By Christine L. Mobley
Legal News
Potentially, Michigan faces its worst year when it comes to commercial/non-residential property and that’s only exacerbated by the dropping values and increased taxes.
The one saving grace for owners of these properties is the tax appeal.
According to Jumana Judeh, president of Judeh & Associates, both property owners and municipalities will share the hardship.
“Commercial and non-residential property values have dropped in certain areas and by certain sectors and in certain sub-markets have lost up to 50 percent of their value,” Judeh points out. “However, the notices of assessment that went out last month are showing a decline that is ridiculously low.”
Some assessments show a slower decline than the rate of declining property values that leaves the property owners over-taxed and over-burdened in already stressful economic times.
“You can imagine where if the city is coming down 3 percent and property values are dropping at a rate of 20 percent per year sort of puts the property owner in a position where he or she are way over assessed.”
This may seem like a boon for municipalities that will be paid excess taxes, however, property owners hold the right to appeal the taxes.
According to Judeh, property owners need to weigh cost versus potential benefit before starting the tax appeal process as it can be costly. She recommends that property owners contact a knowledgeable professional to assist them on their journey through tax court.
Enter a huge storm front for municipalities.
The tax appeal cases now being filed may not be heard or decided for another 3 to 5 years, but when those verdicts are handed down, municipalities may find themselves in a bind.
“During that period of time, the property owner must continue to pay their taxes — even if they believe they are over-assessed, even if they have a pending case at the tribunal,” Judeh points out.
Doing the math, already budget-strained municipalities are in for a rude awakening if the property owners prevail in their tax appeals and they’re unprepared.
“If property owners are paying their taxes on a property over-valued at 20-30 percent over a five year period and they win in 2015, well the decision is retroactive to 2010 and not only is it retroactive but interest is mandated.
“If these communities are not forecasting and putting aside a reserve for these tax appeals cases that are going to hit them in the next four to five years,” Judeh notes, “some of these communities may go under and may not be able to pay the property owner back.
“Unfortunately, the way the law is written, communities are not legally obligated to put aside whatever possible loss that they are exposed to at the tribunal level in an escrow account of some kind.
“For both sides it is not a good situation right now,” Judeh continues. “If a property owner does not take a strong look at their assessment this year, I think they may be really missing the boat on potentially saving themselves some money.”
The burden of proof lies with the property owners when filing tax appeals and working with a professional knowledgeable even when dealing with small claims can be beneficial.
“Ignorance or being uninformed may actually get the case dismissed,” Judeh notes. “The judge is not going to bend the rules for anybody simply because the applicant says ‘I didn’t know.’”
For amounts over $200,000, cases are sent to the Michigan Tax Tribunal where property owners are advised to hire an attorney as it is a more formal legal proceeding.
“When a case makes it to the tribunal or small claims or any tax appeal claim no matter what pipeline they’re in the only question that is on the table pertains to value,” Judeh states. “The only person who can assist the attorney and the property owner is a value expert — that’s the appraiser.
“Legally, the appraiser is the only one who can say, ‘I think this property is worth Y’ and put their signature on it.”
Judeh & Associates specializes in such appeals, providing appraisals and expert testimony where needed. In her two decades of experience, Judeh has found that 75-80 percent of properties she examines are over-assessed. Moreover, in 95% of such cases, she is typically able to help reduce tax burdens from 30-50 percent.
Judeh says that once her company is brought onto a tax appeal case the property is examined; the market is researched; and numbers are crunched to determine if the case is viable.
“Consult with a value expert,” Judeh stresses. “Bring the value expert in very early and have the value expert take a strong look at the property and tell you whether they think you are a possible candidate for appeal.
“It’s the value expert that’s going to open the door to this entire process.”
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