May 20, 2010

Now is the time for property owners who have received their real estate assessments to determine whether it is in their best interests to appeal these assessments. Generally, the deadline for real estate tax appeals in New Jersey is April 1 (In Pennsylvania, the deadline is Aug. 1).

Annual real estate taxes are the direct product of the assessed valuation of the property, so it is important to review these assessments to determine whether they are accurate and fair. While such reviews should take place annually, they are particularly crucial when, as now, property values have suffered deep declines in value. In this climate, an annual tax assessment often is too high and should be appealed.

A successful real estate tax appeal will lead to the reduction of the annual assessment on the property for the year under appeal–and also potentially for as much as two years following the year of the appeal under New Jersey’s so-called Freeze Act. This, in turn, will result in reduced annual taxes on the property for these year(s), providing real savings.

If you believe your property may be over-assessed, we recommend acting immediately upon receiving notification of your assessment to determine whether or not you have a tax appeal worth pursuing.

Full and Fair Value

Under New Jersey law, the tax assessor in every municipality generally is required each year to determine, in his or her judgment, the full and fair value of each parcel of real estate in the municipality, as of October 1st of the pre-tax year. This amount then is used by the assessor to determine and establish the municipality’s assessed valuation of the property for the tax year in question.

The tax assessor is required by law to notify every taxpayer in the municipality by mail, prior to February 1st, of the current year’s assessment against the taxpayer’s property (among other information). The property assessment amount set forth in such “Notice of Assessment,” however, can be somewhat misleading because it typically represents a certain portion of the actual value determined by the assessor (except during a revaluation or reassessment year).

This is due to an “average tax ratio” for your municipality that usually will be applied to the actual value claimed by the assessor in all tax years that do not involve a revaluation or reassessment. The “average tax ratio” is also sometimes referred to simply as the “common level.” The “common level range” for the municipality (which is plus or minus 15 percent of the average ratio) must also be taken into consideration when attempting to determine whether a parcel of property is assessed accurately and fairly.

Thus, a tax payer should not assume the assessment amount set forth in the Notice of Assessment is the actual value determined by the assessor in any tax year that does not involve a revaluation or reassessment. Rather, the tax payer must apply the average tax ratio as well as the “common level range” to the assessed value to judge whether the actual value determined by the assessor is excessive and unfair.

Other Factors

Even when the assessment set forth in the Notice of Assessment is based upon a just-completed revaluation of all parcels in the municipality, or upon a reassessment of your property pursuant to applicable law, do not assume the assessment amount set forth in the Notice accurately reflects true value of your property.

New Jersey law requires property to be both valued and assessed at 100 percent of its full and fair value as of October 1 of the pre-tax year (without any application of the average tax ratio or the common level range). Nonetheless, the assessment amount set forth in the Notice of Assessment still may be inaccurate or unfair for a number of reasons.

For example, because the revaluation process typically takes months to complete, the data and other information the revaluation firm relies upon to render its opinion and determination as to the (claimed) true value of your property may be outdated as of the statutorily mandated valuation date of October 1st of the pre-tax year.

Thus, even in the case of a revaluation year, we advise clients to have their assessments reviewed to determine whether they are accurate and fair.

For up-to-date information concerning real estate tax appeals, please visit the New Jersey Real Estate Tax Appeals blog at http://www.propertytaxesnj.com/.

For assistance with tax appeals, please contact one of the attorneys on Hill Wallack LLP’s Tax Appeals Team. In addition to assisting clients with New Jersey tax appeals, we also represent clients in tax appeal matters in Pennsylvania.