Keep a Watchful Eye on Your Property Taxes
The Wisconsin Industrial economy continues to exhibit generationally low vacancy rates and strong user demand quarter after quarter. As owner users are faced with limited existing inventory and the cost of new construction climbing daily, the overall industrial values continue to escalate. For current owners of real estate, having their investment appreciate in value is on the surface a positive outcome. However, rising overall values can correlate with the property’s increasing tax bill. Furthermore, investor’s interest in industrial real estate has pushed values of leased assets to eye-popping levels. We continue to field questions from concerned taxpayers on the ability of assessors to increase the assessed value of the industrial property. If you own or lease industrial real estate it is important to understand your legal rights relating to property tax valuations.
Chasing sales and spot assessments are two actions that an owner of real estate should be aware of if their assessment recently increased. Spot assessment is an illegal practice for valuing property in Wisconsin and occurs when an assessor changes the value of specific property without adjusting comparable properties. This should not occur unless there is a revaluation of the entire business park or community as it violates the uniformity clause. The action of ‘chasing sales’ is also illegal and occurs when a property trades and the assessor changes an assessment based on that specific sale. As more investors are driving down cap rates for industrial real estate, we are seeing assets trade for record pricing. Most of these investment deals are secured with long-term triple net leases and tenants that are solely responsible for the tax payment of the property. A sharp increase in operating costs for a tenant can be the difference between a tenant renewing at the property or looking for cheaper alternatives in the area.
Tips for Owners & Tenants:
- Can you challenge the assessment? Yes, all values for real estate are placed as of January 1 for the tax year and all municipalities have an appeal deadline from May-October. These challenges will be reviewed by the Local Board of Review, Circuit Court, and if needed State Supreme Court.
- Will I know if my assessment changes? Yes, Wisconsin law 70.365 requires all property owners to be notified if their valuation has changed.
- Do tenants have a right to challenge an assessment? This is specified in the lease and is an important tenant right to secure in order to control operating costs.
- How do I know what my property is worth? Speaking with Brokers, Appraisers, Investors and other real estate professionals is a good first step to determining a fair market valuation.