In the wake of the subprime mortgage crisis, unprecedented government bailouts and plunging investment portfolios, the troubled real estate market will likely continue to decline for some time.  You could be left paying too much in real estate taxes if your town fails to account for this decline.  If you believe your town has overassessed your commercial property, you may be able to lower your real estate taxes by filing a tax appeal. 

In January of every year, your town provides you with an assessment card identifying the value it has assigned to your particular property.  It is sound business practice to have this assessment reviewed annually and to pursue an appeal if the value assigned by the town is unreasonably high.  This applies whether you own the property or you bear primary responsibility for making real estate tax payments pursuant to a lease. 

The first step in this process is to determine whether the decline in your property’s value is substantial enough to warrant a reduction in your assessment.  You must contact the tax assessor in your town and ask for the “average ratio,” which is a variable percentage used by municipalities to calculate your final property assessment. 

Once you have the average ratio, simply take your property’s total assessed value and divide that number by the average ratio.  The resulting figure represents the value that the town has assigned to your property and is known as the property’s “equalized value.”  If you believe that your property’s actual market value is less than the “equalized value,” then it may make sense to pursue a tax appeal.

If an appeal appears warranted, your attorney will consult with a professional appraiser to confirm that the property has been overassessed and then will commence an appeal with the tax court or county board of taxation.  During the appeal process, both you and the town will present evidence regarding the property’s value.  If your property is found to be worth materially less than the amount assessed by the town, your property taxes will be reduced for the current tax year and the two tax years that follow (known as “freeze years”).  In most situations, you will not incur any legal fees unless the appeal results in a reduction of your tax bill.

Because all tax appeals must be filed no later than April 1 of each tax year, it is essential that you take action as soon as you receive your annual property tax assessment card in January.  It is important that you consult with an experienced attorney who can analyze your particular circumstances and advise you as to a proper course of action.

Simply put, if you believe your commercial property has been overassessed, a tax appeal may be a viable way to reduce your real estate tax burden and improve your bottom line for years to come.