A case recently decided by a New Jersey tax court has clarified that environmental contamination can be considered when determining a property’s true market value for tax purposes, even if it possesses a “value in use” to the owner.
This decision is significant, because it is contrary to the existing rule that commercial property that is “in use” can only be assessed using “normal assessment techniques,” which precludes considering environmental consideration.
In this case, known as ACP Partnership v. Garwood Borough, a company purchased property before there were legal requirements to investigate whether the property was contaminated.
The property is a multi-tenant industrial and warehouse complex that the owner leases to various tenants, as well as using a small part for self-storage. As a result, the property is considered “in use” because it generates income for the owner and is used by the owner.
This designation is important, because existing New Jersey case law held that if a property is in use, normal assessment techniques must be used to determine its value.
On the other hand, a different line of case law holds that in cases where the activity that caused the environmental contamination have stopped and the owner is engaging in efforts to clean it up, the environmental contamination can be considered when determining its market value.
In the case at hand, the property owner, while still using the property, had not caused the contamination and was actively engaged in investigating the contamination and cleaning it up.
For this reason, the court held that while normal assessment techniques must still be used, they must be “tempered by the costs encountered by the tax payer in addressing the environmental condition of the property.”
The court did not provide an exact method for the assessment to be adjusted, but rather left it to the judgment the appraisers involved.
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If you believe that your property has been incorrectly or unfairly assessed for tax purposes or have any other legal issues related to real estate, you should contact an experienced attorney as soon as possible. These cases often raise complicated legal issues, the outcomes of which could have significant financial consequences. T