2011 New Jersey Property Tax Appeals: Things to Know

February 1st has passed. By now, if you own or manage the commercial real estate in New Jersey, you should have received a Notice of Assessment (green card) for each property from your municipality’s tax assessor. How do you feel about the assessment? My guess: not good.

The deadline for filing a property tax appeal is April 1, 2011 (unless a revaluation is taking place, in which case it is May 1, 2011). Hopefully, you have already decided whether to pursue a property tax appeal for one or more properties.

Did you know that it is the amount of the assessment, not the amount of taxes, which is the subject of the appeal?
Did you know that the 2011 assessment is supposed to reflect the fair market value of the property as of October 1, 2010?
Are taxes paid in full on the property through Q1 of 2011? Failure to pay fees through Q1 of 2011 will result in dismissal of an appeal.
If you received a request for I/E information on the property from the municipality, did you complete it in full and return it within 45 days of receipt? If not, any tax appeal will likely be subject to a motion to dismiss which is difficult to overcome. (Please see my related post on Chapter 91.)
Do any of the following circumstances apply to your property assessment by the assessor; a partial taking of the property by way of eminent domain; denial of an application to the planning board or board of adjustment; partial destruction of the property; a flaw in the structure, materials, or design that diminishes the function, utility, and value of the property, e.g., inefficient floor plan, inadequate parking (functional obsolescence).
Did you know that the threshold assessment amount for direct appeal to the Tax Court was raised to $1M from $750,000.00? If your assessment is below $1M, make sure that it is headed to the County Tax Board, not the Tax Court, with notice to the municipality and the assessor.
Do you know the “Equalized Value” of your property? Hint: it may not be the assessment amount on the Notice of Assessment. (Please see my related post on the importance of Equalized Value when weighing a property tax appeal.)
Did you know that New Jersey’s real property tax laws provide assessors with a margin for error when establishing assessments? Generally speaking, estimates are deemed valid when the property’s fair market value (FMV) falls within a corridor which ranges between 85% of the property’s Equalized Value and 115% of the property’s Equalized Value. This corridor is also known as the Common Level Range.
For example, in Linwood, NJ, a 2011 assessment on a property that had a FMV of $1M as of 10/1/10 will generally be sustained if the assessment is between $752,675.00 [$1M x (65.45% x 115%)] and $556,325.00 (1M x [65.45% x 85%)]. An assessment above $752,675.00 would be reduced to $654,500.00 (1M x 65.45%). Likewise, an assessment below $556,325.00 would be increased to $654,500.00 (not what we’re looking for).

Here’s another way to look at Common Level Range: Linwood’s Average Ratio for 2011 is 65.45%, making its Common Level Range 55.63% (Lower) to 75.27% (Upper). If the ratio of the property’s assessment to FMV(Assessment/FMV) results in a percentage above 75.27%, then the estimate should be reduced; if the rate falls between 55.63% and 75.27%, it will not be changed; and, if it drops below 55.63%, it will be increased.

WARNING: apparently, an appeal would not be recommended where the assessment is currently below the Lower Level of the town’s Common Level Range. You would just be inviting a cross-appeal from the city and an increase in your taxes.

BOTTOM LINE: with vacancies and rents showing little improvement in 2010, the time may still be right to appeal the current assessment on the property. A reduced assessment will result in reduced taxes, thereby decreasing expenses, and making the property more attractive if on the market for sale. However, as highlighted above, NJ’s real property tax appeal laws are complicated. Moreover, given NJ’s current budget fiasco and ongoing cuts in aid to municipalities, it is fair to assume that many local tax rates are going to go up further and that the cities are going to fight tooth and nail for every penny of tax revenue. If you are going to challenge the assessment on a property, make sure that you do it with an experienced appraiser and attorney by your side.

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