June 27, 2018
Court Finds Tax Appeal Attorneys Not Engaged in Appraisal Practice
The Circuit Court of Cook County, Illinois (Chancery Division) on June 20 ruled that attorneys who referenced comparable property valuations and market values based on an income approach as part of tax appeal proceedings were simply engaged in the traditional practice of law and not in appraisal practice.
The case, Illinois State Bar Association vs. Illinois Department of Financial and Professional Regulation, was filed in July 2017 after two Illinois attorneys were accused by the IDFPR of engaging in unlicensed appraisal practice after they submitted comparable property valuations, income approach information and market value opinions as part of two tax assessment appeals in DuPage County and McHenry County.
ISBA filed a complaint seeking a declaration that the IDFPR lacked authority to prosecute, discipline or sanction lawyers for engaging in the practice of law for advocating on behalf of clients in real estate tax assessment proceedings. The case also sought to enjoin the IDFPR from initiating, maintaining or threatening prosecution of attorneys for engaging in that activity.
The main question before the court was whether an attorney representing a client in a tax proceeding violated the state’s Appraisal Act and functioned as an unlicensed appraiser when providing an analysis of comparable property valuations or developing an opinion of market value utilizing the income approach in a legal brief supporting a tax appeal.
ISBA issued a statement when it filed suit noting, “Arguments based on property valuation are common in many legal fields and have long been typical of real estate tax assessment practice. The ISBA believes that making such arguments on behalf of clients clearly constitutes the practice of law, does not entail the submission of an appraisal, and is well beyond the authority of the IDFPR to regulate.”
IDFPR filed a motion to dismiss in September 2017, arguing that the Appraisal Act “forbids any unlicensed person, even an attorney, who does not fall under a statutory exemption from engaging in the conduct that led to the pending administrative enforcement proceedings. Such conduct constitutes the provision of an appraisal, for which a state license or exemption is required.”
In its order granting summary judgement to the ISBA, the court stated, “There is nothing in the text and structure of the Appraisal Act that suggests that the General Assembly intended its prohibition on unlicensed appraisers to extend to what is the traditional practice of law in the property tax context.” The court further noted, “An attorney’s reference to comparable valuations in a property tax proceeding constitutes the practice of law, which is regulated exclusively by the Illinois Supreme Court.”
The court found, “The comparison of properties or an income approach valuation presented by a licensed Illinois attorney on behalf of a client in real estate tax assessment proceedings does not entail the development or submission of an appraisal or constitute the unlicensed practice of real estate appraisal.”
The IDFPR was permanently enjoined and prohibited from taking further administrative action against attorneys submitting comparable properties and market value opinions based on the income approach.
The case is 2017 CH 09418. Read the court ruling.