Being hit with an unexpectedly high property tax assessment is alarming. Fortunately, there’s a way to combat the unplanned increase in commercial property tax liability, and that’s through a commercial property tax assessment appeal. Yet, an estimated 85 to 90 percent of U.S. companies are paying their commercial property taxes with no questions asked.
Many business owners simply don’t know what to do. They’re unaware of their right to file a commercial real estate appeal. Just knowing that you have an option – and that there’s potential to lower your tax costs – may may be a huge relief to you.
Even so, once you begin considering this option, you might end up with more questions than answers. If you’re left wondering what you should do to prepare for the commercial real estate appeal process, use these tips to help set yourself up for a successful hearing.
1. Don’t Assume They’ll See The Property In Person
Even the most seasoned and diligent property assessors typically do not have the time or financial resources to visit every property during the assessment process. Assessors typically rely on mass appraisal methods that analyze properties grouped by similar submarkets and characteristics. This is important to remember for commercial property tax appeals because your real estate can’t “speak for itself” – you have to speak for it!
2. Be Your Property’s Worst Critic
Speaking for your property does not mean talking about how great it is. You’re not trying to sell your property, so don’t talk about its advantages. This is the time to highlight the property’s problems that impede your use or your production. Just make sure you stick to issues with the property itself. A sob story about personal troubles will have no effect on your property’s value.
3. Include All Important Factors
A myriad of conditions may impact your property’s assessed value, and one should take full advantage of that during the appeals process. In addition to highlighting the cost of deferred physical maintenance and improvements that need to be made to the property, you must present a full analysis of comparable sales that have sold in your market and an income analysis to establish the fair market value of your building, even if you don’t rent it. Many jurisdictions allow uniformity wherein you can compare your assessed value to similar properties in the submarket. The more data and analysis you present, the closer you’ll get to receiving a reduction.
4. Attend Other Appeal Hearings
If your jurisdiction will allow it, one of the best ways to prepare is to attend someone else’s hearing to get a better grasp of how it works. Each hearing will have a board of three to five members who may or may not be knowledgeable in valuation. There will be a chairman who will manage the process, and at least one representative from the assessor’s office. You can observe the proceeding and identify what the board is focused on and wants to see from the taxpayer. That way, your appeal hearing won’t be your first experience with the real-life process.
5. Ask For What You Want
You won’t get what you don’t ask for. Some business professionals are skeptical about appealing their property assessments, wrongly assuming they won’t be able to get it changed. Remember, the law guarantees that your assessment must be at market value. So, educate yourself on the market and put together a persuasive presentation. This gives you the evidence to support your assertion that you are being over-assessed and increases your odds for a tax refund – so go out and blatantly ask for one!
6. Bring In Professional Help
No matter where your property is, the process for going through a commercial real estate appeal is no less daunting, and it’s clearly outside your area of expertise. That’s why it’s important to consider partnering with a commercial real estate tax advisor – one who can guide you through the steps and afford you the best chances of coming away from the process with a favorable outcome.
Ultimately, local taxing authorities don’t always have the resources on hand to accurately calculate the tax value of a property. If you think your assessment is above market and will result in you paying more than your fair share of commercial property taxes, don’t just accept your assessment increase.
Of course, be aware that not paying your taxes will result in the loss of appeal rights, so it’s imperative that you handle that first. Then start considering your options for an appeal and use these tips to help steer your efforts.
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