One might think that only property owners have the right to appeal a property tax assessment, however such is not the case.  Where a property owner is in default under a mortgage, a mortgagee possesses the right to appeal a property tax assessment in order to limit its losses.  [For more information on who else may have the right to appeal an assessment, click here]

In Chemical Bank of New Jersey, N.A. v. City of Absecon, 13 N.J. Tax 1 (N.J. Tax 1992), the Tax Court of New Jersey established the right of a mortgagee to file a tax appeal for a property in default under a mortgage.  The Court reasoned that a mortgagee has a substantial interest in the property.  Nonetheless, the Court recognized the need to provide notice of the appeal to the property owner by requiring a copy of the complaint to be forwarded to the owner.

A mortgagee considering a tax assessment appeal must still be cognizant of an owner’s responsibility to complete a Chapter 91 request.  [Click here for a detailed discussion of Chapter 91 requests]  In Carriage Four Associates v. Teaneck Township, 13 N.J. Tax 172 (N.J. Tax 1993), the Tax Court determined that a Chapter 91 defect runs with the land.  In other words, where an owner has refused to comply with a Chapter 91 request, the subsequent owners, including receivers and possibly even mortgagees, are bound to the consequences of not filing a response to such a request.  Therefore, where an owner fails to respond to a Chapter 91 request, a subsequent owner or similar entity, such as a mortgagee, may not file a tax appeal.

In today’s economic environment of rising foreclosure rates Chemical Bank provides mortgagees with an important tool to limit losses.  However, a mortgagee should verify whether the township’s Chapter 91 requests have been complied with prior to expended additional funds to file an action to contest a tax assessment.