Real Property Tax Appeals Versus Eminent Domain Cases

by: Michael Realbuto
30 Jun 2023

The real estate tax appeal process can ultimately lead to reduced tax burdens for New Jersey property owners…that is the good news, and our firm specializes in representing property owners across N.J. in those types of cases. However, unique situations may arise during a tax appeal that can pose a dilemma for owners. One such situation is if a property owner is confronted with a potential taking of the property by eminent domain while a tax appeal is pending.

Tax Appeals

New Jersey, like many other states in the northeastern United States, uses a “value-based” or “ad valorem” method to calculate real estate taxes. All real property is assessed annually by the tax assessor in each municipality and is either based on the “true value,” or market value, of a specific piece of property, or upon an “equalized” value in which case a ratio is applied to the assessment in an effort to equalize it and translate the assessment into current market value. This value is essentially what a willing, knowledgeable buyer would pay a willing, knowledgeable seller on the open market at a bona fide sale as of the pre-tax-year assessment date. Once an assessment is generated, a property tax bill is calculated by multiplying the assessment by the local tax rate. County, municipal, and school budget costs are all factors that determine a town’s local tax rate. One way for property owners to reduce their tax burden is to file an appeal with the local county board of taxation or with the New Jersey Tax Court protesting the assessment. To successfully appeal an assessment, applicants must submit sufficient evidence of their property’s true value that questions the validity and accuracy of the underlying assessment.

Eminent Domain Cases

Although proving that the true value is lower than the assessed value or equalized value is the dispositive factor in a tax appeal, eminent domain proceedings usually involve a situation where the property owner, in seeking just compensation for the subject property, is advocating that the property has a higher value than that advanced by the condemnor. Consequently, a conflict may arise if a taking occurs during the pendency of the tax appeal. On the one hand, the property owner would submit evidence, or even generate discoverable information, in favor of a lower value to question the validity of the underlying tax assessment, and on the other hand, the owner might also argue or create discoverable information for a higher value in the eminent domain proceeding. This could lead to a situation that is detrimental to either the eminent domain or tax appeal matter, or both, as it may cause credibility issues for the property owner and the opinions of its valuation experts. In light of this potential conflict, practitioners should balance the likelihood of success in either case and determine which proceeding would result in the greatest benefit to the property owner.

In sum, consulting with experienced counsel is an important step in protecting your property rights. If you believe that your property was incorrectly assessed, or if you are confronted with a governmental taking, please contact McKirdy, Riskin, Olson & DellaPelle, P.C. to speak with an experienced tax appeal and eminent domain attorney.