“Highest and best use” is a vital phrase in the world of property appraisal; it is the standard applied to determine how a piece of property will be evaluated to determine its value. In a nut-shell, it figures out the use that would yield the biggest return and thus the largest value (and the largest tax for local property taxation).
Open space is a concept meant to preserve the State’s scenic majesty and reduce residential density within a municipality, as well encourage the efficient use of land and promote farms, forests, orchards, wetlands, etc. Open space, therefore, encourages maintaining a piece of property in an eye-appealing, undeveloped state. It doing so, thereby, open space initiatives can keep that property from being utilized to its full economic potential (while not maximizing the use of the individual parcel, studies suggest that open space has economic benefits to the whole of the community).
Thus, the highest and best use standard can directly conflict with encouraging the maintenance and/or development of open space. After all, if a property’s highest and best use is as a shopping facility or another type of commercial property, and it is taxed as such, there is little incentive in keeping the lot from being economically productive through a use that is consistent with an open space initiative.
To encourage the maintenance and development of open space, the legislature enacted RSA chapter 79-A in the 1970s. RSA chapter 79-A authorizes the board of selectmen of a municipality, upon a petition from a landowner, to designate property as “open space” and subject that property to a “current use” standard rather than the highest and best use standard. Because this open space property is determined by how it is presently used, rather than its most economically beneficial use, the value under a current use standard is lower. The value of land given the current use classification is determined by the Current Use Advisory Board on a yearly basis. Pursuant to RSA 79-A:7, if a piece of property classified for current use is changed such that it is no longer eligible for that classification, the assessing officials within the municipality may assess a “land use change tax” — set at 10% of the properties “full and true value” — and begin taxing that property according to the highest and best use standard again.
Notably, RSA 79-A:12 allows for the Board of Tax and Land Appeals (“BTLA”) to reclassify property, either upon the BTLA learning that a current use property was classified fraudulently, improperly, or illegally or by complaint by a third-party landowner alleging the same. Absent from the statutes, however, is a clear authorization stating that a municipality can reclassify property upon which it has mistakenly given the current use classification.
The New Hampshire Supreme Court in Appeal of Town of Charlestown solved this conundrum. In that case, the Town had bestowed current use status upon land owned by TransCanada. Thereafter, the Town learned that the land was actually part of a hydro-electric generation development and filed a complaint with the BTLA to reclassify the property. The BTLA refused to consider the Town’s request, stating that RSA 79-A:12 did not allow municipalities to use the BTLA to challenge the current use classification. The Town argued that the BTLA must have such authority, because RSA chapter 79-A did not give the Town the “unilateral” authority to revoke current use status, and a remedy had to exist to correct the Town’s mistake.
The Supreme Court disagreed and found that there was nothing in the statute that prohibited the municipality from unilaterally changing a property’s current use status; however, absent an actual change in use, it could not assess the land use change tax. Therefore, since the Town was mistaken about how the property was being used it could not impose a tax predicated upon an actual change in the use of that property; it, however, remained free to reclassify that property so that it was subject to the highest and best use standard again for valuation again.
The Court’s ruling is a mixed blessing. On the plus side, municipalities do not have to subject themselves to the initial oversight of the BTLA prior to reclassifying a current use property based on mistake (that does not mean they are relieved of any review, as the landowner can ask the BTLA to reinstate the current use status). On the negative side, and rightly so under the statute’s plain language, municipalities cannot assess the potentially large land use change tax when it removes the classification based on mistake.