How Vermont's Grand List System Creates Commercial Overassessment

Vermont’s Grand List system is fundamentally sound—in theory. But in practice, it creates systematic overvaluation of commercial properties. Understanding why this happens is the key to winning your grievance.

The issue isn’t that listers are incompetent. It’s that the system itself has structural gaps that push assessments higher than fair market value. Once you understand these gaps, you can exploit them in your grievance.

What Is the Grand List?

Vermont’s Grand List is the official list of all taxable property in a town and its assessed values. Each municipality’s listers create and maintain the Grand List annually. The Grand List determines the tax base for that town.

Every property gets a line on the Grand List: property ID, location, property type, assessed value, and tax classification (homestead or nonhomestead). Commercial properties are nonhomestead—they get a higher tax rate than residential properties.

The Grand List is filed by April 1 each year. The listers base their assessments on a combination of:

• Recent comparable sales (market approach)
• Income capitalization (for income-producing properties)
• Cost approach (replacement cost minus depreciation)

In theory, this is solid. In practice, several structural factors cause overvaluation.

The Data Lag Problem

Here’s the first systematic gap: The Grand List is based on sales and data from 6–12 months prior.

Listers assess property values in January and February for the April 1 Grand List. They’re using sales data from the prior 12–18 months. In a stable market, this lag isn’t a problem. But Vermont’s market has been volatile:

• 2020–2021: Prices surged (pandemic remote-worker migration into Vermont)
• 2022: Market flattened and prices began declining
• 2023–2024: Prices stabilized at lower levels than 2021–2022 peaks

Many listers still use 2021–2022 sales comparables to value 2025 property. They’re anchored to peak-market data.

For commercial property, this matters enormously. A retail building that sold for $800,000 in early 2022 at peak market might sell for $650,000 today (2026). Yet listers often still use the $800,000 comparable as their anchor, adjusting downward only slightly for condition, not for the market shift.

Example: A downtown commercial building was comparable to one that sold in 2022 for $750,000. Listers assessed it at $740,000 (using that sale as primary comparable). But comparable sales in the past 6 months show similar buildings selling for $600,000–$630,000. The lister’s 2022-anchored value is 15–20% too high.

The Cap Rate Trap

This is where commercial property overvaluation really happens.

When valuing income-producing commercial property, listers use an income capitalization approach:

Net Operating Income ÷ Cap Rate = Value

Example: A building generates $50,000 NOI. If the cap rate is 8%, the building is worth $625,000. If the cap rate is 6%, it’s worth $833,000.

Here’s the problem: Listers often use outdated or market-inflated cap rates that don’t match current reality.

In hot markets (2020–2022), cap rates compressed (dropped to 5–7% for good commercial property). Listers adopted these compressed rates. Now the market has shifted and cap rates have expanded back to 7–9%, but some listers still use 2021–2022 cap rates.

Using a 6% cap rate when the market demands 8% creates a 25% overvaluation.

Real example from 2024: A small office building in Rutland County generating $40,000 NOI was assessed at $571,000 (using a 7% cap rate). Market data from recent sales showed comparable office buildings selling at 8–9% cap rates. Using 8.5% cap rate, fair value was $470,000. The lister’s value was 21% too high—purely because they used an outdated cap rate.

How to Spot Cap Rate Overvaluation

If you own income-producing commercial property and want to check whether you’re overvalued:

1. Calculate your actual NOI (revenue minus operating expenses, excluding owner labor)
2. Research what cap rate comparable commercial properties are trading at in your market
3. Divide your NOI by a realistic market cap rate
4. Compare to your assessed value

If your assessed value is higher than fair market value × cap rate, you’re overvalued.

The Occupancy and Lease-Term Blindness

Listers sometimes assume commercial properties operate at peak occupancy with stable, long-term tenants. Reality is messier.

Vacancy overvaluation: A commercial building with 30% vacancy (common in many Vermont markets) isn’t worth the same as a fully occupied comparable. Yet listers sometimes value it assuming full occupancy, or apply only a 5% vacancy factor when 15–25% is realistic.

Tenant instability: A property with a single tenant on a year-to-year lease isn’t worth the same as one with multiple long-term tenants on multi-year leases. Listers often don’t account for tenant quality or lease stability.

Lease rate timing: Rents increase over time. A building with leases signed in 2018 may have rents 10–20% below market rates. Yet listers sometimes value based on in-place lease rates rather than current market rents.

Example: A Chittenden County retail building with three tenants, all on leases signed in 2018 (with 2–3% annual increases), was valued by listers assuming current market rents. In reality, in-place rents were 12% below market. The assessed value was 12% too high because listers ignored the lease rate discount.

The Highest-and-Best-Use Problem

Some listers value commercial property based on “highest and best use” even if the current owner has no intention of pursuing it.

A mixed-use building on Route 7 in a town with zoning for hotel use might be valued by listers assuming it could be converted to hotel. Yet the current owner operates it as a retail building with upstairs apartments. Listers inflate the value based on development potential, not actual use.

Or a property near a ski resort is valued assuming ski-related income potential, even if it’s actually a quiet residential rental.

This “potential use” overvaluation is pervasive in Vermont. Listers use the income from the highest-and-best use, not the actual use.

How to fight this: Argue that fair market value is based on actual use and actual income, not speculative potential. If you’re operating a retail building, value it based on retail income. The fact that it could theoretically be a hotel is irrelevant.

The Statewide Reappraisal Lag

We covered this earlier, but it bears repeating: Towns that haven’t been reappraised in 5+ years are operating on stale baseline data.

If your town’s last reappraisal was 2019, listers are working with 2018–2019 comparables and assumptions. The market has shifted significantly. They’re anchored to old data.

This isn’t the lister’s fault—it’s the system’s. But it creates systematic overvaluation in towns awaiting reappraisal.

Town Reappraisal Status	Likely Overvaluation	Evidence Strength
Reappraised 2024–2025	8–15%	Moderate (property-specific)
Reappraised 2022–2023	12–20%	Strong (market shift + comps)
Reappraised 2020–2021	15–25%	Very strong (2021 peak anchoring)
Not reappraised since 2018	20–35%	Extremely strong (stale data)

The Lack of Cost Approach Rigor

Listers are supposed to use three valuation approaches: market, income, and cost.

In practice, many listers use market and income but apply cost approach loosely. They don’t account properly for:

• Deferred maintenance and capital expenditure needs
• Functional obsolescence (outdated systems, poor layout)
• External obsolescence (declining neighborhood, zoning changes)

A 40-year-old commercial building with aging HVAC, roof needing replacement, and outdated wiring isn’t worth what a newer comparable sold for. Yet listers sometimes apply only a small depreciation factor.

Example: Two similar-sized office buildings. Building A is newer, well-maintained, 1990s vintage. Building B is 1960s vintage with original HVAC and roof needing $80,000 replacement. Comparables show Building A selling for $550,000. Listers value Building B at $510,000 (applying a 7% depreciation factor for age). But Building B’s deferred maintenance is $80,000. Fair value should be roughly $430,000 ($510,000 − $80,000 in required cap ex).

Listers miss this consistently. They apply depreciation percentages but don’t adjust for actual known repair costs.

The Inadequate Adjustment Methodology

Even when listers use comparables, their adjustment methodology sometimes inflates values.

A typical lister adjustment might be:

• Comparable sold for $600,000
• Adjust +5% for larger size: $630,000
• Adjust −3% for worse location: $612,000
• Adjust +2% for newer construction: $624,000
• Subject property value: $620,000

The problem: Small percentage adjustments compound. If five adjustments are made, and each has a 5% error rate, the compounded error is 25%. Listers’ final values are often outside the reasonable range for the property.

Moreover, listers often miss critical adjustments—tenant stability, lease rates, occupancy rates—and over-weight superficial ones (square footage, year built).

How the System Creates Overvaluation: A Summary

Structural Gap	Mechanism	Typical Impact
Data lag	Using 12–18 month old sales in volatile markets	8–15% overvaluation
Cap rate anchoring	Using outdated cap rates	10–25% overvaluation
Occupancy assumptions	Assuming full occupancy	10–20% overvaluation
Highest-and-best-use	Valuing speculative potential	15–30% overvaluation
Stale reappraisal baseline	Using 5+ year old data	20–35% overvaluation
Inadequate deferred maintenance	Under-weighting repair needs	5–15% overvaluation
Rough adjustment methodology	Compounding small errors	5–10% overvaluation

For most commercial properties, two or three of these factors apply simultaneously. Combined, they create 20–40% overvaluations regularly.

How to Use This Knowledge in Your Grievance

Once you understand these structural gaps, your grievance strategy becomes clear:

1. Identify which gaps apply to your property (data lag, cap rate issue, occupancy assumption, etc.)
2. Gather evidence specific to those gaps (recent comparable sales, market cap rates, actual occupancy, deferred maintenance documentation)
3. Present evidence showing the lister missed something systematic
4. Propose a corrected value accounting for the gap you’ve identified

Example grievance argument:

“The assessed value of $520,000 is based on a comparable sale from 2021 at peak market prices and assumes a 7% cap rate. Current comparable sales in our market show similar properties trading at 8.5% cap rates, reflecting current market conditions. Additionally, my building operates at 75% occupancy, not the assumed 90%. Using current cap rates and realistic occupancy, fair market value is approximately $410,000.”

This argument directly addresses two structural gaps listers frequently miss: outdated cap rates and optimistic occupancy assumptions.

---

Next Steps

1. Analyze your property against the seven structural gaps outlined here. Which ones apply to you?
2. Gather evidence for those specific gaps—recent sales, current cap rates, actual occupancy or lease rates
3. Calculate a fair value using current market data, not lister assumptions
4. Schedule a consultation to discuss your overvaluation case
5. File your grievance before your town’s deadline

You can also read about Vermont’s grievance timeline or explore your specific county’s assessment challenges.

Vermont’s Grand List system is legitimate, but it has structural blind spots. Knowing them puts you in control of your property tax outcome.