Fighting For The Underdogs In Commercial Property Tax Appeals

Delinquency on commercial property taxes on the rise

On Behalf of | Nov 12, 2020 | Commercial Property Tax Appeals

Minnesota’s commercial property owners feel the tugs of a variety of taxmen. For the past 20 years, there has been a Minnesota property tax on commercial industrial and utility properties, though it generates only about 4 percent of the state’s tax collections. (At about 45 percent, individual income taxes are the biggest source of state collections.)

When you add state and local governments together, property taxes account for about 28 percent of tax revenues collected.

Growing property tax delinquency rate

Any which way you slice it, property taxes are a significant source of income for state and local governments, which makes a recent report about a surging delinquency rate on commercial property taxes compelling.

According to an analysis by Crain’s, New York City commercial properties (including offices, factories and retail spaces) had a 3.6 percent nonpayment rate in July, which rose to a 4 percent rate by Oct. 15.

Crain’s says property taxes are more than 40 percent of the New York City’s total tax revenues, and that real estate taxes account for more than half of that figure.

Comparing apples

On the other hand, in the Minneapolis mayor’s proposed budget last year, property taxes accounted for about 22 percent of total taxes collected by the city. So a Big Apple to Mini Apple comparison isn’t exactly apples to apples, but it is nonetheless instructive.

In both places, a drop in property tax collections could further strain pandemic-battered city budgets. And Minneapolis has an additional burden of civil disorder not equaled by any other U.S. city in 2020.

Looming property tax deadline

In NYC, property taxes on properties with an assessed value of more than $250,000 are due every January and July. So the upcoming New Year’s Day deadline will be carefully scrutinized to gauge the current health of its commercial property market.

According to an NYC real estate publication, normally, the Big Apple auctions off properties with commercial property taxes past-due for about three years, but in 2020, the tax lien sale has already been rescheduled three times because of the pandemic.

Avoiding foreclosures and sales

About 4 out of 5 property owners are spared the sale when they pay their tax bills, agree to a payment plan or qualify for an exemption. For those who don’t do one of those things, NYC sells the outstanding debt to a nonprofit trust, which can foreclose on the unpaid taxes and then sell the property.

This year, the sale of tax liens has been delayed until Dec. 3.

No one knows if that deadline will be pushed back again, just as no one yet knows the full extent of the pandemic on Minnesota’s commercial property owners or the fiscal fortunes of local governments dependent on commercial property taxes.