Real Estate Values During COVID-19

08/21/20

     The tax certiorari world is still in chaos, as the county is valuing properties based on pre-COVID rental and sale figures. Interestingly, as a result of the pandemic, the values for residential and commercial properties are heading in two different directions.

     As for homes, there has been a significant flight from New York City as people are relocating away from crowded streets and seeking homes with backyards. We have already experienced anecdotal evidence of buyers over paying for homes due to increased demand and a scarcity of properties on the market. This has driven up the prices for residential homes significantly in the past several months.

     The main concern for these home buyers is securing mortgages. Albeit the low mortgage rates, the fact that the banks need to confirm income and the continuity of same, has made the loan process complicated.

     Closings are taking place even though the clerk's office has limited hours and the building departments are unavailable to search for Certificates of Occupancies and/or violations. This is requiring attorneys and title companies to be creative, as well as aggressive, in securing all disclosures regarding title.

     Tax certiorari has certainly been impacted by this trend. In particular, the residential values indicated based upon assessments determined by pre-pandemic values may be lower than the current market value. We will see what the residential values look like when the 2022/23 assessments come out in January 2021.   

     On the other hand, commercial properties are suffering significantly as a result of the pandemic. In particular, many commercial tenants are not paying rent as their businesses are suffering as a result of the economic downturn. Commercial property owners will be paying taxes for 2020/21 and 2021/22 based on valuation dates of January 1, 2019 and January 1, 2020 respectively. These valuations are based on pre-pandemic market values. It has been a struggle for commercial landlords to collect rent or income. Now, these landlords will need to deal with taxes based on their pre-pandemic values, which will undoubtedly be a serious impediment to survival.

     In an earlier blog, we discussed the possible creation of a COVID-19 relief bill, which would allow commercial property owners the opportunity to obtain tax relief as a result of the pandemic. As of this date, such a bill has not been addressed by the Legislature, which is already concerned about tax revenues decreasing (FYI-- The Sandy Relief Act took place within 12 months of the storm, which was not ongoing event like this pandemic.)  

     With that being said, this creates significant uncertainty for commercial property owners, as the rental value of their property has decreased, in some instances quite steeply. This will certainly affect the 2022/23 assessment, but how we address the previous two tax years remains to be seen.

     We will continue to monitor these developments carefully over the next few months as we continue our negotiations with the County for the current tax years at issue. Unfortunately, until the Legislature acts, tax relief for 2020/21 and 2021/22 may be out of reach.