The ongoing credit crunch and the resulting decline in values of commercial and residential real estate continues to present opportunities for property owners to obtain reductions in the tax valuation of their property, and thereby decrease their real estate taxes.  If you own real estate in Ohio, this article will explain how to appeal the tax valuation of your real estate.

In Ohio, each county auditor reappraises real property in the county every three years.  In Butler County, Franklin County, and Hamilton County, that reappraisal occurred for the 2011 tax year.  Cuyahoga County’s next reappraisal is for the 2012 tax year.  (Because real property taxes are paid in Ohio in arrears, the taxes for 2011 are paid in installments in late 2011, or early 2012 and again in mid 2012).

If you have reason to believe that the value that the auditor has established for your property is too high, you have the right to appeal the valuation of the property to the county board of revision. The last day to do that for 2011 is March 30, 2012.  Unless you own the property in your own name (i.e., not in an LLC, partnership or corporation), an attorney must prepare and file the complaint.

In order to determine whether to file a complaint, you should hire an appraiser who has experience in appraising the type of property you own in the area in which the property is located.  The appraiser should also have experience in testifying before the board of revision for the county in which the property is located.  Prior to ordering a formal narrative appraisal, you may want the appraiser to arrive at a “guesstimate” of the value of the property.  If the appraiser guesses that the actual property value is not meaningfully different from the value at which the auditor has assessed the property, filing a tax valuation complaint may not make economic sense, particularly when you consider the attorneys’ fees and appraisal fees associated with filing and prosecuting the complaint.

At a board of revision hearing, the complainant presents a case by introducing the narrative appraisal that the appraiser has prepared and the testimony of the appraiser.  Sometimes a representative of the owner must testify.  At the hearing, the members of the board of revision,  a representative of the county auditor, and often, an attorney from the school district in which the property is located, will cross examine the appraiser with a view to discrediting the appraiser’s appraisal and testimony.  In some cases, the school district may offer the appraisal and testimony of its own appraisal expert.

The board will hear the presentations.  It will then deliberate and issue a written decision.

You should be aware that even if you are successful at the board of revision, the school district may appeal the board’s decision to either the Ohio Board of Tax Appeals or the Court of Common Pleas.  On appeal, the party appealing bears the burden of proof, but the appellate tribunal may make its own independent decision based on the evidence before it.

One other factor to consider before deciding to file the complaint is whether the property was recently acquired through a transfer by deed.  If the transfer occurred within a couple of years of January 1 of the year for which you are considering filing the complaint, the board of revision may presume that the price paid for the property is the fair market value of the property.  Of course that rule can benefit you if the price you paid was less than the value that the auditor assessed for the applicable year.

If you decide that pursuing a complaint is worthwhile, you should ask the appraiser to prepare a full narrative appraisal of the property.  However, if you are relying on the fact that the purchase price you paid in an arms length sale a year or two before the year for which you are appealing is below the correct valuation of the property, you probably do not need an appraisal.  You need only prove the arms length nature of the sale.

When taxes become due while a complaint is filed, you may either (i) pay the taxes computed on the current assessed value of the property, or (ii) pay the taxes computed on the value of the property that you assert in the complaint as the current value.  If you are successful at the board of revision and have paid real estate taxes on the basis of the higher originally assessed value, you will be due a tax refund.  If you are unsuccessful at the board of revision and have paid taxes on the basis of the property value claimed in your complaint, you will owe additional real estate taxes, together with interest.

Once the board of revision issues a decision, the value that the board determines will remain the value for the year with respect to which you filed the complaint and, if you filed the complaint in the first year of the three year cycle, the following two years, or if you filed the complaint in the second year of the three year cycle, the following year, unless there is a significant change in circumstances.  These include:  (i) a significant new tenant or the loss of a significant tenant, (ii) new construction at the property, (iii) destruction of the property in whole or in part; and (iv) an arms length sale of the property.

Taft Can Help

In light of the dramatic reduction in property values brought on by the turmoil in the real estate markets, many property owners will likely want to seek decreases in the assessed value of their property.  We can assist such efforts for either commercial or residential real estate in Ohio.  For those property owners in Ohio that face a valuation complaint from a school board seeking an increase in the value of the property, we can also defend you in such complaints.  For more information, please contact a member of Taft’s Real Property Practice Group.