In municipalities where a revaluation or reassessment has been undertaken, real property tax appeal petitions must be filed and received by May 1st.
All property owners have the right to file tax appeals with the County Board of Taxation, regardless of the amount of their assessment. For properties with assessments greater than $1,000,000, owners also have the option of filing an appeal directly with the State Tax Court of New Jersey.
New Jersey’s Real Property Tax
A property owner’s tax is computed by applying the tax rate to every one hundred dollars of assessed value. For example, if the tax rate is $5.00 and the assessed value is $100,000, then the total yearly property tax is $5,000. The property taxes are paid at a rate of one-quarter of the yearly amount four times per year. Property tax payments are due the first day of the second month of each quarter: February 1, May 1, August 1, and November 1.
Since the property tax is the result of the local budget, the amount of tax itself cannot be appealed. In other words, the fact that a property owner is paying a specific amount of tax is insufficient to appeal the property tax imposed. However, the assessed value of the property can be appealed on a yearly basis. Property taxes can also be challenged on other bases, such as a $250 deduction, farmland assessment, or other exemptions and abatements as discussed below, but in order to maintain an appeal based on a discriminatory or excessive assessment, it is important to understand how the assessed value is computed.
Optimally, the assessed value of real property should be based on the “true value” of the property; however, this is not always practical since the value of property is constantly changing. Accordingly, one of the following values is applied to the property in question in determining if the assessment is “fair” and whether or not the assessed value should be changed on appeal. In both valuation situations, the value is determined as of October 1 of the pre-tax year.
True Market Value
From time to time, a municipality will conduct a reassessment or a revaluation of all real property within the municipality. A revaluation is conducted by an outside appraisal company whereas a reassessment is conducted by the local assessor’s office. The terms are often used interchangeably since in both situations the result is that the assessed value in the year of reassessment/revaluation equals 100% of the true value.
As mentioned, it is impractical for the assessed value to equal the true value every year. Real property values change based on inflation, recession, appreciation, and depreciation. To compensate for the change in values, the Division of Taxation, along with the local assessors, compare sales data related to the property within the municipality with respect to the assessed values. This comparison results in an “average ratio” for the assessments. The average ratio is also called an equalization ratio. This ratio is used in determining a common level range applicable to all assessed values, as discussed below.
Common Level Range
For a tax year in which a reassessment or revaluation has not occurred, the assessed values that fall within 15% above or below the average ratio are considered “fair” and will not be adjusted on appeal. It is important to note that the 15% range, also called the “common level range” or “Chapter 123 ratio”, is 15% of the average ratio, not 15% of the value. A copy of 2010 common level ranges for the central and southern New Jersey Counties is attached as Appendix B.
The following are examples of how the common level range is applied to the assessed value and whether or not the assessed value would be adjusted on appeal:
Example 1- No Change in Assessment
Assessed value: $200,000
True value: $210,000
Average ratio: 85%
Common level range: 72.25% to 97.75%
Ratio of assessed value to true value: 95.24%
Even though the ratio in the example exceeds the average ratio of 85%, since it falls within the common level range the assessment will not be disturbed.
Example 2- Decease in Assessment
Assessed value: $200,000
True value: $203,000
Average ratio: 85%
Common level range: 72.25% to 97.75%
Ratio of assessed value to true value: 98.52%
The ratio of assessed value to true value exceeds the upper limit of the common level range. If this property were under appeal, the value would be adjusted to the average ratio of 85% of the true value, or $172,550. The appeal would result in a decrease in the assessed value of $27,450.
Example 3- Increase in Assessment
Assessed value: $200,000
True value: $280,000
Average ratio: 85%
Common level range: 72.25% to 97.75%
Ratio of assessed value to true value: 71.43%
The ratio of assessed value to true value is below the lower limit of the common level range. If this property were under appeal, the value would be adjusted to the average ratio of 85% of the true value, or $238,000. The appeal would result in an increase in the assessed value of $38,000.
Notice Of Assessment
In a year in which there is a reassessment or revaluation, the property owner will typically receive notice, generally in the form of a letter, indicating the new assessed value of the property. Whether in a reassessment/revaluation year or not, the property owner should receive a formal notice of assessment sometime around the beginning of February. By statute, the notice is to be mailed by the assessor’s office no later than January 31, unless the municipality has been granted an extension from the Division of Taxation.
Typically, the formal notice of assessment is a postcard. Property owners often mistake the notice of assessment as being a notice of taxes paid the previous year for income tax reporting purposes. It is important that the assessment information is reviewed annually in order to determine if an appeal is appropriate. The notice will list the previous year’s assessment along with the new assessment. In a non-reassessment/revaluation year, the two amounts are generally the same.
In order to file an appeal, several requirements must be met by the property owner. The first requirement pertains to timing of the appeal. In a non-reassessment/revaluation year, the appeal must be filed no later than April 1. This deadline is dictated by statute and cannot be extended. If the property underwent a municipal-wide reassessment or revaluation, the deadline to file is May 1. Again, this date cannot be extended. If the filing deadline is not met by the property owner, the assessment cannot be appealed until the next tax year.
The second requirement is that all amounts due to the municipality, through the first quarter of the current year, must be paid in full. The amounts required to be paid include all property taxes, in addition to municipal charges such as water and sewer.
The final requirement pertains to income producing property. Although not required on an annual basis, the municipality might from time to time request income and expense information from the property owner. The request must be sent by the assessor no later than forty five days prior to October 10, but are often mailed in the summer. The request is commonly referred to as a “Chapter 91 request”.
Certain requirements are imposed on the assessor when a Chapter 91 request is sent, but the requirements are easily fulfilled. Specifically, the Chapter 91 request must be sent by certified mail and must include a copy of the statute, N.J.S.A. §54:4-34. If a Chapter 91 request is sent to a property owner, the request must be answered within forty-five days. Failure to answer the request precludes an appeal of the assessment.
Although the courts have determined that owners of non-income producing property do not need to answer a Chapter 91 request, it is advisable to have all property owners respond. See H.J. Bailey Co. v. Neptune Tp., 399 N.J. Super, 381 (App. Div. 2008). One reason for this advice is based on the fact that the property could later be found to be income producing and if the request were not answered the appeal would still not be allowed. Further, if the property was previously considered income producing, the property owner must respond to the request in order to notify the assessor the property is no longer income producing. See Thirty Mazel, LLC v. City of East Orange, Docket No. 00371-2008 (Jan. 16, 2009).
Appeal Filing and Proof Requirements
An appeal can be filed by the deadline with either the County Board of Taxation or the Tax Court, based on the assessed value of the property. If the property assessment is under $1 million, the appeal must be filed with the County Board of Taxation. Any property, whether residential or commercial, that exceeds $1 million in its assessed value, can be filed directly with the Tax Court.
Whether in the Tax Court or in front of the County Board of Taxation, the presumption is that the assessed value is correct and the property owner has to overcome this presumption. For residential properties, comparable sales or an appraisal based on comparable sales is generally sufficient. For commercial properties, an appraisal should be conducted with a conclusion regarding the value based on three views: comparable sales, income and expense, and cost of replacement.
Provided a property owner is successful on appeal, the “Freeze Act” requires that the adjusted assessed value remain in effect for a minimum of the year under appeal and the next two succeeding tax years. N.J.S.A. §54:51A-8; N.J.S.A. §54:3-26. The assessor cannot change the value during this time unless the property undergoes a change in value outside the normal increase in property values. Generally, the change in value occurs when the property changes, such as an addition or a renovation. However, changes in the surrounding property that increases value or a municipal-wide reassessment/revaluation will also allow a change in value.
If the assessment is erroneously changed during this time, the property owner can file an appeal under the Freeze Act and, if successful, can also recover legal fees and the cost of any appraisals. Also, when appealing for a violation of the Freeze Act, the municipality has the burden of proving the change in property value necessitated the change in assessed value.
Although the municipality is generally restricted in changing the assessed value, the property owner does have the right to waive the Freeze Act protection in future years in order to appeal should the value of the property decline further.
Additional Reasons for Appealing
All of the above information relates to the most common reason for appealing the assessed value; specifically, on the basis that the assessment is excessive and discriminatory. However, additional reasons for an appeal exist. The following is a brief overview of some of the potential appeal situations.
Deduction – Senior, Disabled Persons & Surviving Spouses/Civil Unions
A yearly deduction of $250 is allowed for senior citizens, disabled persons, and surviving spouses/civil union partners that meet the income and residency requirements. The application for the deduction must be filed between October 1 and December 31 of the pre-tax year. In order to qualify for the deduction, the property owner must meet the following requirements:
New Jersey citizen as of October 1 of the pre-tax year
Property owner as of October 1 of the pre-tax year
Resident of the property in question as of October 1 of the pre-tax year
Resident in New Jersey for one year immediately prior to October 1 of the pre-tax year
For senior citizens, at least age 65 as of December 31 of the pre-tax year
For surviving spouse/civil union partner, at least age 55 as of December 31 of the pre-tax year
For disabled, permanent and totally disabled as of December 31 of the pre-tax year
Income not exceeding $10,000, excluding Social Security benefits, Federal Government Retirement/Disability Pension including Federal Railroad Retirement benefits, and State, County, Municipal Government and their political subdivisions and agencies Retirement/Disability Pension
If the deduction is denied in the first or subsequent years, the property owner can appeal by filing with the County Tax Board on or before April 1 of the tax year under appeal.
Deduction – Veteran or Surviving Spouse/Civil Union Partner of Veteran
A yearly deduction of $250 is allowed for certain veterans and surviving spouses/civil union partners of certain veterans that meet the requirements. The application for the deduction must be filed between October 1 and December 31 of the pre-tax year. In order to qualify for the deduction, the property owner must meet the following requirements:
Active wartime service in the United State Armed Forces and been honorably discharged as of October 1 of the pre-tax year
Own property, wholly or in part, or hold legal title to the property for which the deduction is claimed as of October 1 of the pre-tax year
Be a citizen and legal or domiciliary resident of New Jersey as of October 1 of the pre-tax year
A surviving spouse/civil union partner, in addition to meeting the residency and ownership requirements above, must also have documentation that the veteran was a citizen and resident of New Jersey at death and the surviving spouse/civil union partner has not remarried/formed a new civil union
No income restrictions apply to this deduction. As with the previous deduction, if the application is denied, the property owner can appeal by filing with the County Board of Taxation no later than April 1 of the tax year under appeal.
Exemption – Disabled Veteran or Surviving Spouse/Civil Union Partner
A full exemption from property taxes is allowed for certain disabled veterans and surviving spouses/civil union partners of certain disabled veterans that meet the requirements. The application for the exemption can be filed at any time. If filed during a tax year, the exemption can be prorated for the partial year. In order to qualify for the exemption, the property owner must meet the following requirements:
Active wartime service in the United States Armed Forces and have been honorably discharged
United States Veterans Administration certification of wartime service-connected disability as described on the application
Wholly own or hold legal title to the dwelling house for which the exemption is claimed
Occupy the dwelling house as the principal residence
Be a citizen and legal or domiciliary resident of New Jersey
A surviving spouse/civil union partner, in addition to the ownership, occupancy, resident, and disability documentation requirements above, must also provide documentation that the veteran was a resident of New Jersey at death with wartime service and was honorably discharged or died during active service, and has not remarried/formed a new civil union
No income restrictions apply to this deduction. If the application is denied, the property owner can appeal by filing with the County Board of Taxation no later than April 1.
Exemption for Non-profit Organizations
A full exemption from property taxes is allowed for non-profit organizations. Application for the exemption must be made with the assessor no later than November 1 of the pre-tax year. Subsequent reapplications are required by November 1 of every third year thereafter.
Although the allowance for exemptions is complex and requires an evaluation of each situation by someone familiar with the exemption statute, the following is a general list of properties eligible for exemption:
All buildings actually used for colleges, schools, academics, or seminaries
All buildings actually used for historical societies, associations, or exhibitions, when owned by the State, county or any political subdivision thereof or when located on land owned by an educational institution which derives its primary support from State revenue
All buildings actually and exclusively used for public libraries, asylum, schools for feebleminded or idiotic persons and children, and owned by volunteer first-aid squads, incorporated as associations not for pecuniary profit
All buildings used exclusively by any association or corporation formed for the purpose and actually engaged in the work of preventing cruelty to animals
All buildings actually used in the work of associations and corporations organized exclusively for moral and mental improvement of men, women, and children; for religious purposes, including religious worship, or charitable purposes; for hospital purposes; and for charitable or religious purposes
All buildings owned or held by an association or corporation created for the purpose of holding the title to such buildings as are actually and exclusively used in the work of two or more associations or corporations organized exclusively for the moral and mental improvement of men, women, and children
A maximum of two buildings occupied as parsonages by the officiating clergymen of any New Jersey religious corporation
If the application for exemption is denied, an appeal can be filed with the County Board of Taxation no later than April 1.
Property qualifying as farmland is assessed at a value based on productivity, which is typically lower than assessments on residential or commercial property. The assessment does not apply to any buildings or land associated with a farmhouse. Buildings and homes are assessed in the same manner as all other non-farm property. As with the non-profit exemption, an appeal of farmland assessment requires an understanding of the potential situations that qualify and disqualify the property. However, the following general requirements must be met for a farmland assessment:
Applicant must be the owner of the property
The application must be filed annually no later than August 1 of the pre-tax year
The land must be devoted to agricultural or horticultural use for at least two years prior to the tax year
The land must consist of at least five contiguous acres – land under and adjoining the farmhouse is not counted in the five acre minimum
Gross sales of products from the land must average at least $500 per year for the first five acres, plus an average of $5 per acre for each acre over five
The property owner must represent that the land will continue as agricultural or horticultural use to the end of the tax year
When the property ceases to qualify as farmland, rollback taxes apply to the year of change and the preceding two years
If the application for farmland assessment is denied, an appeal can be filed no later than April 1.
Added and Omitted Assessments
When property is improved, such as a renovation or addition, or when the assessor’s records are found to be inaccurate, such as listing a residence as a three bedroom but is actually a four bedroom, an added/omitted assessment will be imposed. The property owner generally receives the notice of the additional assessment in October of the year in which the change is substantially completed for its intended use. The additional assessment will be due on November 1, February 1, and May 1. The new assessment will also be reflected in subsequent tax years.
Since the added/omitted assessment notices are not received until October, the deadline for appealing this additional assessment is December 1 of the year in which the tax is imposed. For example, if a property owner remodels a kitchen in the spring and summer of 2009, the assessor can impose an added assessment by providing notice of the increase in October 2009. The additional tax amount will be split into three payments due as noted above. The assessment for 2010, which is based on the value as of October 1, 2009, will include the increase in value from the kitchen remodel.