COVID-19, Property Taxes and Expense Relief

Our country and the commercial real estate market are facing unprecedented challenges related to the COVID-19 pandemic.

For owners, this includes tax burdens that will continue (or even increase), even though the commercial real estate industry is facing a challenging economy and tenants that may be struggling to meet payments.

This blog aims to explain the difficult conditions for commercial real estate owners in the current environment and offer solutions to address these challenges.

Valuation Date

In most U.S. jurisdictions, county or city appraisers/assessors establish the taxable value of commercial property as of January 1 of the valuation year. As U.S. government restrictions resulting from the coronavirus did not begin in earnest until March, many counties may take the position that changes in value as a result of the pandemic is an issue that should be dealt with next year. However, rent reductions, rent payment delays, non-payment of rents, tenants filing for bankruptcy, and co-tenancy will all cause the pandemic to be a THIS year problem for commercial property owners.

Real Estate Property Types and Locations

The type and location of real estate will also create different challenges as a result of the market disruption. CBRE Research estimates the assumed impact on the following industries:

• Hotels, accommodation and food services – 40%
• Retail trade – 29%
• Arts, entertainment, and recreation – 25%
• Transportation and warehousing – 25%
• Educational services – 20%

COVID-19 has not impacted real estate values evenly. Locations such as Las Vegas, Orlando, and Miami are hardest hit due to their large hospitality industries. Houston, Dallas, Chicago, Charlotte, and Detroit have also been impacted due to their transportation and energy industries.

Commercial property owners in these locations will be at the forefront of the fight to ensure that current property values are considered in light of the COVID-19 outbreak.

Appeal Deadlines

With appeal deadlines approaching in many states, commercial real estate owners will need to evaluate the assessed value of their properties considering the current environment. If an appeal is not filed prior to the deadline, owners will have lost the chance to appeal property values until the 2021 tax year. The following states and provinces have counties with upcoming appeal deadlines that commercial property owners need to be aware of:

• April – North Carolina, Arizona, Maryland, Ontario Canada, Oklahoma, Wisconsin, Iowa, and Quebec, Canada,
• May – Oklahoma, Virginia, North Carolina, Wisconsin, Texas, Alabama, Kentucky, Georgia, New York, Illinois, Michigan, New Mexico,
• June – Colorado, Tennessee, Wisconsin, Missouri, Indiana, Idaho, Alabama, Illinois, Georgia, Nebraska, Washington,
• July – Missouri, Vermont, Georgia, Washington State, Montana, Alabama, District of Columbia,
• August – Pennsylvania, Delaware, Georgia, Mississippi, Illinois, Louisiana, Arkansas, Washington
• September – Florida, Washington, Illinois, Utah, California,
• October – Rhode Island, Illinois, New York,
• November – California,
• December – Oregon.

Assessment/Valuation Appeals

Commercial property owners will need to be aggressive with appeal positions related to values that were set by counties based on January 1, 2020 data. This data will not include the effects of COVID-19 and as a result, values will be overstated and will need to be addressed by appeal.

Some counties are beginning to announce how they plan to address the impact of COVID-19 on real property values. For example, Cook County is planning to revalue all properties due to the outbreak.

Many states have statutory or rule provisions that address “events” or “disasters” that impact commercial real estate. It will be incumbent on the property owner and his/her advocate to persuade authorities to consider the realities they are currently facing.

All states have made a disaster declaration in accordance with FEMA, and the U.S. President has declared a nationwide emergency due to the COVID-19 pandemic. These declarations should help owners and their advocates persuade counties of the impact on commercial real estate values in 2020.