NJ Commercial Real Estate Tax Appeals May See 50% Jump

As property values continue to plummet amid the economic crisis, New Jersey commercial real estate owners are seeking tax appeals to lower their operating costs, while trying to keep vacancy rates low and attract new tenants.

Experts say that the appeals could rise as much as 50 percent in 2009. Filings for tax assessments over $750,000 are due by April 1, while appeals for assessments that are less than $750,000 must be filed with the county boards of taxation by June, according to the Tax Court of New Jersey. In 2008, the state received 7,139 commercial real estate tax appeal filings, up from 6,659. More than 90 appeals have been filed and assigned docket numbers so far in 2009, with 1,000 additional filings waiting in the wings.

In some cases, owners are filing appeals on behalf of tenants. They say that the tenants are coming to them asking for relief, and in some cases, they mention appealing the property tax. A successful appeal could make a difference for tenants because real estate taxes are passed on to the tenants either through triple-net leases or gross leases.

In a triple net lease, in addition to paying the base rent, the tenant is responsible for paying all expenses related to its space. In a gross lease, the owner pays the expenses for the building, but can bill the tenant for its portion of the expenses or for the percentage increase in expenses that have occurred since the beginning of the lease.

In addition to helping tenants cut their costs, filing a tax appeal helps an owner can reduce the expenses on its vacant spaces. It also gives the owner a competitive advantage, as it relates to releasing the space.

To determine whether to file an appeal, you should review your assessment and any other information and market data related to your property. And, if after reviewing the information, you determine that you’ve been over-assessed, file an appeal with the state taxing authority.

Source: NJBusiness.com