Assessing Your Assessment

Tim Millett  /   October 19, 2018

Are You Overpaying On Property Taxes?

Property tax has a significant financial impact on owning or leasing commercial real estate. Often property owners deem their real estate taxes as fixed and irrefutable. In the case that your assessment is low, don’t move a muscle and hope the Town doesn’t catch wind. In the case that your assessment is higher than perceived value, you have the legal right to appeal. Seek the help of tax abatement specialists who will work with your respective municipality to determine a fair valuation. Someone well-versed in tax abatement will apply a valuation method to give you the best shot at influencing this significant cost. To make sure you’re not overpaying, look for red flags that signal over-assessment, know assessment trends, and be proactive about potential abatement.

Red Flags

Property Owned By Tax Exempt Institution

Properties previously owned by the State—non-profits, religious organizations, etc.—often have artificially high assessments because the property taxes are not being paid at the end of the day.

Product That Was Once Class A

A These are properties that were often built-to-suit 30 or 40 years ago and have significant deferred maintenance. They were once the nicest properties in town and the assessment reflected it; now they are vacant, obsolete, and over-assessed.

Vacancy-Plagued Area

In times of economic prosperity we don’t often see commercial corridors with considerable vacancy, but when there is, current owners should consider their unique economic conditions before undergoing a review of their assessment.

Assessment Trends

Industrial

Lease rates, vacancy rates and demand has never been stronger for industrial buildings. In these prevailing market conditions, there is a fair chance market value exceeds assessed value.

Retail

Traditional retail in malls and strip centers has taken a large hit from online commerce. Business failures and foreclosures are contributing to an excess of vacant property which bodes well for abatement.

Office

When businesses are expanding, they’re gravitating toward modern buildings, resulting in vacancies for owners of outdated buildings. If you own older office product, you should evaluate.

Multifamily

The market for multifamily units is booming and vacancies are low; this trend appears to be indelible. Though there doesn’t appear be an intrinsic reason to appeal your assessment, all properties should be evaluated case by case knowing influencing factors such as neighborhood, deferred maintenance and/or vacancy trauma.

Proactive Policy

It is too late to seek reassessment when the tax bill comes, when your prospective buyer says the taxes are too burdensome, or when an interested tenant chooses another property because the “triple nets” (operating costs inclusive of taxes) were lower. The process for the tax assessor could take months, and the reassessment might not take effect for a year or more. Decreasing your tax burden adds money to your bottom line whether you are an owner-user or landlord. If you come across a “red flag” property or purchase a property for considerably less than its assessment, the money invested in a tax abatement specialist will pay off in in your occupancy costs and marketability. Do not wait, act now!



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