Winning Real Property Tax Valuation Cases
Commercial property owners who believe the value of their property has been overestimated can file a protest with a County Board of Revision (BOR) to have the value adjusted. Formally called a Complaint Against Valuation (CAV), this complaint must be submitted on or before March 31st of the following tax year and must contain significant evidence that the property in question has been overvalued.
Property owners bear the burden of proof when it comes to a property’s value. Legal professionals at The Bluestone Law Group have identified four key pieces of information that commercial property owners need to have in their appraisal in order to maximize their chances of a receiving a favorable ruling from a tax board:
- A detailed description of their commercial property.
- Reliable data that accurately portrays local real estate market trends.
- A credible and well-supported explanation of how the appraiser came to this valuation.
- 3 years of financial records (including rent rolls and income and expense statements) for the subject property.
There are many things that appraisers and property owners can do raise their chances of a favorable ruling:
Value the Property Retrospectively
The appraiser must value the property as of its tax-lien date of the year in question (January 1st of the applicable year).
Use Financials Derived From the Market
The appraiser’s value must reflect the current sales, rental, expense and cap rates of the market using statistics and numbers derived from recent trends.
Show Non-biased Comparables
When using comparables to determine value, make sure they are from properties that were sold in arm’s-length transactions. If a comparable arm’s-length transaction contrasts the appraiser’s value, do not exclude it from the report. Otherwise, the report may be deemed uncredible.
Appraisers should also be familiar with comparable properties used in order to get the best idea of what the subject property’s value should be.
Include cost approach analysis on newer properties
If a property is less than 10 years old, include a cost approach analysis. Since estimating depreciation becomes more difficult as properties age, this is less effective for older properties.
Take Construction Into Account
New construction is to be valued based on its percent of completion and the tax lien date. Appropriate discounts (based on the county) are then applied based on the partial completion of the project.
Properties Should Be Valued at Their Highest and Best Use
Regardless of how the property is currently being used, it should be valued based on its greatest potential use. If the appraiser believes that an alternate use would yield a greater return, they must submit valid reasoning and evidence to support their conclusion.
What Else to Include in the Report
- A certification of an opinion of value from the appraiser.
- A résumé or statement of the appraiser’s qualifications.
- A copy of the appraiser’s license.
What to Avoid
- Overreliance on list prices: list prices are not the definitive value of a property and should not be the sole determinant of value.
- Property encumbrances: properties are valued as unencumbered for real tax purposes.
- Mortgage financing appraisals: these value properties on a leased-fee basis and the value conclusion can differ significantly from a tax appeal appraisal.
- Reliance on discounted cash flow analysis: since these are subjective and based on speculation, tax boards tend to discredit their impact.
- Restricted use appraisals: restricted use reports are can sink an appraisal because there is much less information or analysis involved. Appraisers should use a self-contained report instead.
Another step that the appraiser can take is to testify at a BOR hearing to further explain the analysis. Otherwise, the appraisal report may be challenged as “hearsay” by the school district.
Make Your Deadlines!
Appealing property owners must disclose their appraisers and reports within 150 days from filing the Notice of Appeal with the Ohio Board of Tax Appeals (BTA). If an extension is needed, property owners should immediately contact the BTA.
Disclaimer: This information is for general educational purposes only and is not intended to be used as legal advice for any specific case. If you need assistance with a Complaint Against Valuation, tax appeal or any other case, we strongly advise you to contact an attorney who regularly practices in this field.