New Construction Reassessment Appeal

New Construction Property Tax Reassessment Appeals

A new construction property tax reassessment can significantly increase the assessed value of a commercial or investment property. However, county assessors do not always correctly identify the taxable improvements, completion date, or value added by the construction. Property Tax Associates helps California property owners challenge excessive or inaccurate assessments and pursue the lowest legally supportable taxable value.

We handle the entire appeal process, including property research, valuation analysis, application preparation, negotiations, and representation before the Assessment Appeals Board. Moreover, there are no upfront fees because we work on a contingency basis. Therefore, you pay us only if we successfully reduce your property taxes.

What Is a New Construction Reassessment?

Under California property tax law, assessable construction generally includes additions to real property and substantial alterations that convert an improvement to the equivalent of a new structure. Upon completion, the county assessor establishes a new base year value for the portion of the property that was newly constructed.

However, the assessor generally should not reappraise the existing land and improvements merely because construction occurred. Instead, only the taxable value added by the newly completed construction should receive a new base year value.

The California State Board of Equalization provides additional information about how newly constructed property is assessed. Nevertheless, determining the correct taxable portion and added market value can involve complex valuation questions, especially for commercial properties.

Examples of potentially assessable construction include:

• Building additions and expansions
• New commercial or residential structures
• Major structural renovations
• Conversions to a different property use
• Substantial tenant improvements
• Newly installed taxable fixtures
• Reconstruction after demolition
• Construction in progress as of January 1

In contrast, ordinary repairs, routine maintenance, painting, replacement of worn materials, and many cosmetic improvements may not qualify as assessable construction.

When Can You Appeal a New Construction Property Tax Reassessment?

You may have grounds for an appeal when the county’s new construction value exceeds the actual market value added to the property. Additionally, an appeal may be appropriate when the assessor includes non-assessable repairs, values improvements that were never completed, or uses an incorrect completion date.

Common reasons for appealing include:

• The assessor overvalued the completed improvements
• Construction costs were incorrectly treated as market value
• Routine repairs were classified as assessable improvements
• The assessor included areas that were not renovated
• The project was only partially complete on the valuation date
• The construction completion date is incorrect
• Demolished improvements were not properly removed from the assessment
• Tenant improvements were incorrectly attributed to the property owner
• The property qualifies for a new construction exclusion
• The supplemental assessment covers the wrong period

Because construction costs do not always equal added market value, a detailed appraisal analysis is often necessary. For example, a renovation may cost more than the amount it contributes to the property’s market value. Therefore, relying solely on invoices, permits, or reported project costs can result in an excessive assessment.

How California Assessors Value Newly Constructed Property

County assessors commonly review building permits, construction documents, project costs, property characteristics, and comparable construction data. They may then estimate the market value added by the improvements.

However, this analysis should distinguish between the cost of the work and the actual increase in market value. Certain construction costs may relate to repairs, deferred maintenance, demolition, code compliance, financing, or other items that do not create an equal dollar-for-dollar increase in property value.

For income-producing properties, the assessor should also consider how the improvements affect rental income, occupancy, operating expenses, and overall investment value. Consequently, an income approach or sales comparison analysis may support a lower value than a cost-based estimate.

Our specialists examine the assessor’s methodology and determine whether it accurately reflects:

• The scope of the completed work
• The project’s actual completion date
• Physical and functional depreciation
• Market conditions at the time of completion
• The value of improvements that were removed
• The income-producing capacity of the new improvements
• Any applicable statutory exclusions

Property owners can also learn more about commercial and residential property tax appeal differences and review the other types of property tax appeals we handle.

Construction in Progress and Partial Completion

If construction is incomplete on the January 1 lien date, the assessor may estimate the fair market value of the work in its existing state of completion. Subsequently, the construction may be reviewed again on each lien date until the project is completed.

Nevertheless, disagreements can arise over the project’s percentage of completion, physical condition, or value as of January 1. For instance, a project that is 60% complete based on construction costs may not have contributed 60% of its finished market value.

Therefore, we review construction schedules, permits, contractor reports, photographs, cost statements, and other evidence to determine a supportable value for the incomplete improvements.

Supplemental Assessments After Construction

Completed construction may also generate a supplemental assessment in addition to the regular annual property tax bill. Generally, the supplemental assessment reflects the difference between the prior assessed value and the new value attributable to the completed improvements. It is then prorated from the first day of the month following completion through the end of the fiscal year.

The State Board of Equalization explains the process in its supplemental assessment guidance.

However, supplemental assessment appeal deadlines are different from regular annual appeal deadlines. As a result, property owners should review any assessment notice immediately. You can also read our overview of Los Angeles property tax appeal deadlines for additional filing information.

New Construction Exclusions

Some improvements may qualify for exclusion from assessment under California law. Depending on the property and project, exclusions may apply to certain:

• Active solar energy systems
• Seismic safety improvements
• Fire detection systems
• Accessibility improvements for disabled persons
• Disaster reconstruction
• Underground storage tank improvements
• Construction held for sale by qualifying builders

However, some exclusions require timely notices, claim forms, or supporting documentation. Therefore, property owners should determine eligibility as early as possible rather than waiting until an assessment notice arrives.

How We Challenge New Construction Property Tax Reassessment

Property Tax Associates uses a comprehensive, evidence-based approach to identify valuation errors and build persuasive appeals.

1. Review the Assessment

First, we examine the assessment notice, supplemental tax bill, building permits, construction history, and county property records.

2. Separate Taxable and Non-Taxable Work

Next, we distinguish assessable additions and major renovations from maintenance, repairs, replacements, and other potentially non-assessable work.

3. Determine the Value Added

Then, we analyze construction costs, depreciation, comparable sales, market conditions, and income data to estimate the actual value contributed by the improvements.

4. File and Prepare the Appeal

After completing our analysis, we prepare and file the appeal within the applicable deadline. Additionally, we organize the documents and valuation evidence needed to support the requested reduction.

5. Negotiate and Attend the Hearing

Finally, we communicate with the county appraiser, pursue a settlement when appropriate, and represent the property owner at the Assessment Appeals Board hearing when necessary.

Why Choose Property Tax Associates?

New construction cases often involve both technical valuation issues and complicated property tax rules. Consequently, effective representation requires more than simply comparing the assessment with the project’s construction costs.

Property Tax Associates offers:

• More than 18 years of property tax appeal experience
• Thousands of successful California appeals
• Commercial and investment property expertise
• Detailed market and valuation research
• Complete appeal filing and hearing representation
• No upfront fees or out-of-pocket costs
• A contingency fee payable only after a successful reduction

We represent multifamily, office, retail, industrial, hospitality, mixed-use, land, and other commercial properties throughout California. Moreover, our goal is to reduce both the immediate tax burden and the long-term effect of an excessive base year value.

Frequently Asked Questions

Does Every Building Permit Cause a Reassessment?

No. Although assessors receive building permit information, ordinary maintenance and repairs generally do not constitute assessable new construction. However, substantial additions, major rehabilitation, and changes in property use may trigger reassessment.

Is Construction Cost the Same as Added Market Value?

Not necessarily. Construction cost is relevant, but the assessor should determine the market value added by the completed improvements. Therefore, depreciation, market conditions, functional utility, and the property’s income potential may also need to be considered.

Can I Appeal a Supplemental Assessment?

Yes. If you believe the supplemental assessment is excessive or incorrect, you may file an appeal. However, the filing deadline may begin from the date shown on the notice, so prompt action is essential.

Will the Entire Property Be Reassessed?

Generally, only the newly constructed portion receives a new base year value. The existing land and improvements should ordinarily retain their established Proposition 13 values unless another reassessable event occurred.

What Happens If Part of the Existing Building Was Demolished?

The value attributable to demolished improvements may need to be removed before the assessor adds the value of the replacement construction. Otherwise, the assessment could improperly include both the removed improvements and the newly built improvements.

Request a Free Assessment Review

If you recently completed, renovated, expanded, or converted a property, an excessive new construction property tax reassessment could increase your taxes for many years. Therefore, it is important to review the assessment, valuation date, and taxable improvements before the appeal deadline expires.

Property Tax Associates will evaluate your assessment and identify potential grounds for a reduction at no upfront cost. If we do not successfully reduce your property taxes, you owe us nothing.

For A Free Market Analysis and Evaluation of your Property, Call (800) 252-3544 Or Click Below To Get Started