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October 7, 2021

How to Challenge Your Property Taxes

Understanding the Basics

Every residential and commercial property owner understands the annual burden of real property taxes. Few understand how their property taxes are calculated, whether they are correct, and if not, how they can be challenged. To understand taxes you need to first understand the basic concepts around them. For the purposes of this article, dates, deadlines, and procedures will be specific to the city of Buffalo, New York. 

The key factor in calculating property taxes is the assessed valuation (AV) of the property, which is based on a property’s fair market value (FMV). The FMV is defined as “the price that a property would sell for on the open market under usual conditions.”1  Once you have a property’s FMV, the next step to determine the assessment is to apply the equalization rate (ER). An ER represents the mathematically appropriate calculation between property FMV and the actual assessments in a city, town, or village, based on the state’s statistical analysis of the comparison of property sales prices with this respective assessment. For example, an ER of 20 percent means that the property in a community is generally being assessed at 20 percent of its FMV. Multiplying the ER by the FMV gives one the AV.

FMV × ER=AV 

An ER is used to ensure that properties carry an equitable tax burden. The ER is an effort to get an apples to apples comparison to determine the property owner’s taxes. In the same regard, someone may use the ER and the AV to determine the assumed FMV of a property. For example, a property owner’s tax bill should indicate the property’s AV. By dividing the AV on the tax bill by the ER, which can be found on the state’s website, the owner can determine what the assumed FMV of the property is.

AV ER = Assumed FMV

The city or town assessor is charged with determining the FMV of every property in their jurisdiction. Depending on the type of property being assessed, the assessor may use one of three approaches to calculate a property’s FMV: the sales comparison approach, the cost approach, or the income approach. The assessor uses a particular approach depending on the type of property. For the purposes of this article, we’ll focus on the sales comparison approach. 

As a hypothetical example, let’s look at a single-family home located at 17 Bills Street, Buffalo, New York. In determining the FMV of this property using the sales comparison approach, the appraiser or assessor would compare the subject property with the arms-length sales of similar properties. The assessor would compare the sale of other similar homes in the area and determine that the FMV of 17 Bills Street is $100,000. The City of Buffalo’s 2021 ER is 88.5 percent. So, using the first calculation (FMV x ER = AV), if 17 Bills Street has an FMV of $100,000, its AV would be $88,500.

Since property taxes are completely under local control, the relevant municipal and school budgets determine the total amount of real property taxes to be paid for that year. This is also known as the tax levy (levy). The assessments of the property in that jurisdiction determine how the total taxes paid are divided among the property owners in that jurisdiction. A tax rate is determined by dividing the total amount of money to be raised by the total taxable assessed value for the tax jurisdiction. In New York, tax rates are per $1,000 of assessed value. 

Tax Rate = Total Tax Dollars Required (Tax Levy)) / Total Taxable Assessed Value of All the Property in the Municipality
    
For example, if there are only two identical homes in a city with a FMV of $100,000, and an ER of 50 percent, they would each have an AV of $50,000. If you combined the AV of both homes you would have the total taxable assessed value of all the property in the municipality at $100,000. If the city needed to raise $2,000 in property taxes, it would divide that burden by the total taxable assessed value. 

$2,000 /$100,000 = 0.02 multiplied by 1,000

This produces a tax rate of $20 per thousand dollars, meaning each home would be responsible for paying $20 for every $1,000 of their AV. At an AV of $50,000, each home would be responsible for $1,000 of taxes, which is exactly half of the total levy. 

50 (AV per $1,000) x 20 (Tax Rate) = $1,000.

Challenging Your Assessment

If you believe that your assessment is inequitable and have support for the value, the first thing you should do is speak with your local assessor. If you two cannot agree and you believe you have a valid claim, then follow the steps below to challenge your assessment.

Note: The dates below are specific for Buffalo, New York. The dates for your actual property may be different and you should check with your town for the deadlines applicable to your property.

Step 1: File a grievance complaint with the Board of Assessment Review (board)

File a grievance complaint indicating what you believe to be the correct assessment for the subject property. To file a complaint, you must use the standard form available at your local assessor’s office or online. In Buffalo, the grievance filing period is from December 1 to December 31, 2021. Applications must be signed, dated, and received by the Department of Assessment and Taxation prior to this date. Use a separate form for each parcel being challenged. 

Note: If the property is in a town, there is usually a single grievance day.

Step 2: Provide evidence to support your valuation of the property to the board.

State law assumes the assessment is correct. Therefore, the burden of proof is on the property owner to prove their value is correct. Keep in mind, financial inability to pay property taxes will not be considered. Do not submit original documents as they will not be returned.  

Step 3: Board hearings 

The board meets each year to hear complaints on assessments, otherwise known as “Grievance Day.” Complaint hearings are not required, but are scheduled at the request of the owner when filling out the grievance complaint form. The owner is also not required to be represented by legal counsel, but may employ counsel if desired. Due to the COVID-19 pandemic, hearings are currently conducted virtually. If you choose to represent yourself, keep in mind that eloquent or heartfelt speeches won’t win over the board, which may require you to provide additional evidence to validate your valuation.  

Step 4: Results

Results of assessment challenges are mailed on March 1 to the address provided on the grievance form. The board may:

  1. Leave your assessment unchanged
  2. Lower your assessment to what you requested 
  3. Lower the assessment from below the initial assessment but higher than you requested

The board may not increase your assessment, and it may not reduce the assessment below the figure you requested. 

If you are not satisfied with the board’s decision, you have 30 days from the final roll date to file for further review in either Small Claims Court or commence a proceeding in the state Supreme Court. You may only elect to file for further review if you have completed steps 1 through 4. Homeowners whose claims are lower than $5,000 may elect for further review through Small Claims Court. However, if your claim is greater than $5,000 or is for a commercial property, you would seek further review from the state Supreme Court, which would require you retain legal counsel. 

Conclusion

Property owners, both residential and commercial, should understand their rights and requirements for challenging their property tax in every jurisdiction where they own property. Failure to meet the municipality deadlines results in a forfeiture of the owner’s right to challenge the assessment and can have costly repercussions.  

____________________________________________

  1Ross S, How the Real Estate Market Determines the Value of a Property. (May 19, 2021) Investopedia, https://www.investopedia.com/ask/answers/072915/how-market-value-determined-real-estate-market.asp, viewed September 8, 2021. 


 

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