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Mortgagees, Tenants and Tax Sale Certificate Holders May Have Standing to Appeal New Jersey Property Tax Assessments

Thumbnail image for 1387291_decorative_house_in_sunlight.jpgUnder New Jersey law, a taxpayer feeling aggrieved can appeal a property tax assessment. Obviously, the owner can qualify as a “taxpayer feeling aggrieved.” However, it is not well known that others can also qualify under the statute. Tenants, mortgagees, tax sale certificate holders and even non-owner spouses of a marital residence can, under certain under certain circumstances, qualify as aggrieved taxpayers and thus are permitted to file an appeal of a property tax assessment.

The word “taxpayer” has been interpreted by New Jersey courts to include not only the owner of record of a property but also tenants, mortgagees and holders of tax sale certificates under certain circumstances. The courts have often based their findings upon the belief that the “taxpayer feeling aggrieved” means anyone with a legitimate interest in the property and who pays the property taxes, and is thus adversely affected by an incorrect assessment.

If a lease requires a tenant to pay all taxes for a full tax year, the Tax Court has held that the tenant qualifies as an aggrieved taxpayer. However, the Tax Court required that because the appeal of the assessment could result in an increased assessment, the owner of the property must also be a party to the action. The Tax Court noted that the lease was silent on the issue of whether the tenant was permitted to file a tax assessment appeal.

In another case, the New Jersey Supreme Court listed five factors which must be considered to determine whether a non-owner has standing to file such an appeal: (1) the terms of the lease including its duration and the burden of the tax on the tenant; (2) the tenant’s relationship to the property – for example, if the tenant occupies the entire premises; (3) if the tenant’s interests are substantially the same as the landlord’s (or any other tenant’s) interests; (4) the tenant’s ability to prosecute the appeal; (5) the landlord’s relationship with the taxing authority – for example, does the landlord own other properties in the municipality.

A mortgage lender can qualify as a “taxpayer feeling aggrieved” when the property owner is in default under a mortgage and will be permitted to file an appeal of the tax assessment on the property. The Tax Court has found that a mortgagee (the mortgage lender) has a substantial interest in the property through the terms of the mortgage because the mortgagee can foreclose on the property if the mortgage payments are not made and become the owner of the property. If the owner of the property is not paying the property taxes, the lender has the right to pay those taxes and often does so to make sure no tax lien will affect its right to foreclose. Thus, if the owner has stopped paying the mortgage payments and the lender has been paying the property taxes, the lender has standing to file a property tax appeal. The lender must, however, notify the owner of the appeal.

When a property owner fails to pay the property taxes when due, the tax lien is often sold by the municipality. The person who purchases the tax lien is the tax sale certificate holder. A tax sale certificate holder who then pays the subsequent property taxes on the property as they become due has standing to appeal the property taxes. The tax sale certificate holder has a future right to foreclose on the property and potentially become the owner of the property.

A non-owner spouse can be a “taxpayer feeling aggrieved” under New Jersey law and can appeal a property tax assessment for a marital property because she has an interest in the property where she resides and can potentially be liable for the real estate taxes on the marital property
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