In Greth Development v. Berks County Board of Assessment Appeals, the Berks County trial court considered whether the tax assessment of individual lots of a residential subdivision should take into account “ongoing subdivision concerns, including cash flow, absorption rate of lot sales, and ongoing expenses.” The case involved a residential subdivision in which 25 lots remained unsold. The property owner argued that “to obtain an appropriate value, the assessment should take into account the owner’s ongoing concerns relating to the subdivision, including the time and cash flow considerations. While the subdivision has been divided into individual lots, improvements have been made and a few lots have been sold, there remains an extensive inventory of remaining lots, which likely will be sold over the course of several years, particularly given the current state of the economy. . . . During the pendency of the sales, [the property owner] would continue to be saddled with taxes, maintenance, and other subdivision costs.”

The taxing authority argued that “one the subdivision has been divided into individual lots, each lot becomes an independent entity, subject to its own assessment. [The property owner’s] subdivision costs become irrelevant, for those costs do not affect what a buyer of a lot would be willing to pay.”

The court agreed with the taxing authority and held that the lots should be assessed on an individual basis and, therefore, the considerations that would impact the valuation of a subdivision do not necessarily apply to the valuation of individual lots. “A prospective buyer of an individual lot of that subdivision, however, even assuming the lot would be purchased for income producing purposes, would not be concerned with the ongoing subdivision costs, or the time lag in sales of neighboring lots, for that would have no effect on his income projections, capital expenses incurred in preparing the lot to produce income, or the ongoing expenses incurred thereafter.”