NYS property tax assesments and tax grievances: What the future holds for real estate professionals

The declining real estate market has created challenges for real estate brokers, property managers and owners of both residential and commercial realty. Among these challenges is what to do about property that one owns or is attempting to sell that is substantially over-assessed resulting in an onerous tax burden. Assessing jurisdictions in New York, as with most municipalities in the U.S., rely upon property taxes as a key component of their revenue stream to support basic governmental functions and programs. These taxes are generally "ad valorem" taxes, or taxes that are based upon property value. The actual tax amount levied is based upon the owner's eligibility for exemptions, the tax rate, and the assessment placed on the property. Residential and commercial property owners are wise to investigate their eligibility for those exemptions they may qualify for such as veteran's, senior exemptions and abatements on new construction. In most cases, there is little that can be done to change the tax rate, other than becoming active in local political activity related to budget setting and governmental spending decisions. Property assessment, however, is where many people have their greatest opportunity to save on property taxes. Departments of assessment at all levels of local government are charged with the task of determining the proper assessments based on their estimation of fair market value for the properties within their jurisdiction. This can be a daunting task under the best conditions. These, however, are not the best of times with real estate values declining at historic rates and many municipal property assessors are faced with an overwhelming workload as their departments are flooded with tax grievances. Last December, a state commission on property tax relief recommended that assessments be consolidated at the county level such as in Nassau County. Newsday recently reported that the ten townships in Suffolk County had 35,573 challenges last year and court mandated reductions in property taxes related to over-assessments reached the highest figure ever, $84.9 million, up from $37.4 million in reductions just three years ago. Nassau County had 42,508 challenges last year. Together, Nassau and Suffolk Counties, with just 15% of New York State's population, were reported by Newsday to have accounted for 85% of all assessment challenges filed in courts throughout the state. On May 29th, the Nassau County Department of Assessment released a review of the current system of assessment administration. Some of the recommendations related to improving public understanding of the assessment system, such as changing the assessed value of property from a fractional amount to full market value, to focusing more on commercial properties which make up fewer than 10% of the parcels in the county but account for more than 80% of the tax certiorari refunds every year. Initial commentary on this study by the Nassau County assessor illustrated what a hot potato the issue is for political figures, with Newsday reporting on May 31st a "lukewarm reaction" from Nassau County executive Thomas Suozzi, who had commissioned the study. Suozzi, who noted that he had only been briefed on the report, was quoted as saying, "The system is broken. The public can't stand the assessment system." Research Recap reported on May 20th that U.S. commercial real estate prices as measured by Moody's/REAL Commercial Property Price Indices fell 1.7% in March, leaving the index 20.8% below the level of one year ago and 22.8% below the price peak reported in October of 2007. Moody's also reported that nationally, office prices have fallen 30% from market peaks after a decline of 20% in the first quarter of this year. Retail properties were reported to have declined 13% in the first quarter with apartment and industrial prices remaining relatively stable. In such a climate, it is important that real estate professionals and property owners carefully review their property assessments and evaluate the options available to them to reduce their assessment and tax burden. An over-assessed property not only results in higher costs during these difficult times but leads to higher costs in future years and difficulties in marketing the property. Bill Collins is the president of Appraiser Help, Inc., Bay Shore, N.Y.