As tumultuous as 2020 has been, 2021 may be even worse for many multifamily real estate owners and investors.
“Property owners need to be aware that in addition to taxes going up [in 2021], they can be sued by municipalities,” said David Wolfe, Esq. during CAPRE’s Multifamily Leadership Roundtable on Thursday, October 29, 2020. The virtual event featured speakers from across the country and every facet of the commercial real estate industry. Wolfe served as both moderator and panelist.
“Globally, property taxes are now at the C-suite level of concern,” he explained. As a co-managing partner for one of the nation’s leading property tax appeal practices, Wolfe has secured billions in assessment reductions for his clients. He provided investors with some key insights into the legal world of property tax appeals as part of the discussion.
“Too many of these deals are being bought on such thin margins, that a significant increase in property taxes is going to destroy your return,” said Wolfe. Conversely, a strategic reduction can significantly enhance investment returns and enable investors to execute on their investment theses.
With active cases in major markets throughout the U.S., Wolfe and the Tax team at Skoloff & Wolfe have a unique perspective into the coming legal threat for multifamily investors. In the past few years, they have seen a significant uptick in “increase cases”, lawsuits filed by a town or city to increase a taxpayer’s property tax assessment. Wolfe cautioned investors with dealings in Ohio, Texas, Pennsylvania, and New Jersey in particular.
From Newark to the North Shore of Hawaii, municipalities across the United States have begun rethinking how to account for lost revenues due to the pandemic. The year 2021 will mark the first tax year in which these towns and cities are forced to acknowledge COVID-19’s impact on land values.
Wolfe cautioned that real estate investors can no longer ignore the Purchase and Sale Agreement (PSA) provision relating to property taxes. “Too many times, I get into the deal and the client has no rights concerning their tax appeals,” Wolfe explained. This result leaves most deals dead in the water.
Founded in 2011, CapRate Events, LLC (CAPRE) is a digital media and events company specializing in property-specific conferences. CAPRE is the organizer of The National Data Center Summit Series, The National Healthcare Real Estate Series, The National Multifamily Investment Series and The New Jersey CRE Series for New York and New Jersey commercial real estate.
About David Wolfe, Esq.
David Wolfe, Esq. is co-managing partner of Skoloff & Wolfe, P.C., and is a nationally-recognized leader in the real estate tax litigation, due diligence, and analysis. Mr. Wolfe counsels corporate and individual taxpayers involved in complex civil litigation and property tax due diligence.