Commercial Property Tax Appeals

During downturns in real estate cycles when commercial property values decline, it is prudent for property owners to meticulously scrutinize their property tax statements to ensure that the assessor's valuation reflects the true current market value. In California, property owners who believe their property taxes are disproportionately high, due to the tax assessor's inflated property valuation, are constitutionally entitled to a formal notification and a subsequent hearing where they can contest the tax assessment. This process, known as a property tax appeal, provides a critical check against over-assessment and safeguards the property owner's right to a fair tax valuation. Successfully appealing property taxes can result in substantial annual savings for owners, often amounting to thousands of dollars.

Navigating a property tax appeal involves a series of distinct and structured steps,which are as follows:

1. Assess Legal Basis for Appeal: The first step is to determine whether or not a legal basis exists to challenge the tax assessment. Carefully review the assessment to understand how the assessor arrived at the assessed value of the property and identify any basis to challenge the assessment, such as, is the property correctly classified, have proper assessment procedures been followed, has anything occurred to change the base value, what data did the assessor use in determining value, and any other potential discrepancies.

2. Gather Evidence to Support Appeal: Collect evidence to support your appeal, i.e. facts to establish the reduction and the owner's opinion of the full value of the property. This might include recent sales of comparable properties, income and expense statements, financing terms, appraisals, or any physical condition issues that affect the property's value, such as damage or defects at the property. At this stage it may be prudent to hire a professional appraiser to value the property to determine whether the assessed value is reasonable.

3. Negotiate with Tax Assessor:

Prior to filing an appeal, it may be beneficial to discuss with the assessor regarding any perceived problems with the tax assessment. If there is a clerical error or something that is easily corrected, or if information exists that the assessor wasn’t aware of, e.g. the property burned in a fire, the assessor may be able to resolve the issue without the owner going through the appeal process.

4. Review Deadlines to File Appeal:

Be aware of the deadline to file an appeal. In California, the deadline can vary by county, but typically the deadline is usually 60 days from the date of the assessment notice and/or it must be filed within a certain window, e.g. July 2 through November 30. Missing this deadline can result in losing your right to appeal for that tax year.

5. File the Appeal: Complete the necessary appeal form provided by the county assessor's office. Include all supporting documentation and evidence with your appeal. Submit the appeal before the deadline either electronically or by mail.

6. Attend Appeal Hearing:

The assessment appeals board for the County where the property is located then conducts a public hearing with the applicant to receive evidence and decide on the appeal. The hearing must be held and a final determination made within two years of the timely filing of an application for a reduction in the assessment. If the board fails to hear evidence and make a final determination within two years, the applicant's opinion of value as reflected on the application shall be the value upon which taxes are to be levied for the tax year covered by the application. If the application is successful, the property taxes will be reset at the new valuation and a tax refund should be issued.

7. File Court Action:

In the event the applicant’s appeal is denied, the property owner may file a court lawsuit against the assessor to contest the valuation.

Ultimately, the goal of a property tax appeal is to secure a fair tax valuation and, consequently, meaningful cost savings, which can have a substantial impact on an owner’s bottom line. Engaging legal expertise is a strategic investment toward achieving a successful outcome in the property tax appeal process.

Disclaimer: This blog post is intended for informational purposes only and does not constitute legal advice.

Consulting with a qualified attorney and your tax advisor is strongly advised to navigate the legal complexities and ensure compliance with the law. If you have specific questions about your California commercial property please do not hesitate to contact our firm.