A little-known but widespread practice of giving property tax breaks to homeowners for adjacent lots they also own is illegal, the Maine Supreme Judicial Court decided Tuesday.

The justices reviewed the outcome of a 2014 superior court appeal filed by 34 residents of Scarborough’s seaside neighborhoods, who had been denied abatements after being assessed property tax increases they said were discriminatory and unconstitutional.

The landowners lost their initial claim that the former town assessor discriminated against them when he increased most waterfront land values in 2012. Some of their neighbors, however, were immune to the full impact of the increase because they owned adjacent lots that were considered “excess land” for assessment purposes.

The practice, which has been permitted by state officials, led to assessment reductions ranging from a few thousand dollars on inland parcels to a few million on waterfront properties.

On Tuesday, the state supreme court found that the practice of randomly undervaluing adjacent lots upon request violates the constitutional requirement for equal taxation and state laws that call for each lot to be assessed separately and at just value.

“Maine law does not permit the town to engage in the fiction of treating separate smaller abutting lots as if they were a single larger lot, which results in an assessment that does not reflect just value,” the justices wrote.

The high court rejected the homeowners’ claim that it was unfair for the assessor to adjust the value of waterfront homes based on recent sales absent a townwide revaluation since 2005. And it upheld the town’s practice of assessing lesser used or unused portions of larger single lots at a lower rate as long as it reflects fair market value.

The decision against undervaluing adjacent lots calls for Scarborough’s Board of Assessment Review to make “appropriate abatements.” How the town and other Maine communities will respond remains to be seen.

For more than 30 years, if a Scarborough homeowner asked the town assessor to value two lots as if they were one, the secondary lot would be assessed below the fair-market value based on its highest and best use. The tax break had been applied to at least 110 properties across town as of 2014, but it was unclear how much tax revenue was represented by the reduced assessments or what cost had been passed on to other taxpayers.

In waterfront neighborhoods, where half-acre lots sold for $2 million to $4 million, depending on the view, having a parcel assessed as “excess land” could save a property owner $30,000 to $60,000 or more in yearly taxes.

In one case on Prouts Neck, a vacant one-acre lot was assessed at $12,700 – a fraction of the normal one-acre assessment of about $2 million – because it was merged for tax purposes with the house lot next door, reducing the property owner’s 2013 tax bill by $30,000.

The practice of assessing adjacent lots as “excess land” came to light during Scarborough’s hearings on property tax appeals in 2013 and 2014. Testifying were former Town Assessor Paul Lesperance, who retired last year, current Town Assessor William Healey and David Ledew, director of the Property Tax Division at Maine Revenue Services.

All three said the practice of combining lots with shared ownership for assessment purposes was common across the state. They pointed to a state law, Title 36, Section 701-A, that allows contiguously owned parcels to be combined for assessment purposes.

The law stipulates that it applies to “unimproved acreage in excess of an improved house lot … when each parcel is 5 or more acres (and) the owner gives written consent to the assessor.” It doesn’t say that parcels may be combined this way to reduce property assessments.