So we’re in the twilight zone between tax board and state court hearings because we got an unsatisfactory tax board ruling.

The Assessor and the Cat Bird Seat

Many tax assessors and tax boards have “wised up” to the need for a commercial appraisal.  Up until the past three to five years or so, attorneys and tax consultants rarely ordered an appraisal, relegating the need to do so to the State Court level if the expense could be justified.  The rules have changed and now the assessor and the board in many jurisdictions require an appraisal before the tax court hearing.  In this respect, the assessor is sitting in the proverbial cat bird seat.

Why do assessors require appraisals before tax board hearings?

• Huge volumes of tax appeals filed by a small number of tax consultants in the hope that enough of them will settle favorably at the board level clog the system.
• The time allotted for a tax appeal has declined, sometimes to ridiculous levels. I’ve been involved in board-level hearings that only allow the appraiser 10 minutes to make the case (see Part 3 for the “blow by blow” account). Typically when all of the board members, or all but one, are not appraisers this is a herculean task.  If there is only one appraisal issue at play, it can be done effectively, but two or more issues does not leave enough time to present any one point effectively.  Certainly without an appraisal it becomes almost impossible for an attorney or tax consultant to make a factual case in so short a time period.
• Non-compliance with tax assessment law is all the grounds assessors need to get the appeal thrown out.  One important point about this is that even if the appraisal is done and delivered to the assessor to distribute to the board members, you absolutely, positively must get a receipt.  You guessed it… I was involved in a case where the tax consultant delivered the appraisal to an administrator in the tax office and did not get a receipt.  When the assessor said he hadn’t received the appraisal and the petitioner was in violation of the ten day document exchange period built into the tax assessment law, without the receipt, the case went down in flames.  In my humble opinion, everything ever shipped in a tax appeal case should be done certified mail or some form of signature delivery method; in person always get a receipt even if you have to wait for it.  Always follow the rules.
• Few assessors want to present their entire case before the tax board only to have it haunt them in State Tax Court because the petitioner’s appraiser didn’t have to make a case.  It’s kind of a double jeopardy thing.  I don’t blame them one bit.  It’s the smart thing to do and I would do it if I had their job.
• As a result of the above, many jurisdictions say the petitioner must have an appraisal submitted prior to the tax board hearing.  Why all of them don’t require it is beyond me.

To make matters worse, when they require an appraisal there is usually a certain amount of time prior to the tax board hearing date that it must be received, the document exchange period (referred to by other names in different jurisdictions).  You guessed it… again… I was involved in a case where the petitioner provided my appraisal to the assessor one day after the required ten day “study period” and a motion was brought to dismiss the case before the judge.  Although the judge allowed it, the point here is that giving opposing counsel leverage to get a case dismissed before it has even begun is not a good thing.

Hiring the Appraiser

I am always amazed when I get a phone call to appraise a property in a short period of time because the trial date is only one, two or three weeks away.  This applies to tax appeal, bankruptcy or any type of court case that requires a real estate value opinion.  That’s no big deal for residential appraisers but for commercial appraisers you’re practically walking away from the case.

Commercial appraisals take much more time to do than residential appraisals.  Anything that is 50-150 pages long takes time.  The comparable sales need to be verified and there are a whole host of reasons why short turnarounds don’t work with getting people to tell you what’s going on with their financials.  Not just the appraiser’s sales… the assessor’s sales need to be investigated too.

Let me put it another way.  The number one reason for why a good court appraisal cannot be done on a short turnaround is an insufficient time to gather the data.  The appraiser is typically called on to rebut the sales in the opposing report so researching the entire market, verifying the appraiser’s sales, verifying the assessor’s sales, obtaining rentals, getting cap rates from sales and supporting the operating expense ratio can’t be done in one, two or three weeks.  Throw in holidays and seasonality and it gets even worse.  ‘Nuff said on this.

There’s a lot I could say about this topic, but let’s just skip the little stuff.  There are two points here:

• Allow sufficient time for the appraiser to do his/her job.  Even if you don’t hire them, call a few appraisers and find out how long they would take to do the job.  Or go to the Appraisal Institute website, search for an appraiser in the subject property’s jurisdiction and send them a quick boilerplate email.  Why risk losing a case because only ten minutes of your time would have made all the difference?
• Attorneys have the ability to petition the court for a time extension.  Don’t use them up on submitting exhibits!  Just today I got a call from an attorney who needed an appraisal done in three weeks on a really complex “pain and suffering” case that will cost their client millions of dollars if they lose.  If you use up your time extensions and don’t give the appraiser enough time to do the report, you won’t be able to hire anyone who is any good.  Like they say, “you snooze, you lose”.

In Part 5, we raise our right hand, swear to tell the truth, the whole truth and nothing but the truth and get down to the most fun part of the tax appeal process – the State Court trial.  ‘Hope to see you staring back at me from the wooden bleachers.