Delaware Issues Long Awaited Property Tax Reassessments – What Commercial Property Owners Should Know

Before 2023, Delaware was among the few states that did not have a constitutional or statutory requirement to periodically adjust property values for purposes of real estate taxation. As a result, the last county-wide property tax reassessment took place in New Castle County effective 1983, Kent County effective 1987 and Sussex County effective 1974. As would be expected, the intervening decades have witnessed widely divergent rates of appreciation in market value amongst the hundreds of thousands of properties located throughout the State. According to civil rights activists and public education advocates, this has created unequal treatment of properties and inequities in the way public schools are funded. These circumstances were brought before the Delaware Court of Chancery in 2018, in the highly-publicized lawsuit, In re Delaware Public Schools Litigation, C.A. No. 2018-0029-JTL (Country Track), 2020 WL 2296888 (Del Ch. May 8, 2020).

In 2020, the Court of Chancery issued a landmark ruling, holding that Delaware’s property tax system violated the Delaware Constitution, which requires all property owners to be taxed on an equal footing.  The Court also ruled that Delaware statutory law had been violated, as it requires all property subject to taxation to be assessed at its “true value in money” (a concept similar to “fair market value”).

While the Court declared the existing property tax system unconstitutional, it did not go so far as to offer a workable solution. In the wake of that decision, the litigation parties agreed to a settlement that required each County to undertake a reassessment of its tax parcels. Kent County completed the tax reassessment in time for the 2024 tax year. New Castle County and Sussex County will have their reassessments completed for the 2025 tax year, with notices of tentative assessed values mailed to property owners in November 2024.  The State also adopted legislation requiring reassessments every five years.

While such countywide reassessments are intended to be revenue neutral, certain caveats under state law might lead to a tax revenue increase.  Following a reassessment, school districts can realize up to a 10% increase in revenue over the fiscal year immediately preceding the reassessment.  Municipalities in Delaware may also choose to increase their property tax rates with no statutory cap on such increases.  Finally, counties can increase their tax rates to increase overall tax revenues by up to 15%.  Regarding county taxes, officials from New Castle County and Kent County have stated that they intend to keep the reassessment revenue neutral.  Similarly, Kent County, after completing its reassessment earlier this year, did not seek an increase for tax year 2024.  For tax year 2024, Kent County lowered its property tax rate from 36 cents per $100 of assessed value to 5.72 cents per $100 of assessed value.  Because of the new higher property assessments, this “rolled-back rate” was necessary to keep tax revenue neutral.

Consulting group Tyler Technologies is handling reassessments for all three counties.  The company stated that it will invite property owners to provide feedback through an informal review process for a limited period before the formal appeals process begins. In New Castle County and Sussex County, it remains to be seen how a property owner’s feedback will be considered or impact the final reassessed value.  

In the event of an overstatement in assessed value, property owners have other forms of redress available – i.e., the property tax appeal. When the last general reassessment in New Castle County was performed, a flood of property tax appeals were filed in the years following.  We anticipate another increase in appeals following this reassessment.

Property owners should beware − each county has its own appeal process. If appeals are not filed in a timely manner, owners will be estopped from appealing that year’s property taxes.   Concerned property owners should remain alert to developments in this area – especially given the consequences of failing to meet filing deadlines. 

These materials have been prepared solely for informational and educational purposes, do not create an attorney-client relationship with the author(s) or Morris, Nichols, Arsht & Tunnell LLP, and should not be used as a substitute for legal counseling in specific situations. These materials reflect only the personal views of the author(s) and are not necessarily the views of Morris, Nichols, Arsht & Tunnell LLP or its clients.