Spring is Around the Corner – It’s Time to Clean Up Your Real Property Tax Bill
February 1, 2018 • 4 min read
Does your Ohio real estate tax bill need a little spring cleaning?
Spring is right around the corner. It is a time for owners of Ohio real estate to spruce up and perform maintenance on their assets. Just like spring cleaning and maintenance of physical real estate can result in long term cost savings by avoiding costly repairs, improvements, and attracting quality users, periodic spring cleaning of Ohio real estate tax values can result in often large tax savings for years to come.
Property acquisitions can have an impact on real property tax values. Have you recently checked your Ohio retail, commercial, industrial, or residential real property valuation on your tax bill to see if it is accurate? Unfortunately, property valuations conducted by the various counties can be inconsistent and inaccurate. But there is good news: there are tools you can use to decrease your real estate tax valuation, and in return, your tax bill.
Understanding the tools at your disposal may help in determining if you should challenge the value attributed to your real estate. However, you have to take steps to protect your right to challenge your real estate valuation by March 31, 2018.
The procedure by which real estate is valued for tax purposes is set forth in Ohio Revised Code Chapter 5713. Real estate is taxed at 35% of its true value, which is referred to as the assessed value for property. The county auditor is charged with adjusting the assessed value of each parcel within a county every three years. There are two different valuations that occur: “Reappraisal Year” and “Update Year.” The Reappraisal Year occurs every six years, and during the Reappraisal Year, each parcel is viewed and evaluated based on market conditions. The Update Year occurs three years after the Appraisal Year, and involves re-valuing real estate without physical inspection. This is often done using computer-assisted modeling of value changes by neighborhood and type of real estate within the county. The value of real estate is based on its condition on January 1st of each year.
The county auditor’s valuation of real estate may be challenged. Pursuant to Section 2, Article XII of the Ohio Constitution, real property is to be taxed “according to value.” Ohio Revised Code Section 5713.03 also requires that each separate tract of real estate be valued according to its “true value.” Section 5713.03 states, in relevant part, that “[t]he county auditor, from the best sources of information available, shall determine, as nearly as practicable, the true value of each separate tract, lot, or parcel of real property and of buildings, structures, and improvements located thereon.”
This begs the question: How is “true value” of real estate determined? True value is equivalent to fair market value, which is an actual recent sale of such property between one who is willing to sell but not compelled to do so and one who is willing to buy but not compelled to do so. In Re Estate of Sears, 172 Ohio St. 443, paragraph 2 of syllabus (1961). This is known as a recent arm’s length transaction. When this information is not available, or when a sale not conducted at arm’s length, appraisal evidence becomes necessary.
In sum, when Ohio real estate is the subject of a recent arm’s length transaction between a willing seller and willing buyer, the sale price of the real estate is the best evidence of the value for taxation purposes. The determination of how “recent” a real estate transaction has to be is determined on a case-by-case basis. Only the value of real estate, not the value of personal property, is considered when determining real estate value. A sale might not be considered evidence of true value if it was not arm’s length – for example sales involving bankruptcy, foreclosure, or sales involving a seller under duress.
When real estate is not subject to a recent sale or such sale was not conducted at arm’s length, then an appraisal or other evidence may be necessary to challenge the county’s real property value applied to the subject property.
Given the inconsistencies in the county valuations, it is a good idea to periodically engage in a spring cleaning and maintenance of your Ohio real estate tax values for your retail, commercial, industrial, and/or residential real estate. If you disagree with the assessed value of your Ohio real estate, the primary tool you have at your disposal is to file a tax valuation complaint with your local county board of revision. A complaint must be filed with the board of revision by March 31, 2018. This is an absolute deadline. The county provides a form with instructions referred to as Form DTE 1, Complaint Against the Valuation of Real Property. While the complaint form appears to be straightforward, it is important that the complaint is accurately and thoroughly completed, as there are many pitfalls and that could result in dismissal of the complaint. Additionally, although the instructions accompanying the complaint indicate that certain non-attorneys may prepare the complaint and file it on behalf of a company, it is important to note that the Ohio Supreme Court has questioned the constitutionality of that provision, and has determined that in many circumstances having a non-attorney prepare the complaint may constitute the unauthorized practice of law, especially if the matter involves legal issues and would involve the questioning of witnesses, such as appraisers. See, e.g., Dayton Supply & Tool Company, Inc. v. Montgomery County Board of Revision (2006), 111 Ohio St.3d 926, 927. Consequently, it is advisable to consult an attorney when filing a complaint.
If you are thinking of utilizing an appraisal, you are not required to submit an appraisal with the complaint. An appraisal may be submitted after the complaint is filed. After the complaint is filed, in many cases the local school board of education may file a counter-complaint seeking to keep the higher tax value. Then, the board of revision will schedule a hearing where it will take evidence of the recent arm’s length transaction or appraisal, and it will render a decision. The parties have the opportunity to appeal the board of revision’s decision either to the local court of common pleas or to the Ohio Board of Tax Appeals.
By periodically making a review and update of your Ohio real estate tax valuation part of your spring cleaning, you will be well on your way to getting the most out of your investment by mitigating against the risk of overpaying on your real estate tax liabilities. It is important to consult with an attorney knowledgeable in property tax valuation challenges for an assessment of the possibility for a reduction in value and tax liabilities and the procedure to do so. So take the opportunity this spring to clean up your tax bill!
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