Major Property Tax Reform Proposed in GA Legislature

Posted on February 11, 2010 by Kevin Caiaccio

Last week, Senate Majority Leader Chip Rogers introduced a major overall of the property tax system in GA.  Senate Bill 346 (PDF) was drafted in response to the perceived unfairness which has resulted from falling home values.  Despite the significant drop in property values, assessments for tax purposes have remained artificially high.  This problem was well documented in a thorough report in the AJC late last year.

The comprehensive bill proposed by Sen. Rogers includes over 40 changes to the property tax system and will have a major impact on GA property owners.  Some of the highlights of the bill are as follows:

  • Requires the county to send annual assessment notices on all properties along with information on how to file an appeal.  The current system only requires a notice if the assessed value is changing.
  • Allows the property owner to file an appeal up to one year after receiving the assessment notice. This is probably one of the more controversial provisions of the bill.  Current law requires the owner to file an appeal within 30 days.
  • Requires unanimous approval by the Board of Equalization to approve a value higher than that claimed by the property owner.
  • Requires that the market value for tax purposes not exceed the sales price for the first year after an arms-length sale of the property.

 My initial thoughts on this bill are as follows:

Pros:   would create a more consistent, objective and fair system by shifting some power to the homeowners;  would simplify the tax appeals process.

Cons:  would increase administrative costs to counties; would likely result in reduced revenues unless the counties take the unpopular step of raising millage rates; could delay the approval of the tax digest and make budgeting more difficult;  could hurt schools which derive much of their revenue from property taxes.

Bottom Line:  I like the fundamental policy objectives of this bill, but some of the finer points will need tweaking. 

Sen. Rogers has indicated that the bill will not be fast tracked and that he is seeking wide input on the bill.  As result, the proposal will likely go through many iterations before reaching the Governor's desk. 

Because of the significance of these changes and the impact on GA property owners, I will continue to monitor this bill and provide updates as warranted.

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Court Opinion Reiterates Deference to Trial Court in Confirmation Proceeding

Posted on January 17, 2010 by Kevin Caiaccio

As I wrote back in November, the dramatic fall in real estate values is leading to litigation  involving confirmation proceedings after a non-judicial foreclosure.  Under Ga. law, a creditor is allowed to foreclose on real property without a court hearing or other judicial action.  However, if the lender claims that the foreclosure sale did not fully satisfy the debt obligation and seeks to recover the deficiency, the lender must file a confirmation action which requires a court hearing and testimony as to the fair market value of the property.

The Ga. Court of Appeals issued an opinion earlier this month in Statesboro Blues Development, LLC v. Farmers and Merchants Bank (PDF) which reiterates the deference given to the trial court in determining fair market value.  The case involves a very typical scenario in Georgia:  the borrower purchased a large acreage tract with the intention of developing the property for single-family home lots.  After the residential  market collapsed, the borrower defaulted.  At the time of default, the outstanding loan balance was over $3.5MM.  The bank was the sole bidder at the foreclosure sale (as is usually the case) and bid $2.915MM.  After the foreclosure, the bank sought to recover the deficiency from the borrower and guarantors.

At the hearing, the borrower contested the bank's appraiser's use of comparable sales and his estimate of development costs.  The trial court accepted the appraiser's calculations and found for the bank.  On appeal, the court reiterated Ga. law:  “The trial court is the trier of fact in a confirmation proceeding, and an appellate court will not disturb its findings if there is any evidence to support them.”  Because the trial court found in favor of the bank, the court of appeals held:  "it appears that the opinion is not based on sheer speculation, then this court cannot second guess the methodology utilized to reach the opinion.”

The upshot for future litigation is that the ruling of a trial court will not often be overturned.  The trial court judges are relying on appraisers who are often guessing at fair market value.  The result will be inconsistent rulings based on the leanings of the appraisers and the judges.  In other words, borrowers can only hope for friendly judges.

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