Reference

The ad valorem glossary.

Eighty terms commercial property tax professionals use in notices, hearings and valuation exhibits, with formulas where the math matters.

80 terms

A

Ad valorem taxAssessment

A tax levied in proportion to the value of the thing taxed, from the Latin for "according to value." Real property tax is the standard example: the taxing unit applies a rate to the property's taxable value, so the bill moves whenever the value moves. Because owners do not set the rate, the assessment is the part of the bill they can challenge.

Tax = taxable value x tax rate

Appraisal districtAssessment

In Texas, the county-level public agency that appraises all taxable property for every taxing unit inside the county, for example the Harris Central Appraisal District (HCAD) or the Dallas Central Appraisal District (DCAD). A chief appraiser runs it under a board of directors chosen by the taxing units. The district sets values only; school districts, cities and counties set the rates and collect the tax.

Appraisal review board (ARB)Appeals

The Texas panel of citizens, appointed by the appraisal district's board of directors, that hears property owner protests under Tax Code Chapter 41. Most formal hearings are held before a panel of three members. An owner who disagrees with the ARB order can sue in district court or, if the property qualifies, go to binding arbitration.

Arms-length saleMarket Data

A sale between a willing, informed buyer and a willing, informed seller who are unrelated and neither under pressure to transact. Only arms-length sales belong in a sales comparison grid or a cap rate extraction. Foreclosures, sales between affiliates, bankruptcy sales and many portfolio or sale-leaseback transactions are examined closely and often excluded.

Assessed valueAssessment

The value the assessor places on a property for tax purposes, after applying any statutory assessment ratio, cap or classification. In a state that assesses at 100% of market value it equals the assessor's market value; in Cook County, a Class 5a commercial parcel is assessed at 25% of market value, and in Georgia at 40%. Comparing assessed value with market value is only meaningful once the ratio is stripped out.

Assessed value = market value x assessment ratio

Assessment cycleAssessment

How often an assessor reappraises property. Cook County reassesses on a three-year rotation by township, Texas requires reappraisal at least once every three years and many appraisal districts do it annually, and California does not reappraise a property to market value unless it changes ownership or is newly built. Long cycles let assessments drift from the market, which is why a mid-cycle market decline often goes unrecognized.

Assessment ratioAssessment

The ratio of assessed value to market value, either as the statute prescribes it or as a ratio study measures it. Texas and Florida assess at 100% of market value, Georgia at 40%, and Cook County at 25% for Class 5a commercial property. When the legal ratio and the measured ratio differ, the gap is the basis for an equalization factor and for uniformity arguments.

Assessment ratio = assessed value / market value

B

Band of investmentValuation

A method that builds an overall capitalization rate from the cost of the two pieces of capital behind a property: debt and equity. The rate is the loan-to-value ratio times the mortgage constant plus the equity share times the equity dividend rate. Appraisers use it to test a cap rate against current financing terms; it supports a market-derived rate but rarely replaces one.

R0 = (M x Rm) + ((1 - M) x Re)

Binding arbitrationAppeals

An appeal route in which an independent arbitrator decides the value and the result binds both sides. Texas Tax Code Chapter 41A lets an owner take an ARB order to arbitration instead of district court when the property is a homestead or the value in the ARB order is $5 million or less, with a deposit paid to the Comptroller that scales with value. Georgia likewise lets a taxpayer choose arbitration instead of a Board of Equalization hearing.

Board of equalizationAppeals

An independent local or state body that hears challenges to assessments and can adjust them so that property is assessed equally. The name and role vary: Georgia has county boards of equalization that hear appeals from the board of assessors, Arizona uses a State Board of Equalization for its largest counties including Maricopa, and in California the county board of supervisors sits as the board of equalization, usually through an assessment appeals board.

Board of Review (BOR)Appeals

The Illinois county body that hears assessment complaints after the assessor has set values (35 ILCS 200/16-55). In Cook County it is run by three elected commissioners and takes complaints in filing windows set township by township. A BOR decision can be appealed to the Illinois Property Tax Appeal Board or to the circuit court.

Business enterprise valueValuation

The value of the operating business conducted at a property, such as a hotel's brand affiliation, management contracts, workforce and going-concern goodwill, as distinct from the real estate itself. Most states tax only the real property, so an income valuation of a hotel or other operating asset must remove the portion of income attributable to the business before capitalizing. Failing to make that allocation is a common reason assessors overvalue hospitality property.

C

CAMA (computer-assisted mass appraisal)Assessment

The software and statistical models an assessor uses to value every parcel in a jurisdiction at once, usually with cost tables, regression on recent sales and neighborhood factors. CAMA is calibrated on past sales and the assessor's data, so it lags when markets move quickly and handles unusual commercial properties poorly. IAAO and National Tax Association research ties the 15% to 25% average over-assessment of commercial property during market shifts to lagging CAMA models.

Capital expenditures (CapEx)Income & Expense

Spending that extends a building's life or adds to its value, such as a new roof, a parking lot reconstruction or a lobby renovation, as opposed to routine repairs. CapEx is not an operating expense and does not belong in net operating income. Appraisers account for it through a reserve for replacement, so an owner's actual CapEx in a given year should be removed during normalization.

Capitalization rate (cap rate)Valuation

The ratio of a property's stabilized net operating income to its value, also called the overall rate or R0. Market cap rates are extracted from arms-length sales by dividing each sale's NOI by its price. A move from 7% to 8% cuts the indicated value of the same income stream by 12.5%, which is why the rate is the most contested number in an income approach.

R0 = NOI / Value

Change in ownership (Prop 13)Legal & Statute

Under California's Proposition 13, a transfer of a present interest in real property, or a transfer of control of a legal entity that owns it, triggers reassessment to current market value and sets a new base year value. Acquiring more than 50% of the ownership of an entity that holds the property is a change in control, reportable on Form BOE-100-B within 90 days. Entity-level transfers are easy to miss because no deed is recorded.

Coefficient of dispersion (COD)Assessment

A measure of how tightly assessment-to-sale ratios cluster around the median: the average absolute deviation from the median ratio, divided by the median and multiplied by 100. A low COD means similar properties are assessed similarly; a high COD means uniformity is poor. IAAO's Standard on Ratio Studies publishes target ranges and tolerates wider dispersion for income-producing property than for single-family homes.

COD = (average absolute deviation from the median ratio / median ratio) x 100

Common area maintenance (CAM)Income & Expense

The costs of operating shared areas of a multi-tenant property, such as landscaping, lighting, parking lot upkeep and security, that the landlord recovers from tenants on a pro-rata basis. In most retail and office leases real estate taxes and insurance are reconciled alongside CAM. When an assessment drops, the saving normally reaches tenants through the next CAM reconciliation.

Common level ratioAssessment

The ratio of assessed value to market value that prevails across a county, derived from a sales ratio study. In Pennsylvania, the State Tax Equalization Board publishes it annually and it is used to convert a market value finding into an assessment; it matters most in counties such as Allegheny that assess from a base-year value. Appeals there turn on whether the assessment equals the market value multiplied by the common level ratio.

Cost approachValuation

A valuation method that adds land value to the cost of replacing the improvements and subtracts accumulated depreciation from physical deterioration, functional obsolescence and external obsolescence. Assessors lean on it for new, special-use and unusual buildings, and CAMA systems use cost tables as a base layer. It is rarely the primary approach in a commercial appeal, but a cost value far above the income and sales indications points to missing obsolescence.

Value = land value + replacement cost new - depreciation

D

Dark store theoryAppeals

An argument in big-box retail appeals that an occupied store should be valued by comparison with sales of vacant ("dark") stores, not by its replacement cost or its operating performance. Taxpayers say the real estate is worth what a buyer would pay to re-lease the building; assessors answer that dark sales are often deed-restricted, are not comparable to an operating store, and understate its value in use. Courts have split, and some states have passed legislation that limits the theory.

Direct capitalizationValuation

A method that converts one year of stabilized net operating income into value by dividing it by an overall cap rate. It works when a property is stabilized and its income is reasonably level, and it is the default for most commercial tax appeals. For lease-up, large rollover or uneven income, a discounted cash flow is the better tool.

Value = stabilized NOI / R0

Discounted cash flow (DCF)Valuation

A method that projects a property's cash flows over a holding period, usually 5 to 10 years, and discounts each year plus the reversion at the end of the period to present value. It handles uneven lease expirations, free rent, tenant improvement spending and lease-up that direct capitalization cannot. Boards ask for the discount rate, growth assumptions and terminal cap rate to be supported with market data, so the model is only as persuasive as those inputs.

Value = sum of NOI(t) / (1 + r)^t + Reversion / (1 + r)^n

E

Effective gross income (EGI)Income & Expense

The income a property is expected to collect: potential gross income less vacancy and collection loss, plus other income such as parking, antenna leases or late fees. It is the revenue line from which operating expenses are subtracted to reach net operating income. Appraisers use market vacancy rather than the owner's actual vacancy when the actual figure is not sustainable.

EGI = PGI - vacancy and collection loss + other income

Effective tax rateAssessment

Annual property tax divided by market value, which folds the assessment ratio, equalization, exemptions and every taxing unit's rate into one number. A property with a $10 million market value that pays $250,000 a year has a 2.5% effective rate. It is the figure that converts a value reduction into tax savings, and it is what gets added to a base cap rate to form a loaded rate.

Effective tax rate = annual property tax / market value

Equalization factorAssessment

A multiplier applied to assessed values to bring a county's or township's average assessment level to the statutory standard. In Illinois, the Department of Revenue sets the state equalization factor by dividing 33.33% by the county's measured average level of assessment, and Cook County's factor has been close to 3.0 in recent years (3.0355 for tax year 2024). Because it multiplies every parcel, it does not change a property's position relative to its peers, only the taxable base the rate is applied to.

Equalization factor = 33.33% / measured average level of assessment

Equalized assessed value (EAV)Assessment

The Illinois tax base: the assessed value multiplied by the equalization factor, less any exemptions. The composite tax rate from all taxing districts is then applied to the EAV to produce the bill. When the Board of Review lowers an assessed value by a given amount, the EAV falls by that amount times the equalization factor, so the tax saving is larger than the raw assessment change suggests.

EAV = (assessed value x equalization factor) - exemptions

Equity comparableAppeals

A property offered to show that the subject is assessed higher than similar property, as opposed to a sale offered to show market value. Good equity comparables match the subject in use, class, size, age, condition and location, and are adjusted for remaining differences. Under Texas Tax Code §41.43(b)(3), the owner compares the subject's appraised value with the median appraised value of a reasonable number of comparable properties appropriately adjusted.

External obsolescenceValuation

A loss in value caused by factors outside the property that the owner cannot cure, such as oversupply in the submarket, a declining local economy, an adjacent nuisance or a change in demand for the property type. Appraisers measure it by capitalizing the rent loss it causes or by paired sales. It is the usual explanation when a cost approach produces a value that the income and sales approaches do not support, and mass appraisal models rarely capture it.

F

Fair cash valueLegal & Statute

The Illinois value standard: the amount for which a property can be sold in the due course of business and trade, not under duress, between a willing buyer and a willing seller (35 ILCS 200/1-50). Illinois generally assesses at 33 1/3% of fair cash value, with Cook County's classification ordinance setting lower levels for some classes, such as 25% for Class 5a commercial property. Michigan and Ohio use similar concepts under the names true cash value and true value.

FF&EValuation

Furniture, fixtures and equipment: the movable items in an operating property, such as hotel guest room furnishings, restaurant equipment and kitchen gear. FF&E is personal property that is taxed separately or excluded from real property value, depending on the state. In a hotel income valuation, an FF&E reserve is deducted from NOI and the value of installed FF&E is removed so that the assessment reflects the real estate alone.

Full cash valueLegal & Statute

Arizona's value standard, defined in A.R.S. §42-11001 and generally equivalent to market value as derived by standard appraisal methods. Arizona levies primary property taxes on limited property value, which cannot rise more than 5% a year and cannot exceed full cash value, so an appeal helps only when it pushes full cash value below the figure limited property value would otherwise reach. In California, "full cash value" is the Proposition 13 base year value adjusted for inflation.

Functional obsolescenceValuation

A loss in value from features inside the property that no longer meet market expectations, such as 18-foot clear height in a market that leases 32-foot warehouses, an inefficient office floor plate, too few dock doors or inadequate parking. It is curable when the cost to fix it is less than the value it restores, and incurable otherwise. Documenting it with market rent and sale evidence is how owners offset a cost approach that assumes the building is fully competitive.

G

Gross leasable area (GLA)Market Data

The total floor area designed for tenant occupancy and exclusive use, measured to the centerline of shared walls and excluding common areas. It is the standard rent and value metric for shopping centers, where rents, sales and tax per square foot are all quoted on GLA. Assessors sometimes use gross building area instead, so a comparison across sources must confirm which measure each uses.

Gross rent multiplier (GRM)Valuation

The ratio of a property's sale price to its gross annual rent, applied to the subject's rent to indicate value. It ignores expense differences, so it suits small multifamily and small commercial properties where operating data is thin and expense ratios are similar. For larger income-producing properties, boards expect an NOI-based approach instead.

GRM = sale price / gross annual rent; Value = GRM x gross annual rent

H

Highest and best useValuation

The reasonably probable use of a property that is legally permissible, physically possible, financially feasible and maximally productive. It is tested twice: as if the land were vacant, and as the property is improved. A building worth less than the land beneath it under the as-improved test suggests that demolition or conversion is the highest and best use, which changes both the comparable sales and the value.

Homestead capLegal & Statute

A limit on how fast the taxable value of an owner-occupied residence can rise from year to year. Texas caps homestead appraisal growth at 10% under Tax Code §23.23, and Florida's Save Our Homes limits the increase to 3% or the change in the consumer price index, whichever is lower (Fla. Stat. §193.155). These limits do not protect commercial property, which is why commercial owners look to separate non-homestead limits where they exist.

I

Income approachValuation

A valuation method that measures a property's worth as the present value of the income it is expected to produce, through direct capitalization or a discounted cash flow. For stabilized commercial property it is usually the primary approach, because buyers price these assets on income. It is also the approach where mass appraisal is weakest, since CAMA models rarely see a property's actual rents, expenses or vacancy.

Informal hearingAppeals

A meeting with the assessor's staff before a formal board hearing, where the owner presents evidence and the two sides try to agree on a value. In Texas it is an informal conference with an appraisal district appraiser after a protest is filed, and in Florida it is an informal conference with the property appraiser before the Value Adjustment Board hearing. Cook County's counterpart is an appeal to the Assessor's Office before a complaint to the Board of Review. Many commercial protests settle at this stage, and unresolved ones go on to the formal hearing.

J

Just valueLegal & Statute

Florida's constitutional standard for assessment (Art. VII, §4), which Florida courts equate with fair market value. Fla. Stat. §193.011 lists eight factors the property appraiser must consider, including present cash value, highest and best use, income and the net proceeds of sale, and it reduces sale prices by 15% for the usual costs of sale when they are used. Just value is the figure a petition to the Value Adjustment Board challenges.

L

Land-to-building ratioMarket Data

Site area divided by gross building area, a basic screening characteristic for commercial parcels. A ratio of 4 to 1 means four square feet of land for every square foot of building, typical of suburban industrial or retail, while a ratio near 1 to 1 describes dense urban development. Appraisers also use the phrase for land value divided by building value, so check which meaning a source intends, and note that a wrong land or building area in the assessor's record corrupts every value built on it.

Land-to-building ratio = site area / gross building area

Leasing commissionsIncome & Expense

Fees paid to brokers for procuring a tenant, usually a percentage of the aggregate base rent over the lease term, paid at signing and again on renewal or expansion. They are a cost of re-leasing space, not a recurring operating expense, so they are removed from the operating statement when normalizing NOI. In a discounted cash flow they appear as a separate leasing cost when leases roll.

Loaded cap rateValuation

A capitalization rate increased by the effective tax rate so that real estate taxes do not have to be deducted from NOI. It avoids a circular calculation, since the tax depends on the value being estimated. With a 7.0% base rate and a 2.5% effective tax rate, the loaded rate is 9.5%, and a pre-tax NOI of $950,000 indicates a value of $10,000,000.

Value = NOI before real estate taxes / (base cap rate + effective tax rate)

M

Market rentMarket Data

The rent a space would most probably command in the open market for similar space, on similar lease terms, as of the valuation date. It is compared with contract rent, the rent a tenant actually pays, to find leases signed above or below market. In an income valuation, rents are generally set at market for vacant and expiring space, while in-place leases may be held at contract rent for the remaining term.

Market valueValuation

The price a property would most probably bring in a competitive and open market, with a willing and informed buyer and seller, neither under undue pressure, and with reasonable time to expose it for sale. Texas defines it in Tax Code §1.04(7), and other states use their own wording, such as fair cash value in Illinois and just value in Florida. The income, sales comparison and cost approaches are three ways of estimating it.

Mass appraisalAssessment

The practice of valuing a group of properties as of a common date using standardized methods and statistical testing, in contrast to a single-property appraisal. Assessors rely on it because they must value thousands of parcels every cycle. It produces credible values for homogeneous property, such as tract homes, and weaker values for commercial property, where rents, vacancy and condition differ widely from building to building.

Mill levyAssessment

The tax rate a taxing district sets, expressed in mills, and the term used in Colorado and Kansas for the total of the rates levied on a parcel. In Colorado, the bill is the actual value multiplied by the assessment rate for the property class and then by the total mill levy per thousand. A value reduction in an appeal therefore lowers the bill in direct proportion.

Tax = actual value x assessment rate x mill levy / 1,000

MillageAssessment

A tax rate expressed in mills, where one mill is $1 of tax per $1,000 of taxable value. Florida, Georgia, Michigan and Ohio, among others, levy this way, and a parcel's millage is the sum of the rates of the county, school district, city and special districts. A combined 40 mills on $3.0 million of taxable value produces $120,000 of tax.

Tax = taxable value x mills / 1,000

N

Net lease (NNN)Income & Expense

A lease in which the tenant pays base rent plus its pro-rata share of real estate taxes, insurance and common area maintenance, which is why it is called triple net. Under a net lease the tax burden sits with tenants, so an assessment reduction usually flows through to them in the reconciliation, and some leases address who may contest the assessment and how savings are shared. Landlords still carry the tax cost on vacant space, which is where their direct benefit lies.

Net operating income (NOI)Income & Expense

Effective gross income less the operating expenses of running the property. It excludes debt service, depreciation, income taxes, capital expenditures and leasing costs, so it measures what the real estate earns regardless of how it is owned or financed. For a tax appeal, NOI is stabilized, then either reduced by real estate taxes and capitalized at a base rate or left before taxes and capitalized at a loaded rate.

NOI = EGI - operating expenses

Non-homestead assessment capLegal & Statute

A limit on how much the assessed value of commercial and other non-homestead property can rise in a year. Florida limits increases to 10% for non-school levies under Fla. Stat. §193.1555 and resets the assessment to just value after a change of ownership or control, and Michigan limits annual taxable value growth to the lesser of 5% or inflation and uncaps it on transfer. Where a cap holds the assessment below market value, a value appeal saves nothing until the market value falls below the capped figure.

NormalizationIncome & Expense

The adjustment of an owner's reported income and expenses to a stabilized, market-supportable basis that a buyer would underwrite. It removes debt service, depreciation, one-time and capital items, leasing commissions and owner-specific costs, then applies market vacancy, a market management fee and reserves for replacement. Boards trust a normalized statement because every adjustment can be traced back to the owner's operating statement.

Notice of appraised valueAssessment

The Texas notice an appraisal district mails each spring, showing the prior-year value, the proposed appraised value and market value, and the protest deadline. The deadline is generally May 15 or the 30th day after the notice was delivered, whichever is later (Tax Code §41.44). Other jurisdictions use different names, such as the reassessment notice in Cook County and the TRIM notice in Florida, but each starts a short appeal clock.

Notice of protestAppeals

The filing that starts a Texas protest, made on Comptroller Form 50-132 and submitted to the appraisal review board under Tax Code §41.41. It states the grounds, such as incorrect market value or unequal appraisal, and requests a hearing. A late notice is accepted only for good cause and only if filed before the ARB approves the appraisal records (§41.44(b)).

O

Over-assessmentAssessment

An assessment above the property's market value, or above the level at which comparable property is assessed. IAAO and National Tax Association research puts the average over-assessment of commercial property at 15% to 25% during market shifts, because lagging CAMA models do not see falling income. ATALI ELECTRIC's Assessment Audit expresses it as a score by comparing the assessed value with sale and peer-assessment benchmarks.

P

Paired salesMarket Data

A technique that isolates the market's value for one characteristic by comparing two sales that are alike in every respect except that one. The difference in price indicates the adjustment, for example for a loading dock count or a parking ratio. It needs verified arms-length sales and works best with several pairs, since a single pair can carry noise from unrelated differences.

Parcel identification number (PIN, APN)Assessment

The unique number an assessor assigns to a parcel, called the PIN in Cook County, where it has 14 digits, the APN in California and Arizona, and an account number in Texas appraisal districts. Every appeal begins with it, and one wrong digit pulls the wrong property record. Parcels combined or split since the last notice carry new numbers, so matching an old file to the current roll is a routine data check.

Potential gross income (PGI)Income & Expense

The income a property would produce if every space were leased at market rent, including reimbursements at full occupancy, before any allowance for vacancy or collection loss. It is the top line of an income valuation. Vacancy and collection loss are subtracted from it to reach effective gross income.

PGI = leasable area x market rent per sq ft (plus reimbursements at full occupancy)

Price-related differential (PRD)Assessment

A ratio study statistic that tests whether high-value and low-value properties are assessed at the same level: the mean assessment ratio divided by the weighted mean ratio. IAAO's standard target range is 0.98 to 1.03. A PRD above 1.03 signals regressivity, meaning higher-value properties are assessed at lower ratios than cheaper ones, and a PRD below 0.98 signals the opposite.

PRD = mean ratio / weighted mean ratio

Prop 13 base year valueLegal & Statute

Under Article XIII A of the California Constitution, a property's taxable value is its base year value, which is its 1975 value or its market value at the most recent change in ownership or completion of new construction. The base year value then rises each year by an inflation factor limited to 2%. Because it can fall well below market value for a long-held property, owners with older base years rarely have a reason to appeal unless a Prop 8 decline brings market value beneath it.

Prop 8 decline in valueLegal & Statute

Proposition 8 (1978) requires the California assessor to enroll the lower of a property's factored base year value and its market value on the January 1 lien date. An owner who believes market value has fallen below the enrolled figure files an Application for Changed Assessment with the county assessment appeals board, generally between July 2 and either September 15 or November 30 depending on the county. A reduction is reviewed every January 1 and rises with the market, up to the factored base year value.

Property classAssessment

The category an assessor assigns to a parcel by use, which can set the assessment level, the valuation method and the appeal rules. Cook County assesses Class 5a commercial property at 25% of market value and Class 2 residential property at 10%, and Texas appraisal districts use state category codes such as F1 for commercial real property. A parcel in the wrong class is assessed at the wrong level, so confirming the class is a first check in any audit.

PTAB (Property Tax Appeal Board)Appeals

The Illinois state agency that hears assessment appeals from decisions of the county boards of review (35 ILCS 200/16-160). An owner generally files within 30 days after notice of the Board of Review decision, or within 30 days after the board transmits its final action for the township to the assessor, whichever is later. PTAB hears appeals de novo, usually on written evidence, and its decisions are reviewable in the circuit court.

R

Real Property Income and Expense (RPIE) statementLegal & Statute

The annual statement of income and expenses that New York City requires owners of income-producing property to file electronically with the Department of Finance, generally by June 1. The Department uses the data to value commercial property, and the same figures are what the owner will present on appeal. Late or missing filings draw penalties of up to 3% of the property's assessed value and can cost the owner a substantive Tax Commission hearing the following year.

ReconciliationValuation

The step in which an appraiser weighs the value indications from the income, sales comparison and cost approaches and reaches one conclusion. It is a judgment about the relevance, reliability and data quality of each indication, not an average. A hearing officer will discount a packet that simply averages three numbers, and will credit one that explains why a single approach carries the most weight.

Rent rollIncome & Expense

A schedule of every tenant and suite in a property, showing square footage, lease start and expiration dates, base rent, scheduled increases, reimbursements and security deposits. It is the core exhibit of an income approach and the source for potential gross income, vacancy and rollover. Boards often require a rent roll dated near the valuation date and certified by the owner.

Reserves for replacementIncome & Expense

An annual allowance, usually quoted per square foot, for replacing building components that wear out before the building does, such as roofing, HVAC equipment, paving and floor coverings. Appraisers deduct it from NOI even though the owner does not spend it evenly each year, because a buyer would price the eventual cost. Owners and assessors often disagree on whether to deduct a reserve, so the evidence for the amount matters.

S

Sales comparison approachValuation

A valuation method that indicates value from the prices of similar properties that sold recently, adjusted for differences. The elements of comparison are property rights, financing terms, conditions of sale, market conditions, location and physical characteristics, with price per square foot as the usual unit. For income-producing property it supports and tests the income approach, and for owner-user buildings it is often the primary method.

Sales ratio studyAssessment

A comparison of assessed values with the sale prices of properties that sold, used to measure the level and uniformity of assessment. It yields the median ratio, the coefficient of dispersion and the price-related differential. Assessors and state agencies run them, for example the Texas Comptroller's annual Property Value Study and the Illinois Department of Revenue's work that sets equalization factors.

Special magistrateAppeals

The hearing officer who hears petitions for a Florida Value Adjustment Board in counties with more than 75,000 residents. Special magistrates are generally state-certified appraisers for value disputes and Florida Bar members for exemption and classification disputes, and they take testimony and recommend a decision with findings of fact. The board can adopt the recommendation without holding another hearing.

T

Tenant improvements (TI)Income & Expense

The build-out of leased space to a tenant's needs, funded in part or in full by the landlord through a TI allowance quoted per square foot. It is a cost of leasing, so it is treated as a capital item or a leasing cost, not an operating expense. Appraisers account for it in a discounted cash flow at each lease rollover and remove actual spending when normalizing NOI.

Terminal capitalization rateValuation

The cap rate applied in a discounted cash flow to the NOI of the year after the holding period, to estimate the property's sale price at the end of it. It is also called the reversion or going-out rate and is usually somewhat higher than the going-in rate, because the building will be older and the buyer will face rollover risk. Because the reversion often makes up more than half the DCF value, hearing officers ask for market evidence behind it.

Reversion = NOI in year (n + 1) / terminal cap rate, less costs of sale

Time adjustmentMarket Data

An adjustment to a comparable sale price for the change in market conditions between the sale date and the valuation date, also called a market conditions adjustment. Appraisers support it with paired or repeat sales, or with trends in rents and cap rates. It matters most in a falling or rising market, where an unadjusted year-old sale can misstate value by double digits.

Adjusted price = sale price x (1 + monthly market change)^(months from sale to valuation date)

TRIM noticeAssessment

The Florida Truth in Millage notice, formally the Notice of Proposed Property Taxes, which the property appraiser mails each August under Fla. Stat. §200.065. It is not a bill: it shows the just value, assessed value and exemptions, along with the millage rates the taxing authorities propose. A petition to the Value Adjustment Board is due on or before the 25th day after the notice is mailed (Fla. Stat. §194.011(3)(d)).

U

Unequal appraisalAppeals

A claim that a property is appraised at a higher level than comparable property, whether or not its value exceeds market value. In Texas the claim arises under Tax Code §41.43(b)(3) before the ARB and §42.26 in court, and the remedy is a reduction to the median appraised value of a reasonable number of comparable properties appropriately adjusted. A property can win on unequal appraisal even when its appraised value is at or below market value.

UniformityLegal & Statute

The constitutional principle that property must be taxed equally and in proportion to its value, found in Texas Const. art. VIII, §1(a) ("equal and uniform") and Ill. Const. art. IX, §4(a) (uniform levy by valuation). The U.S. Supreme Court has held that the Equal Protection Clause protects owners from systematic assessment disparities (Allegheny Pittsburgh Coal Co. v. County Commission of Webster County, 488 U.S. 336 (1989)). A uniformity argument measures the subject against similar property, not against market value.

USPAPValuation

The Uniform Standards of Professional Appraisal Practice, published by The Appraisal Foundation's Appraisal Standards Board, which govern how licensed and certified appraisers develop and report value opinions. Many boards accept owner-prepared evidence without it, but a board or court that requires a signed appraisal expects a state-licensed or certified appraiser to prepare it. ATALI ELECTRIC compiles evidence and analytics; it does not issue USPAP appraisal reports.

V

Vacancy and collection lossIncome & Expense

An allowance, subtracted from potential gross income, for space that sits empty and rent that is never collected. Appraisers use a stabilized market rate, reflecting the submarket and the property's competitive position, rather than the owner's actual vacancy when that figure is unusually high or low. A market rate applied to a half-empty building is one of the main ways income valuations come in below the assessor's value.

Vacancy and collection loss = PGI x (market vacancy rate + collection loss rate)

Valuation dateAssessment

The date as of which a property's value is determined for tax purposes. It is January 1 in Texas, Illinois, California and Florida, and in Arizona it is January 1 of the year before the tax year. Evidence has to speak to that date: a sale or lease signed afterward may be considered as a trend indicator, but the conclusion must be stated as of the valuation date.

Value Adjustment Board (VAB)Appeals

The Florida county board, made up of two county commissioners, one school board member and two citizen members, that hears petitions on assessments, exemptions and classifications (Fla. Stat. §194.015). In larger counties special magistrates hear the petitions and the board adopts their recommendations. A petition is filed on Form DR-486 within 25 days of the TRIM notice mailing, and further review lies in circuit court, generally within 60 days.

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