Most property managers and owners can state their property’s most productive use and reel off a list of potential uses as well. But not all of them know their property’s specific use restrictions, and fewer still realize how those limitations affect the property’s value for tax assessment purposes. Government Restrictions Local zoning laws impose the most common use restrictions, and their impact on property uses and potential values is commonly understood. A property zoned for development as a retail power center, for example, will generally have a higher market value than a property which is limited to uses such as auto repair or animal kenneling. Market values are often used to set tax assessment values, so a use restriction that increases or reduces market value will also increase or reduce a property’s tax assessment value. Less common restrictions that can impair a property’s value include covenants or agreements entered into with a municipality. Whether for future development of a parking structure, for fire department ingress and egress lanes or to meet open-space standards, these covenants typically limit the owner’s ability to fully develop the property and thereby reduce its market value. Similarly, historical designations by local government generally reduce a …
