This blog continues the discussion on the draconian remedy under Chapter 91 of the New Jersey statutes which allows a municipality to dismiss a tax appeal in the event a property owner fails to respond to a request for income and expense information for a particular property.  We also provided several updates, including some recent decisions concerning the obligation of a property owner to respond to a Chapter 91 request when the property in question does not produce any income.  Despite the best efforts of property managers, sometimes the Chapter 91 request slips through the cracks and does not get answered.  When this happens and a municipality moves to dismiss the complaint, the property owner is left with one remedy: To request a reasonableness hearing pursuant to Ocean Pines Ltd. v. Borough of Point Pleasant, 112 N.J. 1 (1988).  Recently, the New Jersey Tax Court had an opportunity to review the reasonableness hearing standard for a large parcel of property located in Berkeley Heights, New Jersey.  See Lucent Technologies v. Berkeley Heights Township, (December2, 2008).

In the case in question, the property owner failed to respond to the Chapter 91 request and was limited to the remedy of a “reasonableness hearing.”  A reasonableness hearing is not a hearing to determine the value of the property, but rather a hearing to determine the “reasonableness of the assessment imposed by the assessor.”  The New Jersey Supreme Court has described such a hearing as:

 “The inquire will focus solely on whether the valuation could reasonably been arrived at in light of the data available to the assessor at the time of the valuation.  Encompassed within this inquiry are (1) the reasonableness of the underlying data used by the assessor and (2) the reasonableness of the methodology used by the assessor in arriving at the valuation.”

To no surprise, the property owner was not successful in challenging the reasonableness of the assessment.  The primary obstacle in a reasonableness hearing is not only its limited scope, but the legal problem arising from the “presumption of validity”  of the original assessment.   What this means in lay terms is that the data upon which the assessor relied and the assessor’s methodology are “presumed to have been reasonable.”  In light of the presumption, the property owner is required to overcome the presumption by producing evidence that is “definite, positive and certain in quality and quantity.”  Put another way, the property owner must establish that the “assessor acted arbitrary or capriciously in setting the assessments.” 

Although the property owner proved that the assessor’s methodology did not include a physical inspection of the subject property, did not include any effort to determine the fair market value of the property, and did not include any accumulation or thorough investigation or current data from the market place, the property owner nevertheless lost his case.  The Court found that the assessor was permitted to rely upon data appearing in the file produced or accumulated by his predecessor assessors without verifying or updating the data, and is entitled to rely upon information and recommendation from the municipal appraisal expert without inquiring as to the basis for the information and recommendations.

Although a reasonableness hearing is not impossible to win, the standard is extremely high.  Keep your eyes open for the annual Chapter 91 request and respond in a timely manner.