Commercial Property Tax Litigation and Arbitration Considerations for the 2022 Tax Year

August 4, 2022 |

With the rising cost of Texas real estate, many commercial property owners will find themselves protesting overinflated commercial property tax values/assessments in 2022. And a certain number of those property owners will need to consider arbitration or litigation as a next step. Like so many factors associated with the protest process, the thought of entering into arbitration and litigation can be intimidating. But understanding what goes into the processes, as well as the various factors that come into play, can make a tremendous difference. Lane can help you avoid potentially costly mistakes by entering into arbitration or litigation better informed.

What Factors Should You Consider When Deciding Between the Two?
In many cases, successful negotiations result in a lower value/assessment that both the appraiser and property owner approve, thereby eliminating the need for litigation or arbitration. When no agreement is reached, however, it’s important to weigh your options carefully. Issues such as the appraisal amount and value discrepancy may help guide you toward the best solution for your commercial real estate dispute. For instance, since arbitration is reserved for properties valued at less than $5 million, owners with higher-value properties are excluded from that route. Property tax arbitration awards are final, however, so there is a risk associated with swaying the arbitrator in your favor. Litigation, meanwhile, is typically more time-consuming and costly. Even so, the outcome may be preferable to arbitration with the current real estate market.

Understanding Property Tax Arbitration
To qualify for binding arbitration, a commercial property owner must be in good standing with the IRS and have no overdue taxes. Being the more resolute option of the two, property tax arbitration filings and hearings follow a strict timeline. If both parties cannot agree on a valuation after the board hearing, there is a 45-day negotiation period where you or your team of property tax consultants will open negotiation with the appraisal district. The official arbitration hearing only takes place when the property tax is not settled during the negotiation period. Arbitrators have 20 days to review the hearing and make a final decision, and the final ruling comes down to the arbitrator’s judgment of evidence presented by the property owner and the county appraisal district. As far as finances are concerned, your protest filing and $50 administration fee must be paid within 60 days of receiving the final value from the ARB. Arbitration fees typically cost less than $2,000 and, aside from the administration fee, and are refundable depending on the case’s verdict.

Settling with Property Tax Litigation
Proper attention to deadlines is crucial for virtually every aspect of the protest process — litigation included. In Texas, lawsuits must be filed within 60 days of the ARB’s final order. The litigation process includes negotiations, court-ordered mediations, settlement conferences and a potential judicial ruling in the event of a trial. As such, litigation suits can take several years to resolve, and the expenses alone typically make it a residential property owner’s last resort. Commercial property owners often prefer litigation, however, because they’re more likely to reach a settlement without the risk of losing the entire appeal amount. Unlike arbitration, minimum valuation isn’t a requirement for litigation. Keep in mind litigation can be an expensive and tedious process, so you’ll want a team of property tax consultants to advise and represent you every step of the way.

Lane Property Tax Advocates fights to lower your commercial property taxes while acting in your best interest through litigation and arbitration (and every additional stage, too). Our team of tax experts will guide you through the process, collect evidence for your hearings and negotiations, help handle the associated fees and unburden your business from the stress of preparing the case yourself. Contact Lane and let us work toward achieving the right value for your commercial property.

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