Impacts of COVID-19 on New Jersey Property Taxes

by: Anthony F. Della Pelle
5 Oct 2020

October 1, 2020 represents the date of valuation for New Jersey property tax assessments.  Here’s some info to help you evaluate whether you should consider a property tax appeal:

New Jersey real property owners recently received their final 2020 property tax bills, making many property owners wonder about the economic impacts of COVID-19 upon the New Jersey real estate market.  The pandemic will likely cause many property owners to seek or consider property tax relief due to a decline in their property values. In New Jersey, retail, hospitality and office properties have likely suffered the most to date, while values of residential properties have seen mixed consequences as the single-family home market is strong, but multi-family home pricing has had varied impacts in different parts of the state.

These changes in the market are likely to continue or become more significant for the foreseeable future, therefore providing a warning that property owners may be paying more than their fair share in property taxes. Where an assessment does not reflect a property’s true market value, the taxpayer should consider filing an appeal to reduce the assessment and to provide some and consequently cause property owners to overpay, in some cases by thousands of dollars. In order to remedy this overpayment, you can appeal your tax assessment. Before doing so, we recommend that you ask, and have answered, the following questions:

1. Can I appeal in 2020? It’s unfortunately too late to appeal in 2020 even if your property value has declined, so you need to focus on 2021. For most properties in New Jersey, the annual filing deadline for tax appeals is April 1st, even though the deadline was extended to July 1 in 2020 due to the pandemic. Equally important is the fact that the “assessment date”, or date of valuation, for tax appeals is October 1 of the preceding year. That means that, for a 2021 tax appeal, the assessment date — October 1, 2020 — has just occurred, and evidence of sales or leases of other properties that have taken place around October 1, 2020 could provide a taxpayer with evidence in support of an appeal next year. Appeals for 2021 can be filed starting January 2, 2021 but you can start getting ready now.

2. What is the Property’s Current Assessment and “Equalized Value”?  Prior to starting the tax appeal process, you first need to know your property’s current assessment. New Jersey municipalities use an “equalization ratio” to translate property tax assessment to market value, thereby avoiding the need to reassess properties every year. The ratio is different in every town and changes every year. Ratios are available on the NJ Division of Taxation’s website. For a ratio at or near 100%, the assessment is intended to represent the current market value. But some municipal agencies have base assessments that have not been revalued in many years, so the equalization ratio is low. As an example, the City of Elizabeth has a 2020 ratio of 10.68%. As a result, a property assessed at $500,000 in Elizabeth in 2020 is intended to indicate a market value of about $4,700,000. This means that even small changes in the assessment will indicate significant impacts on value. If the equalization ratio is less than 100%, statewide legislation may provide the town with a shield in the amount of 15% of the equalization ratio, which acts as a cushion so that the assessment does not have to be perfect.

3. Is the Property Currently Under-Assessed? Contrarily, situations do arise where a property’s value may have risen since it was last assessed. In such cases, filing a tax appeal could potentially increase your property tax assessment. It’s crucial to be aware of market behaviors to ensure that you don’t wind up with a higher tax bill. Furthermore, in certain municipalities, appeals have been and are being filed by the town to increase assessments. For example, in the City of Jersey City in 2020, dozens of appeals were filed by the City to raise commercial property tax assessments. For properties which have suffered in 2020, the pendency of an appeal by the City could complicate matters, as the valuation for a 2020 appeal is October 1, 2019, before the impacts of the pandemic were felt in much of the real estate market, and some property owners may be at risk of having their assessments raised, thereby increasing the tax burden!

4. How will the Property be Valued? Sales of similar properties are generally the best indicators of a property’s value for residential properties and land. Income-producing commercial properties such as retail, warehouse, or office properties are typically valued by using a formula to “capitalize” the income stream in order to determine value. Significantly, any owner or taxpayer for an income-producing property needs to determine if “Chapter 91” requests were properly made by the local tax assessor and, if so, whether timely responses were submitted. Failure to timely respond to proper Chapter 91 requests will give the town a right to dismiss any appeal filed in the following year. Special purpose properties, like certain types of industrial facilities, may be valued using a “reproduction cost” approach, since there may not be adequate evidence of the sale or lease of similar properties.

5. Should I Look for Assistance?  Property tax appeals can often be complicated and time-consuming. Commercial tax appeals in New Jersey can take a few years to resolve. In order to be successful, it’s important that to comply with state-sanctioned deadlines and procedures, only some of which have been mentioned above. In cases where thousands of dollars (or more) may be on the line, it is prudent to seek outside help. An experienced property tax appeal attorney can provide assistance by ensuring your tax appeal is filed appropriately and supported by competent evidence.

If you are interested in appealing your New Jersey real property taxes, please contact us at info@mrod.law, or 973-539-8900 in order to obtain a complimentary evaluation of your 2021 property tax assessment.

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