“It’s unfortunate, but it happens all the time,” said Fran O’Malley, managing partner at Worsek & Vihon, recalling the abundant and often too-late calls that come in from commercial property owners concerned about their property taxes.
Recently, O’Malley, who began working on property tax cases when he first joined Worsek & Vihon in 1991, shared that a client who bought a piece of property without consulting the Worsek & Vihon team was blindsided by taxes three times higher than expected.
“It will impact their marketability to sell the property going forward,” O’Malley lamented. “They’re paying three times the amount of taxes that they’d be paying if it was located in most other areas of the county, but they didn’t call us until after they got the first tax bill, which was too late.”
Fran O’Malley, Worsek & Vihon
(Photo courtesy of Worsek & Vihon.)
That example is one of myriad reasons law firms specializing in property taxation encourage property owners to involve counsel through the life cycle of real estate.
“Our firm works with organizations during the acquisition process, helping them underwrite the taxes, so they know what their pro forma is going to be moving forward realistically,” shared Molly Phelan, managing partner of the Chicago office of Siegel Jennings, a national property tax law firm.
Through Phelan’s experience, which ranges from multi-family portfolios to national commercial investment funds, including special use properties such as hospital campuses to multi-million-dollar manufacturing facilities, she is able to identify the nuances of each property and can outline a structure and strategy that aligns with the taxpayer’s goals.
“Then when they’re looking to buy or sell a property, we help with the transition and structure of the sale to limit liability on current and future taxes after the sale,” Phelan said. “There are many opportunities to protect or lower taxes throughout the life of a property.”
Molly Phelan, Siegel Jennings
(Photo courtesy of Siegel Jennings.)
In the interim between acquisition and sale, she and her peers are often helping clients navigate the property tax assessment system. For owners of commercial properties, these assessments represent more than just a bureaucratic exercise; they directly impact the bottom line, influencing profitability and investment viability.
“If you don’t work with somebody who has a very in-depth knowledge of valuation for your specific asset class, you’re going to be most likely overvalued in your appeal,” said Phelan.
Navigating the complexities of property tax assessments can be daunting, particularly when faced with inaccuracies, unfair valuations and escalating tax burdens.
“There are just so many pitfalls for the unwary,” said O’Malley. “For example, it’s not like the IRS, which has an April 15 deadline every year to file your federal income taxes. Instead, property tax appeal filing deadlines vary from year to year depending on the property’s location in each county and township. Plus, you have different customs and practices within each jurisdiction as well.”
In such circumstances, the expertise of experienced tax attorneys becomes invaluable. These professionals possess a deep understanding of tax law and assessment procedures, allowing them to effectively advocate for commercial property owners and challenge unjust assessments.
“The property tax assessment system is complex and impacted by many variables. The system is flawed in some ways due to the volume of real estate parcels to be assessed and the limited resources in local government,” added Brian Forde, partner at O’Keefe Lyons & Hynes, who has more than 20 years of experience representing Illinois commercial, retail and industrial property owners in real estate taxation appeals and litigation.
Brian Forde, O’Keefe Lyons & Hynes
(Photo courtesy of O’Keefe Lyons & Hynes.)
In Cook County, he explained, government assessing officers are tasked with valuing almost 2 million parcels of real estate with about 250 staff members handling that load.
“It’s not surprising that government officials sometimes overshoot the mark on value, or simply assess improperly,” Forde said. “That’s why it’s important to have property reviewed by someone outside of government who understands the system and can determine if the assessment is in line with similar properties.”
In the absence of a formal reassessment, fluctuations in interest rates and vacancy rates can cause market values to shift, potentially reducing a property’s actual value despite stagnant assessed values.
“The market is always in flux, so just looking at the market value of a property on a reassessment year is potentially missing an opportunity to reduce your taxes,” said Phelan. “It should be reviewed every year.”
In cities like Chicago, where office buildings represent a substantial portion of the assessed value, upcoming decreases in assessed values are anticipated. Such decreases, affecting approximately 25 percent of the city’s assessed value, will necessitate adjustments in tax rates to compensate for the reduced revenue, impacting all property owners in the city. Thus, ongoing assessment and advocacy are essential to ensure that property taxes accurately reflect current market conditions, maximizing opportunities for tax savings and mitigating financial burdens for commercial property owners.
Property tax assessments wield significant influence over financial outcomes, often serving as a critical determinant of profitability and investment feasibility. As O’Malley, Phelan and Forde have aptly highlighted, the landscape of property taxation is rife with challenges – from inaccuracies and unfair valuations to the limitations of government resources.
Yet, amidst these complexities lies an opportunity for property owners to proactively manage their tax liabilities and safeguard their financial interests. By engaging the expertise of seasoned tax attorneys, property owners can navigate the intricate nuances of assessment procedures, leverage market insights to optimize tax outcomes and effectively challenge unjust valuations.
