There is little question that the Coronavirus pandemic will have an effect on the property value of New Jersey real estate. One viable option for effected property owners is to address these changes in value by filing a municipal property tax appeal. Thankfully, Chief Justice Rabner of the New Jersey Supreme Court, in conjunction with New Jersey Governor Murphy’s declaration of emergency, has extended the tax appeal filing deadline by thirty (30) days, from April 1, 2020 to May 1, 2020. This extension was granted following the determination by the Governor that the NJ State of Emergency declared under Executive Order 103 has ended. Accordingly, there is sufficient time to evaluate and utilize this legal mechanism.
Nevertheless, the road to a successful 2020 tax appeal does have some hurdles. For example, a municipal tax assessor is within his or her power to postpone property tax relief until the tax year 2021. In New Jersey, the valuation trigger date for a municipal tax appeal is October 1st of the pre-tax year. Thereby, the current snapshot of value for a 2020 property tax assessment challenge is October 1, 2019. Consequently, and despite the fact that the recent COVID-19 events may have some current impacts on property values, any adjustment in the New Jersey tax appeal forum becomes a prospective, not retroactive relief.
On a practical note, no one should lose sight of the fact that in these especially trying times property taxes remain essential to fund a municipality’s police and fire protection, public debt, the wages and salaries of town employees and administrators, the hiring of town professionals, the education of public school students as well as all other municipal services that foster town spirit, local pride and sound governmental operations.
To Appeal or Not?
Let’s proceed with the assumption that you are presently pondering whether to have your property evaluated by way of filing a 2020 tax appeal. What questions should you be expected to answer in the property real estate tax forum? First, the Court will analyze what is the fair market value of your property. That is, what is the price that a willing buyer and seller would conclude if a transaction were undertaken? This value is not the sales price arising from a foreclosure, an estate sale or some other type of conveyance fostered by a distressed circumstance. To thoughtfully answer, know that here are three (3) recognized property valuation methods explored:
For the sake of this blog, I am going to present you with an easy valuation test: Take a look at your property assessment and ask yourself these questions: Would you pay that assessed value number to purchase your own property? Or perhaps better said, is that assessment number too low or too high of a value? Given an ordinary and non-distressed sale, would you expect to receive more or less money than your assessed value? These questions sound easy enough to answer, but when reality intrudes, few things are ever easy. Complicating matters is something called the State Equalized Ratio, which cannot be ignored. I will discuss the State Equalized Ratio shortly. For the moment, let’s go back to your property self-examination. If you value your property as having a worth of over $1,000,000 and it is assessed lower than that number, let’s say $900,000 (again I am assuming a 100% State Equalized Ratio for your community) you should not file a tax appeal. To make matters worse, if you file a tax appeal where your property is under-assessed, the town can actually move to increase your property taxes. Don’t be that person, do your homework.
Now it is time to talk about the State Equalized Ratio, which I think of as the town’s report card grade. If the town ratio is 100%, they get an A+. If the town’s ratio is below 80%, you should start getting concerned that the assessed value may need some help Each town has its own Equalized Ratio, based upon a sales study within your town. So I am going to leave this Equalized Ratio discussion to a case by case discussion, as I am afraid that I may be losing your tax appeal enthusiasm.
So in these days of social distancing and quarantine confinement, there is no harm in adding something to your “to do” list: “Should I file a 2020 commercial or residential tax appeal or not?” Hopefully, I can help you travel that path.
Be well and stay safe!
Ken Porro, Esq.
Kenneth A. Porro, Esq is a partner at our firm and has over thirty (30) years of tax appeal valuation and land use matters experience. Ken can be reached at Kporro@chasanlaw.com for a free tax appeal or land use matter consultation