Guest Contributor W. Scott Jones is head of the tax appeal division and principal at NAI Earle Furman LLC Commercial Real Estate.
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In the next few weeks, 2013 tax assessments and tax bills for commercial real estate will be making their way to property owners around the Upstate. The impact of an elevated tax assessment has become an issue of importance, and during the recent economic slowdown, numerous property owners became almost as interested in saving money as making money on commercial assets.
Preserving hard-earned working capital became a critical component of not only maintaining profitability but, in some cases, reducing a loss on a commercial property. Although the economy has greatly improved, reducing tax liabilities on commercial assets is still a relevant means of minimizing expenses.
It is doubtful that anyone would consider paying property taxes an enjoyable activity, but it can be made even less enjoyable when property owners are not assessed fairly. Fortunately, many local governments allow a reasonable dialogue between the tax assessor and the property owner to adjust a tax assessment, should it be too high.
Local market experience does show that many assessments are within reason, but on certain occasions, a tax liability assessment may reflect an opportunity for appeal. Frequently, the subject of the tax liability has not been considered or addressed by the owner for a long period of time, which can result in inaccurate data on the commercial asset.
During an appeal process, a tax assessor has to employ recent sale comparables, recent market data and current economic trends, while the property owner, in turn, must also provide up-to-date information. Time and again, a well-thought-out appeal on a case that is worth considering will prevail over an appeal absent of current market data.
But keep in mind that market data is not always the only contributing factor to success. An appeal letter that is honest, clear and polished can make a positive difference and often moves along through the process more quickly.
If an appeal is found successful, it can yield positive results for the property owner by reducing the tax liability and carry cost for the commercial asset.
Typically taxes are the most costly expenditure an owner will have to contend with year after year. Those with commercial assets in a competitive lease market are at a tremendous disadvantage when taxes are too high. The property will experience less ability to accumulate rental revenue due to a greater amount of expense incurred. Remaining competitive is critical to securing tenants and maintaining a higher level of net income is an important way to augment property value.
The assistance of a professional in the tax appeal process may be an option to consider as you receive your 2013 tax assessments. Years of experience coupled with positive established working relationships can increase a property owner’s chance of success in the reassessment process.
