Will the COVID-19 Outbreak Impact Your Pennsylvania Real Estate Tax Assessments?

Fox Rothschild LLP

Fox Rothschild LLP

If you are the owner of a retail, office, industrial or other commercial property in Pennsylvania, then now is the time to review the tax assessment for your property against its current market value. The COVID-19 outbreak has caused many property owners to experience declining rents, increased vacancy and the need to become "creative" in leasing vacant space. These and other factors may be grounds to support a reduction in the tax assessment of your property.

Unfortunately, boards of assessments cannot reassess property every year based on the local economy. As a result, the real property taxes assessed against your property by the board of assessment for county, municipality and school district taxes may be out of proportion to the actual value of your property or the value attributable to your property by the county.

What To Do If You Think Your Real Estate Taxes Are Too High?

First, you need to determine whether to file an appeal to the county board of assessment for your property. To do so, you need an experienced real estate assessment attorney and a qualified appraiser. Our office can assist you in performing a preliminary analysis of the fair market value of your property and then, if appropriate, identifying the best real estate appraiser to determine the fair market value of your property, complete an appraisal report and testify at the board of assessment hearing.

Second, you need to multiply the assessment, as determined by the board of assessment, by the state published common level ratio for the county where the property is located to determine the assessed market value.

Third, compare the fair market value of your property to the assessed market value to determine if you have a legal basis to file a tax appeal.

Determining the Fair Market Value of Your Property?

For commercial properties, two calculations often guide the determination as to whether or not to appeal your tax assessment. Capitalization of income and comparable sales gives us the ability to make a preliminary determination as to whether a particular tax assessment is out of line.

The capitalization of income approach is the easiest and quickest test to determine the value of your property; whereas, comparable sales require more information. Up-to-date information on costs, square footage, occupancy, types and number of leases, use, location, mortgage amounts and interest rates, rental income and expenses are all necessary to complete the capitalization approach. Recent comparable sales within the last year or two should be reviewed and analyzed, as well as properties under agreement of sale. Rent abatements, lease defaults and vacancies are also factors that impact the value of a property.

With the above in mind, now is the time of year to review your real estate tax assessment on any of your commercial properties. If the assessed market value determined by the board of assessment exceeds the fair market value of your property, or if you have experienced rental income problems this past year, or other issues from the COVID-19 outbreak, then an appeal of your assessment this year may be in order.

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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.

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