Can You Get Property Tax Relief Based on Vacancy?

If a home or commercial building has been vacant for more than a month, it’s possible to get a property tax reduction. Although there are some similarities in the approach to appealing for vacancy on a residential and commercial property, there are also many differences.

Appealing a Residential Tax Bill on Vacancy

Some of the reasons a residential property might sit vacant include:

  • It is going through a major renovation, which can include property damage caused by fire or weather
  • It is a rental property and is in between tenants
  • It is new construction that isn’t move-in ready yet

The Cook County Assessor’s Office doesn’t receive certifications of vacancies on properties, so it’s only through the appeals process that it can adjust its assessment of the property, taking into account the length of time the house was empty.

In the case of new construction, the property tax assessment should only include the dollar amount of the land. The structure shouldn’t be assessed as part of the property tax until a certificate of occupancy has been issued because it can’t be occupied yet.

Appealing a Commercial Property Tax Bill on Vacancy

If a commercial property has a lot of vacancies or vacancies for a long period of time, that will lower the market value, and therefore, should impact the property tax.

However, the assessor’s office doesn’t have information on every commercial property’s vacancy levels, so it’s left to the building owner to appeal the tax bill.

In order to justify an appeal, a building owner should gather information on market occupancy rates for that property type and submarket, as well as information to justify a vacancy shortfall deduction. There are three components of a vacancy shortfall deduction are:

  • Direct costs, which include improvements that would need to be made for a new tenant
  • Indirect costs, which include lost rent or concessions made to bring in a new tenant
  • Entrepreneurial incentive, which recognizes that in order to stabilize occupancy, there is extra risk, skill, and effort required to find tenants

Before it comes to all of these calculations, a contact to the assessor’s office about the vacancy rate can often lead to lower assessments on the next property tax bill.

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