Market Overview

Law Office of Michael D. Mirne Offers Analysis of Real Estate Tax Consequences of Hurricane Sandy


In this month's article, the Law Office of Michael D. Mirne discusses a unique set of circumstances that may result in an unprecedented number of tax appeals being filed in 2013.

(PRWEB) November 29, 2012

In the summer of 2006 real estate values in New Jersey had reached their highest levels ever. However, over the course of the 6 years that followed, New Jersey real estate values have gradually declined. This is no surprise to residents of New Jersey whose home values have depreciated substantially during this time frame. Likewise, it is also no surprise to tax assessors, whose primary administrative purpose is to estimate property values, and whose primary appellate purpose is to defend real estate tax appeals when the property owners contend that the assessment exceeds the actual value of the property. In this month's article, however, we will discuss a unique set of circumstances that may result in an unprecedented number of tax appeals being filed in 2013.

Deflationary real estate markets occasionally occur. Most notably, in 1987, after the United States Supreme Court removed some of the advantages of owning investment properties, the real estate market dropped drastically and did not recover for close to a decade. The problem at hand this time, however, is not like any that has been seen in New Jersey since 1962, when several shore area communities became flooded. That storm, which occurred in April of 1962 led to some new legislation and also resulted in the application of rarely utilized legislation.

Most specifically, N.J.S.A. 54:4-35.1 affords relief to taxpayers whose homes were destroyed by way of hurricane, fire or other catastrophic event after October 1 but before January 1. Absent this Statute, the tax assessor would not be allowed to consider any diminution of value that occurred after October 1. This would be bad news for thousands of victims of Hurricane Sandy, whose homes were destroyed approximately 4 weeks after the October 1 assessing date. Fortunately, the statute allows taxpayers who suffered material destruction to the improvements of their properties to apply for the appropriate reduction.

A taxpayer applying for the reduction of assessment for damage caused by Hurricane Sandy must make his or her claim known to the tax assessor of the town no later than January 10, 2013. Taxpayers must also keep in mind that only the depreciation the improvement (i.e.; the physical building or house) is compensable. The loss of property value that will almost certainly occur due to market factors in flooded communities is not a basis for adjustment under this Statute. The decline in land values will, however, result in comparable sales data with lower values that may form the basis for appeals in subsequent years.

Since tax assessors, although mostly tenured after serving their initial 4 year term, are not in the business of giving massive amounts tax reductions, it is unlikely that the reductions being offered will be commensurate with the actual losses of value. It is therefore likely that the State of New Jersey will see a massive quantity of tax appeals in 2013. This will certainly result in large increases in tax rates, municipal bonding and municipal requests for State assistance. If your property has been affected by Hurricane Sandy and you have not been given the proper reduction in assessment, you are encouraged to file a tax appeal.

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