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Question of the Week: Ad Valorem Tax Values

The question this week comes from somebody in Jefferson County who just received the new tax appraisals for his rental properties, and went into shock!!! He was hoping they were worth as much as the county thought, but that was highly unlikely. It just meant his taxes were going to increase astronomically and unfairly. What could he do?

If this happens to you, be sure to dispute the valuation to the local Board of Equalization. Counties are not able to afford the personnel necessary to appraise properties by the old fashioned methods. Instead, they rely on computer software and artificial intelligence that makes educated guesses about values. Those guesses can be wildly wrong. It is fairly easy to attack them, but you have to be prepared.

First, don’t miss your deadlines, or you’ll be out of luck until next year. You have thirty calendar days from the date of the final published notice to dispute it, in writing. The Code sections explaining this process start at Section 40-3-20, Code of Alabama 1975.

Second, call the tax appraiser’s office and find out HOW their appraisal was done. Was it recent comparable sales, or was it replacement cost minus depreciation?

Third, be prepared for the hearing with all of your evidence. You will need to persuade the Board of Equalization that your property is worth less than the tax appraisal. For a comparables methodology, you will need information about recent comparable sales, and current competing properties in the market place. If at all possible, try to find sales within the last year, within a one- to three-mile radius and in the same community. For example, a property one block away from a Mountain Brook address, but actually in the Irondale city limits, would not be a legitimate comparable sale. If past sales were at higher prices, but there are very similar properties that remain unsold even though listed for those higher prices, (or even your tax appraised value) then that is very good evidence the value is lower. For replacement-cost-minus-depreciation, you will need information about the quality of the construction, and the current condition of the components.

Fourth, be prepared to dispute the evidence offered by the County attorney. They might have recent sales they say are comparable, but which are really not. You should bring your laptop computer and be able to access property information quickly. You cannot rely on wireless Internet. Make sure your cell phone is set up for mobile hot spot use, and know how to use it. Practice doing this, and looking up information on MLS, Zillow, or other sources. Or, they might say your building is better-built and still in better shape than reality.

Get to the hearing early. Ask the county’s attorney for a list of the properties they plan to use as comparable sales to support the appraised value. In the alternative, ask the for details regarding the base value of construction, and how they calculated a percentage of depreciation. That way, you can research them while the Board is getting settled in for the hearings. Hopefully you will not be the first one!

In my experience, they rarely give taxpayers the value they want, but usually do lower the values somewhat. If you are unhappy with the result, you can always appeal to Circuit Court. The legal fees to do that might be far more than the higher taxes, though. Even if your property is owned by an LLC or corporation, you can still be the advocate in the Board of Equalization. If you appeal to Circuit Court, though, you will have to hire a lawyer unless the property is titled in your own personal name.

We do not currently have a specific class or video on disputing your property tax valuation. You can always reach out via email, though, if you need to hire a consultant to help you prepare for your dispute.

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Question: Owner Wants Property Back

The Question of the Week is from someone who wrote, “I have an owner who wants possession of her home due to personal reasons. The tenant’s lease expires November 2020. The tenant  has informed me that he has no intention of moving.  What recourse do I need to take because the owner is insisting that she will demand possession because it is her home?”

I asked some more questions and found out there was no lease clause allowing early cancellation by the owner. The tenant was a model tenant and also paid her rent early every month. My answer was: Because there was no specific language in the lease authorizing it, the owner is not allowed to cancel the lease and cannot demand possession. She can wait until November of 2020. She can offer money to buy out the tenant’s remaining lease term. MAYBE she can fire the property manager, find some lawyer to file an eviction lawsuit, and end up being sued by the tenant and having to pay damages and the tenant’s legal fees.

It is not uncommon for owners of single family residence rentals to want the flexibility to cancel a lease. This is especially true for military owners who move back to the area, and also owners who rent a property until they can sell it. Other times, the child of an elderly person in an assisted living facility will rent out the parent’s home. After death, the child wants to sell the home.

The solution is to have a lease clause allowing cancellation under certain limited and specifically described circumstances. Typically such a clause will give the tenant 60 days notice of cancellation. Sometimes a tenant will negotiate the clause, and want the last month’s rent free. Most owners are willing to give that.

Do you want more information about landlord/tenant law, including lease clauses that can provide better protections and more flexibility than the standard leases everybody uses? Check out the full day class on Landlord Tenant Law, or the half-day FAQ Landlord Law, under the Resources tab on this website.