Who Pays Property Taxes on City Land Leased to a Business? (Grove Key Marina v. Casamayor)

The Facts

The City of Miami leased waterfront land to Grove Key Marina, LLC, which subleased part of it to Scotty’s Landing, LLC for a bar and restaurant. The lease’s tax provision said the property was exempt from ad valorem taxes, and the lease had no clause shifting property taxes to the tenant. The tenants paid the tax on their leasehold interest.

Because the land was used for private, profit-making purposes rather than a public purpose, it was not exempt. The county sent the tax bills to the City, the City forwarded them to Grove Key, and Grove Key sent them back unpaid, year after year. In 2012 the tax collector threatened to revoke the tenants’ occupational licenses and corporate charters unless they paid. The tenants sued for a declaration that they owed nothing; the tax collector counterclaimed and brought in the City.

The trial court ruled that the tenants owed no ad valorem taxes under the lease and that the City alone was responsible for the 2007 to 2011 taxes, the years not barred by the statute of limitations. It denied the tenants’ request for attorney’s fees. The City appealed, the tax collector cross-appealed, and the tenants appealed the fee ruling; the cases were consolidated under No. 3D13-1713. The points below are what the lawyers argued, not findings by the court.

• The City argued the statutes and a Department of Revenue rule point the tax collector to the lessee, and that the City cannot pay taxes for a private business.
• The panel pressed the City on the lease: it had no pass-through clause, and the City itself had promised the tenant the property was exempt. One judge framed the case as a mutual mistake of law and asked why the tenant should bear it.
• The tax collector agreed the City was the taxpayer, but argued that if the City did not pay, section 197.432 and section 196.199 let it pursue the lessees, including by revoking their licenses and charters. The panel noted the tenants had never been sent a tax bill.
• The tenants argued that Florida Supreme Court precedent already put the tax on the City absent a pass-through, and that they were entitled to fees under section 57.105 and the taxpayer bill of rights, section 192.0105.

The Decision

The Third District affirmed on May 27, 2015, in a written opinion. Following Capital City Country Club v. Tucker, it held that a municipality is liable for ad valorem taxes on its leased property unless the lease contains an express pass-through provision, and this lease had none. It rejected the City’s reliance on Florida Administrative Code Rule 12D-13.046, finding that the City ignored the rule’s later sentences. The tenants owed only the intangible tax on their leasehold, which they had paid.

The court also held that the tax collector could not use the lessee remedies in sections 197.432(10) and 196.199(8) against the tenants, because those remedies apply only when the lessee owes the tax, and these tenants owed nothing. It could not threaten their licenses and charters to collect the City’s taxes.

On fees, the court found no abuse of discretion in denying sanctions, given the complexity of the tax issues and the tax collector’s limited knowledge of the lease when it counterclaimed. Rehearing was denied on June 25, 2015.

The Law

Florida’s constitution exempts municipal property only when it is used exclusively for municipal or public purposes. Government land leased to a private business for profit is usually taxable. Section 196.199 governs how leasehold interests in government property are taxed, and section 197.432 limits how delinquent taxes on government-owned land can be collected; no tax certificate can be sold on property owned by a governmental unit.

Who actually pays depends on the lease. Under Capital City Country Club v. Tucker, the government owner bears the ad valorem tax unless the lease expressly passes it through to the tenant. Fees for a claim or defense with no support are governed by section 57.105, and the taxpayer rights statute, section 192.0105, sets out notice rights in the tax process.

Lessons

• Government landlords: if the tenant should pay property taxes, the lease must say so expressly. A promise that the property is exempt makes it worse, not better.
• Tenants on public land: read the tax clause and track the property’s exemption status. A loss of exemption can mean a large tax bill for someone.
• A tax collector’s remedies against a lessee depend on the lessee actually owing the tax.
• Winning the case does not guarantee fees. Sanctions under section 57.105 require a claim that was clearly unsupported, and complexity cuts against them.

Source: Grove Key Marina, LLC v. Casamayor, Nos. 3D13-1599 & 3D13-1713 (Fla. 3d DCA May 27, 2015); ACIS docket.

Watch the Oral Argument

This is the recording of the actual oral argument, posted on the channel. What lawyers and judges say at argument is not the ruling; the decision is summarized above.

📋 Who Pays the Taxes on City Land? A Private Marina, a Lease, and No Tax Clause

Go Deeper

• County Delivered the Old Plat, Tenant Paid Rent for Years (Coconut Grove Station v. Miami-Dade)
• A 1974 Park Deed's Reverter Clause Survives: Not a Dedication Under 95.36 (1000 Brickell v. City of Miami)
• Homestead Exemption Revoked for Nine Years: The 10% Cap Still Applies (Russell v. Hassett)

Frequently Asked Questions

Do I have to pay property taxes if I lease land from the city?

It depends on your lease and how the property is used. If the land is used for a private business it is usually taxable, but under Capital City Country Club v. Tucker the government owner bears the ad valorem tax unless the lease expressly passes it to the tenant. In Grove Key Marina, the City owed the taxes because the lease had no pass-through clause.

Is government-owned land exempt from property tax in Florida?

Only when it is used for a public purpose. Land a city leases to a private marina or restaurant for profit generally is not exempt, as the parties in Grove Key Marina agreed.

Can the tax collector sue a tenant who never got a tax bill?

Not on these facts. The Third District held the tax collector’s lessee remedies under section 196.199 and section 197.432 apply only when the lessee owes the tax, and these tenants owed nothing under their lease.

Can I get attorney's fees if the tax collector wrongly comes after me?

Possibly, but it is hard. Fees under section 57.105 require a claim that was clearly unsupported by the facts or law. In Grove Key Marina, the tenants won on the merits but the denial of fees was affirmed because the issues were complex.

Talk to a Florida real estate litigation lawyer

Weidner Law, P.A. handles Florida real estate disputes, title problems and appeals from St. Petersburg. If you need a real estate litigation lawyer, call (727) 954-8752 or email weidner@mattweidnerlaw.com.

Read the law yourself, free: every Florida statute and court rule is on floridarules.net.

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