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The Quest for Economic Rent
The course to economic rent before New Jersey’s Tax Court seems straightforward, but taxpayers and municipalities alike continue to run aground on shoals both old and new.
The recent decision in Burr Corporate Center, LLC v. Township of Westamption considered four years of appeals on a “flex (office/warehouse) complex consisting of two buildings totaling about 78,000 square feet.
The taxpayer’s expert relied primarily on the subject leases, but failed to articulate the particulars of his analysis and had no market data to support his conclusion that the rents reflected the market. The Court rejected the argument that the subject’s rents should constitute the presumptive economic rent, as is assumed of the income derived from apartment buildings and hotels.
The municipal appraiser fared no better. The appraiser failed to articulate a methodology for arriving at the adjustments to the comparable leases utilized in the analysis. In addition, the quantum of the gross adjustments (25 - 50%) to the leases utilized by the appraiser were such that the Court was forced to call into question their comparability.
With no viable conclusion of economic rent, the Tax Court affirmed the assessment. After eight years of litigation, it is a disquieting and unsatisfactory result. However, it is one that happens all too frequently. The Tax Court’s full opinion is linked to the button below.