New Wrinkle In Miami-Dade Value Adjustment Board Hearings

Assessments standards in Florida include the requirement that values, for ad valorem purposes, should be unencumbered fee simple. Effectively, that means a hypothetical should be used, and the assumption should be that any building is considered vacant on January 1st, the assessment date. Then the question becomes: On January 1st, what would the property command if offered to the market, for lease or for sale?

So, what's going on at the Miami-Dade VAB?

At least one representative of the property appraiser is presenting occupational license information with evidence to support assessments of income producing properties.

What's wrong with that?

What's wrong is that unencumbered fee simple, or vacant, is the only way to create uniform assessments within and between similar properties throughout the county and, indeed, throughout the state. If the identify of the tenants becomes a factor - and tenants are not included anywhere in state standards - then the door to discrimination is opened.

For taxpayers with tenants perceived in any way to be superior might end up with higher assessments, therefore higher tax bills. And taxpayers with tenants perceived in any way to be inferior might end up with lower assessments, therefore lower tax bills. The disparities would mean a lack of uniformity in the tax rolls.

The quality of the tenant also implies taxation of the business. If the assessments are based upon who tenants are or what contract rent is, then leased fee values would be included in the valuation of real property. The definition of real property, in Chapter 192, Florida Statutes, does not include the value of leases, or the presence of any tenant.

Other material descriptions indicative of state standards clarify what should be assessed. Market rents should be applied, not contract rents. Market vacancy factors should be used, not actual vacancies. Even when absolute triple net leases are assumed, landlords always have some operating expenses - to manage the revenue, for reserves, and the costs of operating the entire property when market vacancy is assumed. And whether leased or sold, whether cost, income, comparable sales are used to determine the market prices or leases, in arms length transactions, ownership always is responsible for real estate taxes and there will be transaction costs.

SO, it does not matter who the tenant is. What matters, and is really critical for any VAB petitioners, is to know if the VAB special magistrates know and apply the unencumbered fee simple standard!