Top 7 Commercial Property Tax Frustrations For CRE Executives

Posted by Anne Sheehan on Jan 21, 2016

479146411-789385-edited.jpgFor many commercial real estate executives, property taxes are a huge source of frustration, and steep increases inspire feelings of anger and powerlessness. “How could the government do this? It isn’t fair!”

Through discussions with professionals like you, we’ve developed a deep understanding of the many challenges and frustrations that CRE executives face in terms of compliance and taxation. In this article, we explore those frustrations to uncover underlying causes and help provide solutions.

The Top 7 Frustrations For Commercial Real Estate Executives

  1. Being Asked To Do More With Less

    As with CFOs and Controllers, today’s CRE executives are asked to deliver more value from fewer resources. Thirty years ago, a typical company treated commercial real estate as an afterthought: “We need a building, and we can afford it. Let’s buy it and use it to build our widgets.”

    Today, these decisions are far more complicated, and CRE execs face increased pressure to manage costs and risks more effectively. Some companies have internal tax departments of 20-25 people to handle all of the details of property tax management, but most companies lack that expertise and end up paying more than they should in commercial property taxes.

  1. Lacking The Empirical Data For Decision Making

    CRE executives now face cost-per-seat guidelines and other published benchmarks as to what the cost of occupancy should be for companies. The problem with these benchmarks is that workspace is changing rapidly, and there’s not much empirical data available. If you want to know how much value you add with a designation like LEED platinum or silver, for example, there just aren’t enough transactions to establish a range baseline.

  1. Keeping Track Of Deadlines

    Depending on your portfolio and situation, you might have to keep track of over 1,000 dates to stay on top of your commercial property taxes. That’s a massive task – and a huge source of frustration. To keep track of all of these dates, it’s essential to constantly go to jurisdictions to confirm dates as some don’t even mail notices.  

    If you wait for the jurisdiction to send the necessary paperwork, you’re always in crisis mode. An assessment notice could float around inside your company for weeks, and then suddenly the appeal deadline is tomorrow.

  1. Inconsistent Property Tax Appeal Deadlines

    In addition to having to manage hundreds or even a thousand dates for your commercial property taxes, the deadlines for appeals probably are not uniform across your portfolio. Some appeal dates are set by the legislature (in California for example), while other taxing jurisdictions set their appeal deadlines every year. This lack of consistency isn’t a problem if you have one building, but it creates huge headaches when you’re managing a portfolio of 25 or more buildings in different jurisdictions.

  1. Competing Definitions

    As if inconsistent deadlines weren’t enough, different jurisdictions have their own ways of defining “due,” and these variations increase the risk of making mistakes. Is the paperwork due in the assessor’s office by January 20? Or does it just have to be postmarked by January 20?

  1. Record Keeping And Lost Documentation

    From rent rolls to operating statements, it takes considerable time and effort to gather all required documentation for property tax management, plus the challenge of maintaining access to the information. Misplaced documentation means additional time spent trying to recover the information and may increase compliance risks.

  1. Meeting Jurisdictional Requirements

    Some jurisdictions want certain data when you file a property tax appeal, while others don’t. Some require specific data and will throw out your appeal if you don’t provide it.

    Most businesses simply don’t have the time for all of these laborious tasks, and many have found that outsourcing is a more effective approach to commercial property tax management. Outsourcing also allows your company to gain the benefits of a proactive approach to property taxes.

Eliminating Frustrations With A Proactive Approach

As with many aspects of running a successful business, it’s best to be proactive rather than reactive when it comes to commercial property taxes.

Imagine you receive your tax assessment in the mail and see the county is saying you owe three times what you’d expected to pay in taxes. A reactive CRE executive is likely to panic and then scramble to try to find a solution. With a proactive approach, however, you have greater foresight into assessment increases, as well as access to market data that proves the true value of your property and what taxes you actually owe.

When you’re proactively managing your commercial property taxes (especially through an outsourced partner) you’re far less likely to overpay – and less likely to waste your energy on frustration.

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