Start Date
22-6-2023 10:30 AM
End Date
22-6-2023 12:15 PM
Description
The Dutch property tax assessment system has been on a yearly revaluation cycle for over 15 years. Municipalities and service centers make sure each property, both commercial and residential, is reassessed every year. This setup fosters actual values, trust, and transparency, however there are downsides. A yearly revaluation cycle goes hand in hand with a yearly possibility to object and appeal against the assessed value. Although there are not many objections (around 3% for residential properties and around 6% for non-residential properties) these objections cause a growing concern for municipalities and service centers working for municipalities. Under Dutch law, costs made for hiring professional assistance to object or to make a court appeal are covered by the “losing” party (in the case of a change in assessed value, the municipality or service center). This phenomenon has led to the emergence of legal fee companies (LFCs) (a specific form of tax agents), in Dutch referred to as No Cure No Pay (NCNP) companies, which make a business case of filing objections and appeals in the name of property owners. If the objection or appeal is granted the LFCs will take the compensation of the costs as generated income. If the objection or appeal is not granted, the costs will be for the LFC. The process of filling an objection or an appeal is intended to be simple so any taxpayer should be able to this without professional assistance. But for many people formal procedures with government is always considered a barrier. LFCs serve an important role by making the process for objections and appeals accessible for people who are affected by such a barrier. They also induce that municipalities and service centers maintain their high-quality processes. Thereby limiting the number of objections and appeals which get granted. Though, on the downside, LFC activities now amount up to 52% of all the objections and appeals filed in the Dutch property tax system. The costs of covering these objections and appeals paid to these LFC’s is about 10% of the total costs of the system. But because these LFC’s benefit from long and formal procedures the main problem is that handling these long and formal procedures for objections and appeals is very hard to do within the annual cycle. And this results in the fact that objections and appeals now cause one third to half of the total yearly costs of the assessment. This presentation will shed more light on the phenomenon and will address possible solutions. These solutions are mainly sought in way to stimulate taxpayers to use more informal contact with the municipality or service center, with question on the correctness of the assessed value. For the quest to solutions, we used the comparison (benchmark) of different systems based on the IPTI scorecard. From this benchmark we selected to possible tools to solve this problem: a proper central site on property assessment run by government and alternatives way to settle a difference in opinion on the value of a property.
Recommended Citation
Hermans, Luc and Kathmann, Ruud, "The Impact of Legal Fee Companies on the
Dutch Real Estate Assessment Practice" (2023). Mass Appraisal Valuation Symposium. 1.
https://researchexchange.iaao.org/mavs/mavs2023/session6/1
The Impact of Legal Fee Companies on the Dutch Real Estate Assessment Practice
The Dutch property tax assessment system has been on a yearly revaluation cycle for over 15 years. Municipalities and service centers make sure each property, both commercial and residential, is reassessed every year. This setup fosters actual values, trust, and transparency, however there are downsides. A yearly revaluation cycle goes hand in hand with a yearly possibility to object and appeal against the assessed value. Although there are not many objections (around 3% for residential properties and around 6% for non-residential properties) these objections cause a growing concern for municipalities and service centers working for municipalities. Under Dutch law, costs made for hiring professional assistance to object or to make a court appeal are covered by the “losing” party (in the case of a change in assessed value, the municipality or service center). This phenomenon has led to the emergence of legal fee companies (LFCs) (a specific form of tax agents), in Dutch referred to as No Cure No Pay (NCNP) companies, which make a business case of filing objections and appeals in the name of property owners. If the objection or appeal is granted the LFCs will take the compensation of the costs as generated income. If the objection or appeal is not granted, the costs will be for the LFC. The process of filling an objection or an appeal is intended to be simple so any taxpayer should be able to this without professional assistance. But for many people formal procedures with government is always considered a barrier. LFCs serve an important role by making the process for objections and appeals accessible for people who are affected by such a barrier. They also induce that municipalities and service centers maintain their high-quality processes. Thereby limiting the number of objections and appeals which get granted. Though, on the downside, LFC activities now amount up to 52% of all the objections and appeals filed in the Dutch property tax system. The costs of covering these objections and appeals paid to these LFC’s is about 10% of the total costs of the system. But because these LFC’s benefit from long and formal procedures the main problem is that handling these long and formal procedures for objections and appeals is very hard to do within the annual cycle. And this results in the fact that objections and appeals now cause one third to half of the total yearly costs of the assessment. This presentation will shed more light on the phenomenon and will address possible solutions. These solutions are mainly sought in way to stimulate taxpayers to use more informal contact with the municipality or service center, with question on the correctness of the assessed value. For the quest to solutions, we used the comparison (benchmark) of different systems based on the IPTI scorecard. From this benchmark we selected to possible tools to solve this problem: a proper central site on property assessment run by government and alternatives way to settle a difference in opinion on the value of a property.
