Auto Dealerships and B.C. Property Tax: Avoid Inaccurate Assessments

For most auto dealerships, property tax can represent a significant overhead expense. Are you paying more than your share? That depends on whether your property is accurately assessed.

Last year, the British Columbia Assessment Authority (BC Assessment) assessed over two million properties. With this volume of properties, an individual analysis of each property is not possible: instead, BC Assessment relies on mass appraisal methods to determine annual assessed values.

Auto dealerships are valued using the cost approach. In this approach, the assessor estimates the value of the land by comparing the market price of other similar parcels of land. The estimated replacement cost of the improvements less depreciation is added to the land value.

What this means for property owners is the assessed value may not reflect the specific characteristics of each property which can lead to inaccurate assessments - and you wind up paying more than your fair share of property taxes. The best way to prevent this is by beginning a review early and resolving issues before you receive your tax bill.

Some of the factors to consider are:

Physical Condition and Permitted Use

The B.C. Assessment Act requires that both physical condition and permitted use of a property are determined as of October 31. Property owners need to verify the property is only being assessed for what is on the property and is classified according to the use of the property as of October 31.

The assessed value of auto dealerships is primarily driven by the value of the land they occupy. With recent changes to many of the community plans in the Lower Mainland, a review of the permitted highest and best use of the land as of October 31 is critical.

The improvement costs and depreciation applied by the assessor must also be reviewed for accurate valuation.

Market Value

Reviewing the market value of the property is another key step to ensure the assessed value is reflective of the market value of comparable properties in similar areas.

BC Assessment assesses property values as of a July 1 valuation date. The assessment notice you will be receiving in January 2020 will be based on sales of similar properties that occurred around July 1, 2019. Work with your advisor to review market transactions throughout the year and determine when a property is assessed above market value. In these cases, a property tax specialist can present market evidence to the assessor and negotiate a reduction in value.

Equity

The primary purpose of an assessed value is to determine a property owner’s fair share of taxes. An independent equity review is used to ensure you are assessed fairly. Similar properties with similar characteristics should be assessed similarly. For property owners, this means they could see an assessment value that reflects the market value of their property but still be paying more than their fair share of taxes.

By reviewing the assessed value of a property and conducting an analysis of the assessed value of other comparable properties, you can ensure your property is equitably assessed. And that you are not paying more taxes than other comparable properties.

What’s Ahead

Property tax assessment reviews can be quite complex. To ensure you get the most accurate assessment, confer with a property tax specialist. They will conduct an in-depth review for each property at multiple times throughout the year to ensure you are being assessed fairly.

For more information, contact Inder Nijjar, Manager, Property Tax Services, at 604.536.7614 or [email protected].