Property tax appeals can save real estate owners money by addressing outdated assessments. Learn the process, valuation methods, and preparation tips.
Property taxes are one of the largest operating costs for real estate and operating businesses. However, assessments can lag behind market realities.
If your latest notice doesn’t reflect the current market value or earning potential of your asset, you may have a strong case for an appeal.
Where appeal opportunities might be (by asset class)
When net operating income, rents, or marketability shift, or when vacancy trends rise, assessments often reflect outdated assumptions, creating opportunities for review:
Office
Vacancy remains elevated, and demand for older, non-amenitized buildings continues to decline. Assessments could reflect pre-shift market assumptions, creating opportunities for downward adjustments.
Multifamily
Heavy new supply in growth markets has slowed rent growth and increased concessions. Assessments can rely on peak-cycle data, potentially overstating value in today’s softer conditions.
Senior living
Rising labor costs and occupancy volatility are affecting profitability. The income approach is often applied without fully distinguishing real property from the operating business component, which can lead to overstated valuations.
Industrial
After years of strong absorption, speculative construction has outpaced demand in several markets. Assessments may assume peak-era rents and occupancy, ignoring recent normalization.
Retail
While essential retail is stable, centers with tenant turnover or prolonged downtime face net operating income pressure. Assessments that overlook these impacts might be inflated.
Hospitality
Hotel performance is highly sensitive to RevPAR and occupancy swings. Intangible business value, such as brand and management agreements, can be blended into taxable real estate, which can inflate assessments.
What to expect from the appeals path
Most jurisdictions follow a three‑tier process for appeals, and timelines are short; missing a filing window can delay relief for an entire year.
- The process typically begins with an administrative review where the assessor and property owner exchange facts and valuation evidence informally.
- If the matter is not resolved, it moves to the Board of Review or Equalization, a formal hearing that creates an evidentiary record.
- The final stage, when necessary, is a court or tax tribunal, which involves litigation, discovery, and expert testimony.
Three accepted approaches to building a defensible valuation
- Cost approach — Replacement cost new, less physical, functional, and economic obsolescence. Often relevant for newer or special-use assets; obsolescence analysis is critical for underutilized properties.
- Market (sales) approach — Comparable sales adjusted for size, age, quality, tenancy, and terms.
- Income approach — Capitalizes normalized NOI reflecting market vacancy, credit loss, concessions, non-reimbursable expenses, and market cap rates. Essential for operating or income-producing assets.
Pre‑filing checklist for appeals
- Evidence of market change: leasing comps, submarket vacancy/absorption, broker opinions of value, recent sales or re-trades
- Assessment history and notices, including recent method or classification changes
- Current rent roll and trailing 24 months of operating statements, including concessions, free-rent, and TI packages
- For operating assets (hospitality and senior living): ADR/RevPAR or census, labor cost trends, and key management/franchise terms
- Statutory filing windows by county to make sure appeals fall within the current cycle
How CLA can help with the appeals process
CLA’s real estate and state and local tax (SALT) professionals deliver comprehensive property tax appeal services. Leveraging national resources and local market insight, the team identifies appeal opportunities, develops defensible valuations, and manages the process from initial review through representation.
With short appeal windows and assessments often based on outdated assumptions, early action can provide immediate cash-flow relief and position assets for future cycles. Schedule a 30-minute assessment review to explore potential savings.