You Know Your Taxes Are Too High - But What Are You Going to Do About It?

So you received your property tax assessment for 2011 and are wondering what to do about it. While a perfectly plausible instinct would be to ceremoniously burn this missive, it is important to take a moment, prior to the ceremony, to look at the assessment to determine if your property is being over-assessed.

You should bear in mind that the assessment may or may not represent the market value of your property. This will depend on the overall ratio of assessed values to fair market values for all properties in your town. For instance, if your town is generally assessing properties at 50% of their fair market value and you receive an assessment of $1,000,000, that assessment represents a fair market value of $2,000,000 for your property. There are several complicating factors with respect to calculating the market value of your property and determining whether you have an appeal that goes beyond the scope of this article.

If you feel that you are being assessed at a value in excess of the fair market value that your assessment represents, the State of New Jersey provides you with an opportunity to address that concern through filing a real property tax appeal. If you received a notice of tax assessment, chances are you are an owner, tenant, contract purchaser, or mortgagee in possession and, therefore, have standing to file an appeal of your property tax assessment. Lest you think that this process is somehow obscure, overly complicated, or will make you a pariah to your community and local government, let me assure you that: (1) all towns have a high expectation of tax appeals; (2) the vast majority of the appeals settle with the towns; (3) many towns have included reserves in their municipal budget for tax appeals; and (4) appeals brought in good faith by reputable attorneys who have good relationships with municipal assessors and attorneys rarely raise the ire of local authorities. Bear in mind that when filing a tax appeal, you are appealing the fair market value of your property represented by the assessment; you are not appealing the fact that your taxes are too high. This is an important distinction because if you own property in New Jersey, regardless of whether you are fairly assessed, your taxes are probably too high.

Another complicating factor is that for real property tax purposes, multi-family properties are generally valued based on the income the property produces as opposed to other appraisal methods such as the sales approach and cost approach. Don't assume that because a neighbor's property sold for more than your assessment, you have no appeal. Sales comparables (other than the subject) are often only indirectly implicated in property tax valuation. In addition, many of the components of an income analysis, such as vacancy rates, expenses and capitalization rates, are taken utilizing a stabilized approach, which may or may not closely correlate to actual numbers. Using a stabilized approach is meant to balance the highs and lows over periods of years.

Here are a few key items to remember:

1. The appeals deadline is APRIL 1, 2011, for most communities. Where a municipal-wide revaluation or reassessment has been conducted, that deadline will be extended to MAY 1, 2011. You can find a list of all the municipalities scheduled for a 2011 revaluation or reassessment at our real estate tax blog, which can be found at our website BrachEichler.com.

2. If you receive a request in the mail sometime during the year from the taxing authority to provide the income and expense information on the property (referred to as a Chapter 91 request), you must provide that information to the taxing authority within 45 days from receipt. Failure to do so could leave you barred from filing a tax appeal for the next year.

3. The Tenant Property Tax Rebate Act may result in the property tax collector sending you a rebate notice as the property owner.

If you feel that your property may be over-assessed and would like to learn more, please contact us directly at (973) 403-3125. It is imperative that you review your assessment and consider an appeal before April 1, 2011 (May 1, 2011 if your town has performed a reassessment or revaluation), because after that date, you no longer have this avenue for relief from your 2011 taxes.