Boat docks as personal property

[ETex2]

There is a lake in Texas where a District Court judge ruled that boat houses and docks are personal property and not real property. This is due to the water authority's atypical procedure in giving only temporary permits to use these docks (built by the adjoining property owners) on the water authority's property. Appeals court affirmed decision. There are no leases, only annual permits which are easily revokable. Land is all owned by the water authority; only adjacent property owners may build.

Appraisers, mortgage companies, and local appraisal district has always treated these lakefront docks as real property. Should appraisers and mortgage companies be made aware that these improvements are not considered to be real property by the courts? This might be a real nightmare for the appraisal district since personal property (other than business personal property) is not taxable and they have always been taxed as real property.

 

[Mike Boyd]

Most taxing authorities do have personal property taxes. Based on what you have written, I would agree with the court's decision.

 

[ETex2]

Most taxing authorities do have personal property taxes. Based on what you have written, I would agree with the court's decision.

Unless a local municipality or other taxing authority has authorized specific ad valorem taxes on certain types of personal property other than business personal property (such as autos), in Texas personal property is not taxable. The court's decision is not in question. What I question is mortgage companies funding loans covering boat houses as real property. There are some of these that are quite expensive (over $100K).

 

[Greg davenport]

I bet this is a Corps of Engineers lake.

We have one in our area, and this is the best quote from their site, and we us it in all reports on the lake.

[FONT=Verdana, Arial, Helvetica, sans-serif]Boat Docks
Private boat docks are permitted only in areas designated for limited development. A map showing the location of these areas is displayed at the Project Office. The number of docks permitted in any given area is limited by a minimum spacing of 100 feet between docks at conservation pool; elevation 461.26 feet msl. Dock applicants must have legal (deeded) access to the shoreline within 200’ of the proposed facility. Ownership of land adjacent to public property is not required. The dock must serve as the home port moorage for the applicant's boat(s), and the owner of each boat in a dock must also own an interest in the dock. A household may have a maximum of two slips and will not be permitted ownership in more than one dock. A copy of the Corps of Engineers minimum design requirements for docks is available at the Project Office. After dock plans are approved and a permit is issued, construction may begin. Rangers will inspect the dock when it is completed. Docks are inspected annually, and noncompliance with the permit terms can result in revocation of the permit and removal of the dock. Private dock permits do not convey or imply authorization for any modification on public land unless specifically stated on the permit. Mooring buoys are not permitted.[/FONT]

Since they can be required to be removed at the will of the ranger, and the dock permits do not convey, how can we (appraisers) give them value?

 

[Mike Boyd]

More appeal with a boat dock?

 

[ETex2]

Not a core of engineer's lake. The lake is owned by a municipal utility district and serves as the city's water supply. The boat docks are listed separately under the appraisal district's worksheets and are taxed at their contributory value to the land. Appraisals done for mortgage purposes include the boat docks, since the waterfront comps will include the docks and the prices reflect the docks. No one has ever suspected that the docks are "personal property" and not real property, since they are permanent in nature (not removable). It's typical that boat docks in Texas are conveyed as real property, however this appears to be a circumstance unique to this particular lake due to their permitting procedures and absense of any type of long-term lease assuring continued use of the docks.

Local mortgage companies and appraisers I have spoken to treat them as real property, however the recent court ruling says they are not real property.

 

[Mr Rex]

I appraise and own property on a Corps of Engineers lake. Boat Docks are personal property, however, they typically transfer with the properties, and the availability of a dock significantly impacts the value of these properties when sold. So, I disclose that while technically the boat docks are personal property, they are given value as it is typical and customary for the docks to transfer with ownership and they do have a substantial impact on value. Lakefront with a dock vs lakefront without a dock can have a 2x or more impact on site value.

 

[c w d]

So what happens when a home owner fails to renew the permits?

You can't ignore the market reaction of a home with a boat dock as compared to those without. But you can't directly say the dock is worth X.

 

[Mr Rex]

Should a homeowner fail to renew their permit, it would significantly impact value obviously. But I can find market data to support the value of a covered aluminum dock versus a minimum 8x10 treated wood dock, personal property of not, it adds value to the Real Estate, and should be considered. I can build a lakeside McMansion without a dock or dock permit, and it is a POS value wise compared to a Doublewide with a dock.

 

[ETex2]

When you are doing the appraisal for mortgage purposes, do you always include the dock as personal property (say in the addendum), and include their contributory value separately? I assume that you would also have to assign value to the boat docks in your comps as well in order to get to the value of the real property only.

At this lake, there is no problem getting a permit to build a dock if you have a lakefront lot without one. So it's not the scarcity of docks nor the lack of new permitting that creates additional value for existing docks. But docks have always been considered real property here since they are permanently attached. No temporary or floating docks are allowed on this lake, so the piers must be driven into the lakebed permanently. Some docks might be worth $5,000, but some might be worth $100,000.

In my mind, this recent court decision turns that whole market upside down, since underwriters may now require that appraisers exclude the boat house in their valuation of the real estate. And people who have paid taxes on them over the years, may be due a refund for 5 years under the Texas Tax Code since personal property is not taxable. And owners have been paying taxes on them forever.