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An Overview of the Problem
How is Property Value Assessed?
In today’s complex real estate market, commercial
property managers and many commercial lessees • Income: The assessor calculates the
are faced with the daunting task of managing income a property generates against costs
their property tax liabilities. Most businesses do associated with producing this income.
not have the resources to evaluate what they pay
in property taxes. Frequently, it isn’t until taxes
increase from one assessment period to another • Replacement/Cost: The assessor
that they briefly take notice. Even then, only a considers what it would cost to replace the
small number are likely to look into collecting property’s structures and features.
evidence to dispute the assessments on which
their property tax bills are based. Many do not • Market: The assessor considers the
realize that these assessments can be appealed reasonable market value of property in
at all. As we will discuss, taking a proactive comparison with similar properties in the
approach and developing a more nuanced area.
understanding of this seemingly inevitable cost
can produce genuinely impactful savings.
their landlords. Some states even prioritize the
Importantly, this fact does not apply only to claims of lessees over owners as constituting
commercial real estate owners. It is a common the class with true stake in a property’s value,
misconception that commercial lessees cannot providing legal recourse for enterprises operating
appeal the assessments on which their property under net leases to dispute assessments without
taxes are based. In fact, it is fairly routine in owner involvement.
commercial real estate for those leasing property
to be responsible for the full amount or a portion In any case, commercial owners and lessees often
of property taxes. This common arrangement is do not direct resources toward understanding
called a net lease, or a triple net lease, depending their property tax costs. It is, moreover, a
on whether tenants are responsible for all or some challenge to understand the specific state and
of their facility’s property taxes, maintenance local property tax codes that are critical in the
costs, and insurance premiums. Businesses overall success of filing appeals. For those who
under such arrangements do, very often, have lack the experience and time required to navigate
the right to appeal by law in many states or such a process, it can be overwhelming.
under the terms of their lease agreements with
Historically, companies for which we have
reviewed property tax have been initially
resistant to these projects for many reasons:
they are skeptical of the ability of such reviews to
produce savings, or, for larger enterprises, they
are worried that the process of filing appeals
across multiple municipalities and states may not
be worth the difficulty. Nevertheless, forty out of
every one hundred locations we have reviewed
for property tax savings, all over the country,
have resulted in substantial savings. Available
data indeed suggest generally low appeal rates
COMMERCIAL PROPERTY TAX REVIEWS | PAGE 2
