In a court ruling that runs contrary to precedents in other states, Reston has lost an attempt to virtually exempt the planned community's common property from taxation by Fairfax County.
Property taxes are running at about $35,000 a year on Reston's common areas, and the Reston Home Owners Association hoped to get a refund of more than $100,000 for past payments since 1967, said RHOA Executive Director Thomas Burgess.
Most homeowners' associations around the country, including those in Maryland, have been able to have the property tax assessments on common elements reduced to zero or near zero, said James Dowden, executive director of the Community Associations Institute.
The theory behind this is that the common areas have no market value because they cannot be sold, but can only be used by members of the association, Dowden said.
In addition, the homeowners feel that assessments on common property amount to double taxation since the value of their homes include the value of the benefit of common areas, Burgess said.
Common elements might include such things as swimming pools, tennis courts, raw land or club houses for use by the members of the association, for example.
The Reston association appealed its assessment to the Fairfax Circuit Court, which dismissed the appeal. The Virginia Supreme Court refused to review the case because it found no reversible error in the circuit court's judgment.
The ruling could have implications for other homeowners' associations in Virginia, athough it is unclear whether it will be considered a precedent for those organizations, Dowden said.
It does not apply to condominium associations, however, which are different from homeowners' associations. In a condominium, common elements are owned on a pro-rata basis by individual unit owners; a homeowners' association owns the property itself.
Fairfax County argued that its assessment was well below the value of similar residential property in the Reston area, which was selling for between $15,000 and $20,000 per acre. The lower assessment reflected the relationship between the common property and the unit owners' property and the fact that the common property's use was restricted, the county said.
Since Reston has 13,000 households, the yearly property tax on the common areas amounts to less than $3 per family. If the homeowners had won their case, the award would have gone toward next year's budget, Burgess said.
Burgess said the issue only became apparent to homeowners' associations in the past three or four years. That is why the Reston association did not challenge the assessments earlier, he said.
In most states, either the courts have adopted the principle that associations should be taxed nominally, if at all, and in some states the associations are exempted from property tax by law, Dowden said.
A bill is being studied in the Virginia legislature that would provide a tax deduction or a tax credit for payments to a homeowners' association, Burgess said.