December 5, 2023

Have you ever felt the sting of that annual property tax bill and wondered if there’s a way to break free from seeing the amount go up year after year? Today, we’re addressing the real concerns that keep commercial property owners up at night. If you’ve ever looked at your property tax statement and thought, “There must be a way to bring this down,” you’re in the right place. Explore Texas Tax Code Section 25.25 – the key to challenging that sky-high appraisal and claiming the savings you may be missing.

Understanding the 25.25 Rule: A Strategic Tool for Appraisal Errors

The 25.25 rule provides a nuanced approach to addressing appraisal errors, allowing property owners to challenge and rectify discrepancies that may have gone unnoticed. This strategic correction ensures a more accurate reflection of the property’s market value, enhancing overall fairness in the property tax assessment process.

Imagine you own a commercial property, and upon reviewing your property tax assessment, you observe an overestimation in the appraised value by the local appraisal district. The assessed value is substantially higher than what you believe reflects the actual market value of your property. Typically, you can file a protest before May 15 or 30 days after the Notice of Appraised Value is issued, depending on local and state regulations. 

In case you missed the deadline, you can wait for next year to file your protest or use the section 25.25 of the Texas tax code, provided you meet these eligibility criteria:

• The commercial property owner must prove that the appraisal district’s error resulted in the subject property being overvalued by at least one-third (1/3).
• There should not have been a protest filed on the property in the same assessment year.
• The property is not delinquent on any taxes currently owed on the property.

These criteria form the basis for filing a motion under Section 25.25 of the Texas Property Tax Code, offering a strategic avenue to rectify substantial overestimations in the appraised value of the commercial property. If you want to discuss this alternative on a personal basis and explore how it specifically applies to your commercial property, consider reaching out to professionals. They can provide personalized insights and guidance tailored to your unique circumstances.

Navigating the Filing Process

Filing a motion under Section 25.25 is your direct route to ensuring a fair and accurate assessment of your commercial property. This straightforward process allows you to advocate for a just valuation and leverage the hidden financial potential within your property.

How to Apply for 25.25 Rule

Step 1: Gather Necessary Documentation

Collect all relevant documents supporting your claim. These documents may include recent property appraisals, market analyses and comparable sales data. A robust set of documentation strengthens your case and enhances the likelihood of a favorable outcome.

Step 2: Complete the Motion Form

Ensure all required fields are accurately filled out in your official motion form for Section 25.25, providing detailed information about the appraisal error and the correct market value. According to the Texas Comptroller of Public Accounts, “Market value is the price at which a property would transfer for cash or its equivalent under prevailing market conditions if it is offered for sale in the open market.” Precision in this step is critical to a smooth filing process.

Step 3: Submission to the Appraisal District

Submit your completed motion form and supporting documentation to the local appraisal district. This step officially initiates the review process.  This type of appeal can be filed any time before the current year’s taxes become delinquent: Feb. 1, following the assessment year. 

Step 4: Engage in the Review Process

Be prepared for a review process initiated by the appraisal district. They may seek additional information or clarification during this phase. Stay actively engaged, promptly providing any requested documentation.

Step 5: Resolution and Adjustment

Upon completion of the review, the appraisal district will communicate its decision. If your motion is successful, your property’s assessment will be adjusted to reflect the more accurate market value, ensuring fair treatment.

Criteria for Appraisal Error Correction

To better understand where errors may happen in the valuation process, let’s look at some common issues below.

Deciphering the Criteria: Identifying Appraisal Errors

Market Value Discrepancy: Most often, there may be a substantial difference between the appraised value assigned by the appraisal district and the actual market value of your commercial property. This discrepancy often results from oversights in property assessments.

Inaccurate Comparable Sales: Is your appraisal district’s assessment based on incorrect or outdated comparable sales data? Local real estate market changes can render previous comparisons irrelevant, leading to appraisal errors.

Neglect of Property Characteristics: Appraisal errors may also occur when the unique characteristics of your commercial property are overlooked. Elements such as location, accessibility or recent improvements can significantly impact its value.

Failure to Account for Depreciation: If the appraisal district fails to consider depreciation accurately, it can result in an inflated assessment. Commercial properties often undergo wear and tear, and an inaccurate assessment of depreciation can lead to appraisal errors.

Disregard for Market Trends: Changes in the commercial real estate market should be reflected in property assessments. Appraisal errors may arise if the Appraisal District neglects to account for current market trends, impacting the property’s true value.

Understanding and correcting these errors ensures a fair assessment and maximizes property tax benefits. Viewing appraisal errors as strategic opportunities can contribute to substantial savings in commercial real estate.

What is Correct Market Value?

How does the appraisal district determine this crucial figure? Understanding the process can be your strategic advantage in the commercial property tax game.

Decoding Correct Market Value: The Appraisal District’s Formula

Property Assessment Factors: The correct market value is determined based on a comprehensive evaluation of various factors. The appraisal district considers aspects such as location, size, condition and unique characteristics that contribute to the overall value of your commercial property.

Comparable Sales Analysis: A crucial element in establishing correct market value is the analysis of comparable sales in the local real estate market. The appraisal district examines recent property transactions in your area to gauge the fair market value of properties with similar attributes.

Income Approach: The appraisal district may employ the income approach for income-generating commercial properties. This approach involves assessing the property’s potential income, applying a capitalization rate and deriving a value reflective of its revenue-generating capacity.

Cost of Replacement: The cost of replacing or reproducing your commercial property is another factor in determining the correct market value, which considers the expenses of recreating a property with similar utility and functionality.

By understanding how the appraisal district determines your commercial property’s market value, you gain insights into the factors influencing your property’s assessed value. With this knowledge, you can navigate the Section 25.25d process more effectively, ensuring that your property is set relatively and accurately.

Seeking Professional Advice for Commercial Real Estate

Even the most seasoned commercial property owners recognize the value of seeking professional advice when navigating the complexities of property taxes. Wondering when it’s time to bring in the experts? Well, those who navigate property tax codes daily and have a proven track record of success can help. Understanding the intricacies of property tax laws requires a level of expertise that only comes with years of experience and a deep understanding of the ever-evolving landscape.  

When to Consider Professional Advice

Complex Appraisal Errors: If your commercial property’s appraisal errors are intricate or involve nuanced factors, seeking professional advice is essential. Property tax experts specializing in commercial real estate can dissect complex mistakes and formulate strategic solutions.

Legal and Regulatory Changes: Stay informed about legal or regulatory changes impacting commercial property taxation. Seeking professional advice during periods of legislative updates ensures your property remains compliant and optimized for potential 25.25 rule property tax savings.

Strategic Property Tax Planning: Professionals experienced in commercial property taxation can assist in developing strategic property tax planning initiatives. This includes correcting errors and implementing long-term strategies to minimize property tax liabilities and maximize savings.

Appeals and Litigations: When facing appeals or litigations related to property tax assessments, professionals bring a wealth of experience to the table. Their expertise in negotiation and legal proceedings can significantly influence the outcome in your favor.

Evolving Property Portfolio: If your commercial property portfolio is expanding or undergoing significant changes, seeking professional advice ensures the property tax implications are thoroughly assessed. Professionals can guide you in optimizing property tax positions amidst evolving property dynamics.

Experts with Proven Success

Choosing professionals who bring real-world experience and success to the table is crucial. Look for experts who have case studies demonstrating their ability to navigate complex property tax scenarios effectively just like the ones below:

1. A small retail strip center in Ellis County, TX, failed to appeal its 2019 property tax value after the appraised value doubled from the prior year. After contracting with PVS to represent the property, a 25.25(d) appeal was filed by PVS’ licensed Texas agents, who reduced the appraised value by over $400,000. This resulted in $ 9,000 in tax savings to the property owner.

1. A hotel in Harris County, TX, did not appeal their 2020 property tax value after the assessment increased instead of decreasing due to COVID-19. After engaging PVS, we used a 25.25(d) appeal to reduce the appraised value by over $400,000, which resulted in tax savings of over $11,000 to the hotel operator. 

These case studies are tangible evidence of expertise and the positive outcomes achieved for commercial property owners.

Elevate Your Property Tax Strategy with Property Valuation Services

As you navigate the complexities of Section 25.25d, Property Valuation Services stands ready as your trusted ally, leveraging its proven track record, seasoned leadership and 25 years of industry experience to ensure your commercial property meets compliance standards and excels as a strategic asset for substantial property tax reduction.

Why not engage an experienced firm to handle the process? We handle everything from filing the initial paperwork to preparing evidence and handling negotiations and hearings with the appraisal district.

Contact us and let PVS be your trusted partner in unlocking the full potential of Section 25.25d — ensuring that every appraisal error becomes a strategic opportunity for maximizing property tax savings.