Real Estate Tax Assessments and Tax Appeals

More real estate tax appeals are headed to trial. More cases are being litigated. It’s a trend, and it’s costing you, the taxpayer, and your municipalities, more money. Why is this happening? State governments desperate to fund municipal treasuries are pushing property tax appeals. This drive for tax revenue continues to bring more taxpayers to court.

Property owners are finding it more and more difficult to win these battles. Property tax assessment is presumed to be correct until it’s overcome by substantial contradictory evidence produced by the taxpayers or their attorneys. The level of proof required to dispute a tax assessor’s court presentation has been increasingly difficult to attain, since comparable sales for a particular market can be limited, given the soft economic conditions over the past few years.

So how does a taxpayer defend himself or herself in tax court? It’s important for taxpayers to understand the Uniform Standards of Professional Appraisal Practice (USPAP). In doing so, they may discover support to use in tackling the taxing jurisdiction’s credibility. Here’s an example: a tax assessor will seek a commercial appraiser’s advice for the tax assessor’s court presentation. The appraiser will provide a work file illustrating the determination of the real estate valuation. The advice an appraiser gives a tax assessor is discoverable in court, so taxpayers can study the trial’s appraisal report. They can then compare the trial’s appraisal report to the work file prepared when the original valuation was made. Inconsistencies between these two reports may work in favor of the taxpayer. Also, discrepancies in the two accounts may imply a commercial appraiser’s failure to comply with USPAP provisions. This is recognized as professional misconduct. A violating appraiser is subject to sanctions, a suspension, or a revocation of his or her license. Municipalities should settle these cases often and early in the process. On-going legal and appraisal fees may possibly counter any tax revenue gained.

However, the best way to defend your case for an assessment reduction is to hire your own commercial real estate appraiser. Your appraiser will give you an unbiased opinion of the value based on the most current market data for your particular type of commercial real estate, whether it be for office, retail, industrial, multifamily, or whatever. A property owner going against the tax assessor in court without any market support will most likely not be able to make a case for himself. Make sure the appraiser you use has an MAI designation from the Appraisal Institute, since these appraisers have been trained far beyond the state-certified appraiser.

Are you in the midst of a real estate tax assessment appeal? What lessons are you learning? Are you finding your tax jurisdiction fair? We’d like to here your story or any other comments you may have.