🏡 What Happens When Your NEZ Expires? Now What?

If you’ve watched the first two videos in Jan Dijkers’ “Now What? NEZ – New Construction Explained” series, you already know how powerful the Neighborhood Enterprise Zone (NEZ) tax abatement can be for homeowners investing in Detroit real estate. But what happens when that tax break is ending? And more importantly — how do you protect your tax savings and avoid losing your NEZ status?

In Part 3 of this ongoing series, Jan breaks down the key challenges property owners face when their NEZ certificate is nearing expiration, and what actions can make or break that valuable tax benefit.

🎯 What Is the NEZ Tax Abatement?

Before we dive into the details of Part 3, a quick recap: the Neighborhood Enterprise Zone program is a property tax incentive established under Michigan Public Act 147 of 1992. It offers significant tax reductions for residential new construction or rehabilitation projects in designated areas — often in cities like Detroit.

When your project qualifies, the tax on your property improvements is reassessed at a reduced rate for a fixed period — typically up to 15 years — while the land portion is taxed normally.

📉 What Could Make You Lose Your NEZ Status?

According to the description of Part 3 of the video, the focus is on risks that can cause you to lose your NEZ status. While we don’t have a direct transcript, the following issues are commonly discussed in NEZ compliance conversations and are very likely covered in detail:

🔹 1. Failing to Meet Annual Requirements

Many NEZ certificates require proof of occupancy and sometimes minimum investments or compliance reporting each year. Not keeping up with these deadlines can jeopardize your status.

🔹 2. Changing the Primary Use of the Property

Your NEZ benefits apply only while your property is used for residential purposes. If you convert the space to non-residential use, you could lose the exemption.

🔹 3. Letting Taxes Become Delinquent

Staying current on both your regular and NEZ tax bills is essential. Failure to pay could result in automatic revocation.

🔹 4. Transferring the Property Improperly

NEZ certificates can transfer to new owners if handled properly. But if a sale closes without the right paperwork or updates to the certificate, you can lose the benefit.

🧠 How to Stay Compliant & Protect Your Savings

While the rules can vary depending on the type of NEZ (new construction, rehab, or homestead), Jan likely emphasized general best practices:

✅ File all required reports yearly with the city or tax authority.
✅ Keep records of occupancy and improvements — especially if you claimed a principal residence.
✅ Communicate with local officials before making property use changes.
✅ Make sure any transfer of ownership includes correct NEZ documentation.
✅ Check deadlines for extended certificates in the final years before expiration.

Staying proactive with documentation ensures you don’t get hit with unexpected tax costs when the abatement ends