Real estate tax appeals: overcoming presumption of correctness.

The rise in property values have caused many New Jersey municipalities to look at their tax assessments and determine whether a revaluation or reassessment is necessary.

In a revaluation, an outside appraisal company values all of the properties in town in order to bring them to their true values. In a reassessment, the tax assessor performs the valuation.

If a property owner disagrees with the new assessment and chooses to appeal, the property owner has the burden of proof and must overcome the "presumption of correctness." This article will over some insight and tips when appealing assessment for commercial properties.

Know the burden of proof. Once a tax assessor imposes an assessment, the County Tax Board and Tax Court are required to presume that the tax assessment is valid and the taxpayer is required to rebut the presumption by cogent evidence.

The New Jersey Tax Court has held that in order to overcome the presumption, the taxpayer must produce evidence that is "definite, positive and certain in quality and quantity." The assessor is not required to offer any proof if the property owner does not overcome the presumption.

Retain the right professionals who know the rules. The New Jersey Tax Court has developed special rules for the appraisal of property in tax cases.

You must retain an appraiser and attorney who know the rules. For example, when valuing an income producing property, many appraisers will deducted local property taxes as an expense item to determine the net rent to be capitalized when using the income capitalization approach to value. However, for tax appeal purposes, the local property taxes must be reflected in the capitalization rate, not deducted as an expense item. Further, if the leases are "net leases" with the tenant paying the taxes, the capitalization rate should not have a tax factor.

Another common problem arises when the appraiser relies solely upon the gross rents for the property in determining the gross rental income for the property. In tax appeal cases, the appraiser is required to determine the economic rent or income for the property which may be higher or lower than the actual rent.

If the actual rent for the property is going to be used to determine the gross rent for the property, it must be supported by a sampling of comparable leases to show that the actual rent reflects the actual market. An appraiser with experience in tax cases will know these rules..

Look before you leap. When a property owner appeals, the township can defend the appeal or, as sometimes is the case, file a cross appeal to raise the assessment. Therefore, it is very important to have a good understanding of the merits of the appeal before

filing.

Know your deadlines. Generally, tax assessments are appealed on an annual basis. With the exception of certain types of tax assessment (added assessment, omitted assessment and rollback taxes), the appeal deadline in New Jersey is April 1 of each year. If the assessor mails the tax assessment notices out late, the appeal deadline may be extended. However, it is recommended that you call the assessor if you do not receive an assessment notice by the end of February of each year. The deadlines are strictly enforced by the courts.

Use your time wisely. The valuation date is October 1 of the pre-tax year. For an appeal for 2008, the valuation date is October 1, 2007. Since there is five months between the valuation date and appeal deadline, you have time to do your homework. Assemble the important information on your property (ie. rent roll, profit and loss statement, itemization of

improvements, vacancy rates, etc.) and forward the information to an appraiser for review. Most appraisers can give advise you of whether your appeal has merit without performing a complete appraisal. Do not wait until the end of March to call an appraiser and attorney.

New Jersey's real estate tax system is in need of repair. It us unlikely commercial property owners will see any tax relief in the near future.

As a result, it is extremely important to monitor your tax assessments on an annual basis, especially in a changing markets, in order to make certain you are not paying more than you fair share of real estate taxes.

BY Timothy Duggan, Chairman STARK & STARK CONDEMNATION GROUP