Wednesday, February 03, 2010

Falling prices spur more tax assessment appeals

Did I write enough about property taxes, and their relationship with our cities and counties?

Here is some more.

Almost everybody in this country seems to be on the same page. Economy is not what it used to be. People make less money, get pay cuts, fall into the jobless class, or are just afraid of spending as they used to. Which in certain ways is beneficial in the long term for a sustainable economy, a society more focused on happiness, education, family and values than on consumption.

Everybody knows that we must reduce a bit our spending, and sacrifice some of our superfluous expenses.

Everybody, except our South Florida cities and counties.

Lower property values? lower assessments? Lower appraisals? How can our cities and counties live without their ever increasing income? They just raise the tax rate and like magic, everything is balanced again.

Except that this is reaching a level where we citizens cannot afford it any more.

I often talk to foreign buyers and once they compare the cost of ownership in Florida to what it is in their countries, they are outraged. Condominium costs, insurance costs, taxes, are just too high.

Our own Florida residents have now second thoughts about that "American Dream" of owning their home, when the costs go out of hand.

Or if they already own their home, they just give up, after trying to balance their own budget, against the constant flow of higher bills and increases for water, trash, insurance, sewer, taxes, you name it.

The solution? Perhaps we should give up our homes and condos, our gardens and pools, our bedrooms and bathrooms, and just go rent or get lost in another friendlier state.

Or perhaps send the message to our public officers that enough is enough.

That we have given them the authority to govern us, not to abuse us.

We can live without their dozens of departments, comptrollers, directors, managers, committees, boards, employees, pension funds, traffic cameras, and other niceties.

In reality we are ready to give up all these luxuries, that our elected officers seem to enjoy so much.

Because we want to keep our homes.

I got this thought when I was reading the following article from:

Daily Business Review - February 03, 2010

Property taxes and homeowner associations

Owners of apartment communities in South Florida have a message for
their county property appraisers: Get ready for a showdown over 2010
tax assessments.

A spate of recent apartment property sales in the tri-county area —
which followed more than a year of relative inactivity in the sector —
has established pricing levels for apartment complex owners, tax
consultants and appraisers. Armed with new data, they are mobilizing
for a jump in property assessment disputes.

Investors have been snapping up properties at significant discounts,
the result of distressed sales brought on by the collapse of the condo
conversion boom of 2004-2007. And the prices are so low that often
complexes were purchased for much less than the properties are
assessed for tax purposes.

Although the investors got the properties cheap, many are struggling
with soft occupancy levels and declining revenue, said Robert Given,
CB Richard Ellis’ executive vice president of investment properties.

“From 2007 to now, we have had on average anywhere from a 10 to 20
percent decrease in net operating income in [apartment] communities
from the peak,” Given said. “The decrease is from rental collections
being down from more vacancies and concessions being provided to

That’s putting pressure on owners to cut costs, including taxes. And
property tax assessments, which are based on sales recorded in the
previous year, have not caught up with the latest values.

South Florida apartment complex owners have become “edgy” in
anticipation of lower assessments, said tax consultant Christopher
Bates of Wilton Manors-based Property Tax Consulting Services.

Taxes are always a major issue for apartment investors who factor
assessments into cost projections when considering a potential
purchase, said Carlos Berner, managing director of Acumen Real Estate.
Acumen has acquired two South Florida rental communities since
December: Coral Vista Apartments in Tamarac for $30.93 million on
Friday and Banyan Lake in Boynton Beach through an $18.8 million loan

Berner said his company isn’t concerned about assessments for Coral
Vista ($23.48 million) and Banyan Lake ($17.01 million). But Acumen
has walked away from several recent prospective purchases because of
over-assessment fears.

“We have looked at different opportunities where tax issues did not
allow us to go forward at aggressive pricing,” he said. “You never
really know if it will become an issue but we err on the side of

Property appraisers from Miami-Dade, Broward and Palm Beach counties
are aware of the decline in rental apartment values, Bates said, but
that doesn’t guarantee there will be a widespread reduction in
assessments this year.

Under pressure to reduce budgets during the recession, municipal
governments cannot afford to lose substantial property tax revenue.

Appraisers “are trying to hold their values to secure as much tax
[revenue] as they can,” Bates said. “Property taxes are becoming a
moving target. The counties recognize the huge downturn; they just
have a hard time keeping up with it.”

One appraiser, Broward County’s Lori Parrish, acknowledges apartment
complex owners are in line for reduced assessments this year.

Broward is set to start making mass appraisals of the county’s
properties today, Parrish said. The county had more commercial
property owners appeal their assessments in 2009 than ever before, and
this year is expected to be just as busy.

“Prices are going dramatically down,” Parrish said. “We run sales
assessment ratios monthly and see it keeps trending down. Hopefully,
[in addition to lower assessments] it will affect rents and those
folks who live in rental communities will see a reduction in rent, if
there is a reduction in [property] taxes.”

Palm Beach County has not begun appraising specific rental properties,
but the appraiser’s office anticipates lowering assessments across the
board, said senior appraiser Robert Samson, who handles multifamily
properties with 10 units or more.

“We haven’t reached decisions yet on 2010,” Samson said. “We do know
that most of the commercial submarkets took major hits last year. We
will be reducing values but are not sure by how much yet.”

In Miami-Dade, property appraiser Pedro Garcia has sent letters to
20,000 property owners — many of whom own rental apartment properties
— requesting information about rental revenue and expenses, Garcia
said. That information, along with comparable sales data, will be used
to determine whether to reduce assessments this year.

“With apartment buildings, you have to be careful” when appraising, Garcia said.

“There could be bad management, or a property is not kept in proper
condition,” he said. “We have to verify everything before making

Critical Evidence

Will the anticipated adjustments from appraisers satisfy the apartment
complex owners enough to keep them from filing appeals to already
swamped value adjustment boards?

Not likely, said Tal Frydman, vice president of investments at Marcus
& Millichap.

“Owners who are not selling right now are not too thrilled with prices
other properties are selling for in the area,” Frydman said. “And a
lot of my clients who closed [on purchases] are going in and trying to
get their taxes lowered significantly. Very few have been able to
successfully get [assessments] lowered ... a lot of buyers have been

Several apartment complex sales completed late last year gave
multifamily experts evidence that the market is at or near a bottom.

“I can’t imagine values getting much lower,” Frydman said. “The only
way prices go down further is if more distressed deals hit the

The prices the properties sold for, compared to current assessments,
hint at battles ahead between owners and appraisers.

“If you look at values from November 2009 or before, assessments are
high because the appraiser didn’t have anything to prove values were
decreasing,” said Brad Capas, senior director of apartment brokerage
services at Cushman & Wakefield.

“Property appraisers [now] have better market data, and I would like
to think that would result in lower assessments,” Capas said. “If come
November appraisers haven’t dropped values to where the market is
believed to be, owners will be much better equipped when going into an

Recent Deals

On Dec. 31, Coral Gables investor Jose Milton bought the Colony at
Dadeland apartments in Miami-Dade County in a short sale for $21
million, a discount of more than $34 million from what seller Colony
RB-Gem paid in May 2006. Colony had planned to convert the 334-unit
complex into condos.

The complex was most recently appraised by the county at about $30
million, however. Calls to Milton were not returned.

Earlier in December, Aventura-based Advenir paid $17.6 million for the
280-unit Lakes of Margate complex at 5750 Lakeside Drive. That
property is assessed at $18.65 million by Broward County.

Advenir president Stephen Vecchitto did not return calls.

Click play to listen to Robert Given

While being overassessed by $1 million might not seem like much,
Advenir could have a strong case if it chooses to appeal. Adjustments
by property appraisers generally bring assessments down to “anywhere
from 70 to 90 percent of what the [sale price] was,” Given said.

Options for owners

Besides recent sales data, apartment complex owners should be
bolstered by a bill passed by the Florida Legislature last year.

The bill amended an existing law to lower the standard of proof for
taxpayers who challenge their assessments. Instead of requiring that
taxpayers present “clear and convincing evidence” their taxable values
should be reduced, the “preponderance of the evidence” is the new

In the past, appraisers, through the clear and convincing evidence
standard, were presumed to be correct. Taxpayers had to present
overwhelming evidence to value adjustment boards that the appraiser
overvalued the property.

Now, the taxpayer, through the preponderance of evidence standard,
only needs to show “substantial evidence” that the assessment is
wrong. Substantial evidence could be proof that a property was
incorrectly classified by the appraiser, that it qualifies for
exemptions that were not applied, or that a property was appraised
differently than a comparable property.

“Property appraisers statewide no longer have the presumption of
correctness,” Bates said. “Before, the most difficult thing to do was
prove that. [Appraisers] have lost their edge in appeal hearings.”

Meeting with Appraisers

Multifamily investors who do not want to wait for appeal hearings can
schedule a meeting with the appraiser’s office after the assessments
are initially made public, Parrish said. That policy also applies to
Palm Beach and Miami-Dade counties.

The first posting of assessments are generally around May 15.
Miami-Dade plans to release its preliminary assessments on June 1,
Garcia said.

Property owners have 25 days to file with the county from when Truth
In Millage (or TRIM) notices are mailed out in August. Palm Beach
County does not anticipate releasing assessments before the TRIM
notices are sent out, Samson said.

Owners seeking appeals can expect a wait. Broward County is just
starting to hold hearings for 2009 appeals, while Miami-Dade County is
still mired in 2008 hearings. Palm Beach County’s backlog could not be

A successful appeal of an assessment does not always result in lower
property taxes, Parrish warns.

“Last year we lowered assessments,” she said. “But many of the
governments [in Broward County] raised tax rates substantially. When
money gets tight that’s an issue.”

Henry B. Nathan is a Real Estate professional at United Realty Group Inc.

Visit my website: where you can search for Hallandale Beach Condos, Sunny Isles Condos

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