How do property taxes get paid if there are no tenants? Out of the property owners pocket?
There is a small strip retail building near me that was probably built withing the last 10 years and originally had 7 of it’s 8 spaces occupied (Dunn Bros.Coffee, Papa Murphys, Quiznos, Kids Clothing Consignment, Great Clips, 24-hour fitness, Realestate Office). Over the past 4 years all of the businesses have folded with Papa Murphys being the sole hold-out. The rest sit empty.
Is the property owner in the red every year paying taxes on this thing? How can they afford it? Does the city give them some type of break if they have no tenants?
Yes.
That would depend on the finances of the owner.
I doubt this but I don’t know for sure. Around here, the county is the entity which gets property taxes; they only go up or down according to the “improvements” you place on the property (well, or re-assessment). Some cities may charge property tax as well, I don’t know.
You’re assuming that the owner has this one property and no others. More likely it is one parcel of many in the portfolio. The expectation for any landlord is that a certain percent of the properties will be idle at any one time and so the total rental of the earning properties has to cover the ones who are vacant. It is highly unlikely that they would get any help. Thousands of stores are vacant at any moment, far too many to aid.
In a recession, of course, the rented properties may no longer carry the others. In that case the owner can sell the property, go bankrupt, or have the municipality take the property for back taxes.
This is essentially the case for every property: owner is liable for taxes; in some cases he collects rent sufficient to cover those liabilities. An argument along the lines of “I don’t think I should pay assessed taxes this year because I didn’t collect the rent I was hoping to” will receive little but scorn.
Usually, though not always.
I have a friend who owned about 12 acres of land. Almost all of this was within one township, but a tiny corner (under 200 sqft) extended into a different tax jurisdiction. The annual tax on this sliver was something like $350 - probably more than the property was worth.
He fought this battle for a long time. One ploy was an offer to give the land to the taxing authority - but they refused to take it and claimed he had no right to force this short of declaring bankruptcy. I think he got things sorted out after about 5 years.
The municipality does not take the property because of delinquent taxes. The county sells the property at a tax sale. Professional tax buyers are plentiful: people who buy delinquent taxes and hope to reap the high interest rates (usually 12%) for the owner to redeem. Any property worth something will be redeemed. If not, the puchaser will get a tax deed. If nobody bids at the tax sale (highly likely for the sliver of property in question), it is forfeited to the county. A municipality (other than a county) does not levy taxes. The county does. If a parcel of land accrues enough forfeited taxes after many years, the county may be empowered to sell the land for a nominal amount.
Indirectly, the answer is “yes”. Taxes are based on the value of the property, not the occupancy rate. However, property with no tenants is probably worth a lot less than property with no vacancy.
The city has nothing to do with r e taxes.
That may be true where you live. It is not true where I live.
If the property goes down in value the owner can request that the property be re apraised. The property owner always writes the check for taxes, even with triple net leases.
You probably know your own local law, but I find this perplexing because deeds are recorded or filed for record in a county office, whether it is called the Registrar of Mesne Conveyances, Recorder’s Office, Registrar’s Office, etc. in the real estate law that I’m familiar with. This gives public notice of the ownership of the land. In the system that I’m familiar with, the county assessor’s office assesses the value of the land and sends notice of tax due to the owner of record.
New York state may have an entirely different system. If so, where are the deeds recorded? Who does the assessing?
The deeds are recorded in the county office. Assessments are done by individual municipalities. There can be dozens of variable assessments across a county.
In Massachusetts, deeds are registered with the county–though there is a movement here to do away with most county offices and bring everything under the state–but tax rates and tax collection are certainly done by the indivual communities.
My town has a Board of Assessors who set the property values at regular intervals and when property changes hands or has improvements made. The valuation are based on the value of the land plus the value of any buildings or other improvements thereon. Each year the Board of Selectmen (a New England institution similar to a city council or the like) sets the actual tax rate, which may be adjusted up or down depending on a number of factors. (In MA, state law prevents property tax from increasing more than 2 ½ percent, so if values go up the tax rate may be adjusted down to keep the taxes within the limit.)
Everything you said in your post was good except for this.
It may be different elsewhere in the country or world, but in my state, property taxes are levied by not only the county, but the town/city/village, the school district, the college district, and other districts that may exist like sanitary or ones created for special purposes, like development areas.
Tax bills may also have unpaid bills from other government sources included, such as unpaid liquor licenses, surveys or bills for yard cleanup if court-imposed. This becomes the last resort if some bill has not been paid thru normal means, since eventually the property will be sold for delinquent taxes. There’s no way out.
They bulldozed a nice mall in my city last year. It had been a landmark since the late 1960’s.
The decline started when Osco drug closed all their stores. Then Wards. That was a big chunk of the mall. Next various small stores went. JC Penny was the only big anchor left. They weren’t happy.
Now that it’s an empty lot I bet the taxes dropped significantly.
Perhaps, a tax break might have saved the mall. We’ll never know for sure.
There were plans to build a newly designed, modern shopping center. But, funding dried up in this bad economy. Right now, it’s just sitting there.
In SC and also in Illinois, the tax statement is sent out by the county, and it is sold for delinquent taxes through a county sale. The assessment includes taxes levied by subordinate political subdivisions, so I should not have used the word “levy.” The heading on my statement says: “Combined taxes for: Charleston County-wide Entities and James Island Public Service District 3-1 [which is a subdivision of the county].” The OP asked about the city giving a break on the assessment. In states that I’m familiar with, the city does not do the assessing. It is done by the county assessor’s office, which has access to the county public records.
In Illinois, which I am familiar with, the county holds annual sales for delinquent taxes, and the bidding is as I have described it. There is an unwritten agreement among professional bidders on which properties each person will bid on because the property is sold for the amount of taxes and the only bidding is for the amount of interest to be paid to redeem the property by the owner. The Illinois statute provides for a maximum interest of 12%, so all the bidders bid that interest rate, with the collusion that nobody will underbid that.
If the property is not sold at the annual sale, it becomes forfeited taxes and these accrue each year the property is not sold. After a certain number of years of forfeited taxes not having been sold, a tax foreclosure will be had, in which the property goes to the highest bidder. Thus, in that instance, although the taxes may have accumulated to several thousand, the property can be sold for peanuts. This is to get the property back on the tax rolls.
In my area in Wichita county in Texas, they started basing my self-storage facility on units, occupancy rate, and the rate I’m getting per unit size. Each year, I have to fill out this form, and they base my taxes on it. The first eight years or so, they didn’t do this, but the last three I suppose they figured they would get more tax revenue by having us go this route.