The Apartment Association of NM in the form of Attorney Gene Vance and property tax consultant Todd Clarke, represented apartment portfolio owner, Richard Fox, in the handling of his property tax protest case.
In the case, the property owner held title in a series of related Limited Liability Corporations (LLCs) for estate purposes. He and his wife had refinanced their properties in 2007 and again in 2013. In both cases the lender(s) required the property owner to move the ownership of the property from the LLCs, to his personal name before moving them back to the LLC.
In 2007, this related party transfer did not trigger a removal of the 3% cap on property value increases.
In 2014, the assessors office, based on a legal opinion obtained from the State of NM on a related property tax issues, removed the 3% cap and increased property values.
The formal boards ruling for this landmark case can be found here:
FinalDecision-Order-FoxPortfolio-10202014
The opening narrative for the case is as follows:
Attorney Gene Vance and I are here today not just representing our client, Richard Fox, but also the apartment industry through the Apartment Association of NM who has taken a keen interest the number of their members who have experienced a sharp increase in the property tax from the removal of the 3% Cap. These removals did not occur because the owner of the property sold their property, added on to their property or even rezoned their property. These removals were done solely because the property owner took advantage of historically low interest rates to refinance their property. In a post economic meltdown economy, many of the lenders required these owners to handle these refinances through related entity limited liability corporations or LLCs.
Before we lay out our case, I wanted to share with you a story. When House Bill 366 was approved and passed in 2001 and implemented in 2002, its intent was to protect the elderly widowed single family home owner in Santa Fe who risked losing her property due to a sudden and swift property tax increase caused by out of state, Hollywood moguls, purchasing properties around her.
Now, a dozen years later, our case focuses on a similar individual, our clients, Richard and Linda Fox, who have built up a small nest egg of rental investments over decades of ownership, tending to their residents and keeping their properties in good condition.
As part of their estate planning, to ensure continued uninterrupted management of their properties, and to plan for their future, they created a series of related party LLC’s. The need for this estate planning tool became more obvious when both Richard and Linda suffered from cancer in the last few years. Unfortunately, Linda did not survive, and she passed away earlier this year. Richard, who is in his 70s, and is like the elderly widow this law was created for, has had his protection removed by this assessor’s administration in a manner that is not consistent with previous administrations or other county assessors and in direct conflict with state law and a number of legal precedents.
Today, our evidence will show that Under the New Mexico Limited Liability Company Act, there was no change of ownership from substituting the owner’s name on the deed for that of the company. There was no beneficial interest transferred to a separate entity. Interpreting the law to cover these transactions is contrary to the policy behind the 3 per cent cap.
While we all are aware of the inequities created by the property tax lightning law and various follow-up Band-Aid approaches to fixing these, it is ironic the aged population this law was intended to protect is now being used as a weapon to raise their property taxes.