Arbitration vs. Litigation: Your Next Step After Property Tax Hearings
An unfavorable decision after your commercial property tax hearing isn’t always the final word. Depending on your property and the circumstances surrounding your case, arbitration or litigation may provide another path forward. Understanding arbitration vs. litigation can help you determine which option may be right for your business.
Here, Lane Property Tax Advocates’ commercial property tax experts explain how arbitration and litigation work, highlight the key differences between the two and offer guidance on choosing the right path for your situation. It’s all about helping you approach your next steps with confidence, so you can unburden your business.
When Does a Commercial Property Tax Protest Become an Appeal?
Virtually every commercial property tax protest follows a similar path. After receiving a notice of appraised value, a property owner may file a protest with the local county appraisal district (CAD). That protest typically begins with an informal hearing, where the owner or the firm representing them presents evidence supporting a lower valuation.
If the issue isn’t resolved during the informal hearing, the case moves to a formal hearing before the appraisal review board (ARB). Here, both the appraisal district and the property owner present evidence, and the ARB issues a decision for that tax year.
Although formal hearings may end with the board setting an agreeable lower valuation, it’s possible that the new amount they propose will still be too high — or they could deny a correction altogether. In instances where the ARB’s decision fails to meet what you believe to be fair, the protest process may transition into an appeal. When it does, there are a couple of routes to consider.
What is Commercial Property Tax Arbitration?
Commercial property tax arbitration is a process that allows certain property tax disagreements to be reviewed by an independent third party rather than returning to the appraisal district. During arbitration, both sides present evidence supporting their positions. The independent arbitrator reviews the documentation, considers the facts of the case and issues a binding decision.
Arbitration is typically reserved for properties valued under $5 million, and compared to court proceedings, it tends to be quicker, more streamlined and less formal. Eligibility depends on a number of factors established under Texas law, making it important to understand whether this option applies to your property before moving forward.
What is Commercial Property Litigation?
Commercial property litigation takes the dispute into the court system, rather than before an independent arbitrator. It’s a more formal legal process that may include additional filings, discovery, ordering appraisals, informal settlement conferences, negotiations, mediation and, if necessary, a trial.
The court process allows for more extensive legal procedures, which can make litigation a better fit for complex valuation issues or disputes involving substantial tax dollars. Those additional legal procedures also mean litigation often requires more time, preparation and resources than arbitration.
Arbitration vs. Litigation: What’s the Difference?
When comparing arbitration vs. litigation, remember that neither option is automatically better than the other. Each serves a different purpose, and your path forward will depend on the property itself, the issues involved and the circumstances surrounding your appeal. Here’s an apples-to-apples look at how the approaches differ.
Binding Arbitration
- More streamlined and less formal
- Conducted by an independent arbitrator
- Designed to resolve disputes efficiently
- Typically resolved within a few months
- Reserved for properties valued at less than $5 million
Litigation
- More formal and procedurally involved
- Conducted through the court system
- Better suited for certain complex valuation disputes
- Often takes a year or more to reach a resolution
- Reserved for properties valued above $5 million
How to Decide Whether to Appeal Property Taxes
Deciding whether to appeal property taxes involves more than determining whether you disagree with the appraisal district’s opinion. Property owners should also consider whether continuing the appeal makes good business sense. Ask yourself the following questions.
- How much tax savings are potentially at stake?
- How strong is the supporting evidence?
- Does the property’s income performance support a lower valuation?
- Are there market factors that weren’t properly considered?
- How much time and effort will be required to continue the appeal?
- Which appeal process is available for this property?
While the prospect of an appeal can feel overwhelming, you don’t have to approach it alone. An experienced commercial property tax professional can help you determine whether pursuing arbitration or litigation is likely to produce a meaningful financial benefit — and help you pinpoint the option that makes the most sense.
How Representation from a Professional Property Tax Firm Helps
Whether you’re pursuing arbitration or litigation, navigating the appeal process can be complex. Deadlines, documentation requirements, valuation methods and legal procedures all play a role in building a strong case.
Working with an experienced commercial property tax firm can help ensure your appeal is handled strategically while giving you confidence that every opportunity for savings is being explored. In addition, it frees up your time so you can continue to focus on day-to-day business.
It’s important to remember, however, that every property tax firm is different. Here are some things to consider when looking for the right support.
- Find a Firm That Specializes in Commercial Property Tax Appeals: Commercial valuations are far more complex than residential properties. Look for a team with experience representing commercial property owners and navigating the unique challenges these properties present.
- Choose a Team with Arbitration and Litigation Experience: Not every property tax protest ends with an ARB hearing. A firm familiar with the full appeals process can help determine whether arbitration or litigation may be appropriate for your situation.
- Look for an Evidence-Driven Approach: Strong appeals are built on facts, not opinions. The right firm should know how to gather and present documentation such as income and expense statements, occupancy reports, repair estimates and comparable property data.
- Work with a Firm That Communicates Clearly: Property tax appeals can be complex, but your representative should make the process easier to understand. Look for a team that keeps you informed, explains your options and answers your questions along the way. Transparent pricing is important, too.
- Consider the Firm’s Experience and Results: While every property and appeal is different, an established firm with a long history of representing commercial property owners can provide valuable insight and guidance throughout the process.
At Lane, our team has more than 100 years of combined experience representing commercial property owners across Texas and beyond. From the initial protest through arbitration or litigation when appropriate, we help clients navigate every stage of the appeal process. Our evidence-driven approach has helped clients achieve an average valuation reduction of more than 20%, resulting in an estimated $25 million or more in annual tax savings.
Every commercial property tax protest is unique, and so is every appeal. While arbitration and litigation each offer potential paths forward, the right choice depends on the property’s value, the facts supporting the case and the goals of the property owner.
If you’ve received an unfavorable ARB decision or have questions about the next stage of your commercial property tax protest, contact Lane. We’ll help you understand your options, build the strongest case possible and continue working to secure the fair valuation your property deserves.