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Last Call: 2016 Property Taxes, Newfoundland

You have just 9 days left to reduce your property tax burden for 2016.  The appeal period expires at midnight 4th November.  A successful appeal now is a gift that keeps on giving . . . since this is the first year of the tri-annual re-assessment cycle, the reduction in your assessment will continue through three full years.

If you own commercial, industrial or investment property, real estate taxes are undoubtedly your single biggest occupancy expense.  In just over a 20 year period most property owners will pay taxes equivalent to the entire value of their property.  Irrespective of whether you pay the taxes directly or recharge them to your tenants, property taxes have a direct impact on your bottom line since tenants will ultimately seek rent relief if their gross rent, including taxes, falls out of line with competing properties.  Be proactive.  Property taxes should be managed like any other expense and effective property tax management requires a solid understanding of the assessment process.

The basis for your Year 2016 assessed value, is your property’s Market Value on 1st January 2014 (the “base date”) but having regard to its physical state on 1st December 2015 (the “state date”).  In practice these criteria are often cited by the Municipal Assessment Agency and other assessment authorities in defence of their assessed values, but in our experience property is often assessed at less than Market Value to discourage appeals.  Of course it would not matter if all property were under-assessed by the same percentage amount since the tax load would still be distributed equitably:  but such is not the case.  Fortunately the Assessment Act does provide protection against such shenanigans by including a requirement that all properties in each municipality be assessed in a uniform manner … so like properties should carry similar assessments.  In practice it is not quite this simple:  you have to compare the sum of all commercial assessments in the municipality with their aggregate market value … a herculean task unless you have access to the Municipal Assessment Agency’s database.  Since they are unlikely to be that generous we have compiled our own database to assist you.  We can also run a variety of analyses comparing your property’s assessment with others in its peer group.

If you own a property, the design or layout of which, is constructed of special materials or in a manner which restricts its use, your real estate will have been designated as a “special purpose property”.  The 2016 assessment notices for this type of property were not mailed on 5th November 2015; the Municipal Assessment Agency is once again waiting for the Legislature to define “special purpose property”.  The latter’s previous attempt was struck down by the courts as being too vague, and their subsequent decision to instead identify them by address was rejected as being arbitrary.  Since the exercise is akin to the parable of the blind man and the elephant, an early resolution may be some time in coming.  However because the Assessment of a Special Purpose Property is based on its Reproduction Cost (less physical depreciation) rather than Market Value the charade lacks levity to property owners so blessed. 

The Bottom Line:  You should appeal if your property is assessed at more than, (1) its Market Value on 1st January 2014, or (2) the assessment of other, comparable properties … or if you harbour any doubt that your property is over-assessed.

Action Required:  None, if your property is enrolled in our PAMS® Property Tax Manager program.  If it is not and you file an appeal, be careful not to restrict your grounds of appeal.  We recommend that you use the following wording: “The assessment is excessive, unfair, not uniform with other assessments, and any other grounds that may appear.  Praise the Lord and pass the ammunition.”  If you prefer we will file the appeal for you.  If you would like advice on whether to appeal, call our Newfoundland Tax Team, André Pouliot or Mark Turner at (709) 722-1811 (St. John’s) or 1-800-567-3033 (toll free) and pick their brains.

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