Real estate tax statutes say that an “aggrieved taxpayer” may file an appeal but the burden of proof is placed squarely on the shoulders of the “aggrieved.” Any property owner, tenant under a net lease who pays the taxes, mortgagee or holder of tax sale certificate on the property in question who believes the tax assessment is unfair has the right to appeal the assessment.
The annual deadline to file a real estate tax appeal is April 1 of the tax year. If the municipality has a revaluation, the deadline is extended to May 1. Taxpayers are reminded that their appeals must actually be in the clerk’s office on April 1 to be considered validly filed. Appeals must be filed at the County Board of Taxation for all properties assessed at $1,000,000 or less. Properties assessed at more than $1,000,000 may file either with the county board or directly to the Tax Court of New Jersey. An appeal filed at the county board of taxation will have a hearing within 90 days of the filing deadline.
To win a reduction in a real estate tax assessment, the taxpayer must prove that the assessment is incorrect by proving the fair market value of the property was lower than the assessment as of October 1 of the prior year.
There are three approaches to determine the value of a property: the cost approach, the market sales approach and the income approach.
If the property is income-producing, the Court will typically rely on the income approach to value. In this approach, the net income from the property is capitalized to arrive at the fair market value. The tax court will utilize a one-year direct capitalization of the income to arrive at market value. The court will not accept a discounted cash flow for tax assessment purposes. Even if a property sells in an arms- length transaction, the income approach to value is the preferred method of valuation.
Taxpayers may file an appeal each year as each year’s assessment stands on its own. After the appeal is filed to the county board of taxation, a hearing will be scheduled. At the time of the hearing, all property taxes and municipal charges up to and including the first quarter of the current year must be paid in full or the town will move to have the case dismissed. The case can either be settled with the tax assessor or tried before the tax board. The municipality does not need to justify its assessment. The taxpayer has the burden of proof and must overcome a presumption of correctness of the assessment. If it so chooses, the municipality may present expert testimony of its own as to the fair market value of the property. In this situation, the town will hire a licensed real estate appraiser whose report must be given to the taxpayer 7 to 10 days before the hearing.
A judgement entered by the County Tax Board after a trial may be appealed to the Tax Court of New Jersey by either the taxpayer or the municipality within 45 days of the date the judgment is issued.
An interesting set of circumstances surrounds an appeal of a decision of the county tax board to the Tax Court. The taxpayer must have paid all taxes and municipal charges in full at the time the appeal is filed with the Tax Court. This requirement means that if the county tax board renders its decision on August 1, the taxes and municipal charges for the first three quarters of the current year must be paid in full at the time of the filing of the complaint with the Tax Court of New Jersey. If the taxes and charges are not paid in full, the court does not have jurisdiction to hear the matter and the law mandates that the case be dismissed. The taxpayer cannot remedy the situation by paying the taxes later.
Taxpayers who wish to appeal their real estate tax assessments are well advised to seek the counsel of a qualified firm to determine the proper course of action. If it is determined that an appeal is warranted, the firm will generally file the action with the fee contingent upon the outcome of the appeal. Filing a successful real estate tax appeal could result in significant bottom line tax savings.
