What You Should Know About Tax Appeals: How To Perform The Valuation Of A Shopping Center
In this article, you will discover:
- How to value a shopping center for assessment purposes.
- How to determine when to file a tax appeal.
- Timeline-when to file a tax appeal.
How Is The Value Of A Shopping Center In New Jersey, New York, And Pennsylvania Assessed?
Shopping center assessments occur annually. The assessor files the municipality’s assessment role in New York and New Jersey. In Pennsylvania, assessments are levied on a county-wide basis by the county tax assessor.
The primary valuation of shopping centers is based on the shopping center’s rental income. The municipalities look at the actual rents paid or collected by the shopping center owner.
How Do Incorrect Valuations Of Shopping Centers Occur?
Changes in market value and performance are regularly monitored to assess a shopping center’s valuation properly. Based on the center’s performance, our firm would recommend to a client whether or not there should be a property tax appeal filed to challenge the assessed value.
We typically ask our clients for their year-end statement and a rent roll. The rent roll would reflect the rent collected, the lease start and end dates and other pertinent information about the lease agreements.
The objective is to determine the property’s net income and capitalization rate. If the property is over-assessed based on our review of the financials and/or our review of the market, we would recommend that the client file a tax appeal to challenge the assessed value.
What To Look For In An Assessment To Determine A Tax Appeal
The jurisdictions’ ratio is a factor that deals with the relationship of assessed value to market value. The town collects sales that occur within their municipalities within their community on an annual basis, and then that information is given to the state’s Division of Taxation.
The jurisdiction calculates the appropriate ratio for a given community based on the sales and the relationship between the sale price and assessed value. Once the jurisdiction determines the ratio, you take the assessed value, and you divide the assessed value by that ratio to determine the implied market value.
For example, if an assessment is $100,000 and the ratio of assessed market value in that community or that jurisdiction is 50%, the implied assessed market value is $200,000. $100,000 divided by 0.5 gives you $200,000 implied market value.
We monitor these ratios annually to determine if there is a basis for an appeal. The more the ratio declines, the higher the implied market value. Using that same $100,000 assessment, if the ratio is 25%, $100,000 divided by 0.25 gives you an implied market value of $400,000. In other words, twice that $200,000 amount when using a 50% ratio.
The ratio is important because if the market value is too high, we recommend our client to challenge the assessment, which can result in tax savings if we are successful.
What Are The Time Limits To File A Tax Assessment Appeal In New Jersey, New York, & Philadelphia?
The timeline to file a tax assessment appeal in these states are as follows:
- New Jersey by April 1st;
- New York varies by jurisdiction;
- Pennsylvania files in August, September, or October, depending on the jurisdiction.
Are The Lower Tax Rates Adjusted Immediately?
If the taxpayer is successful, the assessed value is reduced, resulting in lower taxes. The tax rate never changes due to an appeal. The value being reduced is what results in the reduced taxes owed.
For more information on the Valuation Of Shopping Centers In NY, NJ & PA, an initial consultation is your next best step. Get the information and legal answers you seek by calling (973) 869-5550 today.
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