HOW TO LOSE A COMMERCIAL PROPERTY TAX ASSESSMENT CASE IN TEN EASY STEPS
I have represented hundreds of taxpayers over my thirty year career and have had to clean up some messes caused by prior counsel. I thought it might be useful to unveil my shortlist of ten recondite dangers in the assessment appeals process.
- Assessment appeals require specialized counsel and experts. An inexperienced professional, unschooled in the nuances of the process, can kill a good case. Many assessment appeals are litigated in trial courts where the rules, written and unwritten, differ from administrative appeals and common trials.
- The heyday of Valley Forge may be over. If you don’t know what I am talking about, then you are behind the curve. Using Valley Forge as your sole defense to a taxing authority appeal may be a losing argument.
- Commercial properties valued by the income approach may require multiple strategies. The is more than one method of calculating a cap rate or a tax load factor. Remember, an appraisal is more of an art than a science. There are no “slam dunks,” so have more than one strategy mapped out.
- If you appeal an assessment without strong factual or legal support, you take the risk that a board of assessment may elect to deny your requested reduction and instead increase the assessment. Yes, I have seen it happen.
- One size does not fit all. A residential property of 50 acres with a mansion is not the same as a home on a half-acre. A mixed-use office and retail building, land subdivided into lots and thereafter improved, shopping centers with big-box users and stand-along net lease properties, all demand specialized arguments and strategies.
- A lawyer who talks too much will detract from an appraiser’s presentation. A board of assessment hearing is often a quick affair, and there is little time for puffery. Get to the point. Not allowing a valuation expert sufficient time to make a presentation to a board can be deadly.
- An appraiser who talks too much is also a problem. Many appraisers are accustomed to the relative informality of a board of assessment and have limited courtroom experience. Proper witness selection and trial preparation requires hard work. The same is true for attorneys as well. I’ve seen some very competent attorneys and appraisers perform poorly in a courtroom due to inadequate preparation.
- Understand the issue. Valuation may be only one element of an assessment appeal. Understanding uniformity and ratios are also important. If your team does not have a good grasp on predetermined ratios, implied values, and common level ratios, and the method of calculation and the importance of each, you have a problem.
- Hubris, arrogance, and stubbornness will get you into trouble. A good settlement beats a bad verdict. Pushing a bad case is a bad idea. Sometimes you need to hold your nose and accept a modest increase.
- Do not buy commercial real estate without considering the possibility of a taxing authority appeal and what it may mean for your operating expenses. Proper planning prior to a purchase may just save you from an after-the-purchase headache. I’ll say no more since this one is more complicated than it appears.
Please heed my advice, and your chance of success will improve.
Related Practices: Land Use, Zoning, and Development