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TAP 27 | Property Tax Assessments

 

Doing property tax assessments is one crucial area of real estate to determine where your money is going and what it means to you in the future. Since this is quite a complicated process, seeking professional help is never a bad idea. Brian Power talks with Karen Hagstrom from Stenger, Diamond & Glass law firm to share how she helps people in this process. She explains the pitfalls to avoid in residential properties and the misconceptions about reducing home value and taxes. Karen also explores how to approach commercial properties in today’s new normal, where certain municipalities may be hurt because of the fast people relocation and the sudden shift to the virtual scene.

Listen to the podcast here:

What You Need To Know About Property Tax Assessments With Karen Hagstrom

Welcome, Karen Hagstrom from the firm Stenger, Diamond & Glass. It’s great to have you here. Our firms work well together. We’ve had a few of your colleagues on. We’re happy to have you here. Tell us a little bit more about yourself and what areas are you practicing.

Thank you for having me. I came to the firm several years ago because this firm is growing in size and has a lot of good talent that’s moving forward. I was excited to join the firm. I’ve been already practicing for about 25 years when I joined. I started off as a DA in Dutchess County for nine years. I got a lot of trial experience under my belt. It was a great job. I was working in another local law firm doing private practice for fifteen years. It was when I joined that firm that I started to specialize in tax assessment work, which is helping people reduce their real property taxes.

My father who was a local attorney specializes in that area so I had about the best mentor around. He taught me the ropes. The nice part was he was doing most of the cases from the municipality side. I mainly do petitioner’s work although I have worked for many towns as well. I’ve represented the town of Rhinebeck for a long time. We’ve represented some other towns near Stanford. It was nice learning all the things not to do. He taught me, “I’ve caught people on X, Y and Z. Here are what you need to know.” It’s always wonderful to do things and know how to do them for both sides. That’s been great. Your clients are happy, that’s what I love about it because you’re saving them money.

It sounds boring but it’s an interesting area of practicing law. You get into some interesting issues. The attorneys are a small group of people because you have to have somebody who specializes in this area when you’re thinking of hiring an attorney because the rules are draconian. That’s the one negative of it. Deadlines are deadlines. If you miss a deadline or you don’t understand it or don’t know it, you’re done. You can’t get an adjournment and an extension. You have to have somebody who understands the process and all the intricacies of what has to be filed when and the legal requirements of what has to be in the filing to preserve your rights.

The overarching lesson of a lot of these shows that we have with you guys is it pays to hire a professional from all angles. That being said, let’s dive right into it. Whether it’s residential or commercial, nobody wants to pay more taxes than they should, which makes this topic appealing to everybody reading. There are differences and similarities between residential and commercial. I know there are some pitfalls we can watch out for, especially on the residential side. Let’s talk about that first.

For residential, there’s a different system as far as filing the petition, which is later in your stage. Everybody has to file. You have to have an administrative review. That’s what’s called a grievance complaint. I don’t want to get over-complicated, but you can work with the assessor before the tax roll even comes out. The tentative tax roll will come out May 1st so this is an ideal time of year for people to start thinking about this and contacting an attorney if they think they are over assessed. The assessors have to give their role to the state. They’re taxable for 2021, by mid-April. If you catch them ahead of time and you’re able to work something out, you might not even have to go down the path of filing a grievance complaint and going through that administrative process if you can agree on something or it’s a more simple issue. I’ve even told people, “You don’t need to hire me.” I recommend that you call the assessor yourself. If you can’t work it out, then call me back and I’ll help you with the next stage.”

Filing the grievance complaint, which generally has to get filed by the fourth Tuesday in May. There can be a different date. You need to check with the individual town or your attorney what that date is because it can change by a few days, but most of the time it’s the fourth Tuesday in May. If you don’t file that grievance complaint whether it’s residential or commercial, you can’t file until the next year. You’re done for another year. That filing has to be done. It’s a pre-printed form but the pre-printed form doesn’t always express all of the legal arguments that you need to express. I often even attach an addendum to it because you have to preserve whatever arguments you’re making in that grievance complaint or you can’t argue them later.

If the difference is big enough, it's worth your investment. Click To Tweet

You need to make sure you get in there whatever the argument may be that you’re making, whether it’s residential or commercial. That’s the first stage. The second stage is the petition stage. That has to be filed by the end of July. You go through a grievance. There’s a board of assessment review for each town or city. They make a decision on your grievance and you can personally appear or you can do it on submission, but you have to get that grievance complaint in and timely. Oftentimes, it doesn’t work out for people and the town or the city wants to keep their tax money and they deny your grievance. At that phase, you need to file a petition. If you don’t file the petition which has to be filed by July 31st, that’s both residential and commercial, you’ve lost your right to do anything.

You have to have the grievance complaint and then file the petition. That’s where there’s a difference because there’s a simpler process or residential. When it’s an owner-occupied residence, you do qualify for what’s called Small Claims Assessment reviewer or SCAR is the acronym. That’s only $30 to file. It’s done by a judicial hearing officer as opposed to the Supreme Court judge. It’s a little less formal. There are some limitations you can only get a 25% reduction on your tax assessment. For bigger properties or states, I do that calculation for my client, figure out and say, “This is the most you’re going to get it reduced. Do you want to instead opt for Article 75?” That is a petition in Supreme Court, which if you’re not an owner-occupied residence, then you would have to go to Supreme. That’s for commercial or larger residential where the 25% is not enough, or you decide strategically you think you’re better off not going to the judicial hearing officer route where the assessors generally represent themselves.

There’s the judicial hearing officer. You might decide strategically after consultation with the attorney, with me, that we make the decision together. I give them all the pros and cons and we decide. I recommend maybe you go to Supreme Court, which is the Supreme Court judge, which in Dutchess County currently is Judge Brands. He’s been there a long time. He’s a retired Supreme Court judge, but he’s authorized to sign off on our judgments. You have to have an attorney to file. The Supreme Court has to have an attorney who files that. That is $305 to file. In the end, it depends on what are you looking at. If the difference is big enough, it’s worth your investment. You sometimes are looking at fees for an appraisal whether you’re going small claims or Supreme Court, it’s often the case that you’re going to need some appraisal work done, at least an analysis.

For homes, you look at comparable sales in your neighborhood and figure out where you’re supposed to be. One of the commonly misunderstood things is people think that I can’t reduce your tax rate, but I can reduce your assessment. Your tax rate will still go up which means your taxes go up. If your property is over-assessed, then it’s going to save you tax dollars. For example, if you had a current purchase, that’s the best indicator of value. Oftentimes we can get it reduced to the purchase price if the assessment is too high. Our firm does a lot of real estates. We try to have them walk out and look at the assessment while they’re doing a closing for a client. The nice part about this firm is we have so many attorneys here. We can service all of their needs.

To stick on residential because I’ve received it, I’m sure everybody has gotten that junk mail looking piece of marketing at some point, where it says, “We can reduce the value of your home and reduce your taxes.” They work off of contingency. Let’s talk a little bit about that. Maybe there’s some misconception. I know there has to be when it comes to that kind of stuff.

I’ve had clients of mine get that letter and then they’ll email it to me and ask me about it. I always say, “It’s fine if you want to do that, but these companies are not attorneys. If it comes to the point where you have to go the route of Supreme Court, you’re going to be paying not only that company, but you’re going to be paying an attorney on top of that to be doing the filing. Whereas if you can start with an attorney, then you’re only paying one fee and you’re all set and you’re not overpaying for what you’re getting.” Now they generate so many letters. I don’t know how intricate the review is. I don’t get the benefit of the follow-up of what happens with people who do use the company. I can imagine they’re doing an in-depth review of the property to send that many letters to that many people.

I don’t lump those marketers in with my profession, but marketers can do good things to have you open up pieces of mail even still.

Property Tax Assessments: By doing your practice in one area for a long time, you build credibility and lots of connections.

 

It’s also the local connection. I grew up in Dutchess County and having practice here for so long doesn’t mean I’m going to get a better deal, but you have credibility, you have that connection. They know I’m straight up. You know the assessors. It helps.

You’re not going to say where these companies are looking to get as many people in as possible. In certain cases, maybe you couldn’t help.

With residences, there’s not as much money involved, especially on an attorney level but I try to help people because they could be clients for other things. I might feel bad leaving people in the lurch. I always try to at least give them some helpful advice. Sometimes I’ll even tell people, “You should contact me assessing yourself and see if you can do this yourself. Here’s my advice, call the assessor. You’re early enough. If it doesn’t work out, call me back. If we have to take the route of filing the grievance or filing a petition, we’ll go from there.”

That’s another reason for our point of hiring professionals and to help you and advisors. To talk a little bit more from residential to commercial, what are some things folks should look out for if they’re looking to do that with their commercial properties?

With the impact of COVID, commercial properties, we haven’t seen the full impact and how it’s impacting all of us. With residential, what I’m hearing is the market’s so hot, and things are going sight unseen. Maybe it’s harder to contest your assessment as far as residential right now. As far as commercial goes, people have lost tenants and have had situations. Commercial properties are valued differently because they’re not just valued on sales like residential are. They’re valued on an income and expense analysis. For those, we asked for rent rolls, income and expense because people purchase commercial properties for their income-producing value. How much income am I going to get out of this property?

That’s the analysis that’s done to value commercial properties, income and expense. They apply a capitalization rate depending on the risk of the property. They take out the tax rate because they assume that the taxes are too high because you’re saying, “I’m over-assessed.” They put in a loaded cap rate, meaning they load the tax rate into the cap. It’s a more complicated process. I generally use an appraiser. We don’t always have to pay for that with a full-blown appraisal. They can do an analysis to see where you are and use that informally to negotiate with the assessor.

It proves itself that it’s more of a process on the residential side. You brought up COVID and more commercial properties are losing tenants. It’s a good time to go to that certain municipality.

If your property is over-assessed, it's going to save you tax dollars. Click To Tweet

The timing is good right now because they all put their roll into the state around mid-April. If a grievance has to be filed, that has to be done by the fourth Tuesday of May. For 2020, even though COVID was here, as far as tax certs go, there are certain dates that they measure everything by. It’s like a date frozen in time. What they call your valuation date or the date they value your property is July 1 of the year before. For the 2021 tax roll, it’s July 1 of 2020 when we were right in the deep throes of COVID. Your taxable status, meaning what’s the status of any improvements to your property or what’s the status with tenants, is as of March 1st of 2021. March 1st of 2020, a lot of people were saying COVID because they’re filing in July, but it’s a more difficult argument in 2020 because as of March 1st, we were still up and running. The shutdown happened about a few weeks later. It’s good timing right now to evaluate.

To evaluate and see if there’s an opportunity for savings. Especially now, you have to assume as we move forward to this, municipalities are going to be hurting as well. Is that something that could affect their decision making?

I suppose you might take one view of it that it’ll be more difficult to settle cases, but on the other side of the coin, municipalities aren’t going to want to invest in obtaining an appraisal. They may be more willing to settle because they don’t want to front that money or paying your town attorney to defend. They’re going to be looking at the costs also of defending the proceeding that you file. One other thing I wanted to mention too which is also with commercial properties, I do a lot of work with exemptions, which that deadline was March 1st. There’s another way to reduce your property taxes. I help a lot of clients with agricultural exemptions.

We’re in Dutchess County and we have a lot of farms. You can do a five-year lease if you have enough land, 7 acres or more. Once you get your certificate of occupancy, you have to look at the local code, but you may be eligible as a commercial property for what’s a business exemption called a 485-b. I help clients with those because you have to have the right timing. By March 1st, you have to have your certificate of occupancy and you have to be a property that qualifies. That can save you quite a bit of money. I do charitable exemptions as well for not for profits.

As we move out into the new normal, we’re in the process of trying to provide our clients with ways to become more efficient and see the savings opportunity if there is any. You don’t want to go to the farther extreme where people need to maybe move their businesses out of the area. On the business side, any other tips or ideas or things that people should be looking for and reasons to call on the real property assessment and exemptions?

It’s a human system. Different assessors and towns have different personalities. Sometimes they’re even willing to work with you for a year like, “You lost some tenants this year. I’ll lower you a little bit, but then when you get some more, maybe we’ll raise it back up because you have the income now. We’ll work with you if you work with us.” It’s important to establish that relationship. The other thing is we need to evaluate cases carefully. One thing you don’t want to do is bring attention to yourself if you’re under assessed. I tell people, “Don’t ring that bell.” If you’ve done improvements, they can raise your assessment for that. People are going to be seeing, especially residential, raises in their assessments this 2021. That’s because the market has gone up and there’s been a market trend. It’s a good time for you to look overall. If I was already over-assessed, maybe they’re only raising me by a market trend, but maybe I need to evaluate that. That’s where I should’ve been, to begin with.

Maybe there isn’t any action to take or maybe you’re in a good spot but still, it can’t hurt to take that look.

TAP 27 | Property Tax Assessments

Property Tax Assessments: The worst thing is to wait a few years to see if something looks good for you. It’s always good to know where you currently stand.

 

Take that review. The worst thing is you decide, “Let’s wait a few years or it looks good for me so I’m not going to do anything.” It’s always good to know where you stand.

You brought up the firm. You guys work as a team and identify different opportunities and things for your clients. Talk a little bit about that too.

For example, in 2020, Ken Stenger, one of the partners, was working on land use issues for a client. I chimed in and he was talking to me a little bit about it because I am doing zoning and land use as well. I said, “I can get a business exemption for this property.” The client didn’t know about it. It ended up saving them a lot of money. It’s nice that we are very team-oriented here. If a client needs the real estate transaction under a deed, all these things tie into each other and it is nice that we can full service and work as a team to maximize the services and the benefits for our clients.

It makes sense why our firms get along so well because we offer the same opportunity and looking out to see where we can help. Add value is the name of the game. Karen, you’ve given us some added value here. Karen Hagstrom, from the law firm, Stenger, Diamond & Glass, we appreciate your time.

Thank you so much, Brian. I appreciate it. Have a great day.

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About Karen Hagstrom

TAP 27 | Property Tax AssessmentsKaren E. Hagstrom began working at SDG Law in January of 2019, as part of the litigation team.  Karen brings over 24 years of trial experience to the firm. Karen spent the first nine years of her career as a prosecutor for the Dutchess County District Attorney’s Office and the Dutchess County Attorney’s Office.  As a Senior Assistant District Attorney, Karen served in the following Bureaus:  Justice Courts, DWI, Special Victims, Narcotics, Welfare Fraud, and Violent Crimes.  As a Senior Assistant County Attorney, Karen prosecuted child abuse and neglect cases in Family Court.

Karen has been in private practice for the past 15 years, focusing on tax certiorari, civil litigation, appellate advocacy, land use, and municipal law. In January 2019, the Dutchess County Legislature confirmed Karen as Legislative Counsel.

Karen will expand SDG Law’s tax certiorari practice.  Karen has assisted owners of commercial and residential real estate in reducing their real property taxes from initial negotiations with the Assessor to the filing of grievance complaints, appearances before Boards of Assessment Review, filing petitions, Article 78 motion practice, hearings and trial. Karen represented the Towns of Poughkeepsie and Rhinebeck for Tax Certiorari cases.

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