The vast majority of property owners only think about reviewing their commercial property taxes once – when they open their bill and see a much larger assessment than originally anticipated. However, in many cases it may be prudent to begin reviewing taxes well before those assessments arrive.
Devoting resources to reviewing property tax issues doesn’t make sense in every case; however, following a transaction or a significant improvement to a property, a more proactive approach might be beneficial.
“There’s this misconception that taxpayers need to wait until they receive their property tax bill to look at their assessment,” says Paul Krupinsky, Senior Director of Property Tax Services for Cushman & Wakefield. “It’s never too early to start the process.”
Property owners can often start a dialogue with the assessor in the fall – well before bills are sent out – to discuss various factors that may affect a property’s final assessment.
Reasons for Abatement
While property taxes are an important part of funding various local governments, it goes without saying that property owners would prefer to keep assessments for those buildings as low as possible.
For the purposes of an appeal, what matters more directly is whether the value assigned to each particular property was fair – or an “equitable assessment” in appraiser terminology.
To evaluate whether an assessment meets those guidelines, a property tax advisor will compare it against comparable properties.
If Property A is valued at $400 per square foot while Properties B and C are valued at $300 per square foot, then it’s possible that the value assigned to Property A is out-of-line with comparable properties, and maybe even the current market, and may be worth pursuing further.
Property Taxes Matter to Occupiers Too
While property tax appeal guidelines are often viewed as a factor to which only property owners need to devote resources, corporate occupiers who account for large amounts of space in any one property may also have the ability to directly challenge their assessments.
In Massachusetts, occupiers which pay more than 50% of the overall tax bill generally have the right to petition for a property tax abatement.
However, all leases are different, and any agreement may have specific language noting who holds appeal rights for a specific property, and whether an occupier can request that the landlord file an application for abatement.
Retail and triple-net leases frequently assign appeal rights to a specific party in the agreement.
Deadlines are Final
At the risk of stating the obvious, the most critical part of filing an Application for Abatement is the deadline set by the local city or town.
Most cities and towns send out final bills in December with an appeal deadline of February 1; however some municipalities with semi-annual tax payments, such as Cambridge, mails property tax bills in the fall, with commercial property tax abatement applications generally due sometime in November. (City of Boston deadlines and information can be found here.)
If property owners miss a deadline, there is generally no recourse.
Reaching a mutual understanding about a particular property’s value for tax reasons can sometimes be a challenge. But in the end, assessors are motivated to make an equitable assessment of every property and avoid what can become a lengthy and costly appeals process.