

1. Current Assessment Method for Apartments

There is a standard assessment method used for assessing
apartment projects in Indiana. ^^^ In making such an assessment, the
assessing official will typically follow these steps:

a. Visit the property and make note of the physical dimensions
of buildings, garages, porches, patios and the like.

b. Count the number of special features, such as fireplaces,
extra plumbing fixtures, air conditioners and the like.

c. Observe the percentage of brick exterior as opposed to mere
frame exterior, observe the general level of quality and design and
make note of estimated depreciation.

^30For example, compare Units A and D on Exhibits C and D infra.
^^^See note 118 supra.

i32To find depreciated replacement cost the 1968 Appraisal Manual sets forth

ranges of various cost factors to be applied to the areas of the buildings being assessed.

The cost factors are found in the 1968 Appraisal Manual, supra note 116, at R62-R64,

C52, C67, 135-136, and F49-F50, and vary according to the type of property being

assessed. Unfortunately, not all possible forms of improvement may be covered in any
manual; therefore, the assessing official must use his judgment in either assigning a
value to something not covered in the 1968 Appraisal Manual or disregarding it for tax
purposes.

133IND. Code § 6-l.l-2-4(a) (Burns Supp. 1976) provides: "The owner of any
tangible property on the assessment date of a year is liable for the taxes imposed for

that year on the property."

i34Exhibit B infra is an example of the standard method. See generally real
property assessments for various apartment projects located in Pike and Washington

Townships, Marion County, Indiana, available at the respective Township Assessors'

offices in the City-County Building, Indianapolis, Indiana.



1977] CONDOMINIUM PROPERTY 719

d. Using some of the above data, estimate from the Apartment
Pricing Schedule^^^ the cost per square foot per floor of the building.

e. Add air conditioning as an additional cost factor per square
foot.

f. Multiply the total square foot cost factor by the appropriate

number of square feet to find a subtotal base value before additions.
g. Add all additional appropriate items, such as patios, to the

subtotal base value. The cost factors for these items are found in the
Commercial or Residential sections of the 1968 Appraisal Manual. ^^e

h. Multiply the total of the above amounts by a "Grade
Factor"^37 which is based upon the judgment of the assessing official
as to the relative quality of the building.

i. Multiply the above result by a cost and design factor to adjust
for quality of design and cost differences based on the county where
the real property is located. ^^^

j. Allow for estimated depreciation. ^^^ The result is known as
the "true cash value" of the improvements.

k. Divide the above true cash value by three to find the assessed

value of the improvements. ^^^

1. Multiply the land area of the project, usually expressed in

acres, by the standard value per acre used in the general locale for

apartment land. The value per acre is generally fixed at the time of
general reassessment by the Board and not varied within a district,

regardless of differences in location, topography, or desirability. The
result is known as the true cash value of the land.

m. Divide the true cash value of the land by three to find the
assessed value of the land.^^^

n. The true cash values of improvements and land are added to
find the total true cash value of the property. The assessed values of
improvements and land are added to find the total assessed value of
the property. The tax rate is applied only to the total assessed value.

2. Current Assessment Method for Townhouses

A standard method for assessing townhouse projects has also
developed in Indiana. ^^^ j^ many ways this method is identical to that

^35See 1968 Appraisal Manual, supra note 116, at C67, reproduced as Exhibit A
infra.

'^Id. at C1-C2, C57-C67, R4-R5, and R57-R59.
i3Vd at R4-R6.

'^Id. at R7.

139/d at R57-R59.

140IND. Code § 6-1.1-1-3 (Burns Supp. 1976).

'*2An example of the standard townhouse assessment method, applied to the same
hypothetical project as the apartment method, is contained in Exhibit C infra. This



720 INDIANA LAW REVIEW [Vol. 10:693

used for assessing apartment projects; however, there are a few
significant differences:

a. Instead of applying cost factors to the building as a whole,

similar factors are applied to each townhouse unit, measured to the
centerlines of party walls^^^^ and the outside of exterior walls.

b. Additional features are assigned individually to the town-

house units instead of spreading the value of such features uniformly

over the entire project.

c. A separate tax parcel is created for the common property
which, as mentioned above, is typically owned by a not-for-profit
corporation.

d. The land owned by each townhouse owner is separately
assessed to such owner together with the total for his respective
townhouse unit. Thus, each townhouse owner pays a tax computed on
his own unit, including all improvements and a separate parcel of
land. Each townhouse owner also shares in the payment of the real
property tax on the common property by payment of his monthly
common charge to the not-for-profit corporation.

3. Current Assessment Method for Condominiums
Using Percentage Interest for Allocation

Two methods of assessing condominiums have been developed by
the Board. The first method^^^^ is identical to that used for assessing
apartment projects, except that in dividing the total assessed value of
the project among the various coowners the Board apportions the
assessed value on the basis of the percentage of undivided interest

which each coowner owns in the common property. While this
method may be appropriate for allocating the assessed value of the
common property to the unit owners, it is obviously inappropriate for
allocating those parts of the property owned in fee simple, for in many
cases the percentages of undivided interest will have no relation to
the relative values of the fee simple estates. The fact that such a

n^ethod is similar to the one employed on Chatham Walk townhouses, as found in the
Office of the Warren Township Assessor, located in the City-County Building,
Indianapolis, Indiana.

^*^A party wall is one which separates two units from each other, as opposed to a

wall located entirely within a unit or an exterior wall.

^^^An example of this type of condominium assessment method, applied to the

same hypothetical project as the apartment method, is contained in Exhibit D infra.
This method was applied to the Lake Forest Horizontal Property Regime property, the

assessments of which are located in the Office of the Pike Township Assessor, located

in the City-County Building, Indianapolis, Indiana. A joint appeal by the declarant
and the coowners to the county board of review has resulted in a revision of the

assessment substantially in conformance with the method demonstrated in Exhibit F
infra.



1977] CONDOMINIUM PROPERTY 721

method may be simple for the assessing official and easily understood
by the taxpayer is superficially persuasive; however, it should not be

allowed to be conclusive.

4. Current Assessment Method for Condominiums
Deducting Fifty Percent Fee Before Allocation

The second method^"^^ used in Indiana for assessing condo-
miniums is identical to that used for townhouses up to but not
including the point of determining the true cash value of the

improvements. Under this method, the assessing official arbitrarily
allocates one-half of the buildings to the common property true value
and apportions the new sum of all common property true value to the
units according to their respective percentages of undivided interest

in the common property. Use of this method appears more often in
buildings where there are semi-public halls contained within the
buildings. The values of the halls are also estimated separately and
allocated to the common property. This method may provide less
distortion of assessed value vis-a-vis market value; however, it suffers
from many of the same basic inequities and legal difficulties as the
first method for assessing condominiums.

C. The State of the Law
In order to provide more meaningful guidance to assessing

officials in their task of equitably distributing the property tax

burden among condominium coowners, the Indiana General Assem-
bly should (1) carefully redefine "assessed value" for purposes of

property tax law, (2) redefine "apartment" under the HPA in terms
such that it may be assessed according to typical assessment methods,
and (3) set forth the limits of "discretion" which may be exercised in
assessing condominiums before the assessing officials become subject
to judicial criticism.

1. The Requirement of Separate Tax Parcels

It is perhaps less time-consuming to assess an apartment building

as a whole than to divide it into various hypothetical parts. Similarly,

as the number of tax parcels increases the amount of time and money
required to maintain proper records and process tax bills increases.

However, both the HPA and the property tax laws prescribe that

i^^An example of this second type of condominium assessment method, applied to

the same hypothetical project as the apartment method, is contained in Exhibit E
infra. This method was applied to the Kings Cove Horizontal Property Regime

property, the assessments for which are located in the Office of the Washington

Township Assessor, located in the City-County Building, Indianapolis, Indiana.



722 INDIANA LAW REVIEW [Vol. 10:693

each owner is under a personal obligation to pay his own taxes, ^^^

whatever they may be, thus requiring the assessing official, with few
exceptions, to divide the real property assessment according to legal

ownership.

2. Difficulty of Administrative and Judicial Relief

The requirement of separate parcels may prove to be a disad-
vantage for the coowner as well. When combined with the additional

i46As set forth in the HPA:
Taxes and assessments.—Taxes, assessments and other charges of this state,

or of any political subdivision, or of any special improvement district, or of

any other taxing or assessing authority shall be assessed against and

collected on each individual apartment, each of which shall be carried on the

tax books as a separate and distinct entity for that purpose, and not on the

building or property as a whole. No forfeiture or sale of the building or
property as a whole for delinquent taxes, assessments or charges shall ever

divest or in anywise affect the title to an individual apartment so long as

taxes, assessments and charges on said individual apartment are currently

paid.

IND. Code § 32-1-6-17 (Burns 1973). As set forth in respect to property tax:
"Owner" defined.—(a) For purposes of this article [6-1.1-1-1 — 6-1.1-37-13],
the "owner" of tangible property shall be determined by using the rules

contained in this section.

(b) Except as otherwise provided in this section, the holder of the legal

title to personal property, or the legal title in fee to real property, is the owner
of that property.

(c) When title to tangible property passes on the assessment date of any
year, only the person obtaining title is the owner of that property on the
assessment date.

(d) When the mortgagee of real property is in possession of the
mortgaged premises, the mortgagee is the owner of that property.

(f) When a life tenant of real property is in possession of the real
property, the life tenant is the owner of that property.

Id. § 6-1.1-1-9 (Burns Supp. 1976); id. § 6-1.1-1-15 (1) (definition of real property) and id

§ 6-1.1-1-19 (definition of tangible property), as set forth in note 108 supra; id. § 6-1.1-2-4

("Person liable for taxes"), as set forth in note 133 supra; id. § 6-1.1-4-1 provides: "Place

of assessment—To whom assessed.—Real property shall be assessed at the place where
it is situated, and it shall be assessed to the person liable for the taxes under IC 1971, 6-

1.1-2-4 [Id. § 6-1.1-2-4]"; id. §§ 6-1.1-4-2, -3. Under former law as under current law,
general taxes were a personal liability of the owner. The courts have held that such
personal liability did not by itself relieve the real property from the property tax lien
without payment of the tax. Schofield v. Green, 115 Ind. App. 160, 56 N.E.2d 506
(1944). It was early established that the owner of property, as evidenced by the legal
title, as of the assessment date, the first day of March, is the person liable for payment
of the property taxes levied thereon for that year, even though not due and payable
until the next succeeding year. Riggs v. Board of Comm'rs, 181 Ind. 172, 103 N.E. 1075
(1914); Mullikin v. Reeves, 71 Ind. 281 (1880); City of Richmond v. Scott, 48 Ind. 568
(1874); see Lose v. State, 72 Ind. 285 (1880); King v. City of Madison, 17 Ind. 48 (1861);
Corr V. Martin, 37 Ind. App. 655, 77 N.E. 870 (1906).



1977] CONDOMINIUM PROPERTY 723

requirement that appeals of assessments must be brought by
taxpayers, ^'^'^ the above requirement would indicate that a condo-
minium coowner is at a disadvantage under the current method of
assessing condominiums, for he must be prepared to challenge the
assessment of the entire property, not just his unit.^^^ The burden of
proving that the total assessment is unjustified would be much more
difficult for a large project than for one house. ^''^ The alternatives for
the complaining taxpayer are to organize as many of his coowners as
possible for a joint appeal or convince the Board of Directors of the
coowners' association to prosecute the appeal. ^^^ A successful class

^'''Standing appears to be required to the extent that in order to "obtain a review

by the county board of review of a county or township official's action with respect to

the assessment of the taxpayer's tangible property" the complainant must be the

taxpayer. IND. CoDE § 6-1.1-15-1 (Burns Supp. 1976). To "obtain a review by the state
board of tax commissioners of a county board of review's action with respect to the

assessment of that taxpayer's tangible property" the complainant must be the taxpayer.

Id. § 6-1.1-15-3. But the "appeal" of "the state board of tax commissioner's final deter-

mination regarding the assessment of his tangible property" may be taken by "[a]
person. " Id. § 6-1.1-15-5. It is probably intended that the "owner" is the person entitled

to prosecute the appeal, regardless of level. Id. § 6-1.1-2-4. The courts of Florida have

inferred the same view. Cf. Commodore Plaza at Century 21 Condominium Ass'n, Inc.
V. Saul J. Morgan Enterprises, Inc., 301 So. 2d 783 (Fla. Dist. Ct. App. 1974)
(condominium association held to have no standing to bring a quiet title action on

behalf of the coowners); Hendler v. Rogers House Condominium, Inc., 234 So. 2d 128

(Fla. Dist. Ct. App. 1970) (no class action to quiet title to common property in the
coowners was allowed).

^•^See, for example, the calculation of individual assessments based entirely upon

a total assessment, as in Exhibit D infra, and the even more complex adjustments
involved in the assessment shown in Exhibit E infra.

^•^^Ordinarily, the burden of proof is on the complainant. However, the
complainant must prove more than that the contested assessment is somehow
inappropriate; rather, he must allege and prove that the assessing official acted
arbitrarily and capriciously in assessing the property. If he does not fulfill this second

requirement, the court will not change the assessment of complainant's property,

regardless of how unreasonable it may appear when compared to other similar
properties. State Bd. of Tax Comm'rs v. Traylor, 141 Ind. App. 324, 228 N.E.2d 46
(1967). The Traylor case is approvingly cited in the 1968 Appraisal Manual, s^ipra
note 116, at 29.

^^Although the HPA appears to grant standing to the coowners' association board
of directors for this purpose, this does not mean that an aggrieved taxpayer has an
unlimited right to compel the Board of Directors to prosecute tax assessment appeals.

Suits on behalf of apartment owners—Service of process upon apartment
owners.—Without limiting the rights of any apartment owner, actions may
be brought by the manager or board of directors, in either case in the
discretion of the board of directors, on behalf of two [2] or more of the
apartment owners, as their respective interests may appear, with respect to
any cause of action relating to the common areas and facilities or more than
one apartment. Service of process on two [2] or more apartment owners in
any action relating to the common areas and facilities or more than one
apartment may be made on the person designated in the declaration to
receive service of process.

iND. Code § 32-1-6-30 (Burns 1973).



724 INDIANA LAW REVIEW [Vol. 10:693

action would appear unlikely because of the possibility that not all

members of the class would gain from successful prosecution of the
appeal. 1^1 Therefore, an assessment would probably be appealed only

when a majority of the coowners were adversely effected by the
property tax assessment and instructed the Board of Directors to act

on their behalf. The expenses of such an appeal could be borne as a
common expense. ^^^

3. Effective Date of Valuation v.

Effective Date of Assessment

Another issue involves the proper assessment of nonagricultural

land.i^^ Under the present statute^^^ land is to be reassessed upon any
change in use or zoning. In contrast, improvements are only required

to be reassessed upon a change in the physical structure. ^^^ In the

past, the 1968 Appraisal Manual has made it possible to add new
improvements to the tax rolls at assessed values similar to those of

older properties;!^^ however, because the 1968 Appraisal Manual
does not set forth the values to be applied to vacant land, some doubt
has been raised as to whether such land, when put to a new use or
rezoned, should be added to the tax rolls at its current market value

or at the market value it would have had if its new use had been
effective on the date of the last general reassessment. ^^^ If the land is

reassessed at its current market value, then the combined effects of

isilND. R. Tr. p. 23(a)(1), (2), (4).

152IND. Code § 32-l-6-2(g) (Burns 1973).
^^^Id. § 6-l.l-4-13(a) (Burns Supp. 1976) provides: "In assessing or reassessing

land, the land shall be assessed as agricultural land as long as it is devoted to

agricultural use." By implication, all land not devoted to agricultural use would be
classified as nonagricultural land. The effective date of all assessments is March 1st.
Id. § 6-1.1-1-2.

154

Reassessment of subdivided and rezoned land.—If land assessed on an
acreage basis is subdivided into lots, the land shall be reassessed on the basis

of lots. If land is rezoned for, or put to, a different use, the land shall be

reassessed on the basis of its new classification. If improvements are added
to real property, the improvements shall be assessed. An assessment or
reassessment made under this section is effective on the next assessment date.
However, if land assessed on an acreage basis is subdivided into lots, the lots
may not be reassessed until the next assessment date following a transaction
which results in a change in legal or equitable title to that lot.

Id. § 6-1.1-4-12 (emphasis added).

i^^The effective date for determining the value of all improvement assessments is
set at January 1967. See the 1968 Appraisal Manual, supra note 116, at R7.

,

157IND. Code § 6-1.1-4-12 (Burns Supp. 1976), fourth sentence, as set forth in note
154 supra, is ambiguous in respect to the point in time of valuation of the land, as
opposed to the date the reassessment changes the tax rolls.



1977] CONDOMINIUM PROPERTY 725

infrequent general reassessments and rapid inflation of land values
will cause many landowners to pay more than their proper share of
property tax.^^*^ Surely it is well-recognized that land value is

determined by more factors than simply its present use or zoning
status.^^^ Therefore, it seems unwise to allow two such narrow factors

to so greatly influence the assessing procedure and valuation.

Perhaps in partial recognition of the inequity of this provision, the

most recent amendment^^^^ to this section of the statute relieved

subdivision developers from the reassessment of their newly-devel-
oped lots until such time as the lots had been sold.^^^ Unfortunately

the amendment did not specify whether at the time of such
reassessment to use the current or historic values of the lots.^*^^ This

question is important to condominium developers because it typically
requires a period in excess of two years to rezone, build and finally

sell all of the units in a project of average size. The obviously harmful
effects of this discriminatory valuation process, if so applied by the

assessing official, would be contrary to the apparent intent of the law.

4. Determination of Correct Assessed Value

Before using a term such as "assessed value" it is necessary to
define "value." Unfortunately, the Indiana General Assembly and
the courts appear to disagree as to both the underlying definition of
"value" and who shall have the final right to define it.

a. Market Value vis-a-vis True Cash Value

Currently, "assessed value" is defined in the law as one-third of
"true cash value."^^^ However, "true cash value" is not defined
therein. The search for judicial interpretation of "true cash value"
reveals that the basic constitutional directive for determining the
proper valuation of property for purposes of taxation has remained
unchanged since the passage of the Indiana Constitution of 1851:
"The General Assembly shall provide, by law, for a uniform and
equal rate of property assessment and taxation and shall prescribe

i^A similar situation is examined in note 38 supra.
is^American Institute of Real Estate Appraisers, The Appraisal of Real

Estate 1-2 (5th ed. 1967) lists 24 forces which create value.
leopub. L. No. 49, § 1, 1975 Ind. Acts 470.
le^lND. Code § 6-1.1-4-12 (Burns Supp. 1976), fifth sentence, as set forth in note 154

supra.

^^^Id. § 6-1.1-1-3 provides: " 'Assessed value' or 'assessed valuation' defined.—

'Assessed value' or 'assessed valuation' means an amount equal to thirty-three and one
third percent [33 1/3%] of the true cash value of property,"



726 INDIANA LAW REVIEW [Vol. 10:693

regulations to secure a just valuation for taxation of all property, both

real and personal."^^^ The question of whether an assessment of a
specific property was correct has more often than not become
overshadowed by other issues in the same litigation, such as whether
"value" meant "true cash value" or "assessed value,"i^^ or the
definition of "true cash value."^^^ Thus, neither the courts nor the

Indiana General Assembly have forthrightly defined the consti-
tutional requirement as one requiring that all property must be
assessed at its "market value"^^'^ or some fraction thereof. ^^^

In contrast, the courts of Florida have avoided this difficulty by
defining "assessed value" as "fair market value" concomitant with
interpreting a constitutional section almost identical to that of the

Indiana Constitution. ^^^ The Florida legislature, in a manner similar
to that of Indiana, has delegated to an administrative agency the duty

to determine assessment standards. However, the regulations

164IND. Const, art. 10, § 1.

i65See Allen v. Van Buren Twp., 243 Ind. 665, 184 N.E.2d 25 (1962), in which
carefully chosen words were presumed to have been used in the Indiana Constitution,

e.g., "just valuation." In holding that "value" in art. 13, § 1 of the Indiana Constitution

means one-third of that value found by use of the rules and regulations of the Board,

the supreme court disassociated the definition of "value" from its connection with the

market place and associated it with government-created standards for some purposes.
i66See Smith v. Stephens, 173 Ind. 564, 91 N.E. 167 (1910).
levSee State Bd. of Tax Comm'rs v. Chicago, Mil., St. P. & Pac. R.R., 121 Ind. App.

302, 310, 96 N.E.2d 279, 283 (1951), wherein it was held that the taxpayer was not
entitled to the lowest assessed value which could be found by all various methods of

appraising, and that the Board need not apply specified methods or use specified facts

in reaching its decision if the final result is not fraudulent, capricious or arbitrary,

citing Southern Ry. v. Watts, 260 U.S. 519, 527 (1923). The Board appears to have used
decisions such as this to relieve it of any requirement to achieve market value in its

assessments. This case is set forth as an example of the above proposition in the 1968

Appraisal Manual, supra note 116, at 29.
i^^Some older holdings appeared to define "true cash value" in terms which might

be construed as implying "market value." In Willis v. Crowder, 134 Ind. 515, 34 N.E.

315 (1893), the supreme court interpreted the meaning of "true cash value" contained
in former Rev. Stat. 1881, § 6330, to be equal to "market selling price"; however, the

court held that if there were no market for the property, the "true cash value" was to be
defined as the actual value to the owner, as set forth in the owner's statement of

assessment. See Allen v. Van Buren Twp., 243 Ind. 665, 681-84, 184 N.E.2d 25, 32-34
(1962) (dissenting opinion), wherein Landis, J., expressed the view that "value" was
most frequently interpreted to mean "market value," e.g., related to the sale of
properties, as perhaps opposed to "assessed value" or other artificially constructed
"values"; Smith v. Stephens, 173 Ind. 564, 91 N.E. 167 (1910), wherein it was held that
the fact that all other property may be undervalued is irrelevant to the legal mandate
that property be assessed at full cash value, State ex rel. Lewis v. Smith, 158 Ind. 543,

565, 63 N.E. 25, 216 (1902) (dissenting opinion), citing Willis v. Crowder.

^^^Compare Fla. CONST, art. VII, § 4 with Ind. Const, art. 10, § 1. Fair market
value has been defined as "the amount a 'purchaser willing but not obligated to buy,
would pay to one willing but not obligated to sell.' " Walter v. Schuler, 176 So. 2d 81, 86

(Fla. 1965), quoting Root v. Wood, 155 Fla. 613, 618, 21 So. 2d 133, 138 (1945).



1977] CONDOMINIUM PROPERTY 727

promulgated by said agency are no longer deemed to be prima facie
in conformance with the Florida Constitution but merely "deemed
prima facie correct."^^^ In addition, the Florida Department of
Revenue, an administrative agency similar to the Indiana State
Board of Tax Commissioners, is required by statute to prepare a
manual for assessments which is continually revised^"^^ in order to
permit assessments to be at correct levels of "just valuation. "^^2 xhe
courts of Florida seem to have accepted the idea that the legislature
has the power to define "market value." This follows from the fact

that the courts will set aside an assessment only when there is an
allegation that the assessment was not in compliance with the statute,
rather than permitting a challenge to the constitutionality of the

definition of market value as expressed in the statute. ^^^

As mentioned above, the Indiana General Assembly has attempted
to define "uniform and equal rate of property assessment''^"^^ and "just
valuation"!"^^ by delegating to the Board^'^^ the authority to establish
regulations for determining such values. ^^"^ The 1968 Appraisal
Manual reproduces the statutory language setting forth the methods
and instructions for classifying and valuing real property for the use
of the assessing official. ^'^^ However, in many assessment appeals^ the
question initially raised before the county board of review^^^ is not

^'^C(mivare Fla. Stat. Ann. § 195.032 (West Supp. 1977) 'with id. (West 1971).

i^iPLA. Stat. Ann. §§ 195.042, 195.052 (West 1971).
i'^2Fla. Const, art. IX, § 1 (current version at id. art. VII, §§ 2 and 4); as

interpreted in Walter v. Schuler, 176 So. 2d 81 (Fla. 1965).

I'^^The courts do not decide the ultimate constitutional issue of whether or not the

contested assessment is equal to "market value." See Powell v. Kelly, 223 So. 2d 305,

308 (Fla. 1969), in which the court announced the rule that it would not overturn an

assessment made pursuant to the guidelines of the statute unless the complainant
establishes bad faith and essential inequality or unjustness of the assessment by

allegation and proof, to the exclusion of every reasonable hypothesis of legal

assessment; Dade County v. Salter, 194 So. 2d 587, 591 (Fla. 1967), in which the court

set up a potentially enormous burden of proof for the complainant when it stated that
he might obtain a reduction in assessment if he could prove that the assessing official

had systematically valued property in his jurisdiction at less than 100 percent of fair

market value, citing Sioux City Bridge Co. v. Dakota County, 260 U.S. 441 (1923). The

assessed value is supposed to be "fair market value." Walter v. Schuler, 176 So. 2d 81,
85-86 (Fla. 1965); Lanier v. Overstreet, 175 So. 2d 521 (Fla. 1965); Graham v. City of
West Tampa, 71 Fla. 605, 71 So. 926 (1916); McArthur Jersey Farm Dairy, Inc. v. Dade
County, 240 So. 2d 844, 847 (Fla. Dist. Ct. App. 1970).

i^^iND. Const, art. 10, § 1(a).

176IND. Code §§ 6-1.1-31-1, -2-2 (Burns Supp. 1976).
i7v/d § 6-1.1-31-5, as set forth in notes 119-20 suprO'.

i785ee 1968 Appraisal Manual, supra note 116, at 17-18.

^'^The county board of review is the first level of appeal for an aggrieved taxpayer.

IND. Code §§ 6-1.1-13-1, -6 (Burns Supp. 1976).



728 INDIANA LAW REVIEW [Vol. 10:693

whether the assessing official acted in accordance with the statute
and regulations, but rather the justness of the assessed value of the
complainant's property in relation to similar properties. ^^^ xhis type

of appeal, therefore, consists of an allegation that the assessment of
complainant's property is "too high" vis-a-vis some ascertainable
standard of "value" other than that contained in the 1968 Appraisal

Manual. In real property appraisal terminology, the question would
be whether or not the assessment was supposed to approximate
"market value"^^^ or be left to the discretion of the assessing official
within the limitations of the 1968 Appraisal Manual. Thus, the
challenge is very often necessarily directed not at the actions of the

assessing official but rather at the regulations as contained in the

1968 Appraisal Manual.

Assuming that the Indiana Constitution requires that real
property assessments should bear a direct correlation to market
value, the question then becomes one of deciding if the current
assessment practices typically develop market value. An accurate
estimate of market value is often a difficult undertaking. As a result,
several professional real property appraisal groups have been formed
in an effort to standardize and organize the appraisal of real estate. A
comparison of the professionally accepted definition of market value
with the operation of the assessment system in Indiana reveals some
interesting dissimilarities. All major professional real estate
appraisal organizations would agree with the definitions of "market
value" published by the American Institute of Real Estate Apprais-
ers:

(1) [T]he highest price estimated in terms of money which a
property will bring if exposed for sale in the open market
allowing a reasonable time to find a purchaser who buys with
knowledge of all the uses to which it is adapted and for which
it is capable of being used.

(2) Frequently, it is referred to as the price at which a willing
seller would sell and a willing buyer would buy, neither being
under abnormal pressure.

(3) It is the price expectable if a reasonable time is allowed to
find a purchaser and if both seller and prospective buyer are
fully informed. 1^2

isoWith the exception of the general reassessment, the only way that a taxpayer
would know or suspect that the assessment on his property is significantly high or low
would be by comparing it to other similar properties. The reason the taxpayer would
make such a comparison is, of course, because he believes that there should be a direct
correlation between the market values and assessed values of similar properties.

^siSee the definition of "market value" in the text accompanying note 182 infra.
^82American Institute of Real Estate Appraisers, Appraisal Terminology

AND Handbook 131 (5th ed. 1967).



1977] CONDOMINIUM PROPERTY 729

These definitions all include subjective elements of judgment on the
parts of buyer and seller in arriving at the sale price.^^^ The purpose
of most real estate appraisal publications is to aid appraisers in the
accurate prediction of the market value of real property. ^^"^ The
appraiser's estimate is almost invariably communicated to his client
by written report. ^^^ Such reports will, with rare exception, contain
an extended analysis of the reasons for the appraiser's estimate. ^^^ In

this analysis the appraiser will typically indicate the consideration

given to each of the three principal methods for estimating value: the
cost approach, the income approach, and the market data approach. ^^'^

Thus, to achieve an estimate of "market value," the professional real
estate appraiser must have the knowledge and training to apply as
many as three different methods for estimating value. While there is
currently not a requirement that all persons who may testify as to
real property values must be qualified experts, there remains
considerable reliance upon such experts in eminent domain actions
and at other times when the court or the jury needs guidance with
respect to valuation of a particular property. Therefore, it would
seem reasonable that the county board of review should recognize the

183AMERICAN Institute of Real Estate Appraisers, The Appraisal of Real
Estate 20-22 (5th ed. 1967).

184/d at 2.

185/d at 3.

186/d at 373-74.

'^^'^Id. at 327-50. The extent of the consideration and the weight of the value
estimate found under each approach will depend to a great extent upon the type of
property being appraised. Id. at ^J^-ll. In valuing real property, the appraiser is

well-advised to view the property as much as possible through the eyes of the typical
buyer. For instance, the reproduction costs and sales prices of single-family residences
are typically well known to buyers and sellers, although rental and expense
information is not well known; therefore, the cost and market data approaches have
considerable validity while the income approach is almost meaningless in appraising

single-family residences. Conversely, the typical investor in income-producing

property is one who emphasizes return on investment to the exclusion of other
measures of value; therefore, because the income approach strives to achieve an
estimate of market value based upon a desired rate of return on investment, it is more
valid for these types of property than the other two approaches. Id. at 374. The
reason for this is that income-producing projects are unique in many respects and rely
on so many extraneous factors for value that it would neither be valid to compare such
projects to dissimilar property nor informative to estimate mere reproduction cost
without adjustment in each case for factors related to the determination of the value

estimated by means of the income approach. For example, the cost approach requires
an analysis of depreciation, which in turn requires an analysis of economic
obsolescence, which requires an adjustment for lost net income due to location and
competition. Id. at 217-18. Similarly, in order to apply the principles of the market
data approach, the professional appraiser often uses the gross rent multiplier, thus

utilizing much of the same information as is needed in the income approach. Id. at 351-
55.



730 INDIANA LAW REVIEW [Vol. 10:693

validity of the principles used by virtually all professional appraisers

to the same extent as they are recognized by the courts.
An analysis of the 1968 Appraisal Manual discloses that except

for a few general words with respect to the use of market data^^^ and
income and expense^^^ information, there is almost a total reliance

upon cost factors for estimating the value of real property for

assessment purposes. In fact, at the assessment level, there is very

little activity directed toward collecting current market information
with respect to sales of land or improved property. ^^^ The manual
sets forth the following general principle for income-producing real

property valuation: "As with residential property, the object of the

appraiser is to reproduce the replacement value based upon actual
material and labor cost as of January 1967. "^^^ As has been true with
the past manuals and 1968 Appraisal Manual, it appears that the
purpose of the 1976 Appraisal Manual is the estimation of reproduc-
tion cost to the almost total exclusion of value as found under the

income and market data approaches to value. ^^^ Thus it is probable
that in many cases the assessment of real property in Indiana will
bear a less direct correlation with its market value than might be the
case if the Board had promulgated rules and regulations which
included more use of market data and income and expense infor-
mation.

b. Delegation of Power to Determine ''True Cash Value"

Assuming, arguendo, that in many cases competent assessing
officials using either the 1968 or 1976 Appraisal Manual in good
faith, to the best of their abilities, cannot accurately estimate the
market value of real property, it does not necessarily follow that such
assessments can be successfully challenged on appeal. Both the
Board and some courts have accepted a literal interpretation of the
statute^^^ by holding that any assessment performed in accordance
with the manual will be left unaltered unless the complainant can
show substantial and harmful wrongdoing on the part of the
assessing official.i^^ There has, however, been a closer reading of the

i88See the 1968 Appraisal Manual, supra note 116, at R69, C1-C2, II.
189M at R57, C1-C2, F1-F4, II.

^^''Strict adherence to the forms of the Board used in assessing does not require
collection or use of comparative data. Id. at R81-R82.

191/d at CI.

'^^^See 1976 Appraisal Manual, supra note 125.
193IND. Code §§ 6-1.1-31-1(3), -5(a) (Burns Supp. 1976).
i94State Bd. of Tax Comm'rs v. Traylor, 141 Ind. App. 324, 228 N.E.2d 46 (1967);

State Bd. of Tax Comm'rs v. Chicago, Mil., St. P. & Pac. R.R., 121 Ind. App. 302, 96
N.E.2d 279 (1951).



1977] CONDOMINIUM PROPERTY 731

statute by a recent case which, ^^^ when contrasted with an earlier
holding, ^^^ indicates that perhaps the courts of Indiana are tending

toward the view that "true cash value" should be defined as "market

value" for purposes of conforming to the Indiana Constitution.

In the earlier case, Indiana State Board of Tax Commissioners v.
Pappas,^^'^ the court adopted the position that the 1968 Appraisal

Manual, once having been fully adopted as a regulation pursuant to
statutory requirement, "ha[s] the force of law and [is] the state-wide
standard used by the State Board of Tax Commissioners (as well as
all assessing officials) in determining the correctness of an assess-

ment on appeal."1^^ In Pappas, the complainant had appealed the
assessment of his home to the county board of review and, not being
satisfied with the result, appealed next to the Board for more relief.
Complainant was granted no further relief and appealed to the
Superior Court of Marion County. The court heard evidence which
had not been presented to the Board and entered judgment in favor of
the complainant in the form of a further reduction of his assessment.
Appeal to the court of appeals was taken by the Board in an effort to
have the judgment of the superior court set aside and the case
remanded to the Board for reassessment. The only issues on appeal
were the admission by the superior court of evidence which had not
been heard at the administrative level, whether the hearings before
the Board met the requirements of constitutional due process, and
whether the superior court had exceeded its authority in revising the
assessment instead of remanding the case to the Board. The court of
appeals quoted extensively from the then current version of the
present tax laws^^^ and held that the 1968 Appraisal Manual has the
force of law.'^^^ This holding was unsupported by authorities and
appears to have been unnecessary to decide any of the points raised

by the parties on appeal. More particularly, the question of whether
the statute which allows the Board to set forth the definition of
assessed value, without requiring that the assessed value bear a

direct relation to market value, represents an unconstitutional
delegation of power appears not to have been raised by the parties.

i95State Bd. of Tax Comm'rs v. Valparaiso Golf Club, 330 N.E.2d 394 (Ind. Ct.
App. 1975).

i^ejndiana State Bd. of Tax Comm'rs v. Pappas, 302 N.E.2d 858 (Ind. Ct. App.
1973).

198/d at 864.

199IND. Code § 6-1-33-3 (Burns 1972) (current version at id. § 6-1.1-31-6 (Burns
Supp. 1976) as set forth in note 203 infra); id. § 6-1-1-17 (Burns 1972) (current version

at id. §§ 6-1.1-31-1, -2 (Burns Supp. 1976)); id. § 6-1-33-2 (Burns 1972) (current version

at id. § 6-1.1-31-5 (Burns Supp. 1976)).
200302 N.E.2d at 864.



732 INDIANA LAW REVIEW [Vol. 10:693

Until the question is raised, however, Pappas will stand for the
proposition that where the property assessed is of a type contem-
plated by the then current assessment manual, the only substantive
basis for appeal of the amount of the assessment must involve an
allegation of improper application of such manual.

In the more recent case, State Board of Tax Commissioners v.
Valparaiso Golf Club,'^^^ several of the issues in Pappas were also
raised. As in Pappas, the complainant in Valparaiso had exhausted
its administrative remedies^^^ j^ an effort to reduce the amount of the
assessment on its property in question, a golf course. The superior
court found that the Board had not properly considered all of the
statutory elements^o^ and remanded the case to the Board for

201330 N.E.2d 394 (Ind. Ct. App. 1975).

202Complainant had already appealed to the county board of review, the Board,

and the superior court.

203IND. Code §§ 6-1-22-1 to -8 (Burns 1972) (current version at id. §§ 6-1.1-31-1 to -8

(Burns Supp. 1976)), in particular id. § 6-1-33-3 (Burns 1972) (current version at id. § 6-

1.1-31-6 (Burns Supp. 1976)), which was quoted by the court as follows:

For the purpose of securing a just valuation for the taxation of real property,

the rules, regulations, standards and conversion tables adopted by the state

board of tax commissioners shall provide for the classification of lands on the

basis of acreage, lots, size, location, use, productivity or earning capacity,

applicable zoning provisions, accessibility to highways, sewers and other

public services and advantages, and such other bases as may be just and
proper; . . . The rules, regulations and standards shall set forth the methods
and instructions for determining the following:

(a) The proper classification of lands and improvements;
(b) The size thereof;
(c) The effect of location and use on value;
(d) The depreciation, including physical deterioration, or functional,

economic or social obsolescence;

(e) The cost of reproduction of improvement;
(f) The productivity or earning capacity;

(g) The capitalization of income;
(h) The valuation of lands and improvements on the basis of the

foregoing elements and such other elements as may be just and proper.
330 N.E.2d at 395-96.

The above statute was expanded in scope by Pub. L. No. 47, § 1, 1975 Ind. Acts,
codified as Ind. Code § 6-1.1-31-6 (Burns Supp. 1976): Bases for classification of real
property—Instructions for assessment.—

(a) With respect to the assessment of real property, the rules and
regulations of the state board of tax commissioners shall provide for:

(1) the classification of land on the basis of:

(i) acreage;

(ii) lots;

(iii) size;

(iv) location;

(v) use;

(vi) productivity or earning capacity;



1977] CONDOMINIUM PROPERTY 733

reassessment. However, in its findings of facts, the superior court
also found that the land was worth the same as surrounding land on
an acreage basis, plus an amount equal to $1,500 per green. On
appeal by the Board, the court of appeals concurred in setting aside
the Board's assessment but also eliminated the findings of the

superior court concerning the value of the land and greens. In setting
aside the assessment, two facts carried great weight with the court.
First, it had been conceded at the trial "that the appraisal manual
contains no rules, regulations or standards applicable to the appraisal

of golf courses. "204 Second, "at the trial, the witnesses for the Board
specifically testified that use was the only factor they considered or
used in fixing the valuation."205 xhe court then concluded that the
1968 Appraisal Manual, as prepared by the Board, did not fully
embrace the statutes^o^ and that the assessment had not been
conducted in accordance with the requirement of the statute, namely,

"that all assessments shall be on the basis of just valuations taking

(vii) applicable zoning provisions;

(viii) accessibility to highways, sewers, and other public services

or facilities; and

(ix) any other factor which is just and proper.

(2) the classification of improvements on the basis of:

(i) size;

(ii) location;

(iii) use;

(iv) type and character of consteruction [sic];

(v) age;

(vi) condition;

(vii) cost of reproduction; and

(viii) any other factor which is just and proper,

(b) With respect to the assessment of real property, the rules and

regulations of the state board of tax commissioners shall include instructions

for determining:

(1) the proper classification of real property;

(2) the size of real property;

(3) the effects that location and use have on the value of real property;

(4) the depreciation, including physical deterioration and obsolescence,

of real property;

(5) the cost of reproducing improvements;

(6) the productivity or earning capacity of real property;

(7) the capitalization of income received from the use of real property;

and

(8) the true cash value of real property based on the factors listed in

this subsection and any other just and proper factors.

The Indiana General Assembly seems, therefore, to have adopted standards which
might tend to result in appraisals or assessments which more nearly approximate
market value than those of the past.

20^330 N.E.2d at 396.

205/d.

20«/d



734 INDIANA LAW REVIEW [Vol. 10:693

into consideration all of the elements referred to in this article, [6-1-33-

1—6-1-33-8], insofar as the same may be applicable. "^ov Thus, to the
extent that a complainant can show that the then current manual
does not set forth proper criteria for the assessment of his real
property, Valparaiso would appear to have overruled the narrow
holding of Pappas, which would otherwise have allowed any manual
to stand unquestioned. By allowing other information to be brought
to bear on the assessment problem than is set forth in the 1968
Appraisal Manual, the court, in Valparaiso, may also have avoided
the potential issue of unconstitutional delegation of assessing author-
ity, namely, the power to define "assessed value," from the Indiana
General Assembly to the Board. In fact, it is possible to construe the
holding in Valparaiso as being in direct conflict with the section of
the tax laws which declares that the Board has the power to define
true cash value.^o^

The Valparaiso holding should not be distinguished on its facts
from Pappas simply because of the lack of rules in the 1968
Appraisal Manual for the assessment of golf courses, for such fact is
irrelevant. Rather, the rule announced in Valparaiso is contrary to

the Pappas rule because the Board is now required to always
consider each of the guidelines set forth by the legislature and utilize
all those applicable to the property being assessed.

5. Effect of Omitting Classes of Property from the Regulations

It will be observed that, when the division of an assessment of a
condominium project is made on the basis of the percentages of
undivided interest, some of the taxpayers will have been assessed for
property they do not own and other taxpayers will not have been
assessed for as much property as they own. Thus, as to those units
which have been under-assessed it is possible to assert that such
property as was not included within their respective parcels was
"omitted. "^^^ The courts of Indiana have dealt at some length with the
effect of omitting whole classes of property and have reached the
conclusion that insofar as the regulations of the Board fail to
prescribe standards by which such property may be assessed the
Board is deemed to have elected to not impose the ad valorem tax on
such property.2i<^ Based on such authority it might be possible to

207/d at 395, quoting IND. CODE § 6-1-33-2 (Burns 1972) (current version at id. § 6-
1.1-31-5 (Burns Supp. 1976)) (emphasis by the court).

208IND. Code § 6-l.l-31-5(a) (Burns Supp. 1976).
209M §§ 6-1.1-1-6, -9-1, -13-3.

2ioSee State Bd. of Tax Comm'rs v. Holliday, 150 Ind. 216, 49 N.E. 14 (1898), a case
involving the taxation of insurance policies, wherein the supreme court held that,



1977] CONDOMINIUM PROPERTY 735

assert that the failure of the Board to provide standards by which it is
possible to divide the assessments of condominium projects into
separate parcels is such a serious defect as to fail to create any

liability for property taxes on the part of the affected coowners. More
likely, an appeal of the allocation of a condominium project into
separate parcels on the ground that the manual contained no rules for
such allocation would probably have the effect of voiding the
assessment on the entire project.

6. Effect of Easements and Covenants on Definition
of "Apartment" for Assessment Purposes

The Board treats condominiums and townhouses differently for
purposes of allocating the total assessed value of the project to the

respective units.^ii The assessment method currently used on
condominiums assumes that the value of the respective interests of
the coowners in their dwelling units is identical to the percentages of

undivided interest in the common property, as set forth in the
declaration. This is often not the case^i^ and should therefore not be
used for assessment purposes. Much of the conceptual difficulty in
assuming a separation of the fee simple dwelling unit, as defined in
the HPA,2i3 from its surrounding common property^^^ stems from the
fact that without the surrounding common property the value of the
"enclosed space" owned in fee simple would be zero. Obviously,
without support, protection, utilities, and access, an "enclosed space"
is useless. Unfortunately, the 1968 Appraisal Manual sets forth no
comprehensive manner of assessing real property other than on a
"physical" basis,^!^ thus forcing the assessing official to equate the

required ownership separation with an impracticable physical

separation.

The Board is presented with a dilemma when forced to assess
condominium units as separate parcels: on the one hand, the extent of

because (1) the taxing power was inherent in the legislature, (2) art. 10, § 1 of the
Indiana Constitution was a limitation on the taxing power, (3) said power was limited
to merely prescribing permitted rules and regulations, and (4) the legislature had
failed to provide for taxation regulations for insurance policies, no other department
could provide such regulations and insurance policies were deemed exempt from ad
valorem taxation. State ex rel. Lewis v. Smith, 158 Ind. 543, 63 N.E. 25, 214 (1902)
(dissenting opinion) (amount of mortgage lien should be subtracted from assessed
value for tax purposes); Riley v. Western Union Tel. Co., 47 Ind. 511 (1874) (poles and
wires of an out-of-state telegraph corporation not taxable).

^^^See Exhibits C, D and E infra and text accompanying notes 142-45.
212M

213IND. Code § 32-l-6-2(a) (Burns 1973), as set forth in note 20 supra.
^^*Id. § 32-l-6-2(f), as set forth in note 12 supra.

2i5See discussion at notes 188-91 supra.



736 INDIANA LAW REVIEW [Vol. 10:693

the ownership of the fee simple estate is only to the inside faces of the
surrounding walls; yet, on the other hand, the 1968 Appraisal Manual
provides cost factors and guidance only for assessing buildings as a
whole. If it is practically impossible to determine the cost or value of

only the interior part of a physical structure in the absence of the

surrounding exterior then the Board should consider ways in which
the legal estates may be separated. An ideal solution to this dilemma
would be achieved if the assessing officials were to assess condo-
miniums in a manner similar to townhouses, for such assessments
would be both easily understood by the coowners and ascertainable
by use of the 1968 Appraisal Manual with but few modifications.

There are several alternative legal theories available by which
the assessing official may view condominium projects in a manner
similar to townhouse projects. Each theory relies upon acceptance of
the basic proposition that every condominium coowner demands,
expects and enjoys the exclusive use of some parts of the common
property which, by definition, lay outside of the fee simple portion of
the property. Examples of such exclusive uses abound in low-rise
condominiums: roofs, exterior walls, foundations, land under the
unit, garages, patios, walkways, air-conditioning compressors and
buried utility connections. While multi-story construction does not
offer such simple examples of exclusive use of common property,
these buildings are even more difficult to assess if it is necessary to
assume a physical separation instead of a legal separation.

The first legal theory which may be used by the Board is to
assume that each coowner has such easements in the common
property over which he has exclusive or near-exclusive use as to
confer on him a quasi-fee simple estate in such common property, and
that such quasi-fee simple estate is substantial enough to cause the
coowner to incur the tax liability for such common property. Such
easements might be assumed to rest on one or more of three bases.
The first basis might be the familiar easement by necessity, whereby
one owner is allowed an easement on the property of another where
there was an original unity of ownership, an actual necessity for the
easement, and an original intent of the parties that the easement
should exist.216 in condominiums, of course, the nature of the use of

some parts of the common property by the coowners exceeds the
degree of need typically required to create the easement by necessity
for, in such cases, the use is totally exclusive of the other coowners.

The second basis for finding easements in the common property
might be the implied reciprocal easement.^i^ This theory is typically

2i6See 3 Powell, supra note 57, T[ 410 (1977), and authorities cited therein.
217M TI411.



1977] CONDOMINIUM PROPERTY 737

employed by the courts where two or more parties share a party wall
without an agreement with respect to their respective rights and
duties for support and maintenance. Such theory would be par-
ticularly applicable to high-rise condominiums with respect to the
maintenance of the semi-public passageways and interior supportive

parts of the building. The third basis for finding easements in
common property in favor of the coowners might involve judicially
created easements.^i^ These easements typically arise when an owner
of a servient tenement attempts to obtain an injunction to prevent the

use of an area by the dominant tenement and fails to do so. In this
manner, the court will have made it impossible to remove the
dominant tenement or his use of the servient tenement and in effect
will have created an easement. Such an easement might occur in
condominiums when the coowners' association sues to prevent the
enclosure and exclusive use by one coowner of a part of the common
yard area but the court allows such enclosure and use. Note the
similarity between the above example and the rights of the parties to
the use of limited common area.^i^ The assessing official should not
be unmindful of the importance and value of these forms of use to the
coowners of condominiums.

The combination of exclusive use by one coowner and the inability
to separate the physical property into viable parcels due to the
statutory requirement that the common property never be separated
from the fee simple estate^^o leads to a second theory by which the
assessing official might assess condominiums. The theory here is that
the use by the coowners of certain parts of the common property, as
per the HPA, the declaration and physical construction, is such that
it might be executed into fee simple title by the Statute of Uses.221
While it is not true that the HPA was intended to create the types of
unacceptable practices which caused the passage of the Statute of
Uses, nevertheless, if the recommendations for the above modifi-

218M If 412.

219IND. Code § 32-1-6-2G) (Burns 1973) provides: " 'Limited common areas and
facilities' means and includes those common areas and facilities designated in the
declaration as reserved for use of certain apartment or apartments to the exclusion of

the other apartments."

220/d § 32-l-6-7(b).

221/d § 30-4-2-9 (Burns 1972) provides: "Necessity of powers or duties.—Subject to

IC 30-4-2-13, if the trustee has neither a power nor duty related to the administration of

the trust, the title to the trust property will be treated as having vested directly in the

beneficiary on the date of delivery to the trustee." Id. § 30-4-2-13 sets forth when the

Statute of Uses does not apply to naked trusts. See Elliott v. Travelers Ins. Co., 121 Ind.

App. 400, 90 N.E.2d 274 (1951) (execution under the statute); Nelson v. Davis, 35 Ind.

474 (1871) (adoption of the English Statute of Uses, 27 Henry VIII, into the Indiana

common law).



738 INDIANA LAW REVIEW [Vol. 10:693

cations of the termination provisions of the HPA are enacted, the
rights of the coowners in those parts of the common property used
exclusively by other coowners will have been reduced to little more
than naked legal title and the Statute of Uses might apply. When a
party, other than a trustee, holds no more than legal title to property
used entirely by another, there should be no reason to prevent the

operation of the Statute of Uses for the limited purpose of real

property taxation and assess the property as though all of the

common property under such exclusive use were owned in fee simple
by the user, assuming that such assessment is convenient for the
Board and not objectionable to the coowner.

The property tax law provides a third theory upon which the
assessing official may assess parts of the common property as though
they were owned in fee simple by the exclusive user. Under such
laws there are two cases where the owner of real property for
purposes of taxation thereon may be a person other than the holder of
the legal title: first, when the property is mortgaged, a mortgagee in
possession is deemed to be the taxable owner;222 and, second, a life
tenant in possession is deemed to be the taxable owner.223 Clearly,
both of these exceptions to the legal title doctrine^^^ involve the

element of exclusive use by the outside party and are justified
because such exclusive use temporarily confers the totality of benefits

of ownership of the premises upon such user, including such benefits
as are available from the government which levies the taxes.
Although it is quite possible that those two exceptions were created in
order to simplify the collection of taxes, the fact is that the law does
not compel the taxing authorities always to seek the legal title holder
for payment of real property taxes.

D. Summary

The following suggestions for adjustments in the property tax
laws are based on the above discussion and are in addition to the
suggestions contained in the section concerning the HPA.

1. "True Cash Value" Should Be Defined as
"Fair Market Value"

Too much emphasis is currently placed on equating reproduction
cost to "assessed value" in the 1968 and 1976 Appraisal Manuals.225 To

222IND. Code § 6-l.l-l-9(d) (Burns Supp. 1976), as set forth in note 146 supra.
^^^Id. § 6-l.l-l-9(f), as set forth in note 146 supra.

^^^Id. § 6-l.l-l-9(b) and (c), as set forth in note 146 supra; see authorities also cited
therein.

225See discussion at notes 188-92 supra.



1977] CONDOMINIUM PROPERTY 739

achieve the constitutional goal of uniformity and equality226 and to
protect the Board from continued litigation on the question of
accurate use of such assessment manuals, the Indiana General

Assembly should define "true cash value" as "market value." In
addition, the Indiana General Assembly should prescribe to the
Board that its rules and regulations should be intended to achieve
"market value." The Indiana General Assembly is free, of course, to
set forth the extent to which each approach to value should be
considered before an assessment will be deemed to have been
prepared in conformance with the statute.

2. Land Value Changes

The Indiana General Assembly or the Board should provide that
when land undergoes a change in use or zoning, followed by a
reassessment as of the following March Ist^^^ based upon change in
value caused thereby, the value placed upon the land should be that
which the land would have had if the change and reassessment had
occurred on the date of the last general reassessment of all real

property, or the date being used by the Board for assessing
improvements, whichever is then applicable.

3. Amendment of Regulations

The issues raised in condominium and townhouse assessment and
Valparaiso^^^ indicate that the Indiana General Assembly should
anticipate that there will be assessment problems of a minor nature
which will require swift action by the Board. The 1968 Appraisal
Manual has not been modified in part since its promulgation in
1968.229 The Indiana General Assembly should consider ways in
which the Board may be more flexible in order to meet unanticipated
situations.

4. Assessment of Condominiums and Townhouses as

Separate Parcels

One suggested standard method for assessing condominiums23o
bears much resemblance to the method now used by the Board for the
assessment of townhouse improvements.23i Each condominium unit

226IND. Const, art. 10, § 1.

227IND. Code § 6-1.1-1-2 (Burns Supp. 1976).
228330 N.E.2d 395 (Ind. Ct. App. 1975).
229The complete revision of the 1968 Appraisal Manual by promulgation of a

revision to Regulation No. 17 in 1976-1977, the 1976 Appraisal Manual, is the first and

only modification of the 1968 Appraisal Manual, despite the passage of Pub. L. No. 47,

§ 1, 1975 Ind. Acts 247, the complete revision of the property tax laws.

2305ee Exhibit F infra.
23iSee Exhibit C infra.



740 INDIANA LAW REVIEW [Vol. 10:693

is assumed to be legally separable from the others for assessment

purposes. All condominium common property which is subject to
exclusive use by the respective coowner is included in his assessment

as though owned in fee, with the exception of the land. The fact that
some walls are common walls with other units is taken into
consideration by the use of the Apartment Pricing Schedule.232 Land
and such other common property as is shared by all of the coowners is
allocated to the units according to their respective percentages of

undivided interest. Thus, this method allocates common property to
those units which have its exclusive use, independent of the legal
title,and allocates those portions of the common property which are
not subject to exclusive use by one coowner according to the legal

title. Use of this method for purposes of assessing real property may
be based upon the three theories discussed at length above: the legal
fiction of easements over commonly owned property,^^^ the legal
fiction of an execution of "uses" into fee simple title under the Statute
of Uses,234 and an extension of the two statutory exceptions to the
otherwise strict requirement that the taxes should be paid by the
legal title holder.^^s Unfortunately, although this suggested method
would allow the assessing official to uniformly assess condominiums
by using the 1968 Appraisal Manual, the resulting assessment would
still lack the validity which could be generated by proper use of the
market data approach to value.^^e This defect in validity is, however,
inherent in many other property assessments and is not correctable
without a change in direction from the Board, support from the
Indiana General Assembly and the courts and dedication by the
county and township assessing officials to such change in direction.

IV. Conclusion

In comparison with more traditional forms of housing, condo-
miniums are quite new to Indiana. As a result, many serious
problems involving internal operations and termination of condo-
minium projects have not yet been experienced by the citizens of
Indiana. On the other hand, real property taxation is one of the oldest
forms of taxation, and it is clear that such tax laws create several
unique problems when applied to condominiums. The above
suggestions are intended to aid in legislative and administrative
solutions to such problems before needless financial hardship is
incurred by Indiana condominium owners.

Philip C. Thrasher

232See Exhibit A infra and note 143 supra.
233See text accompanying notes 216-19 supra.
234See text accompanying notes 220-21 $upra.
235See text accompanying notes 222-24 supra.
236See discussion in note 187 supra.



1977] CONDOMINIUM PROPERTY 741

Exhibit A
Apartment Pricing Schedule

WOOD JOISTS FIRE RESISTANT REINFORCED CONCRETE QUALITY

BRICK FRAME + 50 338
Unit Flnt Upper
Area Fir. Fir.

Firtt Upper
Fir. Fir.

Unit Firtt Upper
Area Fir. Fir.

Unit Firtt Upper
Area Fir. Fir.

AA

+ 25
+ 10

281

248

225
300 12 33 1 1 70 11.75 11.10 300 13 60 12.90 300 14,20 13,45

330 n 53 10.90 10.95 10.35 330 12 45 11.93 350 13,25 12.50 + 40 210
400 1085 'O.JO 10.30 9,70 400 11,90 11.20 400 12,45 1170 + 30

+ 20
+ 10

195

180

165
430 10 25 9 60 975 9.10 450 1125 1055 450 11.75 11.05

500 975 9.10 9.25 8.45 500 10,70 10.00 500 11.20 10.45

A

+ 5 158

150530 9.30 8.45 880 8.33 550 10.25 9.33 530 10.70 9.93

400 1.95 8.30 850 7.85 400 9.85 9.10 600 10.30 9J3 -5 143
450 8.40 7.95 8.15 740 450 9 45 8.75 650 9.90 9.15 ±10 135
700 8 35 7.70 7.90 7.30 700 9.15 8.45 700 9.40 8.80 + 5 128
750 8 10 7.45 7.75 7.10 750 890 8.25

800 8.70 7.95

750 9.30 8.55
ft

-3

122

114800 7.90 7.23 7.50 4.85 800 9.10 8.35

850 7J5 7.10 7.35 4.70 850 330 7.80 850 8.90 8.15 ±10
+ 3

110

105
900 7.40 4.90 7.20 4.40 900 835 7.45 900 8,70 7.95
950 740 4.73 7.05 4.45 950 8.15 7.40 950 8.55 7.80 c 100

1000 7.30 440 4.95 4.30 1000 7.95 7.25' 1000 835 7.40 -5
±10
+ 5

95
90
841050 7.13 4.50 4.80 4.13 1050 7.85 7.15 1050 8.25 7.45

1100 7.05 4.40 670 4.05 1100 7 75 7.05 1100 8.10 7.35
1150 7.00 4.35 465 4.00 1130 7 70 7.00 1150 8.00 7.23 D 82

1200 4.90 4.30 4.40 5.93 1 200 7.43 6.93 1 200 7.93 7.20 -3 71
1230 4.83 4.23 4.35 3.90 1250 7.60 4.90 1230 7.90 7.15 -10

— 20
74

64

1300 4.80 4.13 4.50 3.83 1300 7.50 4.80 1300 7.85 7.10
-30 37

1330 4.73 4.10 4.43 3.80 1350 7.45 4.75 1350 7.80 7.05 E 30
1400 4.70 4.05 4.40 3.73 1400 7.40 4.70 1400 7.75 7.00

1450 4.43 4.00 4.33 3.70 1450 7.35 4.45 1450 7.70 4.95
— 10

20
45
40

1300 4.40 3 95 4.30 5.45 1500 7.30 4.40 1500 7.45 4.90 -30 35

Oy«r 4.50 3.83 4.20 5.33 0»er 7.20 4.30 Over 7.5S 4.80

— 40
-30

30

23

To obtain overage unit area divide total finished areas of all floors by the number of apartment

units. (High rise structures: the first floor may house a small lobby, and the balance devoted to com-

mercial use. In this situation the first floor area should not be used in computing the average unit area \

and an appropriate square foot rate should be selected from the commercial schedule. )

UNFINISHED BASEMENT: Wood joist buildings Use 2.70 S/F
Fire resistant buildings Use 3.80 S/F

Reinforced concrete buildings Use 4.30 S/F

FINISHED BASEMENT: Use upper floor square foot price.

HEIGHT ADJUSTrMENT: Add 1 % to tota 1 base price for each floor above three storie!
PLUMBING:

AIR CONDITIONING:

ELEVATORS:

MINOR ADDITIONS:

TOWNHOUSE (ROW TYPE) APTS:

Base price includes standard plumbing for each unit. Add
$200.00 for each additional fixture.

Central system add .50 S/F Per Floor or

Efficiency Units 350 Per Unit

1 Bedroom Units 400 Per Unit

2 Bedroom Units 500 Per Unit

3 Bedroom Units 600 Per Unit

Window or wall type package units are Personal Property

Use elevator schedule and convert price to square foot of

building area.

Price from dwelling schedule.

Add ' 0% to unit base price for end units only.



742 INDIANA LAW REVIEW [Vol. 10:693

Exhibit B
Hypothetical Apartment Building Assessment

Description: Unit A: 500 sq. ft., one bath, one story, end unit, all
frame (no brick).

Unit B: 1,000 sq. ft., 1)^ bath, one story, inside unit,
half brick, 150 sq. ft. patio.

Unit C: 1,500 sq. ft., two baths, two story, inside unit,
25% brick, 150 sq. ft. patio, inside fireplace.

Unit D: 2,000 sq. ft, two bath, laundry room, two
story, end unit, 100% brick, 150 sq. ft. patio,
inside fireplace.

Building is 100% air conditioned, somewhat better than average
quality, design is ten percent better than average, no depreciation

(new building), no functional or economic obsolescence.

Land is one acre, including playground area.
Parking is on adjacent dedicated street.

Assessment: Average Unit Size = 5,000 sq. ft. -^4 units = 1,250 sq. ft.
Average Brick estimated at 50%.

1st 2nd Total
Rate for 1st floor $6.70
Rate for 2nd floor $6.08
Air-Conditioning 0.50 0.50
Total Rates $7.20 $6.58
Sq. Ft. per floor X3,250 X1.750 5,000
Subtotal $23,400 $11,515 $34,915
Additions: Plumbing (9 extra fixt. @ $200) 1,800

Patios (3 @ 150 sq. ft. X $0.60/sq. ft.) 270
Fireplaces (2 @ $1,000) 2,000
End Unit Factor (10% + 10% = 20%, -^4 units
= 5%, X $34,915) 1,746

Total Base $40,731

Grade Factor for higher quality (C + 10 = 110%) Xl.lO
$44,804

Cost and Design Factor Xl.lO

Total for Improvements $49,284

^3

Assessed Value, Improvements, say $16,430

Land Value @ $10,000/acre $10,000
^3

Assessed Value, Land say $3,330

Total Assessed Value $19,760



1977] CONDOMINIUM PROPERTY 743

Exhibit C
Hypothetical Assessment of Townhouse

Description: Same as in Exhibit B. Land is sold as 4 equal lots of 1/5 acre each.
Common Property consists of 1/5 acre with playground.

Tax Parcels
Unit A Unit B Unite Unit D Assoc.

Cost and Design Factor

Total Value, Improvements

Assessed Value,

Improvements

Common Property (Land)
Assessed Value, Land

Total Assessed Value

(rounded)

$5,631

Xl.lO

$6,194
-^3

2,060

2,000

670

$9,409

Xl.lO

$10,350
-^3

3,450

2,000

670

$2,730 $4,120

$13,251

X 1.10

$14,576
-^3

4,860

2,000

670

$5,530

Rate for 1st floor

^

$9.25 $7.18 $6.40 $6.50

Rate for 2nd floor^ $5.75 $6.20
Air-Conditioning $0.50 $0.50 $1.00 $1.00

Total Rate $9.75 $7.68 $13.15 $13.70

Times: Sq. Ft. per floor X500 XIOOO X750 XIOOO

Subtotal $4,875. $7,680. $9,863. $13,700.

Additions: Patios (150 sq. ft. 90 90 90

X $0.60)
Plumbing, $200/ extra fixt. 400 600 800
Fireplace, good quality 1000 1000

End Unit Factor (10% + 10%
= 20%, ^ 4 units = 5%,
X Subtotal above) 2442 3842 4932 6852

Total Base $5,119 $8,554 $12,046 $16,275

Grade Factor Xl.lO Xl.lO Xl.lO Xl.lO

$17,903

Xl.lO

$19,693
-^3

6,560

2,000 $2,000

670 670

$7,230 $670

Grand Total Assessed Value: $20,280

^Square foot cost factors are selected on a per unit basis, rather than a per building basis.

2End Unit Additions would more properly be applied to Units A & D only, not allocated
to Units B and C.



744 INDIANA LAW REVIEW [Vol. 10:693

Exhibit D

Hypothetical Assessment of Condominium Using
Percentage Interest for Allocation

Description: Same as in Exhibit B. All land is owned in common.
Each unit has 25 percent undivided interest in common property.

Total Assessed Value from Exhibit B $19,760

Assessed Value for each unit found by multiplying Total Assessed
Value for the property by the respective percentage of undivided
interest.

Unit A UnitB Unit C Unit D
Total Assessed Value $19,760 $19,760 $19,760 $19,760

Percentage of

Undivided Interest X .25 X .25 X .25 X .25

Assessed Value per
Unit $4,940 $4,940 $4,940 $4,940

Total Assessed Values of all units: $19,760



1977] CONDOMINIUM PROPERTY 745

Exhibit E

Hypothetical Assessment of Condominium
Deducting Fifty Percent Fee Before Allocation

Description: Same as Exhibit B, Ownership and percentages of undivided interest the
same as Exhibit D.

In these cases the value of the units is split evenly, half being assigned to the fee simple

portion and half being allocated to common property:

Unit A Unit B Unite UnitD Common
Total Value, Improvements

from Exhibit C $6,194 $10,350 $14,576 $19,693
Allocation of half to

Common Property (3,097) (5,175) (7,288) (9,846) $25,406

Adjusted Total for

Improvements $3,097 $5,175 $7,288 $9,847 $25,406
Other Common Property $10,000
Total Common Property $35,406
Allocation of All Common
Property to Units

per Percentage

Interest $8,851 $8,852 $8,851 $8,852 (35,406)1

Total Valuation $11,948 $14,027 $16,139 $18,699

^3 -^3 ^3 -=-3

Total Assessed Value

(rounded) $3,980 $4,680 $5,380 $6,230

Total Assessed Value of All Units: $20,270

^All Common Property is, of course, allocated to the Units.



746 INDIANA LAW REVIEW [Vol. 10:693

Exhibit F

Suggested Standard Condominium Assessment

Description: Same as in Exhibit B. Ownership and percentage of undivided interest the
same as in Exhibits D and E.

iRate for First Floor

iRate for Second Floor

Air Conditioning

Total Rate

Times: Sq. Ft. per Floor

Sub Total
End Unit Factor^
Plumbing, $200/fixt.

Patio, 150 sq. ft. ea.^

Fireplace, good quality

Total Base

Grade Factor

Cost and Design Factor

Total for Improvements

Add: Balance of Unassigned

Common Property
Allocated per Percentage

Interest

Total Valuation

Assessed Value (rounded)

Total Assessed Value of All Units: $20,290^

2,500

Tax Parcels
Unit A UnitB Unite UnitD

$9.25

$0.50

$7.18

$0.50

$6,402

$5.75

$1,002

$6.50

$6.20

$1.00

$9.75

X500
$7.68

XIOOO
$13.15

X750
$13.70

XIOOO

$4,875

488

$7,680

400

90

$9,863

600

90

1000

$11,553

Xl.lO

$13,700

1,370

800

90

1000

$5,363

Xl.lO
$8,170

Xl.lO
$16,960

Xl.lO

$5,899

Xl.lO
$8,987

Xl.lO
$12,708

Xl.lO
$18,656

Xl.lO

$6,489 $9,886 $13,979 $20,522

2,500 2.500 2,500

$8,989
-^3

$3,000

$12,386
-^3

$4,130

$16,479
^ 3

$5,490

$23,022

^ 3

$7,670

$20.2905

^Rate used was interpolated between Brick and Frame rates in the manual, based on
percent of Brick and actual square feet per unit.

2lf Unit C were all on the second floor, there would be no rate for the first floor and the
air-conditioning factor would be $0.50 (one floor only).

^End Unit factor assigned to end units only.

^Patios are Limited Common Area, assigned to units having exclusive possessory
interest.

^Difference from Exhibit B is in allocation of End Unit Factor.