There is always good news and bad news to every movement in the real property industry. On one hand, the 2008 Great Recession has significantly reduced the homeownership rate in the United States, which dimmed the hope for the American Dream. On the other hand, the multifamily sector rose up to the occasion by increasing its construction projects to meet the demand for its units – and herein lies the problem for many, if not most, of the businesses that have dealings with the Gwinnett County Tax Assessor.
Keep in mind that the construction of more multifamily units will have an impact on the sector’s property taxes mainly because of the manner by which tax assessors value the multifamily dwellings. As a property owner of one or several multifamily buildings, you have the responsibility of understanding the dynamics of appraised value of your property and the tax bills applicable to it.
Use of Market-based Indices
You can ask the Gwinnett County Tax Assessor about the appraisal system that it uses for the valuation of multifamily buildings. You may assume that a computer-assisted mass appraisal system is in use since it is the most commonly used system in the country. Even when it isn’t in use, you have to remember that tax assessors have a common goal regardless of their jurisdiction – to generate more uniform assessments instead of providing property-specific valuations for all property owners.
Usually, tax assessors will establish a classification system for multifamily dwellings, such as high-rise or low-rise, among others, with your property falling into one of these sub-categories. The relevant data for all of the real property within the sub-category will then be entered into the system, said data can include market rental income and expenses as well as lease and vacancy data.
The result: A statistical market-based index for each of the sub-category in the multifamily sector. For example, the Gwinnett County Tax Assessor will use the market-based index for the sub-category in the assessment of the value of each individual property. This means that, more often than not, the actual rent income and operating expenses of the individual property will not be considered – and therein lies one of the root causes of over-assessment.
Issues with Use of Market-based Indices
With the filing of appeal for over-assessment, the tax assessor may or may not make adjustments for property-specific issues. However, the Georgia property tax law is clear, if the property produces income then the income and expenses must be considered. The burden of proof rests on the Gwinnett County Tax Assessor in the sense that he should present compelling evidence to justify his original valuation before the board of equalization or hearing officer.
As a property owner and taxpayer, you can also use the weaknesses of the use of market-based indices to your benefit. This is true during periods of rapid, if not highly uncertain, market changes as well as when the classifications become outdated for various reasons.
You can argue that the original property valuation is unjust considering that the market-based index used does not reflect actual property conditions, including actual rent and expenses. You may, in fact, be paying higher property taxes on a multifamily building with net operating loss because the tax assessor lumped it together with newer and more profitable buildings in the area. For more information speak to a property tax consultant.
