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July 27, 2009

Weighing abatements | Plummeting property values spur property tax adjustments. Here's what you need to know.

By Charles Katz-leavy

Maine Real Estate Information System Inc. reported that the median sales price for a single-family home in Maine in April 2009 was $160,000, approximately 10.21% lower than in April 2008. This was an improvement over the prior month in which the median price for a single-family home was $150,000, a 19.89% decline from March of the prior year. As property values have fallen, many property owners are wondering whether to seek an abatement of their property taxes.

The Maine Constitution requires that property taxes be assessed on just value and fairness. Just value has been interpreted as fair market value, determined by looking at the sale price of comparable properties in the area, the income the property could generate and the cost of rebuilding or replacing the property.

Under Maine law, the assessor must consider all relevant factors in making a determination of just value, including alternative uses for the particular piece of land. The assessor also must take into account any enforceable land-use restrictions, current use, physical depreciation and functional and economic obsolescence.

A property owner has two avenues for challenging an assessment. He or she can challenge the determination of value or the fairness of the assessment in relation to comparable properties in the area. If value is challenged, the property owner must show that the assessor used an unacceptable method to determine market value or made an error in computation. If the fairness is challenged, the property owner must demonstrate that the property has been valued higher than comparable properties.

If a taxpayer wants to seek a property tax abatement, there is an informal and a formal process: 

Informal process

  • A property owner who believes his or her real property is overvalued should begin by reviewing the data specific to the property at issue, including any assessments done in connection with recent sales. The owner should then compare the valuation with that of like property. Where real property is at issue, a comparison with neighborhood properties should be conducted. This information can be obtained from valuation books, which are public records and available for inspection at the tax assessor’s office or, in many communities, online.

  • If the property owner finds that the tax on his property is significantly higher, he should make an appointment to review the findings with an assessor. Town assessors we interviewed indicated that they would consider granting an abatement of property tax for the future fiscal year only in circumstances where the difference was “compelling” or larger than 10%. According to the assessors, the fact that a difference in value exists is not itself sufficient to qualify for property tax abatement. 

  • Assessors will review a request with the individual property owner, if time allows. If the request is denied during the informal process, however, no formal appeal process exists. Instead, the property owner will likely have to wait until the next commitment date, at which time a formal request can be submitted.

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    Formal process

    • The formal process should begin in much the same manner as the informal — with a review of the property-specific data and that of like property to determine whether there is a notable difference in valuation. If this has already been done during the informal process, the property owner may proceed directly to filing for abatement. Filing consists of completing the formal application, often available on a town’s website, and should be accompanied with information about the property at issue and evidence of overvaluation. The formal process must be started within 185 days of the date of commitment, which is the date the tax was committed to the tax collector (usually right before the tax bill is mailed).

  • If the property owner’s application was denied during the informal process, the assessor may not take long to make a determination. Once a decision is made, the assessor is required to mail the requesting party notice within 10 days. If the property owner receives no notice within 60 days of filing, the application is deemed denied.

  • The property owner whose application is denied may appeal the decision. An appeal can be filed with a municipality’s board of assessment review, or, if there’s none, with the county commissioner within the same 60-day timeframe.

  • The reviewing body may either make a decision or fail to make one within 60 days after an appeal is filed, in which case the appeal is deemed denied. Although there is no statutory right to a hearing, the assessors we spoke with said the reviewing board will usually schedule a hearing, at which time the property owner and the assessor will present their arguments. If the reviewing body denies the property owner’s appeal, a further appeal can be filed with the Maine Superior Court within 30 days of the decision.

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    Riikka Morrill, a summer associate at Verrill Dana, contributed to this report

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