The ongoing decline in property values in Detroit and surrounding southeast Michigan communities has further-expanded the substantial discrepancies between taxable values and market values for real estate. Assessors remain reluctant to hold or reduce taxable value despite reduced market value because of increased costs of providing public services. In addition, assessors can apply an inflation increase to assessments, thereby raising a tax bill despite falling property values. A successful appeal of a property tax assessment could result in substantial savings.
Why You Should Review and Possibly Appeal an Assessment
There are a number of reasons why one might consider challenging a property tax assessment. Among them:
- Over-assessment: Market conditions preclude resale for at least two times the assessor’s determination of “taxable value” or property improvements have been overvalued,
- Property classification has changed,
- Transfers of title (through acquisition or internal reorganization) are treated as taxable transfers or “uncapping” events,
- For income producing property, income and expenses have changed (i.e., occupancy rates have declined and costs have increased),
- Tenant pays taxes in addition to rent and has written authority to challenge assessments on behalf of landlord,
- Multiple contiguous parcels are taxed differently or inappropriately, and
- Exempt status not granted to non-profit organization.
Basic Chronology of the Appeals Process
It is important to be aware of the appeals process timeline that begins with the initial assessment and continues with strict deadlines for pursuing an appeal. The following chronology should only be used to understand the general time frame involved with appealing a Michigan property tax assessment. It is important to contact the local assessor’s office to get information regarding deadlines and steps to preserve appeal rights because procedures and deadlines often vary by jurisdiction.
December 31, 2009
The 2010 property tax assessment is based upon the value of the property as of December 31, 2009, or what is commonly referred to as “tax day.”
January to Early March
“Notices of Assessment” are issued to property owners during this time period, and depending on the municipality and property classification, taxpayers must often act before strict deadlines with little or no actual notice. The Notice of Assessment might warrant a valuation appeal if the market value (or “true cash value”) of the property is less than twice the stated Taxable Value. Additionally, the Notice of Assessment could raise issues regarding classification, transfer of ownership (transfer tax liability and/or uncapping), principal residence exemption, and valuation of improvements. There are varied appeal procedures for each of these issues.
Some municipalities, including the cities of Detroit, Grand Rapids and Wyoming, require an assessor’s review or similar pre-appeal review process regarding residential and agricultural property. Those reviews occur in early to mid February and are a prerequisite to the right to appeal to the Board of Review and later, to the Michigan Tax Tribunal. In Detroit, for example, this review must be requested in person in the Board of Assessor’s office before February 12, 2010.
It is very important to consult your local assessor’s office to determine whether this or a similar added requirement exists, and if so, the deadlines and special requirements for its completion.
Each municipality holds Board of Review hearings in March, commonly from the second Monday in March unless a different day has been established by ordinance. Some municipalities allow written protests in lieu of a Board of Review appearance. Depending on the property classification and the type of appeal taken, the Board of Review must make its determination and give notice to the property owner typically no later than the first Monday in June following the Board of Review hearing.
May 31 and July 31
General deadlines for appeals to the Michigan Tax Tribunal. The applicable deadline depends on the property classification and type of appeal.
Obligations of Real Estate Professionals
The potential disparity between taxable value and market value provides real estate professionals with an opportunity to help clients understand the tax assessment process and their rights as property owners. Regardless of whether the property is residential, agricultural, commercial or industrial, and whether a client is an owner, property manager or tenant, it is critical to review tax assessments annually and help determine whether an appeal could result in tax savings.
During tax appeal season it is common for property owners to approach real estate professionals requesting an “appraisal” of their property. Real estate licensees often charge a fee for this service. In Michigan, however, the law restricts the services that a licensee may render and under what circumstances:
A real estate salesperson may provide a market analysis solely for the purpose of assisting a customer or potential customer in determining the potential sale, purchase, or listing price of real property or the rental rate of real property. The salesperson MAY NOT charge a fee or require any other valuable consideration in exchange for that analysis.
A real estate broker or associate broker may provide a market analysis for a fee if it does not involve a federally related transaction. The market analysis must be put in writing and it must state in boldface print:
This is a market analysis, not an appraisal and was prepared by a licensed real estate broker or associate broker, not a licensed appraiser.
In light of the statutory requirements regarding real estate licensees, property owners are cautioned to seek appropriate guidance regarding the value of property for tax appeal purposes by obtaining at least a broker price opinion if a formal appraisal is not feasible. A board of review will likely disregard an improper value analysis and on that basis, deny an appeal.
Randy Barker is a member of Berry Moorman P.C.’s real estate practice group. He has significant experience with commercial, industrial and residential real estate transactional and litigation matters, including leasing, development, financing, boundary disputes, property tax appeals and construction lien issues. He also represents real estate professionals in general business, employment, collection matters, errors and omissions claims and licensing complaints.
If you are contemplating a property tax appeal or have other real estate issues, please contact Randy Barker at 313-496-1200.