Tax Appeals

Look closely at your real estate tax assessment statement. The assessment figure on your current Notice of Assessment does not necessarily reflect the true value at which your building and land are assessed and taxed. Real Estate Tax Appeals must be filed by April 1of any given year. However some townships and cities may extend the deadline due certain circumstances.Your municipality’s average ratio of assessed value to true value must be known and applied to your assessment. A town assessing real property at, for example, $1 million, but which has an average ratio of assessed to true value of 50%, is really placing a value of $2 million on the property.To estimate your tax bill, multiply your assessed value by your municipality’s tax rate.Note that your assessed value, based perhaps on the inflated real estate market of the 1980′s, may not truly reflect the lower real estate values prevalent today. You have the legal right to appeal this assessed value and may be entitled to a substantial rebate. Other factors may reduce your taxes. You may also be entitled to a substantial rebate based upon the following factors:

One obvious reason for filing a real estate tax appeal is to obtain a lower assessment on your real property and thereby save significant tax dollars. An equally important reason to keep taxes low is to help maintain the value of the property making it more saleable in the event that the tax appeal is successful.It would be wise to review the assessment on the property each and every year to see whether a tax appeal is warranted. The problem is that most owners of industrial, commercial and apartment properties, as well as tenants under a net lease, are not aware that they may be prime candidates for successful tax appeals even after looking at their new assessment..For obvious political reasons, many tax assessors discriminate against non-residential properties. Studies published each year by the New Jersey Division of Taxation prove this point clearly. Furthermore, although all municipalities in the state are supposed to assess real property at 100 percent of fair market value, these studies show that only a handful, in fact, do. Indeed, few property owners are even aware of the actual assessment/true value ratio in their municipality.

Property owners often feel that their property is worth an amount equal to the assessment on the property. This misconception leads owners to overlook the different ratios of assessed value to true value applicable in each of the assessing districts of New Jersey and to overlook the fact that these ratios generally decline each year. For example, if a property worth one million dollars this year is located in a municipality with a 60 percent ratio, it should be assessed at $600,000 this year. If that ratio drops to 54 percent next year, its assessment should be $540,000. If the ratio drops, but the assessment remains high, it may be time for an appeal.

Because of the inherent desire to keep residential taxes low, the revaluation of all property within a municipality may increase the possibility of over-assessment on the larger commercial and industrial parcels. Other factors that may lead to an assessment error includes environmental contamination, easements, traffic adjustments, & zoning changes.

Tax appeals on assessments of less than $750,000 must first be filed with the county tax board. Taxpayers with assessments in excess of $750,000 are allowed to file an appeal for direct review of their property’s assessed valuation by the Tax Court of New Jersey, without first filing an appeal with the local county tax board. This not only saves on filing fees and costs, but also expedites the appeal process. A complaint for direct review may include – in separate counts, separately assessed – contiguous properties in common ownership, in the same or different taxing districts, providing that the assessed valuation of one of the separately assessed, contiguous properties exceeds $750,000.

If the taxpayer prevails in securing a tax appeal judgment reducing its assessment, the so-called “Freeze Act” binds the municipality for the years covered by the tax appeal plus two additional years, subject to two exceptions. The first exception is a complete revaluation of all real property in the municipality, while the second exception is proof by the municipality of a substantial increase in the property’s value (such as an addition qualifying as an added assessment, a condominium or cooperative conversion, a subdivision or a zoning change). These exceptions aside, the assessment is frozen at the reduced level, at the taxpayer’s sole option. Thus, if a taxpayer wishes to appeal for a further reduction during the freeze period, he or she is free to do so.

The foregoing points are merely intended to scratch the surface of this area of the law. However, it should be clear that there is a tax for the informed and a separate higher tax for the uninformed. This should also help to explain why the sophisticated property owner should have his tax assessment reviewed by competent counsel every year to determine whether a tax appeal is warranted.