Two Different Taxpayers Prove Value and Score at Trial

by: Anthony F. Della Pelle
6 Feb 2018

Two recent Tax Court valuation trials have resulted in favorable outcomes for the taxpayer.  First, in the trial of 416 Route 10 Associates v. East Hanover, plaintiff’s expert deliberately made no adjustments to his comparable leases in the expert’s income approach. Plaintiff’s expert reasoned that numerical adjustments simply led to more rigorous cross-examination so the expert suggested that the adjustments be determined at the discretion of the Tax Court Judge given the court’s expertise.  The court agreed that the Tax Court does in fact have special expertise in the area of real estate valuation but this does not imply or give autonomous authority to the court to draw its own conclusions as to what adjustments are necessary and quantifying those adjustments.  Nonetheless, despite plaintiff’s expert having made no adjustments to his comparable leases, the court agreed with the expert’s rational behind this approach and adopted his findings as to value of the subject property.  Furthermore, the flaws evident in the Township’s expert’s report entitled the Township to little weight.  As recognized by the court, this case goes to prove that sometimes adjustments are not the be-all and end-all of an appraisal report.

The second decision was rendered after the trial in East Gate Business Center, LLC v. Twp. of Mount Laurel.  Both parties presented witness testimony from professional real estate appraisers and both experts also relied upon the income approach in valuing the property under appeal.  The court determined plaintiff’s expert’s findings to be more credible with respect to economic rents, building size, vacancy and collection rate, operating expenses, and capitalization rate.  Having adopted majority of the data proffered by plaintiff’s expert, the Tax Court calculated the value for each year under appeal and determined the true market value exceeded the upper limit for the respective year and thus lowered the assessments accordingly.

The opinions for each case can be found here, and here.