Each commercial property tax appeal has its unique set of factors that determine the range of services and opinion of value for the property tax challenge. The opinion of value will contemplate the three methods of valuation: Sales Approach (comparable properties), Cost Approach and income Approach.

Each commercial property tax appeal has its unique set of factors that determine the range of services and opinion of value for the property tax challenge. The opinion of value will contemplate the three methods of valuation: Sales Approach (comparable properties), Cost Approach and income Approach.

Types of Commercial Property Tax Appeals:

Retail Business
Office Buildings
Medical Building
Industrial Buildings
Automotive
Recreational
Hotel/Motel
Land and Subdivisions

Does the municipality review all commercial properties the same?

No. The type of property, the market demand and/or obsolescence for the property classification and the improvement history will impact the scope of the argument for your tax savings.

Changes in Operating Income/Cap Rates:

For the majority of commercial property, values are based on the net operating income and the cap rate for that property classification. Should you experience a change in vacancy rates or cap rates change, then there will be a change in fair market value.

The following are four areas that historically have caused a change in assessment and warrant one to file a tax certiorari petition.

1 Vacancy Issues:

When vacancy rates change for a commercial property, the result is a change in the net operating income. This may be caused by location, over-building in the market or a change in social habits, such as work from home.

2 Building Improvements:

The governing municipality will increase the property assessment when a building has a renovation or new improvement. Once the project is completed, it is important to evaluate whether the opinion of value provided by the governing jurisdiction is accurate.

3 Re-purposing a Building:

Many buildings are converted to a different purpose that has a higher value. For example, by converting an older office building or industrial building to residential rental housing in an area of low housing inventory, can increase the value. It is important to verify that the new assessment reflects the value of the new building.

4 Excessive Tax on Sale:

All communities may increase property tax assessments following a renovation/improvement. It is important to know that simply because a property transfers at a higher price, the municipality may increase the assessment based on the improvement, however the municipality may not increase the assessment to the value of the purchase price, unless certain factors apply, such as when the jurisdiction assesses property at 100 percent on the annual tax roll, re-valuation, etc. (improvements are case specific and depend on the laws of the local jurisdiction).