Real Estate Law

Real Property Tax Appeals Must Be Filed by April 1, 2008

Asset management is an important function for anyone holding an interest in real property. The annual review of real property assessments is an essential component of asset management. We urge you to review your 2008 New Jersey property tax assessment, which should be delivered by February 1, 2008. This review will help you identify potential opportunities to reduce real property tax liability.

All real property in the State of New Jersey is valued each year as of October 1 of the pre-tax year for purposes of real property taxation. The value, known as the "assessment," is determined by the municipal tax assessor.

The right of a property owner to appeal the assessment of real property is established by the State Constitution and statutory law. In Village Supermarkets, Inc. v. West Orange Tp., 106 N.J. 628 (1987), the Supreme Court of New Jersey determined that a significant tenant, who pays taxes under a lease, has standing to proceed with an appeal in its own name to challenge the assessment of real property.

During the last real estate recession, John M. Pellecchia, a partner at Riker Danzig and head of its Real Property Tax Law practice group, persuaded the Tax Court of New Jersey to extend the rationale of Village Supermarkets to establish the right of a mortgagee to proceed with a tax appeal for a property in default under a mortgage in Chemical Bank of New Jersey, N.A. v. City of Absecon, 13 N.J. Tax 1 (N.J. Tax 1992).

Chemical Bank was decided in an economic environment similar to today's climate of falling property values and rising foreclosure rates. It provides mortgagees with an important tool to limit losses on distressed properties and maintain assets during the pendancy of foreclosure and/or sale proceedings.

Riker Danzig has a sophisticated, statewide practice in property tax law and would be pleased to undertake a review of the assessment of your commercial properties throughout the state to determine whether appeals are warranted. To do this, we work closely with appraisal consultants, who will analyze the assessments (at no cost to our clients) to determine if the properties are properly valued for purposes of taxation.

If you would like us to undertake a preliminary review of a potential tax appeal, we will need a copy of the most recent Notice of Assessment (the post-card mailed to the property owner by February 1 of each year indicating the assessment for 2008) as soon as possible, in order to get our appraiser's feedback prior to the expiration of the appeal deadline.

A brief summary of the procedure for the assessment of real property in New Jersey and the procedure for the appeal of such assessment is set forth below.

Assessment

All real property in the State of New Jersey is valued each year as of October 1 of the pre-tax year. In practice, assessors do not reassess each property annually. As a consequence, assessments often equal or approximate 100% of "true value" only in the years for which a reassessment or revaluation has occurred.

Each year, the Director of the Division of Taxation determines the ratio of assessed value to "true value" on an average basis for each municipality by utilizing sales data of preceding years. These ratios are known as "average ratios."

True value represents the fair market value of the property or the price for which the real property would sell in an arm's length transaction between a willing buyer and a willing seller. To determine the assessor's contention of true value, you must divide the assessment by the average ratio. Grounds for a tax appeal exist when an assessment is in excess of the true value of the property.

Reassessment and Revaluation

A reassessment occurs when a municipality reassesses all properties within a certain class (e.g., all business properties within the municipality). A revaluation occurs when a municipality reassesses all properties within the municipality. In New Jersey last year, several municipalities reassessed or revalued properties within their boundaries.

The municipalities in the charts below are scheduled to implement reassessments or revaluations for 2008. The reassessment or revaluation of property by local taxing districts may increase the possibility of properties being assessed incorrectly, and assessments that arise from a reassessment or revaluation should be carefully analyzed to determine whether such assessments exceed the true value of the subject property.

Appeal Procedure and Deadline

Tax assessors are required to notify each taxpayer of the current assessment and preceding year's taxes by mail prior to February 1.

Taxpayers may appeal when the assessment of real property exceeds true value as described above. Taxpayers may also challenge denials of tax exemptions or tax abatements, and added or omitted assessments, which assessors may impose in response to new construction or the failure to include property in previously made assessments.

In order to bring an appeal, a petition must be filed with the County Board of Taxation, or a Complaint must be filed with the Tax Court. A business partnership or corporation that seeks to challenge a tax assessment must be represented by an attorney at law before the County Board of Taxation and/or Tax Court.

The deadline to appeal the annual assessment of real property for 2008 is April 1, 2008. (Recently enacted legislation extends to May 1, 2008 the deadline to appeal the assessment of real property in taxing districts where a municipal-wide reassessment or municipal-wide revaluation has been implemented for 2008. Nevertheless, we urge you to review all Notices of Assessment well in advance of April 1 so that you may evaluate whether grounds for appeal exist and, if so, the applicable filing deadline.)

If you believe that a property in which you have an ownership, leasehold or mortgage interest may be over-assessed and would like to consider appealing the assessment, please contact a member of our Real Property Tax Law Group as soon as possible.

*Status unconfirmed at the time of publication

Cumberland, Hudson, Mercer, Middlesex, Passaic, Union and Warren Counties reported no municipalities for reassessment or revaluation in 2008 at the time of publication.