Property Tax Appeal Q&A: Harry Renwick, Part I

To file a property tax appeal, or not to file, that is the question. (Apologies to William Shakespeare.)  April 1st is the deadline for most property tax appeals in New Jersey. (May 1st if the municipality is undergoing a revaluation in 2010.)  With April 1st fast approaching, it seemed like a good time to check in w/ Harry Renwick of Renwick and Associates.

As you will see, Harry has spent close to 50 years as a professional real estate appraiser and has extensive experience w/ real property tax appeals in New Jersey. (Full disclosure: my office does use Renwick and Associates as an expert in property tax appeals and we are proud to do so.)  I felt that his perspective on tax appeals would be helpful to any property owner or manager who has decided to file a tax appeal or is considering it.  Harry graciously agreed to participate in a Q&A session w/ me.  Because of the amount of information, the session has been broken down into 2 posts. This is Part I.  (The highlighting in the answers was done by me.)  I hope that you find the following information useful:

  • Tell us about your background/experience and what Renwick and Associates does 46 years as a professional real estate appraiser.  I hold a Senior Certified General Real Estate Appraiser (SCGREA) license designation in N.J.  I also hold a Certified Tax Assessor (CTA) designation in N.J. and I am a licensed real estate Broker.  Our company specializes in litigation matters involving all types of real estate. We provide real estate consulting and appraisal services which place defensible valuations on property for the purpose of settling disputes in matters involving real estate.  The disputes typically involve: real estate tax, federal income tax, eminent domain (condemnation), consumer fraud, insurance claims, economic (market) rent, equitable distribution of estates, bankruptcies, isolation of development rights etc. More information can be found at www.renwickandassociates.com.
  • In general, what is an appraisal?  An appraisal provides a defensible estimate of a property’s value as of a specific date in time. The appraisal is based on a set of disciplines required under state law. The appraiser is attempting to analyze comparable lease, cost and sales data that would be considered by participants (buyers/tenants) in a defined market. The results of this analysis are then correlated in to a final estimate of value.
  • What role does an appraiser play in a property tax appeal in NJ?  An appraiser performs an appraisal of the property and typically serves as an expert witness in support of the tax appeal if/when one is filed.  (At Renwick and Associates, we provide a preliminary evaluation at no charge to give the client an idea as to whether an appraisal and appeal would be worthwhile.) When appealing an assessment, the taxing municipality will have the benefit of an “expert” in support of its position. The property owner is best served to have its own expert to combat the assessor’s position.
  • Can you provide us w/ your current take on the SJ commercial market?  Anything of note in any of the following segments: multi-family; retail; or office?  The current multi-family market is generally experiencing higher than normal vacancy and credit rates directly related to the limited number of qualified tenants and the disruptions in the market related to the recession and the need to attract new qualified tenants. Operating Expense ratios are also trending upward which has a dampening effect on Annual Net Operating Income. Retail and office properties are generally following the same trend except vacancy and credit losses are considerably higher due to an over supply of space and limited number of new qualified tenants. Capitalization Rates are trending higher within each market as a direct response to the higher risk presented within the recessionary market. This also has a diminishing affect on the internal rate of return from these investments.  In short, things are tough in the South Jersey commercial market, especially in the retail and office segments.
  • Why can a property tax appeal be important in today’s economic climate?   The tax laws in New Jersey and many other states employ a standard of Market Value as the basis for the equitable distribution of budget levies over the municipal or city tax base. Under the tax system, a property’s assessed value is supposed to closely approximate its Market Value as of October 1st of the pre-tax year. In today’s economy, w/ sharply declining real estate markets, the assessed value of a property may no longer accurately represent the property’s Market Value.  If the current assessed value is proven to be inequitably high, based on a current appraisal, then substantial financial relief may inure to the property owner. 

In short: if it turns out that the current assessed value of a property is too high, a property tax appeal is the way to get it lowered and save the owner money.  If the owner is not passing through the tax burden to a tenant in full, then a high tax level would reduce Net Operating Income which, in turn, reduces the value of the property. In addition, having tax levels on a property which are competitively high can drive away potential buyers or tenants.

Check back in a couple of days for Part II of the Q&A w/ Harry Renwick regarding property tax appeals in New Jersey.

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