The buyer pays tomorrow's tax bill, not today's

How the cap actually works

A buyer underwrote a twelve-unit building off Calle Ocho at a seven cap and felt good about the number. The seller’s operating statement was clean and every line traced to a document. The tax line came straight from last year’s bill.

The first bill after closing landed well above the line in the model. Nothing had been misrepresented. The building had simply been reassessed on a sale it had not had in nineteen years.

Almost any operating statement on a Miami apartment building carries a real estate tax line taken straight from last year’s bill.

It is accurate. It is documented. It is the number the owner actually paid. And for the buyer it is close to meaningless, because the bill that arrives after closing is calculated on a different assessed value than the bill in front of them.

Florida limits how fast the assessed value of non-homestead property can rise. The limitation is 10% per year, implemented through Florida Statutes 193.1554 for non-homestead residential property and 193.1555 for certain other residential and non-residential property. Two features of that limit decide everything that follows.

It does not apply to school levies. The cap applies to the millage of every taxing authority except the school board. School taxes are already being levied on the property’s full just value, every year, cap or no cap.

It resets on a change of ownership. A change of ownership or control removes the accumulated protection, and the property is reassessed at just value as determined by the property appraiser. Real property is assessed as of January 1 of each year under 192.042(1), so the cap the seller enjoyed survives the balance of the year in which the sale occurs and then goes away.

A related provision closes the obvious workaround. Section 193.1556 requires the owner to notify the property appraiser of a change of ownership or control. A transfer of the entity that holds the property, rather than of the deed itself, is still a change of control, and it is reportable.

One clarification worth making, because the correction often overshoots: a sale does not automatically become the new assessed value. Just value is the property appraiser’s determination. The sale price is strong evidence and it is not a substitute for the appraiser’s judgment, and the resulting assessment carries the usual right to petition the value adjustment board on a deadline tied to the mailing of the annual Notice of Proposed Property Taxes, the TRIM notice required by 200.069.

The arithmetic, worked in the open

The numbers below are illustrative. The values and the cap rate are hypothetical. The millage is real.

The Miami-Dade Property Appraiser’s 2025 millage table lists the City of Miami, millage code 0100, at a total of 20.0180 mills for 2025, against 20.0332 for 2024. Inside that total, the school millages are 5.4990 operating plus 1.0000 voted debt, or 6.4990 mills. Everything else, 13.5190 mills, is the portion subject to the 10% cap.

A building whose just value is $1,000,000 carries a capped assessed value that, after years of protection, has only reached $600,000.

The difference is $5,408 a year, and nothing about the building changed. No rent moved, no expense was incurred, no repair was made. Capitalized at a hypothetical 6%, that $5,408 is roughly $90,000 of value that was never in the buyer’s model.

Three chairs

The seller is not doing anything wrong. The tax line on their statement is the tax they paid. Producing it is honest, and a seller has no obligation to underwrite the buyer’s deal.

What is hard to see from that chair is what the number does to a price expectation. An owner who has watched their assessment lag the market for a decade has been running a building with a subsidized expense line, and they have priced their own asset on the net income that subsidy produced. When a buyer’s offer comes in below that, it often reads as a lowball when it is arithmetic. The seller is selling a building. What they have been enjoying is partly a building and partly a cap, and only one of the two transfers.

The buyer’s correction is right and frequently overdone. Underwriting the reset is not optional. Underwriting it as assessed value equals purchase price is a guess, and it is a guess in the conservative direction, which feels safe and is still wrong. The appraiser sets just value, the assessment can be petitioned, and a buyer who treats the worst case as the base case will lose deals to buyers who did the work.

The second thing that chair cannot easily see is timing, and this is the one that actually bites. The reset lands on the January 1 following the change, so the first bill after closing can look reassuringly close to the seller’s number. In theory nobody is fooled by that, because everybody knows the reset is coming. In practice the first bill arrives, it matches the model, the model gets marked as validated, and the reset becomes something that was discussed once during diligence by someone who has since moved on. The correction shows up a year later as an unexplained variance, and by then it is being blamed on insurance.

The developer’s version is a different problem entirely. Where the plan is to redevelop, the tax line is not an operating expense, it is a carrying cost during entitlement, and it behaves according to 192.042(1): the property is assessed as of January 1, and improvements not substantially completed as of that date have no assessed value. Demolition and construction timing interact with the assessment calendar in ways a developer holding a site for eighteen months should model deliberately rather than discover.

What is easy to assume from that chair is that the direction of travel is always down. Land that is being assembled and entitled is land whose just value is moving, and it is moving for reasons the developer is personally creating.

Our read

The tax line should be split in two before anyone argues about price.

There is the building’s tax, which is a function of just value and millage and belongs in everyone’s model. And there is the seller’s cap, which is a personal historical artifact that dies at closing. Blending them into one number called taxes is how a negotiation ends up with two parties defending different buildings.

The fair read is that neither party should be paid for the cap. The seller should not price the asset as though the buyer inherits it. The buyer should not demand a discount as though the seller manufactured it. It is a rule that applies to both of them equally and it should simply be modeled correctly on both sides of the table.

The practical consequence is that this belongs in the offer, not the diligence. A buyer who discovers the reset after going under contract has to reopen price, which reads as a re-trade even when it is correct. A buyer who priced it from the start has an offer that survives, and a seller who saw it coming has an explanation instead of a disagreement.

For an owner considering a sale, the reset is worth understanding for a second reason. It says something about who the buyer will be. The wider the gap between assessed value and just value, the more a building’s reported net income overstates what a new owner will earn. The wider that gap, the more the eventual price depends on finding a buyer who underwrites the asset rather than reading the statement.

Those buyers exist. They also read the tax roll before they call.

Who to ask

The Miami-Dade Property Appraiser’s office is the authority on every value in this article. They set just value, they maintain the roll, and the roll is public and searchable by folio. A building’s assessed value, just value and current exemptions are a lookup, and it takes minutes. It is also one of the best free resources in Miami real estate and it usually goes unopened before an offer.

When an assessment looks wrong, the Property Appraiser’s office will explain how it was derived, and the formal route is a petition to the Value Adjustment Board on a deadline tied to the mailing of the TRIM notice. That date lives on the notice itself, and it is worth reading there rather than from memory.

The CPA owns the part we deliberately did not model here, which is what the change does to a return rather than to the building’s net income. And when ownership sits in an entity, or the transfer is of interests rather than a deed, that is a question for an attorney and a CPA together, because control is defined more carefully than people assume.

We do the reset math on every building we underwrite. We are not the office that decides what a building is worth for tax purposes, and no broker is. What we can put on the table is the range the arithmetic produces and where the uncertainty actually sits. The millage figures here come from the Property Appraiser’s 2025 table, last checked on August 4, 2026, and rates are set annually.