Navigating the labyrinth of property tax assessments and appeals can seem overwhelming, but understanding the method behind the madness and knowing the rules makes all the difference. In this series of blogs we explain the basics of Colorado property taxes and valuations, and we examine how commercial real estate is valued and taxed. We also walk through the process for appealing those taxes if you feel the assessor’s valuation is unfair.

Colorado Property Taxes: The Basics

In Colorado, property taxes are assessed in arrearage, so property owners pay 2012 taxes in 2013. They can be paid in full in April or in half payments in February and June (for this year’s exact dates, see the Colorado Division of Property Taxation).

When a property is sold, the seller provides an additional payment to the buyer for covering any taxes that have not yet been assessed. Then, the buyer is responsible for paying the taxes when they are due. For example, if you purchase a property on August 1, 2013, then you receive a credit in the settlement statements for the accrued taxes from January 1 to August 1, 2013. Then, when the 2013 taxes are due in April of 2014, it will be the Seller’s responsibility to pay the entire tax bill. Most Purchase and Sale Agreements (PSA) state that this credit is a final settlement, so the buyer cannot go back to the seller and ask for more if the taxes increase; neither can the seller ask for a refund if they decrease.

By law, the county assessor must reassess all real estate properties every two years. This occurs in odd years, such as 2011, 2013 and 2015.

Determining Property Values for Commercial Real Estate

The actual value for tax purposes of commercial and industrial real estate is determined through a three-pronged approach accounting for market, cost, and income.

• Market approach bases the actual value of a property on comps, or an analysis of sales of similar properties, usually within a six-month to one-year time frame.
• The cost approach determines actual value by estimating the cost of replacing the property with an equivalent substitute and subtracting any depreciation from that estimate.
• The third income-based approach to actual value analyzes the annual net income produced by the property in order to account for an investor’s financial return when determining the property’s actual value.

The county assessor can consider any of these three evaluation methods in order to decide the actual value of your property. A property owner can also use any of these methods in order to appeal the value at which a commercial or industrial property is assessed and taxed.

Contact Montegra to find out more about commercial real estate valuations and our commercial real estate loans.

This blog was written by Bob Amter, President of Montegra Capital Resources, LTD., a Colorado hard money lender.  [google_authorship] has been in the private capital lending business for 41 consecutive years.