Same rate, bigger number
An occupied commercial building in DC is Class 2 and pays the commercial rate, which is tiered by assessed value and well under the vacant rate. When DOB designates it vacant, the account moves to Class 3 at $5.00 per $100 under D.C. Code §47-813, and if the building is later found blighted, to Class 4 at $10.00. The rate does not care what the building was used for. It is applied to the assessed value, and commercial assessments in most of the District are a multiple of a rowhouse. A storefront building assessed at $2,000,000 owes $100,000 a year at Class 3, billed as two halves of $50,000, and $200,000 a year at Class 4.
The multiplier is smaller than on a house, because Class 2 starts higher than Class 1, but the dollars are larger, and the dollars are what the owner feels. Our article on how the tax is calculated shows the half year billing cycle; the same March 31 and September 15 due dates apply.
How a commercial building gets designated
The path is the one in our timeline article: the building sits unoccupied, an inspector visits, a notice goes to the owner of record with 15 days to respond under §42-3131.05, and the designation becomes final if nobody answers. Commercial buildings get inspected more often than houses because they are on commercial corridors that DOB and the Advisory Neighborhood Commissions watch, and because a dark storefront draws complaints from neighboring businesses. Papered windows, a for lease sign that has faded, a full mail slot and an untouched sidewalk are the signs the inspector notes. The inspection article lists the rest.
The owner of record problem is worse on commercial accounts. The building is usually held by an entity, the entity's mailing address at OTR is often a registered agent or a former property manager, and the 15 day notice goes there. Fix that field first; the owner of record article shows how.
The exemptions written for commercial buildings
Two of the statutory exemptions are longer for commercial and multifamily buildings than for a single family house, and they are the ones to reach for first. Full details and evidence requirements are in the exemption form guide.
- Actively for sale or rent, up to 2 tax years from the initial listing. A single family house gets half a tax year; a commercial, multifamily or mixed use building gets up to 2. DOB wants real marketing, a broker listing or a signed listing agreement, and for a rental building it wants the business license in place. The clock runs from the first listing date, so a building that has been quietly marketed for a year has already used half the window.
- Pending development approval, up to 2 tax years. An application before the Board of Zoning Adjustment, the Zoning Commission, the Historic Preservation Review Board or a similar body. This is the exemption for the warehouse waiting on a rezoning or the corner lot with a planned unit development in process.
- Active construction, up to 3 tax years. A valid permit and visible work. The construction exemption article covers what an inspector counts as work in progress.
All of them count against the same cap: 5 total tax years of exemption in any 12 year period, and the cap follows the property, not the owner. A building that spent 2 years for rent and then 3 in construction is done, and the next vacancy goes straight to Class 3.
The tenant build out gap
This is the situation that catches retail landlords. A lease is signed, the for rent listing comes down, and the tenant spends six months on permits and build out before opening. To the inspector the storefront is still dark. To the owner the building is leased. To the statute, the for rent exemption ended when the marketing stopped, and nothing replaced it.
The fix is to change categories on the day the lease is signed. If the tenant's build out permit is filed, the building qualifies for the permit application exemption while the application is pending and the construction exemption once the permit issues. File the exemption under the new category with the executed lease and the permit number attached. Do not wait for the notice. A designation that lands mid build out is a Class 3 half on a building that will be occupied before the bill is due, and correcting it after the fact is a longer road than filing before.
Mixed use: tenants upstairs, dark storefront below
DOB designates buildings, not units. A building with occupied apartments on the second and third floors is an occupied building even when the ground floor retail is empty, and the response to a notice on that building is proof of the upstairs occupancy: leases, the rental business license, utility accounts in tenants' names. Owners lose these because the inspector only saw the storefront and the owner only saw the notice after the 15 days ran.
The exception is a building that has been split into separately taxed lots, such as a commercial condominium. Each lot has its own OTR account and can be designated on its own. If the retail unit is a separate lot, treat it as its own building for every step above.
Storefronts go blighted faster
The conditions that move a file from vacant to blighted, at twice the rate, are exterior conditions, and a storefront has more exterior than a rowhouse. A broken display window, a pulled down security gate with graffiti, an unsecured rear door on the alley and a rooftop HVAC unit visibly stripped for copper are the four we see cited most. The vacant vs blighted article walks through where the line falls. On a $2,000,000 assessment the difference between the two classes is $100,000 a year, which buys a great deal of plywood and glass.
A commercial owner's checklist
- Pull the OTR account for every lot the building sits on and read the owner name, mailing address and current class.
- Pull the DOB vacant building record for the same lots. The vacant property list article shows where.
- Confirm which exemption the building is on today, when its clock started, and how much of the 5 in 12 cap is left.
- Put a category change on the calendar for the day a lease is signed or a permit is filed.
- Walk the exterior monthly with the inspection article's checklist. Board and secure before the visit, not after the notice.
If your commercial building is already on Class 3, send us the address. We read the DOB record and the OTR bill at no charge and tell you which periods can still be corrected. Our fee is a flat $1,500 per tax period corrected, paid up front, and refunded in full for any period OTR does not correct.