What does it mean when my DC property is classified as Class 3?

As a real property owner in the District of Columbia, the last thing you would ever want or need is for the Department of Consumer and Regulatory Affairs to classify your property as Class 3 – Vacant Real Property.

That's because the DC Office of Tax & Revenue assesses properties classified as vacant nearly six times the rate of a residential real property. So instead of paying $0.85 per $100 of assessed value, Class 3 property owners pay $5 per $100. (Still not as bad as a Class 4 or "blighted property" classification, which is assessed at $10 per $100.)

While the policy overall has helped the city clean up rundown houses and revitalize neighborhoods, occasionally it can lead to headaches for property owners such as someone who bought a fixer-upper that hasn't been occupied for some time.

Our office deals with these types of situations from time to time. Here are some examples of questions people call in with. If you have other questions, feel free to contact us.

What does it mean when my DC property is classified as Class 3?

In a nutshell, the District's Department of Consumer and Regulatory Affairs (DCRA) - Vacant Building Enforcement Unit has deemed your property vacant and your real property taxes are going to go up significantly. Instead of being taxed at $0.85 per $100 of the assessed value, you will be taxed at $5.00 per $100 of the assessed value.

I just got notice that my property is being re-classified as a Class 3 property. My property is vacant, but I am selling the property. The new purchaser is going to live in the property. The title company is requiring that I get a Class 3 exemption. Why?

You will need to get the Class 3 exemption for the period of your ownership or pay the taxes at the higher rate. (Actively listing the property for sale is one of the criteria for which an exemption is usually granted.) Arguably, your purchaser could try to get the tax bill prorated for the period of time the new purchaser owned and lived in the property; but again, you will be on the hook for your time of ownership.

Most title companies will require a letter from DCRA stating the exemption has been granted and reflects the time frame for which the exemption has been granted.

What can I do to get a Class 3 exemption?

File a Vacant Property Response form with DCRA.

You will need to make sure you file any required supporting documentation with the form or DCRA will not grant the exemption and you will be required to register the property accordingly.

I just purchased a property that was classified as a Class 3 property and I will be living in the property as my principal residence. The seller already got a Class 3 exemption and I filed the Homestead Exemption Application. Is there anything I need to do as the purchaser?

Yes. You will also need to file a Vacant Property Response form with DCRA, so DCRA will reclassify your property as a Class 1 residential property. Why, you ask, do you need to file this form if homestead exemption form has already been filed – clearly you will be occupying the property?

Because DCRA is the department that handles the vacant property classification and the Office of Tax and Revenue (OTR) sends out the bills for the properties. If the Class 3 classification is not changed in the system by DCRA, OTR cannot input the Homestead Exemption into the system until that status has been changed.

A good resource for frequently asked questions is the DCRA website. And of course, if you have any further questions, please feel free to contact me.

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