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Consultus Asset Valuation

Property Tax Consultants & Appraisers

Posts by Jason Letman

Annual Property Tax Appeal Best Practices: Successful Property Tax Appeal Requires Careful Navigation

In May of every odd year (2017, 2019, 2021), property owners across Colorado receive their updated notices of value from the county assessor. Emotions will range widely. Some owners will accept their value as fair; however, if the value doesn’t match expectations, the likely reaction will be surprise, shock, and perhaps dismay.

If you fall into the latter category, we offer three important “pillars” for a successful property tax appeal.

 

Know the Rules

Colorado’s property tax rules are unique. Owners are frustrated when they appeal their assessment because of the labyrinth of rules they must navigate. There are deadlines to meet and restrictions on the data that can be used.

The basic rules are: for 2013, the assessor considers information from January 1, 2011 through June 30, 2012, also known as the “base period”. The value date of the 2013 and 2014 tax assessment is June 30, 2012. The assessor can consider all three valuation approaches (Cost, Sales Comparison, and Income) for commercial property, but only the Sales Comparison Approach for residential properties.

The first level of appeal is directly to the assessor’s office, due June 1st. (Denver county is an exception because they are trying a pilot program with different deadlines this year.) Later deadlines are stated in the responses sent out by the county after each level of appeal.

The second level of appeal is to the County Board of Equalization At this level, your case is heard by a hearings officer. You have three options for the third level of appeal: The Board of Assessment Appeals, Arbitration, and County Court.

Knowing the rules is essential. I once sat in a hearing at the County Board of Equalization where each side is allotted 5 minutes to present their case. The entire time was spent explaining that all of the taxpayer’s data was outside the “base period” and could not be considered. No time was left for presentation of any evidence that the assessment was not accurate.

 

Do Your Research

The assessor’s staff spends the majority of their time collecting information about sales and leases in the county. Most of the information they receive is from surveys returned by taxpayers. From that data the assessor creates a statistical model to value all properties in the county. While the assessor’s office has a lot of information, they don’t have everything.

Successful appeals often start with information the assessor doesn’t already have. Was your property vacant? Does it have deferred maintenance? Do you have a relevant rent study? Was your property listed for sale or lease? Did you get any offers that support a lower value?

For all properties, gather all of the comparable sales of similar properties you can find. Include any information you have about those properties since the assessor may not have a complete picture of the sales. Specifically, do you have information about the condition of the sales. Did you visit the sales as an open house? Do you know if the property needed repairs after the sale?

For commercial properties, gather information about competitive rental rates, operating expenses, and capitalization rates. Are your expenses higher than market for some reason? Are your rents lower? You may be in a niche market that the assessor’s statistical model missed.

Another avenue to explore is the condition of your property. It is impossible to for the assessor to visit every property, every year. Providing photos of the property, including any defects, go a long way toward supporting a value reduction.

In one appeal, we found that the property was being assessed as a 100% commercial property. The owner converted half of the property to residential apartments, entitling the owner to a lower tax rate on that portion.

 

Have A Reason

In preparation for this article, I read several pieces in the mainstream press advising taxpayers to appeal “all of their properties, every year.” This may be appropriate advice in some states with different rules. In Colorado, it is bad advice.

A successful appeal must indicate the reasons why your property’s assessment is too high. Simply stating “My taxes are too high” will not convince the assessor to lower your assessment. Perhaps your taxes are high, but that might be due to a high mill levy which can only be changed through the political process.

Sales that support a lower value, income that shows an under-performing asset, and unaccounted for defects in the property are the major reasons for appeal.

If you’re shocked by the assessor’s valuation in May, take some time to research the rules, gather information, and provide the assessor with a reason to reduce your assessment. It will be worth your while. There are also property tax professionals who can assist you in this process if this seems time consuming.

 

Article originally appeared in the Colorado Real Estate Journal in May of 2013.

Colorado Real Estate Related Legislation

Last week, I attended a Legislative Update by Colorado attorney John Logan, Esq. The update was specifically on bills relating to commercial real estate. It was a lot of information, so I’ll summarize the top three bills that will be of the most interest to Colorado property owners:

1. SB 13-062 Require Security At No-Firearms Business. This bill subjects property owners to civil liability if they ban firearms on premises and do not provide the security required in the bill.

2. HB 13-1090 Prompt Pay Construction Contracts. This bill requires contractors to be paid within 30 days, contractors to pay subcontractors within 5 days, and caps retainage at 5%.

3. Pilot Program Property Tax Appeal for Denver. This bill changes the process for property tax appeals in Denver county.

Other bills of interest cover HOA Monitoring, RTD Parking Facilities, TOD Development Claims, and Storm Sewer. There will likely be other bills covering construction defects, landlord-tenant laws, TIFF Regulation, and EPA regulations.

If you are concerned about any of these bills, please contact your state representative.

Colorado Property Taxes 101 in 2011

By Steve Letman, CRE, MAI , ASA and Jason Letman, MAI

In a weakening economy, it is more important than ever to control expenses. One of the largest expenses faced by property owners each year is property taxes. This expense usually appears on operating statements under the heading “Fixed Expenses”, but property owners should understand taxes are rarely fixed. This article will review frequently asked questions (FAQ) about property tax laws in Colorado (they vary from state to state) and examine ways of appealing property taxes as well as some of the potential pitfalls. Most of the article is focused on real estate taxes, but many of the same guidelines apply to business personal property.

How is my property value determined?

The Assessor must consider a variety of market-based information in appraising different kinds of property. These include cost and depreciation data (the cost approach), sales of similar properties (the market approach), and earning capacity (the income approach). All three approaches are used to value vacant land and commercial property. The assessor is limited to using the market approach and gross rent multipliers when valuing residential property – condominiums, houses, and apartments.

When is my property assessed?

Real estate is re-appraised every two years in the odd-numbered year. (Personal property is re-valued each year). The Assessor’s office is restricted to considering data from the 18-month period ending on June 30 of the year prior to the reappraisal. New 2011 values will be based on data from the period between January 1, 2009, and June 30, 2010.

The Assessor must consider the property condition as of January 1 of the revaluation year, but the date of value is June 30 of the prior year. The assessment generally remains stable for two years, unless there are changes in the property during the year.

What is the difference between “actual” value and “assessed” value?

The Assessor determines the “Total Actual Value” (market value) of real property. A percentage is applied in order to derive the “assessed” value.

Commercial property is assessed at 29% and residential at 7.96% of “Total Actual Value”. Due to this difference taxes on a $1,000,000 warehouse or office building will be more than 3 times as much as taxes on a $1,000,000 home.

The assessed value is multiplied by the mill levy to determine the annual tax bill.

Who sets the mill levy?

Mill levies are based on the budgets of each taxing authority such as school, county, city, fire, water and sanitation, and recreation districts. These districts provide services to you and are listed on the last tax notice. The TABOR amendment places limits on how much these taxing authorities can raise taxes in a given year.

When am I notified of the new value?

Notices of Value are mailed on May 1 each year. The notice states “This Is Not A Tax Bill”, however, the tax bill you receive in January is based on the value established by the Assessor.

What is the procedure for protesting my valuation?

Instructions for appealing your property’s valuation are printed on the Notice of Valuation. Appeals must be filed no later than June 1. You can appeal in person at the Assessor’s office or by mail. (The mail-in deadline is May 27; appeals may be delivered in person up to June 1.)

Most county assessors must respond by July 1. If you wish to appeal further, you should file a protest with the County Board of Equalization (BOE). Further appeals can be filed with the Colorado State Board of Assessment Appeals (BAA), district court, or with County arbitration boards.

Does the TABOR (Taxpayer Bill of Rights) Amendment of 1992 prevent my taxes from rising?

No. The TABOR Amendment controls the amount that the State and local governments can collect and spend. It does not limit tax increases on individual properties.

Should I hire a tax agent?

You can appeal property taxes on your own behalf, but unless you are up to speed on the current tax laws it can be difficult to know if you are being treated fairly. Numerous property tax consultants are available to help with the appeal. You must exercise care when hiring a tax consultant. Ask for references and check their qualifications. A good agent will be aware of the intricacies of valuation as well as the details of property tax laws. Exercise the same caution you would in hiring a lawyer or an accountant. Remember, the tax agent you hire represents your firm. A well-qualified tax consultant can guarantee you pay no more than your fair share of property taxes.

Since property taxes are one of the largest real estate expenses, you should do everything to insure that you pay no more than your share. Ask yourself whether property taxes are “fixed expenses” or if there is something you can do about them.