Property Tax Protest Arbitration

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Finally, an affordable alternative for property owners protesting their taxes and for the taxing authorities too.

Yes! There is an alternative for property owners that are dissatisfied with their property taxes and the value assessed their property by the CAD (Central Appraisal District). After protesting the taxes with the ARB (Appraisal Review Board), the property owner now has an alternative course of action to continue the protest process. The alternative is “Binding Arbitration”. Most other arbitrations are very formal, conducted by lawyers or retired judges with the parties to the arbitration being represented by lawyers. The lawyers argue points of law back and forth and in the end the arbitrator makes a decision (award). When lawyers are involved the cost to the parties is expensive. The property tax protest arbitration does not involve any lawyers, unless one of the parties wants to hire a lawyer. The use of appraisers or sales agents/brokers as arbitrators keeps fees down and lends some expertise to determining the fair market value of the owner’s property.

In September, 2005, The Texas Legislature passed House Bill 182 and Senate Bill 1351, which allows property owners an affordable alternative to continue the tax protest process through arbitration. The Texas Comptroller of Public Accounts sets the guidelines and rules (rule 9.804) to be followed for the arbitration proceedings. No points of law are argued, therefore no lawyers are necessary. The arbitrator is a licensed real estate professional, not a lawyer or judge and a maximum fee is set by The Comptroller. The job of the arbitrator is to review evidence presented in the arbitration, listen impartially to each of the parties presenting their case to support their conclusion of market value of the property in question, maintain order at the arbitration proceedings and make an impartial and fair determination of market value for the property in question.

Prior to September, 2005, property owners could schedule a date to protest their property taxes themselves or be represented by a consultant. Normally the first step in the process was to have an appointment with a CAD staff appraiser. After presenting the owners case to the staff appraiser, and the property owner and staff appraiser could not agree on a reasonable value, the property owner has the option to accept the valuation by the appraiser or present his/her case to the ARB. After presenting the property owners’ case to the ARB, if the property owner still disagreed with the ARB’s valuation of the property, the property owner now has an alternative choice in this process. Prior to September, 2005, the property owner could accept the ARB’s valuation or sue in civil court and have a judge or jury determine the most reasonable value of the property in question. Law suites are an expensive for both parties and lengthy (may be years). This course of action is generally not an economical alternative to resolving the disagreement of value. However, this still may be a viable alternative if the property value assessed by the CAD and the property owner’s opinion of value vary a large amount or the value in dispute is over $1,000,000. The tax consequence on this magnitude of property may economically justify court action. However, the purpose of this article is to make property owners and appraisal districts throughout Texas aware of an affordable alternative, which is binding arbitration. The advantages to both parties (owners and CADs) is an inexpensive and timely (quick) resolution of the dispute.

Since September, 2005, binding arbitration offers the property owner and CADs an affordable way to continue the property tax protest process without court action and additional high legal fees. There are some qualifications the property owner and property must satisfy before an arbitration can take place.

  1. The property value in dispute must be less than $1,000,000.
  2. Property taxes on the property must be current.
  3. Filing for arbitration must be sent to the Appraisal District within 45 days of the ARB’s award (value determination).
  4. The homeowner must send a check for $500, made payable to The Texas Comptroller of Public Accounts.

The arbitration itself is conducted by a licensed real estate appraiser or real estate agent/broker trained in this type of arbitration. Most arbitrations are conducted by lawyers or judges and their fees are considerably higher. Those professions are not qualified for this type of arbitration unless they are also licensed as a real estate appraisers or real estate sales agents/brokers. The Comptroller’s office has a list of licensed real estate appraisers and real estate sales agents/brokers that have satisfied the requirements to qualify as an property tax arbitrator.

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Mike Brubaker