Residential and Commercial Property Valuations: Knowing What To Fight For (And How To Do It)

November 7, 2011 - 11 minute read

A recent Forbes article entitled “Talking Down Your House” reported on an attorney who had successfully appealed the tax assessment on her property.  With the addition to our staff of Janis Lemle,  who holds assessor certification in the State of Louisiana and was formerly with the Orleans Parish Assessor’s office, we are pleased to share the following information on the process involved in contesting tax assessments in Louisiana so that if you faced higher than expected tax bill this fall you can be prepared to challenge the assessment in 2012.

Residential Property

Ad valorem (of value) property taxes are based on fair market values of individual estates or properties. The valuation of residential property is divided into land and improvements (usually structures).  A percentage of this valuation determines the assessment amount of the property.  In Louisiana all land assessment and assessment for residential structures are 10% of the actual or assessed value.  From the assessed value, any exemptions or special assessments to which the homeowner is entitled are subtracted which leaves the taxable amount.  This amount multiplied by the current tax rate determines the tax liability for the property.

The sales approach is the technique most frequently used for assessing residential property.  Under this approach, value is determined using the most recent sales figures of comparable properties.  Generally, the land is given a dollar value per square foot.  The assessment page on the assessor’s website shows the dimensions of your lot size, but not the square footage of your house or the number of bedrooms and bathrooms which are essential for determining value.  Consult a real estate professional to determine the recent sale prices of residential properties similar to yours.  Calculate the square footage of your lot and divide that number into the land value amount.  Then, check the land value per square foot of the properties on your block.

Remember that valuations on homes do not always lend themselves to a formula.  New Orleans is known for its unique neighborhoods that mix old with new and where grandeur and quaint are side by side.  The assessor’s office has information on your home regarding its square footage and number of rooms which is used to calculate your home’s value.  However, this information is not available on the assessment page that is viewable via the website.

If the value of your home seems excessive, contact your assessor’s office and find out what information they are using to calculate value.  Perhaps your home appears to be two stories from the street, but the second story is really unfinished attic space with low ceiling height that is not air conditioned.  This space should not be given the same value per square foot as the rest of your home.  Or, if you haven’t been able to fully renovate since Hurricane Katrina and are only using the second story of your home, the home’s value should not be calculated as if the entire space is habitable.

If your land or building valuation is significantly higher than your neighbors, you should contact the assessor’s office for an explanation.  An attorney’s assistance can be helpful to contest the assessment before the Board of Review (in New Orleans, this is the City Council) and the State Tax Commission, and an attorney is highly recommended, though not required, to challenge the assessment in Court.

Commercial Property

Property taxes for commercial property are also based on the actual value of the property.  As with residential property, the valuation of commercial property is divided into land and improvements (or buildings).    A percentage of this valuation determines the assessment amount of the property.  In Louisiana, all land assessment is 10% of its actual value and commercial buildings are assessed at 15% of their actual value.  The assessment amount multiplied by the tax rate is the dollar amount you will pay in taxes.

The sales approach is also most commonly used to determine market value of commercial property.  The other methods used to determine the value of commercial property are the cost approach, which uses reproduction or replacement cost less accrued depreciation, and the income approach which uses capitalization of market rents.  Application of these approaches requires addition information and calculations.

Commercial property assessment also focuses on the useable square footage in your building.  If the total square footage used by the assessor includes attic space that the average person cannot stand in or a large boiler/equipment room that can only be used for storage but does not contribute to your operating space, this “lesser” space is usually given a lower value per square foot.   Your tax bill may not show you the square footage of the land and building the assessor uses to calculate lot and space of a building, but that information is available to you.  If you can’t find it on the assessor’s web site, then pay a visit to the office and request this information.  Then do your own calculations and speak with the Assessor if there is a discrepancy.

Even if you rent space for your business, you still have a stake in ensuring the accuracy of the property tax bill.   Property taxes are a factor in establishing rent rates.  Small business owners with leases to exclusive rights to a commercial building may find that the landlord will insist on a clause in the lease that requires the tenant to pay the property taxes.   In this instance, the business owner should know that in dealing with the municipal assessor, he can contest the valuation of the property if he has authority from the owner to do so.  Most assessors require and can provide a simplified power of attorney for this purpose.  Property assessments are public information, so you can inquire about the valuation of your building and compare it with valuations for comparable commercial spaces in your area.

Also, if you operate a business in a building which you own and that building also contains your living quarters, you may still qualify for a Homestead Exemption.  Outside of Louisiana, some states apply a prorated exemption based on the percentage of square footage occupied by the living quarters.  It’s worth checking into.  There may be tax exemptions, even temporary ones that might apply to your business.

Contesting Your Property Tax Bill

In Orleans Parish, property tax bills are mailed in December for the coming year and are due in full the last day of the first month of the new year.  It is always best to clear up issues you may have with your property valuation as soon as possible.  If you believe you have grounds to contest your property assessment, arm yourself with evidence and be open to allowing an inspection of your home or business.

There is always a deadline for correcting the accuracy of your assessment before the bills are finalized and a deadline for contesting your final assessment.  In Louisiana, the tax rolls are open from August 1st through the 15th every year.  Know what the deadlines are and check the valuation of your property in sufficient time to make your assessor aware of items you dispute.  Be sure you are armed with the pertinent facts and any documents you have (such as recent appraisals, pictures that are time and date stamped or land surveys) that support your argument.  Be accommodating if the assessor wants to verify land or building square footage with a visit to the property by his or her own staff.

If you and the assessor cannot come to an agreement about the value of your property, then avail yourself of the appeals process.  The first level of appeal is to the Board of Review (BOR), a municipal board authorized to hear property valuation disputes.  The assessor’s office and its website have appeal forms for your convenience.  After the decision of the BOR, either side can appeal that decision to the Louisiana Tax Commission which holds its hearings in Baton Rouge.  Following the decision of the Tax Commission, either party can take the dispute to the appropriate state court by filing a petition.   An attorney’s assistance can be helpful to contest the assessment before the BOR and the State Tax Commission, and an attorney is highly recommended, though not required, to challenge the assessment in Court.

You may reference the Orleans Assessor’s Office website for more information, or  if you have questions about this article you may contact Janis Lemle in our office

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