Most people, and especially business owners, monitor the taxes they pay pretty closely. After all, who wants to pay more than necessary to the government? When it comes to commercial property taxes, it usually pays off to seek the advice of an expert who is well-versed in the latest county tax laws. It also pays to work with experts who are intimately familiar with the land and property values in the area. An inexperienced property owner may not know or recognize the values of similar properties in the area. Anyone who is not constantly buying and selling property in the local area has no way of accurately staying on top of what land and commercial properties are really worth.
Accurate valuations are particularly important at tax time. If the county is sending you a tax bill based on an inflated valuation, you’re going to pay more than necessary in taxes. At regular intervals, usually about every three years, the county recalculates the value of commercial properties. The next revaluation in New Hanover County takes effect in 2017. When an owner receives an updated valuation and the associated property tax bill, he or she has a limited amount of time to challenge the new estimated value.
Over time, it’s not unusual for the county to increase property values. Sometimes valuation increases are warranted by things like property appreciation or building improvements, and the new value assessment may be accurate. However, there are occasions when the county overestimates property value because of the methodology they use to determine the value. Only an expert will have the knowledge and resources to identify unwarranted value discrepancies and develop a complete and effective challenge to the property valuation amount. In order to be taken seriously and to have a legitimate chance of working, your valuation challenge must be sophisticated, accurate and well documented, all of which requires a thorough understanding of the area’s overall property market. Since the county valuations are typically itemized, an experienced property tax attorney or CPA will be able to identify very specific line items to dispute and opportunities for corrections.
The property tax burden can be carried by the landlord or by the tenants. How this provision is written into the lease needs to be carefully worded. Questions, such as, “Who is responsible for paying the county and within what time frame?” need to be answered. If the tenant is responsible for the monetary tax obligation, it still may be better for the landlord to pay the tax to the county and have the tenant reimburse him. This guarantees that the tax is paid on time and there are no tax liens or fines placed upon the property. If the tenant is going to pay the tax directly to the county, then it’s important to have the tenant provide proof of payment to the landlord in advance of the due date.
Your tenant may be allowed to make improvements that increase your property’s value. The lease needs to include a provision that states which party is responsible for the increase in tax liability. The key here is to make sure the lease and your tenants are clear about property tax responsibilities, including variables related to changes in the property value over time.
Grayson Powell is a Managing Partner at Coldwell Banker Commercial Sun Coast Partners (CBCSCP). CBCSCP leverages the vast experience of highly-skilled real estate professionals and developers and specialize in selling, leasing and managing retail, commercial, and investment property. To learn more about CBCSCP, visit www.cbcwilmington.com or call 910-350-1200.
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