Understanding Real Estate Tax Assessment Procedures

by Williams Mullen

If the locality where your company’s real property is situated went through a revaluation of real property for tax purposes effective as of January 1, 2014, your company should soon be receiving a notice of assessment.  You may open the envelope with a sigh, read the contents, and wonder how the local assessor came up with that value.  Familiarity with some basic assessment terminology and procedures[1] will help you understand the principles that guide your local assessor’s determination of the value of your property, and may also help inform your analysis of whether an assessment appeal is warranted.[2] 
All real property in Virginia and North Carolina is subject to ad valorem taxation unless the property is constitutionally or statutorily exempt from taxation.  The Constitutions of both Virginia and North Carolina require all taxable real property to be assessed at fair market value and in uniformity with other similarly situated properties.  These dual (if not dueling) principles of fair market value and uniformity form the foundation for every assessment, and the concepts are not as easy to understand in application as you might at first assume.
Fair Market Value

Both Virginia and North Carolina have adopted definitions of fair market value that are, for practical purposes, consistent with The Appraisal Institute’s definition of “market value”:

The most probable price that the specified property interest should sell for in a competitive market after a  reasonable exposure time, as of a specified date, in cash, or in terms equivalent to cash, under all conditions requisite to a fair sale, with the buyer and seller each acting prudently, knowledgeably, for self-interest, and assuming that neither is under duress.

 Appraisal Institute, The Dictionary of Real Estate Appraisal, at 122 (5th ed. 2010). 
If you are counting, you can parse this definition into more than a dozen elements, and each element has likely been the subject of litigation at some point to determine its meaning.  For example, when is a market a “competitive market”?  What does “exposure time” mean?  How much exposure time is necessary to be “reasonable”?  What are the “conditions requisite to a fair sale”?  What makes a particular sale “fair”?  It may be easy to mouth the words, “fair market value,” but determining whether a local assessor’s valuation of a particular property is at fair market value requires informed analysis.
The North Carolina Constitution provides that “[n]o class of property shall be taxed except by uniform rule, and every classification shall be made by general law uniformly applicable in every county, city and town, and other unit of local government.”  N.C. Const. art. V, § 2(2).  The Constitution of Virginia provides that all taxes “shall be uniform upon the same class of subjects within the territorial limits of the authority levying the tax . . . .”  Va. Const. art. X, § 1.  So what does North Carolina mean by “uniform rule” and “general law uniformly applicable,” and what does Virginia mean by “uniform upon the same class of subjects”? 
The North Carolina Supreme Court instructs that taxes must be assessed using “one and the same unvarying standard.”  But don’t be comforted by this seemingly bright line distinction between what is uniform and what is not, as North Carolina’s courts have also held that “occasional inequities” resulting from a non-uniform application of the state’s taxing statutes likely will not violate the North Carolina Constitution unless the inequalities result from intentional, “hostile discrimination.”  Stated differently, the “unvarying standard” can be varied in application and still be considered uniform so long as the variance was caused by the local assessor’s “mere errors of judgment” and does not amount to an “intentional violation of the essential principle of practical uniformity.”  “[P]erfect uniformity,” says the North Carolina Supreme Court, is in reality “a baseless dream.”
Virginia, according to its Supreme Court, requires the application of ‘‘lawful,’’ ‘‘evenhanded’’ assessment processes, techniques, and methodology, such that the assessments of properties “having like characteristics and qualities, located in the same area,” end up at the same percentage of fair market value (or at least not “unreasonably or arbitrarily disproportionate” to the assessments of “similar properties”). Stated differently, says the Court, taxpayers are “entitled to have the same yardstick which measured the market value of the other properties applied to their property.”  So if the local assessor applies the same “yardstick” to assess all the properties with the same characteristics and qualities in your area, and your property’s assessment is not unreasonably or arbitrarily disproportionate to the assessments of those properties, your property’s assessment likely will be considered uniform.  These principles necessarily beg questions such as:  What “characteristics and qualities” should the local assessor consider?  Who confirms that the local assessor made these clearly subjective decisions correctly?  How do I know that the same “yardstick” was really applied to my property?  How disproportionate is disproportionate enough to be unreasonable or arbitrary?
In sum, uniform operation of law (not necessarily of results) appears to be the standard—or, perhaps better stated, the goal—in North Carolina, while both uniform operation of law and of result appear to be the goal in Virginia.  Just like fair market value, the simple-sounding concept of uniformity is not so simple in application.
Understanding the concepts of fair market value and uniformity should help you understand – before you open that notice of assessment envelope – the analysis your local assessor should employ and the need for you to acquire a higher level of analytical skill to support your valuation position and overcome an inaccurate assessment.  Knowledge is the first step to empowerment when it comes to a potential assessment appeal. 

[1] This Alert addresses the two primary assessment principles that Virginia and North Carolina have in common (or which are at least highly similar).  For a more detailed analysis of assessment procedures in North Carolina, click here.  For a more detailed analysis of assessment procedures in Virginia, click here.
[2] The good news is that your company will have a right to challenge the assessment, usually beginning with an informal appeal to the local taxing official, followed by a formal appeal to members of a locally appointed board, and if still aggrieved, on to the circuit court for the locality (in Virginia) or the Property Tax Commission (in North Carolina). 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Williams Mullen | Attorney Advertising

Written by:

Williams Mullen

Williams Mullen on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.