After rising into calendar year 2006, market values of commercial and industrial properties are now declining rapidly. Property tax assessors are often slow to react to declining markets, which leads to the assessors’ over-valuation of commercial and industrial properties for property tax purposes. Now is the time to act. Now is the time that you should be questioning the assessors’ valuations of your commercial and industrial properties.

How do you do it?

The only way to question your taxes payable in calendar year 2009 is to file a petition for review of property taxes under Minnesota Statutes Chapter 278 with the district court or tax court on or before April 30, 2009. This is an absolute deadline. The timely filing of the petition preserves your right to negotiate a reduced value with the assessor, or take your claim to trial before the tax court or a district court. As a practical matter, almost all these matters are settled with the assessor and do not require a trial. If it is determined that your claim for reduction has merit, a stipulation agreement is prepared and filed with the court to effect the tax reduction or refund. If it should be determined that your property is not overassessed, your petition can be dismissed without further consequences.

Do you need an appraisal to obtain a property tax reduction?

Sometimes yes, and sometimes no. If your commercial or industrial property is rental property, a preliminary evaluation can often be estimated by computing your net operating income (NOI) and applying an appropriate capitalization rate to that income. To get the best results, however, an appraisal is often needed to compare your rents and vacancies with the market rents and vacancies, or to compare your property with comparable properties that have sold in the marketplace. Often, for a minimum fee an appraiser can give you a preliminary opinion whether your property is overassessed by simply viewing the property, reviewing your income and expense date, and reviewing comparable sales data. If the appraiser believes your property is overassessed, a preliminary appraisal report suitable for negotiations can be prepared for a reasonable fee by the appraiser.

Do you need an attorney to obtain a property tax reduction?

Again, you do not necessarily need an attorney, but to get the best result you should retain an attorney knowledgeable in dealing with the assessors and the courts in obtaining property tax reductions. An individual that owns property can serve and file a petition with the courts for himself or pro se. Sometimes, even entities do this, although it may be challenged as practicing law without a license. In any event, an attorney knowledgeable in property tax law and practice should be retained to make sure that the petition is properly served and filed, the 60-day rule statute is complied with for income-producing property, and for dealing with the court and its procedures. Furthermore, a property owner dealing with the assessor’s office without a knowledgeable attorney is at a substantial disadvantage, and may not be taken seriously.

Typically, knowledgeable property tax attorneys are willing to handle your property tax matters on a contingency fee basis where the attorney may even cover out-of-pocket expenses in larger matters. In such cases, there is little or no risk to the property owner.

So why do I say that property tax reductions are gifts that keep on giving?

If you file a petition for review of 2009 taxes payable, the 2010 and 2011 property taxes payable will also be in play and can be resolved at the same time. The 2009 property taxes payable are based on the assessor’s estimated market value as of the January 2, 2008, assessment date. In general, a property owner receives the assessor’s estimated market value for the current year in mid-March each year. So, the property owner is and has been informed of the January 2, 2009, assessor’s estimated market value by the time that the 2009 taxes payable petition is served and filed with the court. Typically, negotiations with the assessor’s office of the 2009 taxes payable petition will not occur before late 2009, and most likely sometime during 2010. Accordingly, the assessor’s estimated market value as of January 2, 2008, 2009 and 2010, for taxes payable in 2009, 2010 and 2011, will likely be known and in play when negotiations are commenced with the assessor’s office relative to the 2009 taxes payable petition.

Finally, once a reduction is negotiated, the reduced valuations tend to be the base from which the assessors’ offices make their valuation decisions for each succeeding assessment dates. Accordingly, the reduction negotiated for the last year tends to influence the assessor’s valuation for many years into the future. Thus, a property reduction is truly a gift that keeps on giving.

Current property tax rates on commercial properties run about 3% of the assessor’s estimated market value. So, a reduction in the assessor’s estimated market value of only $1,000,000 results in a tax reduction of only $30,000. But, when the property owner considers that that $30,000 reduction will ripple through its property taxes for, say, up to ten years in the future, that reduction suddenly becomes a $300,000 reduction payable over the next ten years.

Property tax reductions truly are gifts that will keep on giving. Wouldn’t you like a gift like that? Call your property tax attorney now.