Assessment Advice for Owners of Commercial and Industrial Real Estate

Laying a Good Foundation for the Potential Appeal of Your Commercial or Industrial Real Estate Assessment

It makes sense in any economy for owners of non-residential real estate to carefully review their real estate tax assessments when they are reassessed because:

1. Most assessors are not as familiar with the valuation of non-residential properties as they are with residential properties.  Assessors also rely more heavily upon the owners of non-residential properties to inform them about how the market is performing.

2. The property tax is relatively easy to challenge and success rates are fairly high.

3. Whether you are a sole proprietor, partner, managing partner, or CEO who has to answer to stockholders, reducing annual operating costs like the property tax helps make your organization more profitable.  Paying too much for real estate taxes is not good business sense.

No matter if you are hiring a property tax service or independent tax agent, or instructing your own staff to pursue a reduction in the assessment here is where you'll want to start:  

1. Whatever the timing or situation, first of all make an appointment to discuss the general assessment process with the City or County Assessor or one of his or her staff that is well-informed as to how your type of property is valued for assessment purposes, any abatements or exemptions that you or your organization may qualify for, and deadlines for filing information and assessment appeals.  At a minimum you'll want to know: (a) the effective date for the valuation of non-residential properties for assessment purposes and whether properties are assessed each year or less frequently; (b) when income and expense questionnaires or surveys are due; (c) the deadlines for each step available in challenging your assessment; and (d) generally how your type of non-residential property is valued for assessment purposes. 

2. Once you know where you are in the reassessment cycle from the answers you get to item 1, you can then decide how you should proceed.  If opportunities for challenging the assessment are still available you should start by reviewing the current assessment in light of what the assessor office has told you.  You'll want to decide if you really have a case or not depending on what comparable sales, replacement cost estimates, or what income approach data indicate.  Remember, challenging the assessment will result in one of three outcomes: a lower assessment, an unchanged assessment, or a higher assessment.  The higher assessment result doesn't happen very often, but it can happen.  Be sure to do the upfront homework.

3. In the current economy perhaps one of the best things that you can do is be sure that any requests by the local assessor for income and expense data (typically through annual questionnaires or surveys) have been complied with.  If you have suffered from rent losses, high concessions, higher than normal vacancy, etc., the assessor will want to see this in your current statements and also want to compare current performance with earlier filings to establish a clear direction or trend.  Avoid the temptation of just wanting to keep the assessor informed when things are bad.  In some states, like Virginia, if you haven't complied with your local assessor’s request for income and expense information you can't appeal the assessment on those grounds.

4. If you've missed the deadlines for challenging the assessment for this year all is not lost.  Some of the most effective relationships I've seen or been a part of include property owners who meet with and provide useful information before the next reassessment cycle begins.  Ask the assessor when you can meet before they begin their next cycle of reassessments.  At the meeting be sure to ask questions about how the assessor sees non-residential properties changing for the upcoming year and why, but also (and this is the good relationships part) contribute your own insight into the market as an owner or what you have heard on the street from other owners or competitors.

I know several well-qualified people who work for property tax service companies or who are independent tax agents.  Those who are successful work closely with and have good relationships with local assessors.  If you are considering hiring someone be sure to ask them several probing questions about their working relationships with local assessors.  Remember tax representatives can come and go but as long as you own your property you'll need to deal with your local assessor.  Either you or whomever you hire needs to be able and willing to establish a good working relationship with the local assessor.  If the local assessor is somewhat difficult to get along with (yes, we're just like any other field, we have our share) concentrate on factual information exchange and then focus on developing a working relationship with the Board of Review or Board of Equalization.

Comments

[philippine real estate]

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Deirdre G