Do you know how to interpret your commercial tax assessment?
Commercial property tax assessments are usually done every 4 years and most local businesses should have already received their assessments from the Saskatchewan Assessment Management Agency (SAMA).
The Moose Jaw and District Chamber of Commerce hosted an event on Tuesday at the Heritage Inn that aimed to help local business owners understand their tax assessments better.
Kristy Van Slyck and Rod Van Slyck from Veridian Property management and Ryan Simpson from Atlus Group all spoke at the event and broke down a commercial property assessment report and what exactly goes into it.
Four representatives from SAMA were also at the event to answer any general questions. Dozens of local business owners were also at the event.
In their presentation, they shared that the assessments are based on five attributes.
“The classification, so, that’s retail, warehouse, office, etc. The quality (which) goes one through five; five is the best and one is poor. Then the base rent that’s applied. The vacancy rate that they apply as well as the cap rate,” says Kristy Van Slyck.
The rent rate is predicted based on the quality class and what your business is classified as. For example, a quality one retail business can have a rent rate of $2.75 while a quality five warehouse business can have a rent rate of $12.35 which is not the maximum.
“The reason this is important is that say you are classified as quality five but really you’re just an average building... so if you think you’re a three or a middle ground warehouse and they think you’re a five... you’re getting charged twice the amount of rent than what you’re getting,” says Van Slyck.
The Vacancy rate is prorated and applied to your property value with a base of 2% and it also sits on a price range depending on what your business is and how much empty space is found on your property. This is determined during an evaluation done by SAMA every few years. Currently, SAMA’s vacancy rates are based on numbers that were appraised in 2019.
The cap rate varies depending on your property and business.
“So, cap rates are calculated by analyzing the property sales that were done during that 4-year period. They (SAMA) adjust the actual sale price for time and some other adjustments. Then they apply the base rent that they have created based on our property income expense reports that we turn in. Then they divide the annual predicted rent by their adjusted sale price and that is how they come up with the cap rate,” says Van Slyck.
Commercial property tax assessment reports are issued at the end of April or the start of May every 4 years but business owners can only access their reports by going onto the SAMA website.
Once the reports are issued, business owners have 30 days to submit an appeal if their property tax assessments are incorrect.
Van Slyck also pointed out that most of SAMA’s evaluations that make up the assessments are done at their own discretion. Therefore, errors in classification, quality, whether the building is rented or owned, etc. can be wrong on the report and in return give you an incorrect assessment.
There is a way to avoid this and then avoid having to appeal on your report after you receive it.
Every business owner in Moose Jaw should receive an information request form. Business owners who rent their buildings should receive one of these forms every year, while business owners who own their buildings should receive a form every 4 years.
According to the SAMA representatives at the event, the forms should be mailed out in May. However, many business owners and the presenters claimed that they either receive the form much later in the year, as late as October, or they don’t receive a form at all.
The SAMA representatives said that they’d raise that concern in their offices since that shouldn’t be the case.
Van Slyck stressed that businesses need to submit these information request forms so that SAMA can provide more accurate assessments.
“While we do get a fairly good return rate I think we could do better and the more returns that we get from the property owners here I think the better our models could be in the future. Our next reassessment is going to be in 2025 so we’re working really hard to get more of the participation from the local property owners in Moose Jaw,” says Darwin Kanius, the Manager of Quality Control for SAMA. “That’s the data relied on to model. So, the more data that we have to model, it will kind of narrow the gap in our data if we’re missing some data. The more returns we have, our model will become more accurate.”
Commercial tax property assessments have already been issued for 2022 and local business owners only have until May 24th to submit appeals for incorrect assessments.