Real Estate Tax Appeals – Page 2

The Life Cycle of a Revaluation (And What You Need to Know About It)

sstark on September 28, 2015

Category: Real Estate Tax Appeals, Uncategorized
Tag: Revaluation

The purpose of this alert is to give an overview of a revaluation program in New Jersey, and also provide the taxpayer with information that should help mitigate potentially adverse affects of a new assessment.

A revaluation is a program conducted by an outside appraisal firm that is designed to adjust and update property values throughout a municipality. However, it is essential to understand that a revaluation is not a reassessment, even though both can result in the reapportionment of the tax burden among property owners. Both are intended to adjust and update property values, however, a revaluation is performed by a pre-qualified appraisal firm, while a reassessment is conducted by the in-house municipal assessor and staff.

In New Jersey, a municipal-wide revaluation is a process that a taxpayer should not take lightly or ignore. By being proactive, a taxpayer can lay the groundwork for a successful appeal, or even avoid an appeal entirely. A revaluation can occur for a single reason or a number of reasons, but ultimately the driving force behind one is the conclusion by the State Director of Taxation that assessed values of properties in a municipality are exceedingly inaccurate. Therefore, a revaluation’s stated purpose is to reset assessments and spread the municipal tax burden fairly so that, in theory, every taxpayer is paying their fair share. By the very nature of the process, however, a property’s taxes can be significantly changed, and not necessarily for the better.

Chapter 91 Update: Time to Address the Mailing

tduggan on August 20, 2015

Category: Real Estate Tax Appeals, Uncategorized
Tag: Chapter 91

What happens when the tax assessor mails a Chapter 91 request to the address maintained on the assessor’s public records, but the request is returned “unclaimed”? Is the assessor required to conduct any type of investigation to determine if the address is correct, or can the tax assessor rely solely on his or her records? Recently, the New Jersey Tax Court had an opportunity to review these issues in First Growth Plaza, LLC v. Borough of Raritan. The Tax Court ultimately found that a tax assessor may rely upon its public records in sending out Chapter 91 requests and an “unclaimed” envelope will not defeat a motion to dismiss a tax appeal when the tax assessor relied upon his or her tax list when addressing the envelope. The Tax Court held that a tax assessor is not required to investigate the address of an unclaimed certified mailing. On the contrary, the Tax Court found that it is incumbent on the property owner to ensure that any change in the owner’s address is properly recorded with the assessor. Property owners must be diligent in making certain that a tax assessor has a good address to mail notices and tax bills. Generally, the assessor will use the address set forth on a deed when updating a tax list after the sale of a parcel of property. That being said, this is not always the best address for the company. More importantly, if a company merges, changes management companies or accountants or relocates, it must be diligent and send a formal change of address notice to the tax assessor if tax bills and notices need to be sent to a new address. For any questions regarding this decision, it is recommended that you speak with experienced counsel.

Chapter 91 Update: Delivery of Response

tduggan on August 12, 2015

Category: Real Estate Tax Appeals, Uncategorized
Tag: Chapter 91, tax appeal

In our July 23, 2015 blog, “Tax Appeals: The Silent Killer,” we suggested that property owners return their Chapter 91 response by certified mail or some other method that generates a receipt. The basis for this suggestion is several tax court decisions, including the case discussed in my December 5, 2011 blog and the recent case of 2 JFK Blvd v. Township of Franklin, docket no. 00578-2015 (Tax Court June 24, 2015).

In 2 JFK Blvd, the municipality moved to dismiss a tax appeal alleging the property owner did not respond to a Chapter 91 request. The property owner alleged that it did respond in a timely manner and produced a certification that set forth the date the response was mailed, the address where the response was mailed and enclosed a signed copy of the response. The tax assessor certified that he did not receive the response.

The Tax Court found both witnesses credible and each scenario plausible. The Tax Court also commented that both witnesses “kept records with respect to the question at issue,” which seems to have bolstered the credibility of the property owner and assessor. Based upon the record, the Tax Court denied the motion to dismiss the appeal since there was not “sufficient evidence of non-compliance” by the property owner.

Sending the response by certified mail, overnight mail or hand delivery, provides a property owner with proof of service of his or her response and can help avoid a costly battle at the outset of an appeal.

Income Approach to Valuation – Why Use Market Rent for Tax Appeals?

tduggan on August 5, 2015

Category: Real Estate Tax Appeals, Uncategorized

When valuing industrial, commercial or retail real estate, New Jersey tax assessors are required to value the “unencumbered fee simple interest” of the real estate. This concept often confuses property owners who capitalize the existing leases to show a property is overassessed. In layman terms, what does this all mean?

The cornerstone of New Jersey’s real property tax system is uniformity. Uniformity of assessment is achieved by assessing all property subject to tax at its full and fair value. By using the term “full” value, property is required to be assessed at its highest and best use, not its present use. For example, if a vacant lot is being used for parking but has a more valuable use (i.e., build a new office building), the property can be assessed at the higher value if the alternate use is legally permissible, physically possible, financially feasible and the most profitable use. These are the four criteria for determining the highest and best use of property.

For most industrial, commercial or retail real estate, the income approach to valuation is the most reliable and often given the most weight by tax court judges. To use the income approach, an appraiser must first determine the gross rent for the property at its highest and best use. For tax appeal purposes, the gross rents must be market rent or “economic rent,” which may differ from the actual rent generated from the property. Although actual rent may be a probative factor in determining economic rent, it is not controlling. For example, a lease may be above market because the landlord and tenant are related entities and structured the lease for business or tax reasons. A lease may be below market for the same reasons. However, if supported by other comparable leases, a lease for the property being appealed will often times be given great weight by the court.

The assessor or appraiser must obtain leases and other data from comparable properties in the surrounding area to make a final determination of economic rent. Although there is no hard and fast rule for the number of comparable leases required to opine to economic rent, a broad sampling of current leases is necessary.

Like every rule, there is an exception. The rent roll from a well managed apartment building can sometimes be capitalized to determine value. Going back many years, the New Jersey Supreme Court held “in the absence of convincing evidence to the contrary the current ongoing income scale of a large, well-managed apartment project like this, functioning as customary with leases of relatively short length, should be deemed prima facie to represent its fair rental value for purposes of the capitalized income method of property valuation.” Parkway Village Apartments Co. v. Township of Cranford, 108 N.J. 266, 528 A.2d 922 (N.J. 1987).

It is important to provide a copy of all leases to your appraiser at the outset of the appraisal process. However, your appraiser must also go out into the market and collect accurate information on comparable leases in order to avoid having his or her appraisal stricken by the court.

Tax Liability of Environmentally Contaminated Industrial Property – 2015 Update

mkizner on July 30, 2015

Category: Real Estate Tax Appeals, Uncategorized
Tag: Contaminated Industrial Property, Department of Environmental Protection, Methode, Tax Liability

In a recent New Jersey Tax Court decision, Methode Electronics, Inc. v. Twp. Of Willingboro, the court ruled that the assessment of a contaminated piece of property, which was not developable and could not be developed in the foreseeable future, should be reduced to a nominal valuation.

Methode involved an industrial property where printed circuit boards and airbag components were manufactured for nearly twenty years. As a result of this activity, the property became contaminated with volatile organic compounds and metals. The property owner ceased operations in 1999 and no other businesses have operated at the property since that time. The building was demolished, except for a concrete slab that served as the floor for the facility. The slab was left in place to prevent the off-gassing of toxic vapors from soil and groundwater.

Tax Appeals: The Silent Killer

tduggan on July 23, 2015

Category: Real Estate Tax Appeals, Uncategorized
Tag: Chapter 91, Tax Board, Tax Court

It is crucial for owners and other taxpayers of commercial, industrial, retail and other income producing properties to be on the lookout for the “Silent Killer” of tax appeals, commonly known as Chapter 91 requests. New Jersey law permits a municipality to request income and expense statements from owners of income producing properties on an annual basis (N.J.S.A. 54:4-34). The request (referred to as a Chapter 91 request) must be made in writing, served by certified mail, and must enclose a copy of the statute providing the authority to make the request. A property owner has 45 days to respond to the Chapter 91 request or risk having a subsequent tax appeal dismissed by the County Tax Board or New Jersey Tax Court. Property owners should be aware of the following:

Now is the time to be on the lookout for Chapter 91 requests since many tax assessors mail the requests during the summer. If tax bills are sent to a location outside of New Jersey (ie., accounts payable department located at corporate headquarters), it is advisable to make certain that the Chapter 91 request is sent to the person responsible for completing the request immediately.
Complete the entire form accurately. If a form is not complete or is misleading, the tax appeal may still be dismissed.
Although the statute appears to limit the request to income producing properties, that can be misleading. For example, an owner-occupied office building can be considered “income producing” in this situation. Also, if the property was income producing in a particular year, and vacant the following year for renovations, the property owner should still complete the form and advise the tax assessor that the property is now vacant. Also, inter-company leases or arrangements need to be disclosed. When in doubt, send in a response.
When responding to the Chapter 91 request, file the response to the tax assessor (not the township attorney) via certified or registered mail, overnight delivery service or in person so it is received within 45 days. There have been numerous cases where property owners allege they mailed their response, but the municipality denies receiving the response. In those circumstances, the Court is often required to hold an expensive plenary hearing to hear the testimony of the property owner and municipal assessor in order to decide whether the response was mailed. This is a costly way to start a tax appeal and can be avoided by obtaining a certified mail receipt.

While an assessor of any municipality can serve a Chapter 91 request, taxpayer vigilance is particularly key in municipalities undergoing a revaluation. In Central New Jersey, Hamilton Township, Plainsboro, Trenton and possibility Ewing Township are in the process of completing revaluations. If the revaluations are completed in 2015, virtually every tax assessment in these municipalities will change in 2016. In order to make certain you preserve your right to appeal your 2016 tax assessment, make certain you comply with any Chapter 91 requests in a timely manner. Failure to do so may result in a high tax bill in 2016, with no recourse. For more information on Chapter 91 requests or tax appeals, please contact Stark & Stark or visit www.NJLawBlog.com.

Are Site Improvements-Assessable by the Local Assessor?

tduggan on August 12, 2014

Category: Real Estate Tax Appeals, Uncategorized
Tag: Tax Appeals

Recently, the New Jersey Tax Court had an opportunity to review the issue of whether site improvements on vacant lots are subject to assessment by the local tax assessor.

Court Rules on Calculation of Interest on Tax Over-Payment

tduggan on August 4, 2014

Category: Real Estate Tax Appeals, Uncategorized
Tag: Tax Appeals

Recently, the Appellate Division of the Superior Court of New Jersey affirmed a Tax Court decision which enforced a settlement and determined the amount of interest to be paid on the refund after a successful tax appeal. This blog will focus on the portion of the decision that discusses the interest component of the refund.

Appelate Division Finds That Contract Purchaser Has Standing to File a Real Estate Tax Appeal

tduggan on July 12, 2013

Category: Real Estate Tax Appeals, Uncategorized
Tag: Tax Appeals

I previously wrote a blog discussing a case where the New Jersey Tax Court found that a contract purchaser who did not own the property on date the tax appeal was filed (March 29, 2012) did not have standing to file a tax appeal. As a result, the Tax Court dismissed the appeal. On July 3, 2013, the Appellate Division of the Superior Court of New Jersey reversed the Tax Court and held that the contract purchaser had standing to file the appeal and is entitled to proceed towards trial.

Stark & Stark Associate in Bankruptcy and Creditor’s Rights Group Published in US1

sstark on April 4, 2013

Category: Bankruptcy & Creditor's Rights, Real Estate Tax Appeals, Uncategorized
Tag: Bankruptcy & Creditor's Rights, Tax Appeals

Marshall T. Kizner from Stark & Stark’s Bankruptcy and Creditor’s Rights Group authored the article, Commercial Property Taxes: Is Your Business Paying More Than Its Fair Share?, published on March 20, 2013 in US1 Newspaper.

Blog Categories