BCBusiness

Due Diligence is Essential as Property Assessments Fluctuate Commercial taxes expected to increase upwards of 35 per cent A s commercial property valua- tions climb, small business tenants may face an increased property tax bill that has been passed on by their landlord. They have the option of either relocating or struggling to afford rent in the city's eclectic and premium shopping districts such as Robson Street, South Granville and Kitsi- lano's Fourth Avenue. Warren Smithies, senior vice- president at Martello Property Services, sees rsthand the impact of these assessments. "Primarily, taxes are borne by tenants because of triple net leases [for which tenants pay expenses and taxes], so there have been a lot of issues where tenants are forced to move out because of high taxa- tion levels that are being passed on when a property is rezoned or when there is a new community plan in place," he says. "The issue we're facing now is the BC Assessment valuations continue to rise because they are a year out of date," says Smithies. BC Assessment estimates the market value of properties in B.C. every July and releases the assessments months later. "Even though the owner's property value has plateaued in the market, taxes are going up, which has large ramications for our commercial clientele." Smithies says that tenants end up paying property taxes based on higher valuations even though the true market valuation is lower than it was almost a year ago. If a property's assessed value increases at a higher rate than the city's average change in property values, the taxes for that property will increase. According to the 2018 property assessment highlights from BC Assessment, the typical com- mercial and industrial proper- ties will be subject to increases across most of the province in the 10 to 20 per cent range, with the markets around Vancouver upward of 35 per cent in some areas. "BC Assessment gets fairly detailed when it comes to com- mercial property because they recognize it's not a commodity product or homogenous product," says Smithies. "Consequently, for commer- cial properties that are rented, BC Assessment requests more detailed information that would warrant a higher valuation. Furthermore, if there is a dis- crepancy, that's where an appeal comes into play to decrease or increase the valuation depending on the situation." Smithies suggests that com- mercial property owners be dili- gent in reviewing and appealing their property tax assessments where possible. BC Assessment may make errors in their estima- tions for commercial properties, he says, and if there has been a signicant change in tenancy or construction at the building, BC Assessment will unquestionably be out of date. His advice to commercial owners is to consider working with property tax professionals like Altus Group, for example, to garner assistance through the process. "They have access to signi- cantly more market data and can better argue for a different valu- ation than perhaps an individual property owner can do on their own." ■ Martello Property Services is a Vancouver- based real estate management company specializing in protecting and growing the value of private real estate investments through dependable advisory services and hands-on management. The core business divisions are commercial property management, rental property management, commercial insurance, building operations, and strata management. + martello property services Created by BCBusiness in partnership with Martello Property Services Warren Smithies

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