A sale price may not always indicate market value: It's important to consult a tax certiorari attorney

In tax certiorari, the courts have continuously stated the axiom that a "purchase price set in the course of an arm's length transaction of recent vintage, if not explained away as abnormal in any fashion, is evidence of the 'highest rank' to determine the true value of the property at that time." Accordingly, if a property is assessed at $10 million and sells for $5 million, it is reasonable for the new owner to expect their assessment and resulting property taxes to drop by 50%. However, in the current economy it is critical to act quickly and avail yourself of a beneficial sale price. Should an owner delay in his pursuit of a property tax grievance and rehabilitate a downtrodden location, the market value may increase, allowing the assessor to argue the sale as less relevant. For example, if an owner delays in resolving his tax proceeding and the property has already established a new income stream, the assessor may argue the owner is entitled to a significantly smaller reduction in their property taxes as opposed to 50%. Under this scenario, an investment of capital in order to renovate the property and attract tenants will work to the detriment of an owner's property tax case by presenting the building as more valuable than it was at the time of purchase. Many jurisdictions are obligated to freeze an assessment for the subsequent three years upon reaching a settlement, thus filing and pursuing a grievance in the year the property is purchased is of the utmost importance. A misconception occurs when the assessed value of a property is less than the sales price. If a property is assessed at $10 million and sells for $15 million, many owners assume their taxes cannot be reduced due to the sale price exceeding the assessment. Some owners express trepidation about even bringing a property tax challenge when the purchase price is above the assessment out of fear that their assessment may be increased. Under New York law, an assessor may not raise your assessment as the result of an unsuccessful challenge. The primary exception to this rule is if the jurisdiction is performing a revaluation or update of the assessment roll. It is critical to be aware of your assessing jurisdiction, as many have not performed revaluations in decades. Accordingly in many jurisdictions, the filing of a grievance provides the opportunity only to reduce your assessment without the possibility of an increase. On the other hand, it is important to pay attention to those "abnormal" instances where sale price is not the sole factor in determining the true value of a property. When a property is bought by a current occupant, the premium that buyer may pay needs to be taken into account. It has been held that a user may pay a significantly higher amount to purchase the building where their business is already located. A purchase of this type can occur for a number of reasons, such as when it's too inconvenient or too costly an endeavor to move and reestablish operations elsewhere. These transactions must be explored with greater scrutiny as the buyer is not acquiring the property as an investment, but rather for their own use. There are also those properties that the courts have held necessitate certain deductions be made when using a sale transaction to provide an indication of value. Hotel and motel properties require a business value or a going concern component be deciphered and reduced from the sale price. Furniture, fixtures and equipment must also be quantified and subtracted from a purchase price. The same is true for the business value of golf courses and marinas. These components can be substantial and have a tremendous impact on a sale that should not be considered when valuing a location for property tax purposes. While a sale in some circumstances may indicate value, it is important for an experienced tax certiorari attorney to review all the circumstances and how relevant case law can enable an owner to take advantage of the benefits a property tax proceeding is afforded under the law. Brad Cronin, Esq., is an attorney and partner at Cronin, Cronin & Harris, P.C., Mineola, N.Y.