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Are you paying more than your share of property taxes? That depends on whether your property is accurately assessed. This January, the British Columbia Assessment Authority (BC Assessment) will mail out assessments for more than two million properties. With this volume of properties, an individual analysis of each property is not possible: instead, BC Assessment relies on mass appraisal methods to determine annual assessed values.
What this means for property owners is the assessed value may not reflect the specific characteristics of each property. Often this can lead to inaccurate assessments, which in turn can result in paying more than your fair share of property taxes.
The 2021 property assessments will be used in conjunction with the municipal tax rates to determine your tax bill. If you have not had your property assessment reviewed, it is important to discuss this with a consultant prior to the January 31, 2021 appeal deadline.
The 2021 assessment year is going to reflect a market that was significantly impacted by the Covid-19 pandemic. The sales volume has been very low which results in challenges in assessing properties accurately. The pandemic has created a lot of uncertainty in the real estate industry and has resulted in significant challenges in determining its impact to the market value of properties.
The industrial market has remained very strong with minimal vacancy and increasing rents. In early December 2020, BC Assessment will mail out notification letters to owners of properties that experienced value increases significantly higher than the average. Most of these notifications are expected in the industrial market.
Office properties have experienced significant decrease in occupancy levels. This is primarily due to Covid-19 restrictions and an increased number of companies implementing work from home. There is minimal indication of long-term vacancy impact. Overall market values have remained stable for this market segment.
The two market segments that have been impacted the most by the Covid-19 pandemic are retail and hotel properties.
Retail properties experienced significant reduction in foot traffic resulting in nearly 50 percent of tenants being unable to pay rent or only able to pay partial rents. Many tenants have had to close their doors permanently which will very likely result in long-term increase in vacancy and decrease in rental rates. There has been very limited retail property sales activity in 2020. Many of properties that have sold were purchased for future redevelopment potential.
Hotel properties experienced significant reduction in occupancy levels due to Covid-19. July 2020 occupancy levels were as low as 10 percent compared to 95 percent occupancy in July 2019. Seasonal rates have also experienced a decrease of 50 percent. Many hotels experienced over 6 months of limited or no revenue. While there have been limited transactions, market values are expected to be lower due to lower room rates and occupancy.
For the 2020 tax year the provincial school tax rate was reduced by approximately 75 percent. This resulted in an overall tax decrease of 25 percent or more for most Industrial and Commercial properties. This relief was only in place for 2020 and will not carry forward to the 2021 tax year. Our preliminary forecasts indicate year-over-year tax increases of 50 percent or more in most assessing jurisdictions. There is also uncertainty in municipal budgets leading up to 2021. Many municipalities have had reduced property tax revenue which may be recaptured in 2021. What this means for property owners is scenarios where their property assessment value decreases while their property taxes increase by 50 percent.
This year has been an unprecedent year for property tax and valuation. An in depth review is recommended to ensure you are paying your fare share of property taxes.
An effective tax mitigation strategy for each property you own is critical to ensuring you only pay what you need to in tax. A comprehensive review of the value levied on your property for tax purposes is the first step in determining if you are assessed for your fair share of taxes. This review includes the following:
The B.C. Assessment Act requires both physical condition and permitted use of a property are determined as of October 31, after the valuation date. An MNP tax expert will verify the property is only being assessed for what is on the property and is classified according to the use of the property as of October 31, 2020.
This includes verifying physical attributes of the land and any improvements, to more complex factors such as condition and use. If your property was under construction or going through renovations, the assessment needs to be reviewed to ensure you are only being assessed for the progress to date as of October 31, 2020.
Reviewing the market value of the property is another key step to ensure the assessed value is reflective of the market value of comparable properties in similar areas.
BC Assessment assesses property values as of a July 1 valuation date. The assessment notice you receive is based on sales of similar properties that occurred around July 1, 2020. The volume of sales was significantly limited in 2020 This means it is critical to work with your advisor to review market transactions and determine if your property is assessed above market value. In these cases, a property tax specialist can present market evidence to the assessor and negotiate a reduction in value.
The primary purpose of an assessed value is to determine a property owner’s fair share of taxes. An independent equity review is used to ensure you are assessed fairly. Similar properties with similar characteristics should be assessed similarly. For property owners, this means they could see an assessment value that reflects the market value of their property but still be paying more than their fair share of taxes.
By reviewing the assessed value of a property and conducting an analysis of the assessed value of other comparable properties, you can ensure your property is equitably assessed. And that you are not paying more taxes than other comparable properties.
With the 2021 assessments becoming available January 1, 2021, the deadline to appeal is January 31, 2021. That leaves you less than a month to prepare and submit a formal appeal if you disagree with the assessment.
Property tax assessment reviews can be quite complex. To ensure you get the most accurate assessment, confer with a property tax specialist. They will conduct an in-depth review for each property at multiple times throughout the year to ensure you are being assessed fairly.
Contact Inder Nijjar, Senior Manager, Property Tax Services, at 604.536.7614 or [email protected]
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