United States

Risks associated with losing property tax exemption for community associations with private club style amenities

ECLUB NEWS  | 

Community associations with private club like amenities risk the loss of their property tax exemption for continued use of facilities by non-residents.

A recent court decision in Sarasota County, Florida should attract the attention of community association management there and throughout the state. Based on the court decision, the Sarasota county property appraiser has put communities and subdivisions on notice if:

  1. These subdivisions contain common elements constituting a club operation (e.g., golf club, country club, or yacht club).
  2. The club operation has been valued and taxed as part of the assessment on individual parcels.
  3. And these subdivisions include reciprocal arrangements with other clubs or use by other non-members, thereby not being for the exclusive use and benefit of the homeowners and members.

Under Florida statutes (193.0235), an “ad valorem tax or non-ad valorem assessment…may not be assessed separately against common elements utilized exclusively for the benefit of lot owners within the subdivision, regardless of ownership.” The statute further states that “the value…of the common element for the exclusive benefit of the lot owners shall, regardless of ownership, be prorated by the property appraiser and included in the assessment of all lots within the subdivision.”

An Attorney General Opinion (AGO 2009-23) states that use of community common elements by guests of lot owners does not jeopardize the exclusivity of use. Community association management should evaluate any appearance of the unrestricted use of their common elements by members of the general public and whether the financial benefits outweigh the potential loss of their property tax exemption.

While this is a single case, private clubs should take notice of the precedent set and ensure they under the risks and benefits of their actions.