A growing number of municipalities in New Jersey are suing commercial property owners to increase property tax assessments. Commercial property tax reverse appeals are among the most significant and controversial issues that pose the greatest potential risk for buyers and owners of commercial property in the Garden State.
Whether driven by external counsel motivated by contingency fees, or motivated internally at city hall, these suits are not only bad for commercial property owners, but they significantly impact the local business climate and overall property values.
Singling out commercial properties for increased assessments isn’t fair game
These aggressive reverse appeal cases primarily target commercial property and multifamily properties. Frequently, these properties are targeted following a recent transaction, leaving the new owner with a tax burden not accounted for in underwriting. The municipality sues claiming that the assessment set by its own assessor is too low. For example, a property that was assessed for $20 million and then sold for $40 million is a prime target for a reverse appeal in certain municipalities.
Reduce uncertainty by identifying reverse tax appeals: Protect your commercial property investment
Identifying pending reverse tax appeals is a vital component of every commercial real estate transaction. This due diligence must include a search for the existence of these increase suits to protect the buyer and seller in transactions. Because these suits are only served by regular mail, frequently taxpayers are unaware that they are subject to these lawsuits for months – if not years – after they are instituted. Moreover, standard title searches do not include a search of the Tax Court records.
“Remarkably, I’ve encountered multiple occasions in which a client is unaware of the fact that they are being sued for an increase in their assessment. In fact, I have had to be the one to advise them of the existence of the lawsuits so that they can begin to defend them,” said David Wolfe, co-managing partner of Skoloff & Wolfe.
Skoloff & Wolfe challenges reverse appeal cases on behalf of commercial property owners
Skoloff & Wolfe is actively challenging the constitutionality and statutory validity of these cases. In 2017, the Supreme Court of Pennsylvania declared similar cases unconstitutional under the Pennsylvania constitution. Skoloff & Wolfe is fighting for the same outcome in New Jersey.
How should New Jersey Property owners prepare themselves?
Whether building or buying, property owners must consider this issue. This is an area that should be considered and analyzed in due diligence or preconstruction. Ultimately, clients need an analysis of the likelihood of these suits and their potential outcomes. Failure to do so can imperil any investment or development in New Jersey.
Call Skoloff & Wolfe
Commercial real estate transactions of any size require more than transactional counsel to ensure the underlying investment thesis. Experienced real property tax counsel should be engaged to shine a light on pending property tax reverse appeals, their potential impact, and identify any other property tax related risks or opportunities. Learn more about property tax appeals. Please contact the attorneys at Skoloff & Wolfe if you need any property tax assistance at 973.992.0900.