Don’t Let Chapter 91 Stop Your NJ Property Tax Appeal

With property values still too low and most assessments still too high, many NJ property owners are justifiably weighing the merits of a property tax appeal. For owners of the commercial real estate, one crucial question to ask is whether you are compliant with “Chapter 91” of the New Jersey Statutes concerning the assessment of real estate. You may not be familiar with “Chapter 91,” but trust me when I tell you that non-compliance can stop an NJ property tax appeal dead in its tracks. I’ll explain how and what to do below, but first a brief overview:

Chapter 91, codified at N.J.S.A 54:4-34, is the section of the statutes that allows assessors to serve owners of income-producing property with a request for a report on income from the property (an “I/E Report”). The purpose of Chapter 91 is to afford assessors access to financial information that can theoretically help them get the assessment of the property right the first time and thereby avoid litigation. The assessor must comply with specific statutory requirements when sending the request to the property owner, which will be discussed below. A request for an I/E Report is sent as an assessor’s discretion but must be timely, so that the assessor can use the information by January 10th in setting the assessment for the upcoming tax year. (The requests are typically sent out during the summer or early fall of the pre-tax year.) Once served with a request for an I/E Report, an owner has 45 days in which to file a response.

Here’s the kicker: IF A PROPERTY OWNER FAILS OR REFUSES TO RESPOND TO A REQUEST FOR AN I/E REPORT WITHIN 45 DAYS, THE OWNER IS PROHIBITED FROM PURSUING AN APPEAL OF THE PROPERTY’S ASSESSMENT. In other words, an appeal filed by an owner who is non-compliant with Chapter 91 will be subject to dismissal w/o any hearing on the merits. The draconian nature of this sanction and its strict enforcement cannot be overstated. Even if the owner’s response is only a couple of days late, the property is not currently producing income, the income is minimal and ancillary, the request is believed to be illegal, the owner only recently purchased the property, or a timely but incomplete response is filed, the appeal is barred, no ifs, ands or buts, if a response is not filed w/in 45 days. An owner cannot “cure” non-compliance with Chapter 91 and municipalities usually move quickly to file a motion to dismiss.

Given the harsh impact, one would think that property owners would never fail to respond to a request for an I/E Report w/in 45 days, but it happens more than you might think. Some owners refuse to reply or ignore it b/c a property tax appeal is not being considered at the time. Sometimes the request is filed away for later attention and just forgotten, or it takes too long to get in front of the “right” person. Some owners don’t think that the property qualifies as “income-producing” or otherwise objects to the request. (Even if you object to the application, a timely response setting forth the objection and, if appropriate, providing non-objectionable information, should be filed.)

So, what should a property owner do if faced with a motion to dismiss for non-compliance w/ Chapter 91? Well, for one thing, don’t concede the action until the following potential defences are thoroughly investigated:

Was the request for an I/E Report sent in writing via certified mail, as Chapter 91 requires explicitly an assessor to do? [Warning: if an assessor sends the request via certified and regular mail, the certified goes unclaimed, but the daily mail is not returned, notice to the owner is presumed if the daily mail was handled adequately including postage and addresses, so a “lack of notice” defense, in that case, won’t fly.]
Did the request include a copy of Chapter 91? This is also mandatory w/ the burden of proof on the assessor. Failure to add a text of the statute makes it inapplicable — i.e., non-compliance cannot defeat an appeal — b/c an owner must be duly notified of the consequences of failing to respond.
Does the request explain in clear and unequivocal language what information is being sought and the consequences for failing to respond? [See above.]
Was the application time so that the owner has a full 45 days to meet and the assessor can use the information for the upcoming tax year, i.e., by January 10th?
Was the property never income-producing? If the property was income-producing at one time, a response should be filed even if to notify the assessor that it is no longer income-producing. Also if the property was never income-producing, to be safe, a response indicating as much should be filed.
If a response indicating that the owner is unable to answer the request was filed promptly, is there “good cause” to justify why the owner cannot supply the information w/in 45 days? {There is a limited “good cause” defence to non-compliance, but it is limited and tough to meet.]
If none of the above defenses is available, a non-compliant owner can always hope that the municipality fails to file a timely motion to dismiss or, it can pursue a “reasonableness” hearing which is a limited, an unattractive option (no ability to challenge the assessment) and something to be discussed some other time.

MORAL: if you own commercial real estate and receive a request for an I/E Report from the assessor, don’t ignore it or forget it. File a timely response — even if the property is owner-occupied or not currently income-producing – If the information is available, provide it; it can’t hurt. If the data is not available, explain why.

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