To control costs and enhance profits, real estate owners and managers usually focus on negotiating rent escalations, lowering vacancy rates, improving energy efficiencies, expanding advertising and developing synergy among properties. Maintaining a tight control of property taxes is often either overlooked or misunderstood. While real estate taxes are inevitable, the amount of tax is not. A proactive and aggressive property relief program, coupled with a data management program, can lead to enormous savings and increased profits.
All factors relevant to the taxable value of real estate should be thoroughly examined, including valuation issues, exemptions, abatements, and enterprise zones. These factors, among others, may dramatically influence the taxable value of a wide variety of commercial, light and heavy industrial sites, shopping malls and strip centers, office buildings, banking facilities, environmentally contaminated sites, hotels, motels, and marinas.
A property tax attorney can assist property owners and managers in developing proactive strategies to maximize the opportunity to obtain property tax relief from the assessor, Board of Assessment Review or the Courts. A skilled property tax attorney together with valuation consultants can also evaluate whether real estate tax relief is feasible or warranted based on the range of tax savings that may be reasonably expected if an appeal is undertaken. Accordingly, unnecessary and costly appeals may be avoided.
Valuation Methods
In accordance with the sales method, valuation is determined by looking to the market place and finding arm's length sales of properties that are similar to the property that is being valued. After making appropriate adjustments for differences in size, location, condition, and other relevant factors, the analysis will indicate an appropriate unit measure of comparison on a dollar per s/f basis. If a property is being offered for sale or purchased for an amount below the assessed value, the property is likely over-assessed.
The income capitalization approach produces a value estimate that is based on the market's perception of the relationship between net operating income and value. It is based on the expectation of future benefits. An investor trades a sum of present dollars for the right to receive a stream of future dollars. For tax assessment purposes, the valuation is limited to the net operating income generated by the property, and not the value of any particular business located in the property. Once the net operating income is determined, an appropriate capitalization rate is calculated and the net income is capitalized to determine the present value. The income capitalization approach is often the preferred method of valuation, as it closely reflects the investment decision-making process of an investor.
Impact of the Economy
There are several factors present in the current economic climate that may negatively impact the value of real property. Important considerations are the reduced net operating income that is being realized from many properties and the increase in capitalization rates resulting from the difficulty in the credit market and the reluctance of investors to invest in real property.
The net operating income is being affected by various factors including, but not limited to, property expenses, vacancy rates, rent, environmental factors, as well as capitalization rates.
Despite the downward trend in real estate values, tax assessments remain the same unless they are challenged in strict accordance with real property tax law. A challenge to real property assessment begins with filing a grievance. Grievance Day for most towns in NYS is the fourth Tuesday in May, although there are several exceptions. Since grievance day is set by each town, it is important to know the specific dates of the tax cycle. Assessments should be reviewed with a real property tax attorney. Missing grievance day or incorrectly filing a grievance or petition will foreclose any relief for the entire tax year.

Jon Cooper, Esq., is a senior associate at Gilberti Stinziano Heintz & Smith, P.C., Syracuse, N.Y. Tags: