If you are the owner of a commercial, industrial, retail or office property or you simply want to review your own home’s market value and tax assessment, now is the time to do so.
Today’s economy has caused many commercial and industrial property owners to experience declining rents, increased vacancy and the need to become “creative” in leasing to both the new tenant and the renewal tenant. These factors have aided an already declining real estate market in devaluing property for real estate tax purposes. These same factors are applicable to both the multi-family and single-family residential marketplace.
Unfortunately, county boards of assessments, while attuned to a depressed market, cannot be expected to reassess property every year based on the local economy.
As a result, the real property taxes assessed against your property by the county board of assessment for county, local, municipality and school district taxes may be out of proportion to the actual value of your property or the value attributable to your property by capitalizing the income you receive from the property.
What should I do if I think my real estate taxes are too high?
First, you need to determine whether to file an appeal from the county board of assessment’s determination of assessment for your property. Taxpayers frequently believe that the filing of an appeal before the Board of Assessment is of such an informal nature that professional help is not required. Not only should you have an experienced real estate assessment attorney, but you should also have a qualified appraiser for your property.
On commercial and industrial properties as well as rental residential properties, two calculations often make the determination as to whether or not to appeal. Capitalization of income and comparable sales give your professionals the ability to make a determination as to whether a particular tax assessment is out of line.
The capitalization of income approach is the easiest and quickest test, whereas comparable sales require more information to be developed both by in house and outside real estate professionals. Up to date information on costs, square footage, occupancy, types and number of leases, use, location, mortgage amounts and interest rates, rental income and expenses is necessary to the capitalization approach. Recent comparable sales within the last year before filing of an appeal should be noted and analyzed. Financing implications must also be taken into account to determine whether the sale is an arms length sale or was the result of a mortgage foreclosure or workout agreement. For residential properties, the most reliable determination is of course comparable sales of similar homes within a reasonable distance from the subject property.
With the above in mind, now is the time of year to review your real estate tax assessment on any and all property owned. If the market value utilized by the board of assessment is inconsistent with the market value of your property or if you have experienced rental income problems over the last few years, then an appeal from your assessment this year may be in order. We, at Fox Rothschild, can help you make that determination in short order. If an appeal of your assessment appears warranted, we may suggest further analysis by a qualified real estate appraiser. In Pennsylvania, appeals for the Philadelphia suburban counties need to be filed on or before either August 1 or September 1 depending upon the county in which you own property. The deadline in Bucks, Chester, Delaware and Lancaster counties is August 1, 2012. The deadline for filing an appeal in Montgomery County is September 1, 2012 and for Philadelphia County is October 4, 2012.