Update: Which Pandemic-Related Changes Continue to Affect Commercial Property Taxes?
During the last few years, when businesses were severely impacted by the COVID-19 pandemic, municipalities adjusted deadlines for property tax grievance filings and tax due dates to allow more time to file. There were also a series of other adjustments made. You are likely wondering how these changes affect the current commercial real estate tax landscape, and which are still in place.
The pandemic’s impact on commercial properties varied by property type. The CRE industry was in a strong position before COVID-19, according to Deloitte. The retail, office, and hotel sectors were hit very hard initially. Hotel is beginning to rebound as travel is opening up, and remote workers who may have moved further from the office are now utilizing hotels when they are in town for work.
Retail and office both continue to feel the negative impacts of the downturn, with store closings and vacancies rising. Industrial and multifamily properties, however, have had strong tenant demand, and rents are back to record levels throughout much of the country, according to PricewaterhouseCoopers.
With all the variability within CRE and the loss of tax revenue due to the effects of the pandemic, there have been changes in how municipalities are handling the assessment and grievance processes.
For the 2020/21 tax season:
Nassau County Reassessment and Its Continuing Impacts
In Nassau County, after the county reassessment, for any commercial assessment that resulted in increases (that were not new construction), those increases would be phased in over a 5-year period. If you are a commercial property owner, we highly recommend that if your 2020/2021 assessed value was greater than your 2019/2020 assessed value, you need to check your tax bills. There were some errors made with the implementation, so you want to be sure that your taxable assessed value is less than the total assessed value (AV). You also want to check whether the phase-in and any exemptions were applied correctly to your tax bill.
Class 4 Commercial Property Disputed Assessment Fund (“DAF”) Program in Nassau County – Contributions Continue
Class 4 commercial properties in Nassau County all pay a levy to the DAF, which is based on taxable assessed value. In 2019, Nassau County began to charge Class 4 commercial property owners a levy to apply towards the estimated total amount of commercial refunds that would be due in that year. Class 4 covers all commercial properties other than apartments, condos, residential coops, or public utilities.
The DAF fund is used for tax refunds on Nassau County commercial properties, which are paid to the appealing taxpayer if the outcome of the appeal results in a refund. The 2020/2021 commercial tax bills included a DAF levy charge of $24.363 for every $100 of assessed value (AV), which was down 10% from the 2018/2019 tax year.
We don’t currently have any information on whether the tax levy to the DAF fund will continue or change for the upcoming tax year, but we will update when there is new information.
For the 2022/23 tax season:
The Nassau Country Department of Assessment announced on January 4, 2021 that “Due to the instability of Nassau County’s real estate market caused by the COVID-19 pandemic, County Executive Laura Curran has paused property valuation updates for the 2022-2023 assessment roll. Therefore, unless you have since received a correction of error, an assessment reduction, or physically altered an improvement, or petitioned for a map change, this notice should reflect the same property assessment as the previous tax year, which protects against an assessment update based on the current chaotic real estate market.”
This market value freeze affects all commercial properties in Nassau County and is a reversal from prior announcements stating that property revaluation would be performed every year. This change was pandemic-related in that property values from market fluctuations across CRE (outlined above), caused an imbalanced increase in some property types and market values, spiking taxes for those properties.
Another big announcement was made on July 13, 2022, when NY state Comptroller Tom DiNapoli’s office announced that New York state would cap property tax increases at an upper most limit of 2%. This cap applies to tax calculations for all counties, towns, fire districts, 44 cities and 13 villages that operate on a calendar-based fiscal year. However, it does not apply to New York City.
Retail and office have been on a downward trend. However, we are seeing an increase in office rentals in suburban areas to accommodate people returning to work closer to home, so they don’t have to commute back into the cities. We are also seeing an increased demand for warehousing space.
With all the pandemic-related changes and the constant market fluctuations, it is more important than ever to work with an expert commercial property tax consultant. At RTC, we are the best in the business at understanding valuation and we leverage our expertise in every one of our negotiations.
If you have any questions about the pandemic’s impact on commercial properties, including the assessment and grievance processes, and how the recent changes affect your tax bills, or you would like to begin working with us to obtain a property tax reduction, please contact us.