Commercial Property Tax Savings: Tips For Spotting An Over-Assessed Building

Posted by Anne Sheehan on Mar 12, 2015

Tips For Spotting An Over-Assessed BuildingIf you received a cash windfall of hundreds of thousands of dollars, how would you use the money? Funding capital expenditures is an excellent way to use the “found” money that comes from a tax refund check you see after a successful commercial property tax appeal

Consider a property owner in the Atlanta metro area that received a refund check for $265,000. The owner applied that money to deferred maintenance projects, including repaving the parking lot, installing a new roof, and extensive painting and re-landscaping. Completing those projects ultimately helped the owner to sell the property more quickly for a significant profit.

Other businesses use their tax savings to pay off corporate debt, while some choose to inject the funds into the corporate cash flow rather than allocating the money to a specific project.

So, what must happen for a business to receive a commercial property tax refund? The specifics vary case-by-case, but central to each is overvaluation.

If you’re wondering whether your property portfolio is eligible for a commercial property tax appeal, consider the following:

  1. Property value isn’t static, even if the building is:
    A building that experiences no physical changes or major shifts in occupancy could still lose property value due to outside forces.

    The Great Recession of 2008 is the biggest and best example of external forces affecting commercial property rates. By 2009, commercial real estate values dropped about 40 percent across the nation.

    Another example includes an office building in Palm Beach, Fla., that remained in good shape as the neighborhood around it deteriorated. Even with low rental rates, the owners had difficulties convincing anyone to even look at the building due to its blighted neighborhood.

  2. Internal changes also affect value:
    Similar to how a degenerating neighborhood affects a building’s tax value, changes within a property also have an impact.

    For example, a property owner that eliminates three floors of office space when constructing an atrium in the main lobby should see a tax value reduction based on the amount of leasable office space available. Likewise, if a building’s occupancy rate declines by 20 percent in a year, the property tax value of that building should reflect that vacancy and the property tax should decrease as well.

    Since labor is cheaper in other parts of the world, many manufacturing facilities have outsourced labor to places like China and India. As a result, manufacturing facilities in the U.S. often have machinery sitting idle.

    In such cases, it’s possible to win a tax reduction based on the economic obsolescence. When a business process is offshored, the value of the building and personal property where the process took used to take place diminishes, and the tax value should fall accordingly. 

Remember, the law is on your side. You’re entitled to pay no more than your fair share of commercial property taxes. Plus, the cash windfall from a successful commercial property tax appeal could help you fund much-needed capital expenditures.

To see the greatest returns, contact a commercial property tax management expert that knows how to challenge assessments and uncover property tax savings. 

To learn more, download RPTA’s free whitepaper, 5 Reasons You Should Challenge Your Current Commercial Property Tax Assessments

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