New Jersey Real Estate Attorney Blog
According to some experts, New Jersey’s real estate market reached its peak in the summer of 2006. Since then, real estate values have consistently dropped. Among the properties that have seen the most dramatic decreases in values are New Jersey apartment buildings. As the real estate values have continued to plummet, tax assessors have scrambled to try to ensure that their assessments do not exceed the values. In some cases when a reassessment or revaluation has not been performed to reflect the diminution in values, owners of apartment buildings have enjoyed success in their tax appeals.
While apartment buildings were historically valued based upon the income streams that investors could expect to receive, the prospect of condominium conversions from 2003 through 2008 forced apartment building values to increase far beyond what could normally be justified if the investor were only looking at rental income. In fact, in many cases, the expenses for the recently sold buildings far exceeded the rent rolls. The belief among investors was that their profits would be realized once the buildings were converted into condominiums and their units were sold off to individual owners. When these prospects did not come to fruition, the unfortunate result was a high inventory of vacant condominium and apartment units and a substantial depreciation in residential rents. These factors have all contributed to a decrease in the values of apartment buildings, and an increased number of tax appeals.
To further complicate matters, New Jersey municipalities that conducted their most recent revaluations or re-assessments at or near the height of the real estate market are now substantially over-assessed for most properties. In these instances, filing a Tax Appeal is essential. However, in some towns, properties are valued at as little as 20% of their true value. The reason for this is that conducting revaluations or re-assessments is an expensive process for municipalities to undertake. Some towns have not conducted revaluations in several years. Those under-assessed municipalities will therefore operate under the sometimes faulty assumption that all of their properties are under assessed by the same ratio and will increase their tax rates accordingly.
In cases where your property is located in an under-assessed municipality, you still may have a good case for a Tax Appeal if your “true value assessment” exceeds the value of your property. The True Value Assessment can be easily derived by taking your assessment and dividing it by the equalization ratio for your municipality. Your town’s equalization ratio can be obtained by either calling your assessor or the County Board of Taxation. If you feel that your True Value Assessment exceeds the actual value of your property by more than 15%, then a Tax Appeal may be justified.
The tax appeal procedure begins with an application which is generally due on April 1st. Filing fees for the application range between $5 and $150 depending upon the assessed value of the property. In cases where an attorney is retained, the attorney will often handle the appeal on a contingency fee basis. While property owners who are not corporations or limited liability companies may represent themselves in the tax appeal proceeding, the applicant should have an appraiser at the hearing in all cases where a discrepancy in valuation is at issue. 