Operating with integrity
on behalf of our clients

Small Property Saves Big

In early 2014, our client purchased a small 2,100 square foot retail property in an up and coming neighborhood around greater Grand Rapids. The price they paid indicated that their property assessment and taxes may be excessive, and should be reviewed. Below is an example of why it literally pays to review your assessment, compare it to the market, and initiate a discussion with your Assessor.

The Subject Property

The property was purchased for around $220,000, and a new lease was signed at the current market rate for similar spaces. The property owner was excited to be investing in a neighborhood experiencing a revitalization. Income was coming in and expenses were being paid, and then the tax assessment was received. According to the assessing department, and rates found in the Assessor's cost manual combined with annual sales study data, the suggested assessed market value for this property was $440,000 (SEV at 50% or $220,000). The annual tax bill was going to be $11,000.

A Property Tax Review

The client and I had a brief discussion about the tax appeal system in Michigan; a casual discussion of value with the assessor is a great first step towards tax relief, followed by a presentation to the March Board of Review after a tax notice is received, and finally a petition to the Michigan Tax Tribunal (with a deadline of May 31 each year). After our discussion, I created a one page analysis of the property that contained all of the facts. The current assessment values were compared to a market value analysis for the property. Sales data of similar properties were considered for a Sales / Market Approach to Value, and an Income Approach to Value was created using the current lease rate and market lease rates for similar properties. We confirmed that there was a reason to begin the appeal process and an annual tax savings of $2,500 to $5,500 was possible.

Denied at the Local Level

Even though we had a strong case, supported by market data and income data, we were denied at the first two steps of the appeal process (a casual discussion and the March Board of Review). Sometimes we have great success in the early stages, but it's more common to be denied. Assessors make you work hard for any reduction of value for two reasons; once a reduction of value occurs, there is no mechanism to increase the taxable value beyond the CPI (or 5 %, whichever is less) except a transfer of ownership or an addition of value, and any reduction of value is lost revenue for the City or Township.

Year 1: The Michigan Tax Tribunal

The client agreed that our case was strong, and worth paying the filing fees to appeal at the Michigan Tax Tribunal (in this case, the fee was $250 for year 1 and $125 for year 2). The proper paperwork was filed, and our Tax Tribunal appeal began in May of 2014. Our appeal stated that the property's market value should be $220,000, and not the assessed market value of $440,000. A compromise had to be reached and our goal was to settle the appeal at a # between those two values, hopefully negotiating a value the property owner thinks is fair. My job is now to press for settlement with the assessing department or their representation. Information was provided, such as additional sales and lease data, and a property visit was scheduled with the Assessor. No hearing date had been set and no settlement had been achieved by the time May 31, 2015 rolled around, so year two of the appeal was under way.

Year 2: Deadlines at the Michigan Tax Tribunal

We now have the 2014 and 2015 tax years under appeal, which means the client will receive a refund for any overpayment for these two tax years. We are waiting for a hearing date from the Tax Tribunal, which can ignite serious discussions of value / settlement for a few reasons; it's costly to prepare for and attend a hearing (an attorney can be necessary for this), and it's usually better to have a hand in deciding your own fate through negotiations instead of letting a Tax Tribunal Judge decide the outcome. We finally received a hearing date of late November of 2015, which comes with a deadline to provide any valuation information (such as appraisals and any other supporting information). This was our opportunity to set a meeting with the Assessor to discuss potential settlement.

Our Client Wins: The Settlement and Tax Savings

At the initial settlement meeting we learned that the Assessor's analysis in preparing for the Tax Tribunal deadline revealed that the property may be over assessed (their #'s lined up with ours, which is typical). Our market value position was supported by the capitalized actual and potential income of the property, comparable sales data and the purchase price of the property. The final settlement ended up saving our client $4,200 in 2014, and $4,650 in 2015 that would come in the form of a refund from Kent County. In 2016 and each year going forward, the client will continue to save $4,650. That's $46,500 over 10 years! Property taxes are the largest expense for property owners- our client is only paying their fair share, and so can you!