Should the Government Have to Pay the Attorney's Fees of the Property Owner Who Successfully Challenges Property Tax Assessments?

In honor of tax day, we are re-posting an article entitled “Just How Sensible and Effective is Georgia’s Effort to Reduce Inflated Property Tax Assessments.” It appears that Georgia is one of only two states that awards attorney fees to a property owner who prevails in challenging the government’s property tax assessments – is this a good or bad policy?

The Taxes Would Likey Be High For Pidemont Park

Piedmont Park – A High Tax Area

Due to the sheer amount of money involved, property tax assessment is a highly contentious issue for both governments and property owners.  Those jurisdictions with property taxes rely heavily on them as a major source of income and would obviously like to collect every possible cent.  This can be a large sum of money for many property owners and it is important to have an honest system that protects the taxpayer by preventing governments from excessively valuing property.

The approach used by Georgia is to dissuade excessive valuation by making the government pay the attorneys fees of any property owner who successfully challenges the government’s assessment of his or her property.  This sounds like a sensible way to create a fair system for the taxpayer, but does it really reduce the number of excessive assessments in a manner that is also fair to the government and taxpayers as a group?

Traditionally, awarding attorneys fees to the victorious party is reserved for unique situations where a party needs to be compensated for an unjust trip to the courthouse.  Our country was founded on the idea that we should all have the ability to fight for our rights in court; the chance of having to pay the other party’s attorneys thousands or tens of thousands of dollars would act as a major barrier to the legal system and discourage many legitimate lawsuits.

Though giving people rights results in an enormous amount of litigation, we would rather have too many lawsuits than risk preventing people from accessing their legal rights or petitioning for more rights.  As a result, awarding attorneys fees is usually reserved for those situations in which one party either acts in bad faith or brings a claim that has absolutely no legal or factual basis

Georgia Capitol

Georgia Capitol

This is the case for both §13-6-11 and § 9-15-14 of the Georgia Code.  The latter section awards attorney’s fees to any party whom another party has asserted “a claim, defense, or other position with respect to which there existed such a complete absence of any justiciable issue of law or fact.”  This compensates a party for having to defend against a frivolous lawsuit.  The former section awards a plaintiff attorney’s fees if the defendant acted in bad faith, was stubbornly litigious, or caused unnecessary trouble and expense.

Other states as well as the federal government have very similar statutes in place.  The general idea is that if a party has acted in bad faith by going out of his or her way to wrong you or has raised unbelievable accusations that no court could possibly substantiate then the party should pay your attorney’s fees.

In Georgia we award attorneys fees to parties who prevail on a property tax assessment appeal.  However, § 48-5-311 of the Georgia Code only allows attorneys fees if it is determined, either by judge or jury, that the county board of equalization over-assessed 1.) a commercial property by 20 percent or more; or 2.) a residential property by 15 percent or more.  Nothing more is needed.  No need to show bad-faith on the part of the assessor.  No need to show that absolutely no issue of fact or law exists.  Perhaps this is fine; we want an accurate assessment of property value, as anything we do should be based on the most accurate information available, and it’s unfair for a property owner to have to overpay in taxes due to a false assessment and then pay to defend against those false assessments.

Generic Texas Ranch Image

Generic Texas Ranch Image

After conducting some research it appears that Texas is the only other state that awards attorney’s fees if an appeal results in a lower property value.  While Georgia stipulates a certain percentage difference, Texas awards fees as long as the value found by the appeals process is lower than the assessed value.

In 2011 the Texas Appeals Court in Dallas determined that the award of attorney’s fees is mandatory; if the amount on appeal is lower than the assessed value a court must award attorneys fees to the property owner.  So, like in Georgia, it is not necessary to show bad-faith or a lack of legal or factual controversy.

While Georgia and Texas are certainly acting in a sensible manner by attempting to create an honest system, without a requirement of bad faith or unreasonableness, awarding attorney’s fees does nothing to solve the overall situation of tax assessors inflating property values.  The law doesn’t make clear what is reasonable and what is unreasonable.

There exists a number of different ways to reasonably assess property and different people will choose different methods and factors.  Two assessors could base a property’s value on different factors or use different weights for the same factors and come up with very different values; but both values would be based on reasonable methods.  So even though a tax assessor operates in good-faith and does what a reasonable assessor would do, if a random jury decides it would have chosen other factors and arrives at the stipulated lower value, the government must pay attorney fees.

Louisiana Wetlands

Louisiana Wetlands

Though Georgia courts have fallen short of declaring attorneys fees as punitive in a nature and therefore designed to promote lawful behavior by punishing those that flagrantly disregard the law (those acting in bad-faith), other state courts reached such a conclusion.  In Vaughn v. Franklin, 785 So.2d 79 (La. App. 1st Cir. 2001),  the Louisiana Court of Appeals stated that attorney’s fees are penile in nature and should be strictly construed to avoid assessing penalties against a party who relies in good-faith on valid defenses.  Based on this interpretation a government should not be penalized by having to pay attorney’s fees when a tax assessor acts in good-faith and uses reasonable calculations. Though Georgia courts have failed to categorize attorney’s fees in such a way, the idea exists in other jurisdictions.

Awarding attorney’s fees based on Georgia’s criteria offers little predictability and without predictability the act of over-assessing a property’s value cannot be avoided.  As two reasonable tax assessors may differ, so too can a jury and a reasonable tax assessor.  A tax assessor has little idea what factors a random group of people on a jury will find more important than others.  The only thing the assessor can do is what a reasonable assessor would do: act in good-faith by not going out of his way to inaccurately value the property.

Traditionally this behavior does not warrant attorney’s fees.  If two people reasonable differ on facts then an actual controversy exists and it’s appropriate for a court resolution. Clearly we want to protect taxpayers’ rights and create a system that produces the most accurate information available; the Georgia law protects taxpayers’ rights, but doesn’t do much to create a better system.  Without a better system we all lose.

If the government has to pay out thousands or tens of thousands of dollars in attorneys fees for behavior it cannot predict then we are wasting tax money.  Sure the individual taxpayer wins, but the rest of the taxpayers lose.  We need an honest system, but penalizing the government for acting in good-faith may not be the best answer.  If a jury or judge finds a valuation to be excessive, the value should be reduced and any taxes paid should be refunded.  Forcing the government to deplete its resources by paying attorneys fees for acting in a reasonable manner hurts all taxpayers and does little to correct bad behavior.

Cover Photo: Hall County Courthouse by SustainAtlanta


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