Revaluation of properties - What to expect!

There are so many unanswered questions when it is learned that a major revaluation of properties is to be undertaken in a municipality. Immediately, several property owners have this unsettling concern…….when, how, what and why.

Simply defined, the valuation of properties is a programme undertaken by a municipality to appraise all real property within the taxing district to determine its full or fair value. It is, therefore, the necessary process of conducting data collection and market analysis to verify the value of all properties within a municipality for the purposes of fair distribution of the tax burden.

Over time, cities and towns continue to grow, and since an increase in population often translates into an increase in demand for housing and other municipal paid services such as schools, police, fire, waste disposal and other community related services, it is essential that property values be kept current to meet these exigencies.

Ideally, the revaluation of properties for rating purposes should be performed every five to 10 years depending on population explosion and community services provided. The market value of properties is determined by the activity in the real estate market and the general economy.

Basically, it is the government valuer’s job to research and analyse the values in a particular area or neighbourhood. In effect, the valuer does what you would do to determine the selling price when putting your property up for sale. The property valuer does not frivolously arrive at a rate. He has specific guidelines to follow. The factors that are examined for each property include but not limited to; location, size, quality of construction and zoning requirement if any.

The outcomes

A revaluation exercise, when completed, may result in an increase or decrease of individual assessment; it does not necessarily mean that all property values will increase. You may be saying “yeah you are right”, but remember, assessments are the only consideration used to determine the tax burden.

The tax burden is the amount the municipality must raise to operate the local government and support the many services that they provide. If the same amount is to be raised after the revaluation as the previous year and each assessment doubles, then the tax rate will be mainly be cut in half.

A lot of property owners have the notion that a revaluation exercise will definitely increase taxes. An answer to this question could either be a Yes or a No. Although revaluation will result in an increase of the various individual assessments, it does not necessarily mean property taxes will increase.

To illustrate, let’s assume the amount a municipality must raise from property taxes is GH¢ 18 million. The total of all assessments in that municipality is GH¢ 682 million. In this example, a municipality would have a tax rate (rate impost) of GH¢ 2.60 for each GH¢100 of assessed value/rateable value.

Amount budget from taxes / total assessment of properties = rate impost

GH¢ 18 million /GH¢ 682 million = 0.026 or GH¢ 2.60 per GH¢100 of assessed value

For example, a property with a true market value of GH¢ 386,900.00 and assessed value of GH¢ 245,500.00 would have its taxes calculated as follows:

Assessed value X rate impost = property rate

GH¢ 245,500 X 0.026 = GH¢ 6,383.00

An actual tax rate, however, cannot be determined with any certainty until the new assessments are filed and the budget of the municipality are determined or set.

Generally, taxpayers of most under-assessed properties before a revaluation will pay a greater share of the tax burden. Likewise, taxpayers of overvalued properties will pay a smaller share of the tax burden after revaluation.

Expectations

So what is expected of property owners in this regard? A prospective buyer would not be expected to purchase a property without first making a careful inspection.

Similarly, an individual needing an appraisal done expects that a well-thought-out inspection will be made before a value estimate of the property is reached.

Therefore, a fair and reasonable revaluation depends on the cooperation of taxpayers. I can tell you this much—property owners definitely have a stake in the outcome of the revaluation programme.

Internal inspections of the property especially require that residents, as well as corporate bodies, co-operate with property valuers. The legitimacy of market estimates depends on the collection of accurate data.

Any assistance a taxpayer can provide will aid greatly in the total data collection process. The municipality and the government valuers assisting in the programme should make every effort to cause taxpayers the least possible inconvenience.

Bear in mind that rating authorities tax as closely as possible to the market values. Consequently, you have the right to contest any new assessment, and if it results in a property rate reduction, you can request for a refund or apply the overpayment to the next property rate bill. The property record card or the assessment roll should be examined regularly to determine if a property has been over-assessed, and such over-assessment can be effectively challenged, since assessing authorities have been known to make mistakes for better or for worse.

However, there may be a certain number of taxpayers who are dissatisfied with the proposed assessment placed on their property. Ideally, the notice that includes the assessed value should explain the procedure for a personal informal hearing to review the proposed assessment.

A taxpayer planning to attend the review should be prepared to support any claims with respect to disagreement regarding the appraised value of the property. Examples of such support would be; recent sales or purchases of similar or comparable properties are a good indication of value.

Another approach to support your claim is the cost of recently constructed comparable building. The taxpayer may also want to verify such things as the square footage of the property, number of bathrooms, attached porches, decks and garages.

What can a taxpayer do if he is unsuccessful in having the valuation of his property revised as a result of attending the informal hearing? The taxpayer has the legal right to raise any objections to the rate assessment committee in that particular district or metropolis.

If upon hearing from the rate assessment committee the taxpayer is still unsatisfied by the outcome from the committee, the taxpayer can file his/her grievance to the higher courts in the land. Generally, if the above steps find a clear and significant disparity between the market and the assessed values, presentation of the facts to the assessor is likely to result in a reduction of the assessed value.

It is not easy work, but it is certainly worth your effort. However, if you feel that you cannot tackle this on your own, you should contact your local tax assessor, real estate agent or a property tax consultant for help. Do not sit helplessly watching your property rate bill rise year after year.

• The writer is a Tax Specialist of Auditel International (GH) Ltd. Member of AGI.

Writer’s email: auditelghana@gmail.com