A D.C. Superior Court judge has invalidated a third of the District's 2002 residential property tax assessments, ruling that "widespread discrimination" forced owners of less-expensive houses to shoulder an excessive tax burden.

Judge Eugene N. Hamilton of the Superior Court's Tax Division said the city's 2002 assessments of 35,000 properties -- many of them in rapidly gentrifying neighborhoods east of the Anacostia River, along 16th Street NW and just west of Rock Creek Park -- were "arbitrary" and "capricious." He ordered District officials and disgruntled taxpayers who brought suit to present him with proposed remedies at a hearing in November.

The impact of the case is unclear, and it could be years before taxpayers feel its effect, if any, attorneys said. But Peter S. Craig, the Cleveland Park homeowner and retired federal lawyer who first challenged the assessments, said he will seek to have them rolled back to 2001 levels, a move that could force the city to refund as much as $44 million.

"This decision should be a wake-up call to the Office of Tax and Revenue that it better start following the law," Craig said. ". . . The inclination down there is to try to develop a method so they can do everything from a computer downtown and not bother to look at these houses."

Chief Financial Officer Natwar M. Gandhi, who oversees the Office of Tax and Revenue, declined to comment on "matters of continuing litigation," but he said the city would fight the ruling.

"We continue to feel strongly about the merits of our defense in this case and will vigorously pursue the litigation at the trial and appellate levels," Gandhi said in a written statement.

In 2001, the city sent out proposed assessments for the 2002 tax year. Craig and his neighbors noticed that everyone with a detached home in Cleveland Park had received an identical increase of 49.2 percent.

"The whole neighborhood was quite upset about that," Craig said. "I opposed that, lots of others did, and the Board of Real Property Assessments and Appeals found it invalid," reducing part of Craig's assessment by 10 percent.

But when the city used the same methodology for the 2003 tax year, Craig said he "was persuaded to file a class-action lawsuit."

The suit argues that the city's assessment methodology is flawed because it does not appraise each property individually but instead uses a formula based on recent home sales to determine how much assessments should rise or fall in a neighborhood. For example, that formula in 2002 called for the value of rowhouses in the 1800 block of Calvert Street NW to increase by 13 percent if they are on the north side of the street, in the Mount Pleasant neighborhood, but by 38 percent if they are on the south side, in an area the city designates as Kalorama-C.

In his 26-page findings of fact, Hamilton concluded that the methodology failed to take into account whether a property lies on a quiet street or a noisy one, noting that noisy properties were more likely to be assessed at an amount close to market value than were quiet ones. The city also failed to take note of significant additions and renovations, Hamilton found, permitting potential taxes on improved properties to go uncaptured.

Hamilton also found that the city failed "to inform the taxpayer of the basis, rationale and methodology used in reaching the proposed assessment, thus depriving the taxpayer of information necessary to exercise his rights of appeal." The assessments for tax year 2002, he wrote, are "arbitrary, capricious, an abuse of discretion, and otherwise not in conformity with the Constitution of the United States or the law of the District of Columbia, and are, therefore, void."

City officials have argued that their assessment methods are nationally recognized and are similar to those used in Maryland, Virginia and virtually every other state. They deny that assessors overlook the individual characteristics of each property, including permits for major renovations.