Nancy Nix, the Butler County, Ohio Auditor, has released her summary of the outcome of the property tax revaluations for 2023 (released with the 2024 tax bills).  The report is linked here.

Some report highlights:

  • She explains that eight of the school districts are “below the 20-mil floor,” meaning that there is no tax relief in those school districts due to the “reduction factor” that otherwise automatically rolls back taxes in Ohio as valuations increase.  Those school districts are: Edgewood, Hamilton, Madison, Middletown, Monroe, New Miami, Ross, and Talawanda.
  • The median increase in valuations in Butler County was a whopping 37%.
  • The resulting net tax increases by district are enumerated (but not the valuation jumps alone) and range from a high of 28.41% in parts of the Talawanda school district and as low as 4.61% in parts of the Lakota School District.

This “tax year” is one for the record books.

 

 

On the home page of the web site of Hamilton County Auditor Brigid Kelly, she has a blog.  In today’s entry on that blog, is her final rundown of valuation increases in each neighborhood of Cincinnati and each other city, village and township in Hamilton County.  It also shows the net tax increase after the state statutory rollbacks are included.

That accounting is here.  For homeowners and real estate professionals, it is enlightening.  Here are some highlights:

  • The Cincinnati neighborhood with the greatest valuation increase is East Westwood at 84.12%.
  • The Cincinnati neighborhood with the smallest valuation increase is the Central Business District at 6.55% (the residential neighborhoods with the smallest increase are English Woods and Fay Apartments).
  • The overall increase throughout the City of Cincinnati is 26.65%.
  • In Hamilton County, the political subdivision with the greatest increase is Lincoln Heights at 69.23%.
  • In Hamilton County, the political subdivision with the smallest increase is Mariemont at 12.6%.
  • The overall increase throughout Hamilton County is 28.35%.

She also shares the impact of the Ohio property tax rollback, that automatically rolls back rates as valuations climb.

  • Inside the City of Cincinnati, while values climbed 26.65%, taxes levied increased “only” 16.05%, meaning the rate rolled back a net 10.6%.
  • In Hamilton County, the values jumped 28.35%, but taxes hiked only 11.74%, meaning the average rate rollback was 16.61%.

Great reading.  Enjoy!

If you need help with an Ohio or Kentucky property valuation challenge, or to learn more about the process, contact Chris Finney (513.943.6655) or Jessica Gibson (513.943.5677).

Now that new Auditor’s valuations are out in Hamilton, Butler, Clermont and Montgomery counties (as well as another 20-25 counties throughout Ohio), our firm is experiencing a record number of calls and emails on property tax valuation challenges.  We also have taught four seminars on the topic just in the past week to more than 200 participants.  Based upon our experience and questions raised in these seminars, here are some random thoughts, hopefully providing some wisdom on the topic:

  1. Most — if not all — of our calls and emails start with this line: “I am calling [writing] because the Auditor raised my valuation by xx% from last year.”  OK, that’s interesting and certainly may seem extreme, but (a) it is utterly the wrong starting point and (b) it is completely irrelevant to our analysis and that conducted by the Board of Revision.
  2. The reason this is entirely irrelevant is that (a) a property owner in 2024 (for their 2023 valuation) is entitled to have his property valued at fair market value as of January 1, 2023.  Fair market value is defined as “what a reasonable buyer would pay a reasonable seller, neither party being under undue duress or motivation.”  This is the same valuation formula in which buyers, sellers, lenders, Realtors and appraisers typically engage.  You are not entitled to a lower number because it was lower last year and (b) thus, comparing a newer (and possibly proper) valuation to an earlier incorrect valuation places the analysis in the wrong framework.  The question is not to compare to last year’s valuation.  Rather, the question is: Does your current valuation reflect the value of the property as of January 1, 2023 (the valuation date in question for challenges this year)?
  3. Property owners, including homeowners, are frequently lulled into a belief that they have a statutory right to a lower valuation than “fair market value” — that the Auditor or Board of Revision somehow look at valuation differently than those transactional parties.  This simply is not so.  So, getting the first tax bill at full fair market value can be a jolt.
  4. To my surprise, I received an email last year from a friend and former client who lives in Western Hills: “How could the Auditor think property values have increased 30% over the past three years?”  My response: “Maybe because the nation is experiencing an unprecedented housing boom and Cincinnati/Hamilton County are ground zero of the boom.”  His response: “I had no idea.”  My response: “Do you live under a mossy rock?  It’s been in the newspaper three times per week for the past three years.”  You really do need to be out of touch not to understand the aggressive housing market that has existed some the pandemic began.
  5. The previous blog entries I wrote indicating that tax rates would roll back nearly the same percentage as the average valuation increases turns out not to be accurate.  The rate rollback certainly is there, but it is smaller than I expected and it varies by property categories (commercial, agricultural and residential) and by taxing district — school district and city, village, and township.  Our quick analysis, for example, is that in the City of Cincinnati/Cincinnati Public Schools (the largest taxing district in southwest Ohio) valuation went up 26.65% and the rate rollback was slightly more than 10%, yielding an overall average tax hike of 16.05%.
  6. For many property owners, we are recommending that they not challenge their valuation.  Despite the sticker shock of all of this, most residential properties and certain commercial properties (such as apartment buildings and industrial/warehouse buildings) have in fact soared in value.  Remember, the Board of Revision can INCREASE a valuation as well as provide a REDUCTION, so be careful about asking them to take a close look at your valuation.
  7. This is so also because frequently, the cost of the proceeding (maybe $2,500 for a residential property and $10,000 for a commercial property) exceeds the available savings.  We recommend paying a small sum to an appraiser to get a preliminary valuation before deciding if you want to proceed further, comparing the 3-year savings (a “win” is guaranteed by law to last at least three years) to the out-of-pocket costs.
  8. Unless a recent sale is involved, we generally recommend against proceeding without an appraisal.  For recently arm’s length sales, the sale price is the proper valuation.
  9. When reacting to your new tax valuation, remember that this is a cumulative increase since the last revaluation three years ago.  If we had an average of 8.0% property valuation growth during those three years, the compounded valuation hike would be 25%, and 10% per year would be a 33% bump.  So, (to that fellow who lives under a mossy rick in Western Hills) it’s not hard to see how Auditors in southwest Ohio are seeing average increases of 30% to 40% over the triennial.

If you need help with an Ohio or Kentucky property valuation challenge, or to learn more about the process, contact Chris Finney (513.943.6655) or Jessica Gibson (513.943.5677).

A study by the Tax Foundation shows that Ohio ranks ninth among states in the nation for “Property Taxes Paid as a Percentage of Owner-Occupied Housing Value” for 2023.  Read the study here (click on table 33).

The top 10 and their rates as a percentage of Owner-Occupied Housing Value follow:

  1. New Jersey, 2.23%
  2. Illinois, 2.08%
  3. New Hampshire, 1.93%
  4. Vermont, 1.83%
  5. Connecticut, 1.79%
  6. Texas, 1.68%
  7. Nebraska, 1.63%
  8. Wisconsin, 1.61%
  9. Ohio, 1.59%
  10. Iowa, 1.52%

Many of our readers will note that their own residential property taxes range from 2.25% to 3.5%, and we believe the reason is that the urban areas of Ohio have greater-than-average property tax rates than many rural areas.

 

For both commercial properties as well as single family homes, owners have flooded us with inquiries about their notices from County Auditors in Hamilton, Butler, Clermont and Montgomery Counties as to new property valuations.  We can’t imagine the number of calls the County Auditors must be getting.

A few guideposts for you:

  • First, read this important blog entry that essentially tells you that the first 30% of the valuation increases in southwest Ohio will not result in an increase (or at least not a significant increase) in your actual tax bill.
  • Second, Auditor’s property valuation is not some magical number — for the January 2024 tax bill, it is to be the fair market value as of January 1, 2023.  Thus, if your property was worth more then than in the prior valuation period, you should expect a valuation increase — perhaps one even above average for all properties in the marketplace.  Some clients seem to think that since valuations were less than what they thought the property was actually worth in the past, the Auditor’s valuation process is supposed to yield a lower number.  Well, it’s not.
  • Third, if your property was purchased since the last triennial valuation date (January 1, 2020), the sale price likely will be reflected in the valuation.  As this blog entry addresses, a recent arm’s length sale essentially — and largely irrebuttably — IS the value by law.
  • Fourth, if your property falls in one of the gazelle categories of properties whose values have leaped ahead of the market — single family homes, warehouse and industrial properties, and apartment buildings — you should both celebrate your good fortune and expect a bigger tax bill as a result.
  • Fifth, on the flip side, if you are a victim of the weak office market or the mall or downtown retail market weaknesses, you should should see some tax relief in the January tax bills.
  • Sixth, gas prices are up, grocery prices are up, car prices are up.  You have not had a valuation increase in three years.  Wouldn’t you expect your tax bill would rise some, at least modestly?
  • Seventh, for both buyers and sellers in today’s market, the looming valuation increases create both a possible problem and an opportunity as to contractual tax prorations for sales between now and January when the new — very different — valuations come out.  Read here for more detail on this.
  • Eighth, remember, the Board of Revision process to challenge property valuations is a two-way street.  If your property truly is undervalued, you risk an increase.  Cautiously keep in mind the upward dynamics of the real estate market over the past three years.  You could wind up with an increased valuation as opposed to the sought reduction if you overplay your hand.
  • Finally, I had a client recently ask me “why would single family home valuations be increasing in Cincinnati?” and I swear he must live under a rock.  I responded, “haven’t you seen newspaper articles explaining that Cincinnati has had one of the hottest housing markets in the nation since the start of COVID?”  The response, “ummm, no.”  It is surprising since we deal with this every day, and to some extent it is just denial of the obvious fact that we are blessed in Cincinnati with a fantastic housing and commercial real estate market.  Enjoy it while it lasts!

If, after reading this and the prior blog entry on the new valuations coming out in January, you still have tax valuation questions, please contact me (513.943.6655) or another member of our tax team.  We are glad to help.

Our phones are ringing and email boxes are filling up at Finney Law Firm about notices from County Auditors throughout the state of Ohio about dramatic property tax valuation increases coming with the January 2024 tax bills.

Read this shocking paragraph from an article from Paula Christian at WCPO (Channel 9):

The [Ohio Department of Taxation] recommended a 43% increase in property values in Clermont County and 42% in Butler County. The updates will be reflected in 2024 tax bills, which are sent out early next year and will last for three years until reappraisal.

So, the natural reaction from property owners receiving such notices is that their tax bill (i.e., the amount of taxes they are obligated to pay) will rise a similar amount.  This is not true — not by a long shot — given the intricacies of Ohio property taxation.

How could that be?  We explain:

  • First, the County Auditors throughout Ohio are charged by statute with re-valuing properties in their County every three years (a “Triennial”).  The statutory duty is to value each parcel at its fair market value (in the case of new tax valuations coming in January of next year, that is a January 1, 2023 valuation).
  • In southwest Ohio, January of 2024 will see new valuations for each of Hamilton, Butler, Clermont and Montgomery Counties.  Warren County will have new valuations in January of 2025.
  • It is not the Auditor’s job to show mercy, or to “shade” the fact that the real estate market has changed dramatically since the prior 3-year valuation date (in the case of Counties having new valuation in January of 2024, that would be a January 1, 2020 valuation as a comparison).  They are obligated by statute to value properties fairly (i.e., what a reasonable buyer would pay a reasonable seller for that property).
  • Your property taxes are, very roughly, a result of this formula:

(Tax Valuation * Tax rate) – certain credits = tax bill.

  • Thus, it is natural to assume that to the same degree your valuation rises, so does your tax bill.
  • However, it is much more complicated than that.
    • About 10% of your tax bill is inside millage which does stay at the same tax rate (i.e., it does generate more revenue in direct proportion to your increasing valuation).  But that is a very small part of your tax bill.
    • About 90% of your tax bill is outside millage, which is a result of tax levies that year after year generate a fixed amount of revenue for the levy recipients (depending on the district, schools are about 55-70% of your tax bill).  For example, a specific levy passed by the voters years ago may generate a fixed $40,000,000 in taxes each year (regardless of inflation or valuation increases).
    • That means that for the great majority of your Ohio tax bill, as the valuations increase, the rate rolls back, generating the roughly same revenue for the levy recipient overall each and every year.
    • Therefore, if your property has a lower-than-average valuation increase, the outside millage portion of your tax bill will actually decrease.  To the extent that your increase is merely average for that taxing district, the outside millage portion stays the same.  And to the extent that your valuation increase is more than average, the outside millage portion of your taxes will rise, but only to the extent of that excess increase.
    • Remember the last school levy campaign where the pro-levy advocates told you that “taxes don’t keep pace with inflation”?  Well, as a result of the formula set forth above, that’s actually true.

Do remember that when you get a changed value, that’s the first change in three years, so the increase reflects that entire Triennial period (i.e., 8% per year compounded would exceed a 25% valuation increase over three years).

Also keep in mind that certain categories of real estate have in fact seen dramatic changes since three years ago.  Indeed, our region has seen much greater-than-average appreciation than the rest of the nation for single family homes: “Cincinnati has seen the highest percentage of home-sale price increases in the country over the last year.”    As a result, our view is that property values in certain categories of real estate have skyrocketed in the past few years, especially single family residential and apartments, as well as warehouse and industrial properties.  Office properties, especially downtown, may have seen a decrease in valuation.  County Auditors simply are required by state law — as overseen by the State Department of Taxation — to recognize the full measure of those increases in their triennial valuation work. They have no choice.

Chicken Little cries from taxpayers that “the sky is falling” as a result of these properly-recognized valuation hikes are vastly over-stated.  For most taxpayers, the increase in their tax actually paid will be less than the inflation over that Triennial cycle.

By the way, two of the primary bases we see clients try to raise against the valuation increases of their properties are simply not valid in Ohio:

  • “My property could not have risen in value by this amount.”  While that statement well could be true, the Auditor may have undervalued your property in prior years, resulting in an above-market hike.
  • “The Auditor has valued four similar houses on my street lower than my valuation.”  As entirely unfair as it may seem, the value the Auditor places on another property — as similar in location, size, age and other characteristics as it may be — is irrelevant as a matter of law.  What is relevant are sales of similar properties (which is different than the Auditor’s opinion as to values).

This all leads to a significant caution for those desiring to charge into the Board of Revision and challenge the value of their property: The Board can raise your property value even more if the then-current valuation does not reflect market.  Proceed with great caution.

If you have questions about your new tax valuation, please call the professionals at the Finney Law Firm.  We can answer your questions as well as challenge any valuation that exceeds fair market value of your property.  Contact Jessica Gibson (513.943.5677) or Chris Finney (513.943.6655) to help with that assignment.

 

The purchaser of an apartment building Clermont County and his counsel are learning the lessons of real property taxes — and the ways to handle tax prorations —  the hard way.  Because neither the seller nor his attorney thought through the transaction carefully, the purchaser (a) lost $682,000 in tax proration negotiations and (b) has suffered what appears to be an entirely unnecessary increase in the same amount in his annual real estate taxes, essentially forever.

How can outcomes between savvy and clumsy real estate transactional work vary so dramatically?

Underlying facts

On December 28, 2021, RS Fairways, LLC closed on the purchase of Fairways at Royal Oaks, an apartment complex in Pierce Township on Clermont County for $32,600,000.  The Auditor’s valuation at the time of the sale was $6,622,000.  The difference between the sale price and the Auditor’s valuation was $25,977,700, a whopping 500% increase.

Following the sale, our former Associate, Brian Shrive — who now heads the civil division of the Clermont County Prosecutor’s office — on behalf of the Prosecutor, saw the conveyance fee form filed with the deed reporting the whopping sale price-compared-to-Auditor’s-valuation and filed \a Board of Revision Complaint to increase the valuation — retroactively to January 1, 2021 — to the sales price.

Almost inexorably, the Board of Revision would have so increased the value, so the owner, the Prosecutor and the School Board later entered into a Stipulation as to the new valuation at $32,600,000.

Tax proration language

As we have written about here (just one month before this buyer closed; he should have read our blog!), standard tax proration language in use in the Cincinnati area calls for a tax proration to be based upon the most recent available tax duplicate.  Since the Auditor and School Board will not know about the sale until after the deed is recorded, current taxes can’t possibly be based upon the sale price.  Here, the Auditor obviously had a grossly outdated and inaccurate valuation.

In other words, standard and customary contract language in use in greater Cincinnati simply does not adequately protect the purchaser in a situation where it is paying much higher than the Auditor’s present valuation.

The Contract in question provided:

If the 2021 tax bill is not available as of the Closing Date, then the proration described in clause (b) above shall be based on the 2020 tax bill for the property.

Why do we prorate taxes in Ohio?  Taxes in Ohio are paid “six months in arrears at the end of the period.”  What does that mean?

It means that the first half 2021 tax bill is issued in January of 2022 and the second half 2021 tax bill is issued in July of 2022.  Therefore as of the date of closing (here, the end of December 2021), the seller owned the property for all of 2021, but hadn’t paid the taxes for 2021.  Therefore, at closing (under local contract form and custom) the seller prorates to the buyer the taxes for the period it had owned the property, but at existing tax and valuation rates.

The dual problems are: (i) if there is a change in the tax rate for 2021 (such as with the passage of a school or other levy), the proration will be wrong as to the 2021 rate and (b) if there is a change in the tax valuation in the normal triennial cycle, the valuation (and thus the taxes) will change, and, here’s the kicker, (c) well after the closing, a school board or the County Prosecutor have the right to ask the Board of Revision to retroactively, back to the beginning of the prior tax year, change the valuation to a reported sales price.

And, as Casey Jones of our office blogged here, a recent arm’s length sale is uncontestably the valuation for tax purposes.

Thus, under the law, a purchaser is liable for taxes calculated at the tax amount for the taxes for the periods from the date prior to the sale (based upon the next tax bill to be issued) and into the future.  And this new tax rate calculates in “unknowns” at the time of the closing, which are a change in rate and a change in valuation.  Both of these can be both assessed, and as to the valuation, can be contested and litigated, well after the sale, but the retroactive liability for those taxes falls on the new property owner.

“Forever” increase in taxes

The tax proration flub — a $682,000 mistake — was bad enough, but worse is that the reported sale will result in a new baseline valuation for future taxes of $32,600,000 for a property that previously was valued and taxed at just $6.2 million.  Every three years the County will start with the $32 million number and make (likely) increases from there, so this owner will have $700,000 in higher taxes (than likely he anticipated) forever.

Could the massive increase have been prevented?

Two fairly sophisticated legal techniques could have been employed by this purchaser to avoid these massive “surprise” tax bills.  One would have spared them the cost of the under-proration, and the second could have resulted in a permanent savings — tens of millions to the purchaser’s bottom line.  They employed neither.

First, when a purchaser pays an amount significantly above Auditor’s valuation for property (this is a simple task of comparing the sale price to Auditor’s valuation [a quick on-line check]) before the contract is negotiated and signed, a purchaser will want the tax proration language to include a re-proration after the final taxes for the year prorated are known.  [By the way, when we get into an environment of declining values, the inverse rules as to tax proration can apply — the purchaser will have an advantage in the proration process — an over-proration —  if the contract language is not modified.]

Second, a technique is available in Ohio (but not Kentucky) to have the seller first transfer the property into an LLC that he owns exclusively (by deed, but with an “exempt conveyance fee form,” so that no sales price is reported) and then, at the closing between seller and purchaser, the seller transfers his interest in the LLC to the purchaser — and thus there is no recorded deed.  These transfers are referred to as “drop and swaps” or “entity transfers.”  In this situation — with some possible exceptions, the Auditor and school board are not put on notice of the sale or the sale price, and thus the increase in value could slip by unnoticed.

Here, the purchaser employed neither technique resulting in a bad proration and “forever” tax liability.

Ensuing litigation

Despite terrible tax proration language that we see as “fatal” to the purchaser’s claims (see above, they agreed to base the proration on the 2020 tax bill, period), the purchaser has sued the seller for a re-proration based upon the post-closing tax “surprise.”  Good luck with that.  See the Complaint here.

Conclusion

Smart advance legal planning by a purchaser or seller can dramatically change the outcome as to taxes in a real estate transaction.  Contact Isaac T. Heintz (513.943.6654) or Eli Krafte-Jacobs (513-797-2853) for assistance on your real estate transactions to avoid these disastrous outcomes.

Most property owners recognize that the real estate taxes they pay are directly tied to the county auditor’s assessed value of their property. What most do not understand, however, is how those values are determined. In short, auditors in Ohio are tasked with reappraising all real estate in the county ever six years, with “updates” every three years. R.C. 5715.24.

As one might imagine, this is not an easy task, especially in more populous counties. Auditors use a variety of methods and technologies to assist them with appraising and updating the values in their counties. One of the most common and most accurate methods utilized is an examination of recent sales. This does not refer to recent sales in the area (i.e., comparable sales or “comps”)—that is a different method—but, rather, a sale of the actual subject property.

In Ohio, a recent sale of the subject property is “rebuttably presumed to be the true value and represents the best evidence of true value.” Amherst Marketplace Station, LLC v. Lorain Cty. Bd. of Revision, 2021-Ohio-3866, ¶ 10 (emphasis added), citing Terraza 8, L.L.C. v. Franklin Cty. Bd. of Revision, 150 Ohio St.3d 527, 535 (2017). See also R.C. 5713.03. In other words, “[t]he use of a recent arm’s-length sale price is [] the favored means of determining value for purposes of taxation.” Amherst, at ¶ 10. However, this presumption is subject to rebuttal via evidence that the sale was either (a) not at arm’s length or (b) not recent. Id.

What is an “arm’s length” transaction?

For purposes of R.C. 5713.03, an “arm’s length sale” is “a voluntary sale without compulsion or duress, that generally takes place in an open market where the parties act in their own self-interest.” Buck Warehouses, Inc. v. Bd. of Revision, 2d Dist. Montgomery No. 2007-Ohio-2132, ¶ 13, citing Walters v. Knox City Bd. of Revision, 47 Ohio St.3d 23, 25 (1989). Put simply, the inquiry is: What would a willing buyer pay to an unrelated, willing seller for this property on the open market? Of course, the presumption makes sense in this context—obviously, a buyer would pay what a buyer did pay.

What is considered a “recent” sale?

The recency question is a bit more complex. The Ohio Supreme Court appears to say that courts (or taxing authorities) are not “compelled” to presume the recency of a sale that occurs more than 24 months before the tax lien date. See generally Akron City Sch. Dist. Bd. of Educ. v. Summit County Bd. of Revision, 139 Ohio St. 3d 92 (2014). The “tax lien date” is most easily understood as January 1 of the tax year in question. While the Akron case appears to set a “bright-line rule” as to how recent a sale must be in order to be afforded the true value presumption, the Court qualified it by saying that recency should not be presumed relative to a sale that occurred more than 24 months before the tax lien date, “when a different value has been determined for that lien date as part of the six-year reappraisal.” So, if the auditor determines that a value other than the sale price applies, then that sale price (more than 24 months old) cannot be used to create a presumption of the true value of the property.

Regardless of whether a prior sale is sufficiently recent to trigger a presumption as to the value of the property, even older sales are important to the determination of the true value. The Ohio Supreme Court has held that, even where sales are too remote to be afforded a presumption of value, they are “some indication of true value” and “should [be] taken into account.” Dublin-Sawmill Properties v. Franklin County Bd. of Revision, 67 Ohio St. 3d 575, 576-77 (1993) (emphasis added). Similarly, the First District Court of Appeals has held that taxing authorities act appropriately in “considering evidence of [a] sale . . . in making [their] determination of value” even where the sale was not sufficiently recent to create a presumption of value. Othman v. Bd. of Educ., 1st Dist. Hamilton Nos. C-160878, C-170187, 2017-Ohio-9115, ¶ 22.

What does all of this mean for property owners?

Practically speaking, this body of law affects the average property owner in two ways: (1) preparing for a potential increase in property taxes relative to recently purchased property, and (2) knowing the available options relative to tax appeals.

The first scenario is perhaps most common in the current, booming real estate market. Consider the following:

You purchased a home in May 2019 for a purchase price of $350,000.00. The county auditor’s assessed value of the home was $180,000.00 as of the date you purchased. In 2020, the auditor increases your value to $350,000.00.

(Side Note: Many homeowners are pleased when the auditor increases the value of their home because they think it corroborates the investment they made and demonstrates that they now own a more valuable piece of property. While this makes sense, it is also important to consider that this value is what sets the amount of property taxes for which the owner will be responsible. In short, the higher the value, the higher the taxes.)

In the above example, your property taxes will nearly double if the auditor catches the sale and adjusts the value to the sales price. This is not inherently unfair. Notwithstanding the rising sale prices, that is what you paid for the property so you must have thought it was worth that. But it is important that buyers are aware of this near inevitability, go into the transaction with eyes open, and have the means to properly deal with its implications.

The second scenario will likely be less common with the recent passing of HB 126 (significantly restricting school districts’ ability to file tax complaints seeking an increase in the value and, thus, taxes paid by property owners in their districts).

Your property is and has been valued between $430,000.00 and $450,000.00 from 2008-2018. You bought the property on the open market for $515,000.00 in 2018. In 2019, you receive a notice in the mail that the value is being increased to $515,000.00 (to match the sale price). Three years later (in 2022), you receive a similar notice increasing the value to $800,000.00. You haven’t made any material improvements to the property. What are your options?

Here, this is an arm’s length transaction. However, you purchased the property nearly three years prior to the “tax lien date” (Remember: 2022 tax bills relate to Tax Year 2021, so the “tax lien date” is 1/1/2021). Under the precedent set in the Akron case, you aren’t entitled to a presumption of value based on the sales price. However, the sale price is some evidence of value that any reviewing authority should take into account. These considerations are important in deciding whether to file a Complaint with the Board of Revision to challenge your value.

Our firm’s experienced attorneys represent real estate investors, property owners, and tax payers relative to these issues and can help you navigate the best option(s) for your individual circumstance, including advising as to whether and when you should challenge your property values and formulating a strategy to give you the best possible chance of success. We’d love to work with you.

Pursuant to R.C. 5713.20(A), “[i]f the county auditor discovers that any building, structure, or tract of land or any lot or part of either, has been omitted from the list of real property, the auditor shall add it to the list[.]” This “omitted property” includes property that was incorrectly, though in earnest, subjected to an exemption. However, it does not stop there.

The auditor is also required to compute and assess the taxes for preceding years during which the property was incorrectly omitted or exempted, up to five years, unless the property was transferred in the meantime. For purposes of this provision, “in the meantime” means before the omitted tax is actually assessed. If the property was transferred, the assessment can only relate to the time period after the transfer – i.e., the new owner will not be responsible for omitted taxes that would have accrued prior to its ownership. This should encourage a new or prospective owner to evaluate whether and how the property is taxed, make sure any exemptions, indeed, apply or that such use will continue, and otherwise prepare themselves for the likelihood of an increased tax.

As for property taxes accrued prior to a transfer of ownership, these are typically prorated at the closing (as for arm’s length transactions for value). But what happens if there is no closing?

Consider the following scenario:

Father owns property that has, for years, been subject to a property tax exemption. Father is ill and wants to avoid probate upon his death, so he executes a Transfer on Death (“TOD”) Affidavit, which will allow the property to transfer to Daughter without the need to open an estate. Upon Father’s Death, the property transfers to Daughter. However, unbeknownst to Daughter (and, perhaps, even unbeknownst to Father), an “omitted tax” was assessed two weeks before Father’s death and, thus, prior to the point in time that the property actually transferred to her.

The omitted tax was assessed because the auditor found that the property was improperly exempted or the exemption no longer applied for tax years preceding Father’s death. Because the omitted tax was assessed prior to the actual transfer of the property (remember, it did not transfer until the time of Father’s death), the “unless in the meantime the property has changed ownership” exception to R.C. 5713.20 does not apply. However, property tax assessments “run with the property,” meaning that Daughter is now responsible for, essentially, paying back up to five years’ worth of tax savings that Father realized as the result of the improper exemption (through no fault of his own), even though Daughter had no vested interest in the property during the period for which the exemption was in effect. If Daughter does not pay the omitted tax, she risks tax liens and/or foreclosure of the property. These omitted taxes can pretty quickly add up to tens of thousands of dollars, even before non-payment penalties.

In the case of an omitted tax, timing is of the utmost importance – e.g., when the omitted tax was assessed relative to when the property changed ownership. This may seem like a one-off case or unlikely occurrence. However, TOD affidavits are becoming an increasingly popular method of avoiding probate and, often, the TOD beneficiaries take little interest in the property until such time as it is to transfer to them. The lesson: be vigilant. The county auditors’ websites publish information relating to tax assessments and payments. The knowledge of whether a property in which you may, at some future time, have an interest is literally a few mouse clicks away. And if you need help, we have attorneys who are familiar with these issues relative to each of the tax, real estate, and probate implications who can assist you.

Until now, School Districts in Ohio were fully empowered to participate in legal proceedings to oppose the lowering of Auditor’s property tax valuations and to seek increases in property tax valuations.  No more.

As we explain here, the Ohio House and Senate in the past few weeks passed legislation that upends the current equilibrium among County Auditors, property owners and school boards, to tilt matters decidedly in favor of property owners. (In fairness, Ohio had granted school boards a far greater role in the process than most other states.)

Today, Governor DeWine signed that bill, Am. Sub. H.B. 126, into law.  Read the summary of the legislation here.  The Cleveland Plain Dealer covers today’s events here.

For assistance with property tax valuation matters, please contact Chris Finney (513.943.6655) or Casey Jones (513.943.5673).

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