Caught in a squeeze between spiraling land costs and rising property taxes, some Maryland developers are challenging the way the state commonly puts a price tag on commercial property for tax purposes.

Cases now pending in Montgomery County and before the state's Court of Special Appeals challenge the state's right to assess commercial property for tax purposes based on how much rent a building's owner theoretically could demand in a free market. In both cases property owners contend the state should be forced to consider how much revenue a piece of commercial property is producing.

The same general assessing practice has been successfully challenged in New York and Michigan, and three similar cases are now pending in Fairfax county. Lawyers on both sides of the issue blamed the economy for the new legal assaults on tax assessing methods.

"We're seeing here now, just in the state of Maryland, more litigation over commercial and industrial property than we have in the past," said William Blevin, assistant director of the state's Department of Assessments and Taxation. "The economy is down and the profit margin isn't there, so they're looking for every way they can to save dollars."

In the case before the appeals court, Ort's Inc., an Allegany County flour mill, is challenging the assessment on a warehouse it built in 1963 and rented out to Sears on a 20-year lease at 55 cents per square foot. When county assessors said in 1980 that Ort's could get more than three times that rent on the open market, Ort's appealed its assessment and won in Maryland tax court and again in the Allegany County circuit court. The county assessors appealed last week.

"The Allegany County case is a test case," said Blevin. "It's the principle we're going after more than the dollars. The backbone of every appraisal is fair market value -- that's the starting point."

That case is small by dollar standards, with only a few thousand dollars difference in property taxes hanging in the balance of the court's decision. But lawyers for both sides expect the Allegany decision to set a precedent that will affect the outcome of a much larger suit in Montgomery County, in which Parklawn Joint Ventures -- owner of one of the largest commercial office buildings in the county -- is challenging the same assessment method. The difference in assessing methods in the Parklawn case could mean tens of thousands of dollars in taxes, and a loss for the state in both cases could force a change in assessing practices statewide that could cost Maryland millions in tax revenues.

Parklawn Joint Ventures constructed the massive Parklawn building on Fisher's Lane in Rockville under a General Services Administration contract to house the Department of Health, Education and Welfare under a 20-year lease agreement beginning in 1972, according to attorney James L. Thompson. Under the terms of the government contract, the owners are not allowed to raise the rents to keep up with the market value of other rents in neighboring office buildings.

The Parklawn building is assessed at $17,903,340, and is taxed at about $3.28 for each $100 of that assessed value, according to Robert Rodnick, the state supervisor of assessments in Montgomery County. Lease arrangements are not considered when assessing property, Rodnick said.