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June 9, 2022

Property Tax Appeals with Trevor Smith

Property Tax Appeals with Trevor Smith

On this episode we discuss the timely topic of property tax appeals. Trevor Smith with TGS Realty Advisors provides insight on some of the perceived risks, costs and most importantly financial savings that can be achieved from a tax appeal.


On this episode we discuss the timely topic of property tax appeals. Trevor Smith with TGS Realty Advisors provides insight on some of the perceived risks, costs and most importantly financial savings that can be achieved from a tax appeal.

Transcript

Announcer:

Welcome to the I Love Winnipeg Real Estate podcast. Your premier resource for buying, owning and investing in Winnipeg's real estate market. And now here's your host, Adrian Schulz, who loves all things real estate, property management, and mortgage financing.

Adrian:

On today's episode, we're speaking about something very timely, and that is property tax appeals. On today's episode, I have Trevor Smith joining me. Trevor, welcome to the show.

Trevor:

Thank you for having me, Adrian.

Adrian:

Trevor, can you tell our listeners a little bit about yourself and your company?

Trevor:

Yes, I'd be glad to. Thank you again for the opportunity to reach out to your listeners here. I'm a commercial real estate appraiser with a specialty in property tax consulting. And I've been in this business for going on 15, 16 years with majority of my work centered in the Winnipeg marketplace. So I have a depth of knowledge in Winnipeg and the surrounding Manitoba municipalities. I have worked primarily for an international scale commercial real estate brokerage, worked through them. I was their director of property tax consulting until forming my own property tax consulting firm TGS Real Estate Advisors.

Adrian:

Now, for those who don't know, can you perhaps explain what exactly is a property tax appeal?

Trevor:

Absolutely. Property tax appeal, every property within the City of Winnipeg or within Manitoba actually, will receive a property assessment notice on a two-year cycle from either the province of Manitoba or from the City of Winnipeg, providing them with an updated property assessment value for their distinct property. Now, this value is driven by modeling that the City of Winnipeg or the province of Manitoba does. And there are instances of course, where given the scale of their challenge in assessing that broader range of properties, there are inaccuracies that can creep in. So there is a process in place for property owners to appeal those assessed values, to bring them in line with what a fair market value for their property would be.

Trevor:

And the process involved in that, there is an independent body called the Board of Revision, which operates in each municipality. So the City of Winnipeg will have its own distinct Board of Revision, as well each of the municipalities within Manitoba. And the property owner or their appointed agent on their behalf makes an application to that Board of Revision body to appeal the assessed value for their property. And the process then is a hearing date is set for it, the owner or their representative appears before that body and makes their case with regard to a lowered property assessment.

Adrian:

There seems to be a common misunderstanding about the various valuation approaches to a property. Let me explain. A realtor or a real estate agent may provide one value. A tax assessment provides another assessed value, and a licensed appraiser again provides another value. Which one of the three values is the most accurate reflection of the true market value of a property?

Trevor:

I will say that each of them is accurate in their own way. When you are hiring a real estate appraiser for the purposes of financing, in getting mortgage financing for a purchase of a property, they have a particular process that they go through in order to arrive at a fair market value. And it's fairly rigid process guided of course, by market information, market data that they have access to, and is subject to the regulations of the Appraisal Institute of Canada. So they have a fairly strict means of going through it. A commercial realtor of course, is not subject to those regulations. Interestingly, they're essentially looking at that property on a going forward basis as well. So there is an element of looking at the potential upside for a property when bringing a property to market for sale.

Trevor:

And in looking at the market value that the city or province places on a property for assessment, they use a modeling technique. They collect data from all property owners within the city or the RM. And they run that information through a statistical analysis that breaks it down by property type location, et cetera, and a number of different metrics. And those distinctions are then applied to individual properties to arrive at a projected fair market value based on the entire data that they've collected in the city.

Trevor:

Now, again, there's certainly inaccuracies that creep into this when you're basing market value on a broad spectrum of data rather than the particular property itself. So in looking at fair market value for assessment, we look at the model that the city has used. We look at the performance of the property itself, and we look of course at the market for information as to what a fair market value for that property would be when we're approaching an appeal.

Adrian:

Before I ask you the difficult questions, who are tax appeals for?

Trevor:

Well, essentially tax appeals are for all property owners out there if they feel that they have been inequitably assessed. So as a property tax consultant, we represent a wide range of clients, ranging from national scale institutional investors, real estate investment trusts, property management firms, hotels, large scale manufacturing properties, all the way down to smaller scale owner occupiers and say non-profit housing. There's a really wide spectrum of property owners that would benefit from examining their property assessment. So long story short, essentially all commercial property owners should be keeping an eye on the assessed value to ensure that they're being fairly and equitably assessed.

Adrian:

Aside from the obvious property tax savings that could come out of such an appeal, are there any other benefits such as reducing capital gains exposure, et cetera?

Trevor:

Well, on the tax front, I guess I would give the guidance for individual owners to consult with their accountants on the issue of benefits accruing to the actual owner. There's a number of them that are of course, related to any reduction in property taxes on the investment front. Owners would see obviously a reduction in operating costs. This brings down the overall gross rent that a tenant would pay. So that obviously keeps tenants happy within properties. Can also drive an increase in net income if the overall gross rental cost to a tenant goes down at times leaves room for the net rent to be driven, increased slightly by the owner to a fair market level. And if this increases the net operating income for the property, obviously this leads to an increase in property value overall as well. Main issue on the investor side would be maintaining market competitiveness and increasing the actual market value of the property through these means.

Trevor:

With regard to owner occupiers, obviously a major segment of the market, that reduction in operating costs goes directly to the bottom line for that property owner. And of course, reducing the cost allows them to maintain cost competitiveness in their business as well. If they're not spending their revenue on property tax, then they can reinvest it within their business or other productive means.

Adrian:

We always start with the benefits or the positives, but one does wonder, are there any risks associated with the valuation as it pertains to borrowing or divesting of the property when you do such a property tax or assessment appeal?

Trevor:

I'll deal with the divestment issue first that has come up a couple of times in recent discussions with clients here or potential clients where they were wondering whether they should be entertaining filing property assessment appeal or not, and if it would affect their sale in any manner. Essentially if a property owner files an appeal on their property prior to the appeal deadline of June 28th, this year in Winnipeg. And then subsequently they sell the property prior to a property assessment hearing for that particular property, they can transfer appeal rights to the new owner. So essentially it would be a benefit to the new owner in that they haven't missed the opportunity to have their property assessment appealed for that particular year that they're in.

Adrian:

Okay. And what about the valuation as it pertains to borrowing? Could it affect that?

Trevor:

Again, I would view that as a positive. Essentially, you are doing the proper thing for both your tenants if it's an investment property, or yourself and your own company if you're an owner-occupier in keeping a close eye on all of your costs. So if you've filed a property tax appeal, it's showing the potential lenders that you are doing your due diligence in maintaining costs at a fair and equitable level.

Adrian:

Many of our listeners are going to appreciate the information that you've shared, but at the top of their mind is probably going to be what sort of costs are associated with having a company like yours do a property tax appeal?

Trevor:

Well, essentially in our marketplace Winnipeg, the standard approach for fees in our industry is on a... We operate on a contingency basis. So essentially if we take on an appeal for a client and conduct that appeal, and if for some reason we were to be unsuccessful in achieving a lowered assessment and then of course, lowered taxes, then there is no fee payable to that client.

Adrian:

Wow.

Trevor:

So there's essentially not a downside on that front.

Adrian:

Okay. And Trevor, how can people reach you?

Trevor:

They can reach me directly either by email at trevor@tgsrealtyadvisors.com, or they can reach us by phone (204) 805-1046.

Adrian:

And for those listening, you can also visit Trevor Smith's company website at tgsrealtyadvisors.com. Thanks so much for joining us today, Trevor.

Trevor:

Thank you, Adrian.

Announcer:

Thanks for listening to the I Love Winnipeg Real Estate podcast. If you like this episode, please subscribe and give us a rating which will help us reach more listeners. Until next time, connect with us on social media and online at ilovewinnipegrealestate.ca.

Trevor Smith Profile Photo

Trevor Smith

Founder & Principal

Trevor Smith is the founder and Principal of TGS Realty Advisors Ltd., specializing in property assessment appeal and property taxation consulting. He provides professional property tax consulting and appeal services to a variety of individual, corporate and institutional clients. Trevor has over 23 years of commercial real estate experience in tax appeal consulting, commercial appraisal, and commercial real estate brokerage, with 12 years of experience representing clients in property assessment appeals in the Winnipeg, Manitoba and Western Canadian markets. Trevor served as the Director - Property Tax Consulting with Stevenson Advisors and Cushman Wakefield Stevenson prior to establishing TGS Realty Advisors Ltd.

Trevor has achieved a 97+% success rate in property assessment appeals over the course of his career. During the period 2010 - 2020, Trevor has achieved average annual assessment reductions between 15% - 21% on behalf of his clients, with overall tax savings of exceeding $20 million.

Trevor has represented national institutional real estate investors, real estate investment trusts, local large-scale property portfolio owners, as well as a strong presence in representing housing co-operatives and non-profit multi-family housing providers in the Winnipeg and Western Canadian markets.

Born and raised in Winnipeg, he is part of a strong local community and he is a passionate advocate for Winnipeg and Manitoba. Over the years, Trevor has been personally involved in numerous community sports and activities, including serving on the Board of Directors for the Manitoba Cycling Association. This has more recently transitioned into his involvement with his sons' community sports and activities, as he has helped coach hockey and volunteered in their biathlon and cycling events.