To Abate or Not To Abate- T’is The Question

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Explore the comprehensive process and procedures for handling property abatement applications in various real estate sectors, from residential to commercial and industrial properties. Learn how to address challenges and resolve issues effectively for optimal outcomes.

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To Abate or Not To Abate-Tis The Question Ellen M. Hutchinson, Esq.

PRELIMINARIES: Knowledge of your overlay account Knowledge of number of cases Number of new abatement applications and pending ATB cases Knowledge of legal budget If have one: How much? If not: How easy or difficult is it to get one?

Create Processes and Procedures Check jurisdictional information first Class Group 1 Group 2 Categorize abatement applications what works for you Residential SFR MFR Comm/Indust Small Not Small SFR and Multi-family residential Claimed Exempt Non Exempt Other Small Commercial and Industrial (< $1,500,000 assessment) Other Mid Range Commercial and Industrial (> $1,500,000-$10,000,000 assessment) Large Commercial and Industrial Other

Single Family Residental: Get to Root of Problem Problem with PRC? AA says what? Comparative Assessment? Lack of Understanding of Market? point here Inquire Educate and Communicate Resolve

Multi Family: Income and/or Sales Small MFR: 2-3-4 units Find Comp Sales Use Comp Sales Income and Rental Rates May Not Reflect Market. Don t rock the boat rental rates Adjust for differences Educate and Communicate Resolve

SMALL COMMERCIAL AND INDUSTRIAL: Who Signed the Abatement Application? Did the Applicant specify an estimate of FMV? Quick Hit Application? Esp. With Very Small Assessment Make Them Do The Work. Make Them Prove Overvalued. Small Commercial Infrequently Progress to Trial

SMALL COMMERCIAL AND INDUSTRIAL: Know Your Market; Know Your Sales Know Your Income Approach Parameters for That Sector Rental rates for industrial buildings vs. warehouse vs retail Vacancy Rates: Many small assessment bldgs are owner occupied Cap Rates One Size does not fit all!

MID RANGE COMMERCIAL AND INDUSTRIAL: Know Your Market; Know Your Sales Sale of Building vs. Sale of Guaranteed Income Stream Should Have Database of Rental Rates via Information Requests If No, Send Out Request For Income and Expense Data Critical Data: Rental Rates AND Dates of Lease Rental Rates w/o Date of Lease; Total Income w/o Rental Rates and Date of Lease---Not very helpful

MID RANGE COMMERCIAL AND INDUSTRIAL: Should be able to determine tight range of FMV to gauge legitimacy of application Can be difficult to settle at abatement stage Attorney may be willing to wait, stack cases; makes potential appraisal and trial more financially feasible Don t finance ATB appeal by granting abatement without waiver

LARGE COMMERCIAL AND INDUSTRIAL: Don t get in over your head! Will rarely settle at abatement application. Attorney will stack cases for multiple years; makes trial /appraiser more financially feasible. Want opportunity to get as much information as possible Use AA period to request information: rent rolls, profit and loss statements, Visit the property---information from a concentrated view Spend time with information: data will always tell a story You ll likely deny AA, especially if previous pending cases

LARGE COMMERCIAL AND INDUSTRIAL: After TP files at ATB: Go get more information Malls: 1000 pages of documents: tenant and lease histories; historical capex; occupancy data; occupancy cost ratios; historical tenant reimbursements for CAM and for Real Estate Taxes Request copy of any and all appraisals or estimates of value. For large cases---check on latest ATB decisions for that sector latest cap rate; rental rate; vacancy rate---good guides.

SETTLEMENT, MEDIATION OR TRIAL: TRY YOUR GOOD CASES; SETTLE YOUR BAD ONES Settlement: All about leverage. Willingness to go to trial (or appearance of such willingness); Willingness of Appellant to go to trial or lack thereof). What is your estimate of fmv and how does that compare to the assessment? What is the dollar difference between the parties? Settlement: know what your bottom line number is Settlement: Can you trade a higher number now for a lower number in a future fiscal year? Settlement: Too politically hot: Do you need the ATB to make the decision?

SETTLEMENT, MEDIATION OR TRIAL: MEDIATION: ATB mediation services Agree to Mediate: sends signal of GREAT willingness to settle. Can walk away; but difficult to do so.

THE DECISION TO GO TO TRIAL IS DIFFERENT FOR SMALL, MID RANGE OR LARGE CASE Small /Mid Range Cost factor is different Don t necessarily need an appraiser Length of trial shorter May not need court reporter Prep time is less Potential loss is less Can send a strong signal to other taxpayers in the city /town

THE DECISION TO GO TO TRIAL IS DIFFERENT FOR SMALL, MID RANGE OR LARGE CASE LARGE CASE Cost factor: Appraisal fee; appraiser testimony; legal costs, cort reporter Possible outcomes? Total victory? Big loss? Middle ground? Probability of likely outcomes. Abatement costs of outcomes; Interest costs ( with stacked cases and 1.5 -2 years for ATB findings)

THE DECISION TO TAKE AN APPEAL APPEALS ARE RARE EXPENSIVE! USUALLY NEVER FOR SMALL OR MID RANGE CASES THOUGH SOME SCREAM FOR APPEALS (SOLAR; YOUTH HOSTEL CASE) IDEA: ATB ERRED IN ITS DECISION. LEGAL ISSUES. APPEALING PARTY MUST CONVINCE APPEALS COURT OUTCOMES: ATB DECISION AFFIRMED; ATB DECISION IS VACATED WITH DECISION FOR ASSESSORS; ATB DECISION IS VACATED AND REMANDED BACK TO ATB