The focus of this Article is to assist the reader in determining whether or not to file a municipal real estate tax appeal. Unquestionably, municipal real estate tax obligations have been steadily increasing to a point where these property assets are more aptly described as a liability.
Starting Point
The starting point is a simple question: What is the value of your real property that a willing buyer and seller would have paid as of “October 1” of the pre-tax year in question? For example, if a particular property had a “fair market value” of One Million ($1,000,000) Dollars, as of October 1, 2009, and your 2010 municipal tax assessment value is Two Million ($2,000,000) Dollars, then, on its face, you have grounds to challenge your assessment. Fair Market Value
New Jersey Courts have defined “fair market value” as the price that the property would command if exposed for sale in an open market, where both the buyer and seller are knowledgeable, and neither are unduly forced to act.
Fair market value is determined by one of three methods: the cost approach, the market/comparable sales approach, and/or the income approach. In general, income producing properties such as shopping center/malls and apartment complexes, are valued by way of the income approach. Residential properties are generally assessed by way of the market comparable sales approach (the price of similar type homes sold in the area). The cost approach is less frequently used and, candidly, is only applicable if the property in question commands some type of unique construction characteristics.
Tax Appeal Process
A property owner who is dissatisfied with his/her property assessment can appeal that assessed value to the County Board of Taxation or directly to the State Tax Court, if the assessment is over $750,000.
Burden Of Proof
The burden of proof is upon you, as the property owner, to prove that the municipal assessment is improper. What this means is that a property owner needs real factual evidence that his/her tax assessment is over assessed, not just one’s gut feeling that you used to pay less real estate taxes in the past and now you are paying substantially more. The best way to determine if your municipal tax assessment is too high is to have a licensed real estate appraisal report prepared. The appraisal report is the proverbial sword from which you can use to cut down your over assessment. To challenge your municipal tax assessment without an appraisal report is risky, because a municipal tax assessment has a presumption of correctness.
Grounds For Reductions
The New Jersey Courts have recognized certain property constraints as a basis for the reduction of municipal real estate tax assessment. Some of these are as follows: governmental restrictions; wetlands; environmental contamination; access difficulties; zoning; undersized lot; non-conforming lot; noise; loss of view; functional obsolescence; flooding; asbestos; the economic reality of decreasing property rents; and the list goes on.
Closing
In today’s economic market, it is sound asset management to evaluate and make an informed decision as to whether your property portfolio is properly assessed. The reader should be aware, however, that a municipal tax appeal should only be filed after a proper review of one’s current assessment. A municipality can file a counter-claim against your challenge which, in rare circumstances, could result in an increase in your current assessment. The October 1 valuation date is already here. Therefore, it is time to look at those 2010 municipal real estate taxes! April 1, 2010 is your deadline for challenging your 2010 municipal tax assessment which is based upon your property values as of October 1st of the pre-tax year, i.e., October 1, 2009. Our firm will conduct a no cost municipal tax assessment valuation for your property. In addition, once retained, our firm generally will handle the matter on a contingency fee basis, if the client so elects.