The COVID-19 pandemic has impacted our lives and businesses in ways we never envisioned. The real estate market has certainly not been spared. Office space, hotels, restaurants and retail establishments have been particularly hard hit. Demand for office space is likely to decline given our adaptation to working at home. As of July 30th, the American Hotel and Lodging Association reported that more than half of hotel rooms were empty across the country with many hotels being completely closed.1 Many of our favorite restaurants and retail establishments have also been forced to close during the pandemic. All of this is likely to affect real estate values for years to come.
Starting in January, property owners will have the option to file complaints with their county boards of revision seeking to lower the county auditor’s value assigned to their properties (and their tax bills). We anticipate that many property owner’s will take advantage of this opportunity. However, their complaints may be premature. That is because real estate taxes are paid one year in arrears. Thus, any complaint filed next year is for valuation during the 2020 tax year. By law, boards of revision must establish value next year as of January 1, 2020. As of that date, the COVID-19 pandemic had not greatly impacted our lives or the real estate market. Nonetheless, many property owners will not realize this distinction and will file anyway.
County boards of revision understand and appreciate this aspect of the law. However, the individuals who sit on those boards, which sometimes include elected officials, are often empathetic toward property owners who face significant challenges with their commercial businesses or properties. For that reason, it is not uncommon for boards of revision to grant relief even though they technically should not do so under law. They are easily able to do so when property owners are unopposed.
Faced with similar issues during the great recession, the Ohio Board of Tax Appeals made it clear that general references to decreased real estate values will not be enough to sustain a reduction in property value. In Price v. Summit County Board of Revision, 2012 WL 440783 (February 7, 2012), a property owner sought to reduce the value of his properties due to the recession and foreclosure crisis. The BTA rejected his request because it “has consistently rejected the notion that real property values must necessarily rise or fall commensurate with some preconceived notion of ‘historical trending’ or inflationary/deflationary rates.”
To help ensure county boards of revision uphold the law, school districts are advised to strongly consider filing counter-complaints against requests for reduction that appear unwarranted. Under R.C. 5715.19, boards of education are entitled to notice of all valuation complaints that seek to decrease the value of real property by $50,000 or more. Boards of education have the option to file counter-complaints contesting those decrease requests within 30 days of receipt of that notification.
What this means for your district?
Decreases in value through the county board of revision process directly impact the tax revenue received by school districts. Any decrease in valuation will result in a refund issued to the property owner. Those refunds are directly taken from school funding via the county treasurer settlement statements. We anticipate that school districts will face many decrease complaints next year, some of which are sure to be unwarranted. Ennis Britton attorneys can help school districts determine when it is appropriate to file counter-complaints to contest unwarranted decrease complaints to help maintain the tax valuation of the district.