Tax Relief For Common Elements

Tax season is nearly upon us and now is the time for Community Associations to evaluate the taxes paid on the common elements of the Association and to consider whether or not they are overpaying.

Homeowner’s Associations: A homeowner’s association may file a petition with the County Board of Revision to dispute the amount of tax paid on their common elements if the title to those common elements is held in the name of the Association. Last year, we obtained a reduction in property taxes paid by one association to zero. The property was originally valued at $140,000 with the County Auditor and we reduced that value to zero. This is possible on an argument that the common areas have no independent value to the association.
Condominium Associations: A condominium association typically does not hold title to its common elements in the name of the association. Each member holds a percentage of interest in the common areas and each unit owner is taxed on that percentage along with their unit. For tax purposes, a condominium unit is treated similarly to a single family home.

An association can decide to collectively challenge a tax bill. To do this, individual members would need to retain the same attorney; this would allow consolidation of the appraisals and most paperwork.

Challenges undertaken on a group basis tend to save money for the owners in the long run. A group challenge may also be more time effective. The attorneys will not have to coordinate with each other, everything is handled in one office, which streamlines the process.

Compare recent sales of units in your association to get a picture of the current market values for units in your association. Or compare assessed values of other condominiums that are similar to your association. This is public record and can be found on the County Auditor websites and offices. If assessed values in your association are higher than similar condominiums there may have been an appraisal error that can be fixed by a challenge of the tax bills. Keep in mind that assessed values are not current market values. Assessed values are lower than the current market values for the units.
Check the County Auditor records for obvious errors. For example, such an error could manifest itself as a mischaracterization of a unit as a 3 bedroom, when it is actually a 2 bedroom unit or an incorrect square footage. Sometimes with these types of errors a meeting with the County Tax assessors will correct the problem and a Board of Revision tax challenge is not needed. Be prepared to prove the mischaracterization by providing photographs and/or a floor plan.

In making comparisons to other associations make sure you take into account variables such as size, floor plans, views, or proximity to highways or traffic which can all have an influence on the values given to a unit in an association.
Should the association or the individual owners decide to pursue a tax challenge, contact your attorney to discuss your options. Most counties require you to file your complaints by sometime in March. Hiring an appraiser will be required to produce evidence that the values assigned are incorrect.

Most often, the entity that challenges the tax challenges are the local Board of Education. Any reduction in the amount of taxes the residents of the city pay results in less tax dollars for the schools. They will be your opposition in most cases. However, we have also found that the school districts are often open to compromise as well.

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