Omitted Assessment Tossed — “Error” in Setting Value Not an Erroneous Omission

by: Anthony F. Della Pelle
8 Jun 2017

New Jersey’s omitted assessment law allows a municipal tax assessor to go back one year in the event an assessment on a property was inadvertently omitted from the tax rolls (Yes, it does happen. I once had a client that owned an office building that was assessed at over $4 million for which the assessment was simply dropped from the tax rolls and corrected the following year by way of an omitted assessment). An assessor may also use the omitted assessment procedure to capture the value of an improvement to a property, such as the construction of a new building, that should have, but was not included as part of the assessment for the previous year. But there is a limitation on the use of the omitted assessment procedure.

An appellate court recently affirmed a decision of the New Jersey Tax Court that invalidated an $8 million omitted assessment on an apartment complex in Franklin Lakes (Bergen County). There, the owner had received approvals to build ten buildings, each with ten apartment units.  By 2007, six of the ten buildings were completed, received certificates of occupancy and were included in the 2007 assessment.  The last four buildings were completed and received certificates of occupancy in 2008.   However, there was no additional assessment upon the completion of these last four buildings.

The property owner filed tax appeals for 2008 and 2009, which were settled and included an agreement to set the assessment for 2010 at $12 million. After a town-wide reassessment in 2011 the assessment for the apartment complex remained $12 million.

Franklin Lakes hired a new assessor in 2014 who realized that the property record card for the apartment complex showed an assessment based on only six buildings (60 units), not ten buildings (100 units). The assessor then issued an omitted assessment for 2013.

The Tax Court invalidated the omitted assessment. The court found that there was no question that the 100 units had been completed by 2008 and that after they were completed the owner and the town entered as settlement agreement to resolve the 2008 and 2009 tax appeals.  The Tax Court judge stated that “it is incredible that the Assessor was unaware that all of the structures had been fully completed as of the date the [settlement agreement] was negotiated and executed.”  The Tax Court Judge found that the assessor’s failure to consider the full value of the improvements of which he was aware in settling the previous tax appeals, was not an omission, but “simply an erroneous determination of value” that may not be corrected through the omitted assessment procedure.

The appellate court found the Tax Court judgment was supported by substantial credible evidence that the assessor was aware that all ten buildings had been completed and set the assessment with this knowledge and, as such, agreed with the Tax Court that the omitted assessment was invalid.

A copy of the appellate decision may be found here.

Related blog post:

Borough Underassesses Property for Years, Unable to Recoup with Omitted Assessment