Trends in Refunds and Overcharges
Over the past two decades, a clear pattern has emerged in California’s property tax landscape: certain types of properties and assessments are more prone to overcharges. Correcting these errors has led to significant refunds for commercial property owners. By analyzing over 20 years of historical refund data in Orange and Los Angeles Counties, we see exactly which property categories tend to be overcharged and how substantial the refunds can be. The insights below illustrate the scope of the problem and the potential benefit of addressing it proactively.
Which Properties Are Most Often Overcharged?
Not all properties are equally affected by direct assessment errors. Trends show that commercial properties with high service usage or complex assessments are frequently overcharged. Three categories stand out in particular:
1. Hospitality (Hotels & Resorts)
Hotels often have on-site laundries, large pools, and changing occupancy rates, all of which affect sewer and water consumption. Our data indicates that hospitality properties frequently yield the highest savings when overcharges are corrected. During the COVID-19 pandemic, for example, many hotels continued to be charged sewer fees based on pre-pandemic usage. Once challenged, these hotels received substantial refunds.
2. Office Buildings
Office properties—particularly high-rises or large campuses—typically pay sizable sewer and sanitation fees. When occupancy drops or tenants shift to remote work, water usage may plummet, yet the assessed charges do not always automatically adjust. As with hotels, offices are noted for notable refunds. Additionally, office complexes in business parks sometimes share private services—like landscaping or lighting—where billing errors can creep in, leading to overpayments.
3. Retail and Shopping Centers
Malls, retail plazas, and big-box centers often see multiple line items for assessments (e.g., lighting, security districts, or parking lot cleanup). They are also susceptible to classification mistakes—for example, being charged for year-round maximum occupancy even if significant vacancies exist. As large anchors close or occupancy changes, savvy property owners have found refunds for fees that no longer reflect actual usage.
Our extensive experience has provided us with insights into over $190 million in property tax refunds for commercial real estate owners in Orange and Los Angeles Counties—often obtained by challenging inaccurate direct assessments.
Eye-Opening Refunds: How Much Money Are We Talking?
Data from Orange and Los Angeles Counties indicates that correcting non-ad valorem overcharges can result in five-, six-, or even seven-figure refunds. Below are some representative scenarios:
- Large Portfolio Refund Totals: Owners who systematically audit their entire portfolio have recouped well over $1 million in total refunds. In one case, a regional property owner uncovered mid-seven figures across a decade, demonstrating that small overcharges can add up significantly over time.
- Single-Property Successes: A notable case in Anaheim saw two hotels near Disneyland receive $90,000+ in refunds for the 2019–2020 tax years. The drop in occupancy due to the pandemic did not match the assumed sewer usage, and once corrected, the refund checks followed.
- Most Common Refund Ranges: Many direct assessment refunds fall into the $5,000–$50,000 range per property, often due to overbilling that persisted for multiple years. While these might not make headlines, they represent pure savings—and can quickly add up when a portfolio includes many properties.
What Does This Trend Mean for You?
The frequency and size of these refunds confirm that overcharges are not rare occurrences. They are common enough that entire property categories—like hospitality, office, and retail—are known to encounter them repeatedly. Key takeaways include:
- Widespread Opportunity: If these property types routinely find and correct major overcharges, there is a strong possibility that your own properties may also be impacted—even if they are outside these categories.
- Verify Your Bills: The sheer volume of refunds confirms how often incorrect charges slip through. County auditors generally require a proactive claim from the property owner to remove or adjust a direct assessment—so the onus is on you to spot it.
- Money on the Table: Even a $10k or $50k recovery per property can improve your net operating income. For owners or asset managers handling multiple properties, the gains can be quite substantial.
These realities offer a compelling business case for scrutinizing direct assessments. With consistent multi-year data showing how often overcharges occur, a thorough review of each line item can prove extremely beneficial.
Next Step: In future articles, we will dig deeper into how to identify these errors, the case studies that reveal common patterns, and how to file for refunds without raising any red flags about your property’s assessed value.