Ekmark & Ekmark, LLC

Ekmark Law

The information contained in the Homeowners Association Tips© is for informational purposes only and does not constitute specific legal advice or substitute for specific legal counsel.  Readers should not act upon this information without seeking professional counsel. Please do not hesitate to contact us at 480-922-9292 with any further questions on these issues.

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Property Taxes for Common Areas

At the end of February, the County Assessor mailed out the 2012 notices of valuation. Each planned community association should have received such a notice for its common area parcels. Please review the valuation notices received to ensure that they reflect a $500 valuation with an assessment ratio of 10% and a legal class of 4. Note that if your common areas have been combined, more than one common area parcel may be included on a valuation notice. If your planned community association did not receive any valuation notices, or if you suspect that all of the association’s common areas are not included on the notices received, please contact us so that we can ensure that all of the association’s common areas are properly titled and properly valued.

If your association has not previously filed for Common Area Valuation, you may be receiving a valuation notice reflecting a very high value, since the property will not be classified as common area by the Assessor. Even if your association has filed for Common Area Valuation in the past, there is always a chance that you will receive a high valuation notice, either due to a re-classification of the property or an error by the Assessor. Do not ignore a high valuation notice! Instead, contact our office as soon as possible, as we may need to appeal the valuation. Please note that the window to file such appeals is only 60 days after the valuation notice was mailed out. This year’s deadline to file an appeal is April 26, 2011.

If you have any questions or would like assistance in filing an appeal, please contact Jessica Maceyko at 480-922-9292.

It is essential that planned community associations be aware of the location and tax status of each common area parcel within the community.  Under Arizona law, common area parcels owned by an association are entitled to common area valuation of $500 per parcel, which typically results in a tax bill between $5 and $10 per parcel per tax year.  (Note that certain exceptions may exist that would raise the tax bill that are not discussed in this article.)  However, sometimes a developer will fail to convey common area parcels to the association.  If the parcels remain in the developer’s name, the association may not receive any tax bills or valuation notices and, therefore, may be completely unaware that these common areas are part of the community and are to be owned by the association.  The ramifications of this can be significant over time, resulting in the accumulation of tens of thousands of dollars in delinquent property taxes, fees and interest that must be paid.

Associations should take a proactive approach to common area valuation and taxation for their common area parcels.  The best way to ensure that each common area parcel has been accounted for is to review a map of the community and mark each common area parcel and, in turn, submit each parcel to the assessor’s office for common area valuation.  Just because an association does not receive a tax bill or valuation notice does not mean that there aren’t common area parcels within the community that remain improperly valued and whose taxes remain unpaid.

Under Arizona law, property owned by a planned community may be eligible for common area property tax valuation, resulting in a significant reduction in property tax.  Specifically, all parcels within a plat may be combined for tax purposes.  The combined parcels are then valued at $500.  This results in a tax of approximately $7.

The rationale behind the statute is that people who live in planned communities should not be subject to double taxation.  For example, the amenities in a community increase the value of the homes.  Thus, an owner in a community with amenities is already paying higher taxes.  Moreover, common areas really do not have any market value because they cannot be sold.

To qualify for common area tax status, the property must meet certain statutory criteria. 

In applying these criteria, the Maricopa County Assessor took the position that any use of such property by the general public – no matter how minimal – disqualifies the property as a common area for tax purposes.  In a significant victory for planned communities, however, the Arizona Court of Appeals recently affirmed that common areas do not have to be used exclusively by owners, residents, or their invited guests to qualify for common area tax valuation.  Further, so long as the property is in general intended for the use of owners, residents, and their invited guests, limited commercial use by the general public will not affect the property’s common area tax status.