Taxpayer Foiled Despite Overcoming Presumption of Validity

by: Anthony F. Della Pelle
10 Nov 2014

In Michaud v. South Orange Village Township, the taxpayers challenged the $414,000 assessment on their single family home in Essex County.  Despite overcoming the presumption of correctness which attaches to all New Jersey local property tax assessments, Pantasote Co. v. City of Passaic, 100 N.J. 408, 413 (1985), the taxpayers failed to convince New Jersey Tax Court Judge Joshua Novin that the assessment on their home was, in fact, erroneous.  The Court’s opinion contains useful summaries of the relevant legal precedent concerning the presumption of validity, of the relevance of the sales comparison approach to valuation, and regarding the import of using adjustments supported by objective evidence in that approach.  See Greenblatt v. Englewood (26 N.J. Tax 41, 55 (Tax Ct. 2011)(appraiser’s adjustments “must have foundation obtained from the market and, where appropriate, supported by cost manuals”).

In Michaud, the taxpayers appraiser made adjustments to his comparable sales for location (without market data), but made no adjustments for time, lot size or building design based upon unsubstantiated opinions that they were unnecessary, even though there were marked differences between the comparable sales and the subject property in these categories.  The town’s appraiser adjusted (a) for lot size, without data to support his conclusion; (b) for building size without proper references to the cost manuals he relied upon; and (c) for location, also without any market data.  The Court concluded that neither expert provided “meaningful data” to assist it in determining the true value of the subject property.

The lack of factual, statistical and analytical support for the adjustments made by both sides’ appraisers led the court to conclude that there was insufficient evidence to overturn the assessment, even though the presumption of validity had been overcome.  Accordingly, the court dismissed the complaint.

While this case does not tread any new ground, it serves as a useful reminder that appraisers need to make sure that they do not rely upon net opinions in litigation appraisals, and that each aspect of their opinions must be supported by credible evidence from the market or from recognized authorities.  Otherwise the report and opinions based thereon run the risk of being excluded or just being given little weight in a court proceeding.

A copy of the Tax Court’s opinion in Michaud v. South Orange is available here.