Real property taxes in New Jersey are notoriously among the most burdensome in the nation. An available and efficient process is in place to challenge, by way of appeal, the fundamental assessment upon which municipal tax rates are imposed.
According to the New Jersey Constitution of 1947, real property taxes in New Jersey are levied by municipalities on what is known as an "ad valorem" basis, which means "according to the same standard of value." Real property is thus taxed essentially on the amount a willing buyer, under no obligation to buy, would pay a willing seller, under no obligation to sell, for a particular piece of real property.
Theoretically, the municipal assessor makes the determination of true value as of October 1 of the year prior to the tax year in question. As a practical proposition, the assessment placed on any parcel of real property is ordinarily established by an outside revaluation firm during a revaluation of all properties in the municipality. Some municipalities, rather than engaging an outside firm to perform a formal revaluation, will engage in a "reassessment" program, generally using in-house personnel. Either way, the assessment on any given property is ordinarily established at the same time as the assessments on all other parcels of property in the municipality. Hence, they are established on what may be characterized as a mass-produced basis, rather than an individual, customized basis.
Under the circumstances, even the best of revaluation or reassessment programs can lead to substantial deviations from the norm with regard to any one particular property, since so many properties must be evaluated by a very few people during a relatively brief period of time, and at a very low cost per property.
Because property values are generally established for all properties in a municipality at the same time, they become obsolete with the advance of time and change of circumstances. During difficult economic conditions, we see significant variations in property values. In such times, non-residential properties typically lose greater value than residential ones, resulting in owners of non-residential property paying a disproportionate share of real estate taxes.
To appeal –– or not?
There are advantages, but also costs, to an appeal of property taxes. First, let’s consider the advantages. If a tax appeal is successful, the taxpayer will be entitled to an immediate reduction on his municipal taxes, retroactive to January 1 of the tax year appealed. Interest is theoretically recoverable but is typically waived in the case of a settlement.
Perhaps more important than the actual cash refund received is the fact that the tax reduction is, with certain exceptions, carried forward for at least an additional two-year period under a law commonly known as the "Freeze Act." Therefore, absent an intervening revaluation or change in circumstances, the tax reduction will be good for a minimum of three years. It is likely that the reduction will continue until the next revaluation, since assessors would not normally be motivated to increase a previously reduced assessment without increasing those of all taxpayers at the same time. In this way, a tax assessment reduction could become quite valuable beyond the initial three years.
There is, however, the inevitable cost of taking the appeal. No serious appeal should be undertaken without benefit of a real property appraiser knowledgeable and experienced in tax appeal matters in the State of New Jersey, though settlements can often be achieved following a sophisticated analysis by the attorney and follow-up negotiations. Whereas an attorney may be engaged on a contingency basis, this is not the case with expert appraisal witnesses. A real property fee appraiser with a designation from a recognized professional association may not ethically work on a contingency basis, since the appraiser is obligated to render his or her objective opinion of value, notwithstanding the merits of the case. Hence, payment of a reasonable real estate appraisal fee may be necessary to a serious tax appeal.
Although appealing your current assessment may pose some costs, a well conceived and executed appeal could result in substantial savings to the taxpayer. We would be happy to assist in determining whether a real property tax appeal is a viable option.
Ryan A. Marrone, Esq., Of Counsel for Szaferman, Lakind, Blumstein & Blader, P.C. in Lawrenceville, has more than 13 years of experience representing private and public companies in various capacities. His areas of practice include General Counsel Services, Solar Integration and Development, Zoning and Land Use, Corporate and Banking Finance, and Commercial and Residential Real Estate. He can be reached at : email@example.com.