The rising cost of Texas real estate paired with mass appraisal systems that regularly result in incorrect valuations make it crucial for commercial property owners to protest their property taxes annually. In an ideal scenario, all commercial property tax negotiations would result in a value/assessment mutually agreed-upon by appraiser and property owner alike. Unfortunately, that isn’t always the case.

In instances where the parties fail to reach an agreement during formal and informal hearings, commercial property owners have a final chance to appeal through litigation and arbitration proceedings. For property owners who don’t regularly navigate appeals, the idea of extending protest efforts — through paths they aren’t familiar with — can be intimidating. An informed approach can make a world of difference.

Arbitration and litigation season begins in August and continues through the year’s end. Lane Property Tax Advocates’ commercial real estate experts are here to help commercial property owners like you take the next steps forward with confidence. Read on for a high-level look at how to determine the right approach for your property, what to expect amid proceedings and meaningful ways you can impact arbitration and litigation efforts.

Litigation and Arbitration: Determining Your Ideal Approach

State tax laws govern your decision between litigation and arbitration, but it’s important to weigh options carefully before moving forward. For instance, arbitration is reserved for properties valued at less than $5 million, but property tax arbitration awards are final. As such, there is some risk associated with efforts to sway an arbitrator’s opinion in your favor. Litigation, meanwhile, is the go-to approach for properties valued above $5 million, and whose value discrepancies are more than $200,000. This route is typically more time-consuming and costly, often taking years to reach completion.

We recommend working closely with your tax protest team to fully discuss your options. A seasoned professional will be able to help you understand how arbitration and litigation work, approaches available for your commercial property and whether taking next steps makes sense. Not only that, but if you do opt to take steps forward, they’ll be able to position your efforts for success.

What to Expect During Property Tax Arbitration Proceedings

To qualify for binding arbitration, a commercial property owner must be in good standing with the IRS and have no overdue taxes. Property tax arbitration filings and hearings follow a strict timeline. If both parties cannot agree on a valuation after the appraisal review board (ARB) hearing, once the arbitration is accepted by the comptroller, there is a 45-day negotiation period where the commercial property owner — or their team of property tax consultants — open negotiations with the county appraisal district (CAD).

The official arbitration hearing only takes place when sides fail to settle on a value during the negotiation period. Arbitrators have 20 days to review the hearing and deliver a final decision, and the final ruling comes down to the arbitrator’s judgment of evidence presented by the property owner and CAD.

What to Expect During Property Tax Litigation Proceedings

Proper attention to deadlines is crucial for virtually every aspect of the protest process — litigation included. Litigation is the more formal approach to the appeals process, and it has the potential to move on to court proceedings. In Texas, lawsuits must be filed within 60 days of the ARB’s final order.

The litigation process is comprised of multiple steps, including negotiations, court-ordered mediations, settlement conferences and, should a case go to trial, a judicial ruling. For these reasons, it can take several years to reach a resolution and expenses can add up quickly. Despite the time and financial investment, commercial property owners often find litigation appealing because of the opportunity to reach a settlement without the risk of losing the entire appeal amount. Unlike arbitration, minimum valuation isn’t a requirement for litigation.

How Do You Prepare for Arbitration or Litigation?

At Lane, we believe the first step for any commercial property tax appeal efforts should be to join forces with a professional protest firm. When you team with a firm such as Lane, you benefit from firsthand knowledge of professionals who handle such work every day. Not only are they able to draw from past experiences, but they’re able to take the time-consuming work of data procurement, case-building and market research off your plate, so you can return focus to your own business. There are, however, a few things you can do to help your team.

• Be Responsive: Your tax protest firm can handle a majority of the work on its own — everything from gathering quality evidence to building a solid case in your favor. There are times, however, where they need information only you can provide. If you receive requests for information regarding needed repairs, past valuation data, property photos and the like, make an effort to respond as quickly as possible. The more information your tax protest team has, the better able they are to fight in your favor.
• Keep Your Team Informed: Make your team aware of any new information you gather surrounding the property up for discussion or your arbitration/litigation proceedings. (Do this even if you believe they might already have the information.) From notices regarding upcoming mediation sessions to contractor estimates for needed repairs, the better informed they are, the better equipped they are to handle your case.
• Take a Breath: When it comes to proceedings that have the potential to substantially impact what you pay in taxes, it’s natural to become anxious. Just remember, worrying won’t help. By reminding yourself that your case is in good hands — and asking questions if and when they arise — you can put your own mind at ease while allowing your team to do what it does best.

The prospect of continuing your commercial property tax protest beyond traditional hearings can be uncomfortable, but it’s much more manageable with the right team by your side. If you have questions about how best to prepare for upcoming arbitration or litigation proceedings, or if you’re interested in learning how Lane can help you fight unfair valuations in the future, feel free to reach out at any time. Our team of tax experts is here to save you time, money and stress, and put our knowledge to work in ways that unburden your business.