How Property Tax Appeals Work in New Jersey

"Our new Constitution is now established, and has an appearance that promises permanency; but in this world, nothing can be said to be certain, except death and taxes." Benjamin Franklin, 1789. Letter to Jean-Baptiste Leroy.

New Jersey has the highest property tax rates in the United States.

How can you lower your property taxes in New Jersey? A “property tax appeal” can reduce your tax burden, ensure a fair assessment, and improve real estate profitability. You can fight property tax increases in New Jersey.

This blog How Property Tax Appeals Work in New Jersey will walk you through reasons to appeal property taxes, steps in the appeals process, and mistakes to avoid. Our aim is to demystify the appeal process and offer tools to successfully challenge tax assessments. Whether you own a residential home or commercial property, tax appeals can save you thousands of dollars each year.

Fill in the simple form or call us at (201) 472-0336 for professional assistance with a tax appeal in New Jersey.

What is a Property Tax Appeal?

A property tax appeal is the legal process to challenge the assessed value of property to lower your real estate taxes in New Jersey. The assessed value directly affects the amount of property taxes you pay. A successful tax appeal will lower the assessed value, which in turn lowers your property taxes.

Fairness in assessed values is a constitutional right of all New Jersey citizens.

Taxation of real property in New Jersey is of constitutional dimension. In addition to requiring that property shall be assessed for taxation under general laws and by uniform rules, New Jersey's Constitution requires that all real property assessed and taxed shall be assessed according to the same standard of value, and shall be taxed at the general tax rate of the taxing district in which the property is situated. McMahon v. City of Newark, 195 N.J. 526, 529 (2008).

The appeal process starts with understanding your property’s assessed value. The local tax assessor determines this value based upon recent sales of comparable properties, physical condition of your property, location, and for commercial or rental proprerty income generation. This assessed value is then multiplied by the local tax rate to calculate your annual property taxes.

The assessed value often is higher than your property’s market value. Market value is what a buyer would pay for your property in an open market, while the assessed value is often calculated using a formula that may not accurately reflect recent changes in the real estate market.

Does your assessed value seem disproproational higher compared to similar properties? You may have a valid and winnable tax appeal in the making. The success of your appeal hinges on the strength of your evidence, clarity of your argument, and adherence to the procedural rules.

Why Appeal Your Property Taxes in New Jersey?

New Jersey property tax rates in the country are sky-high. The Effective Tax Real Estate Tax Rate in the 2022 census was 2.23% – the largest of any American state.

Over-assessments combined with the huge tax rate make an already large burden unbearable. Over-assessments can result from outdated evaluations, changes in the local real estate market, or errors in the assessment process. Successfully appealing your property tax assessment can save you thousands of dollars each year.

Why should you appeal your property tax assessment in New Jersey?

Steps to Appeal Your Property Tax Assessment in New Jersey

Step 1: Understand the Assessment Process

Understanding how your property was assessed is essential before moving forward with the appeals process.

Knowledge of the appeals process allows you to identify errors or outdated information leading to an incorrect assessment. For example, if your property was recently renovated and the assessor’s data might not reflect the improvements. Conversely, if your property has suffered damage or if the local market has declined, the assessed value might be too high.

Properties are assessed based on their True Market Value.

True Market Value is determined by the local tax assessor. The tax assessor’s considerations include recent sales of comparable properties, physical characteristics like size, age, and condition, as well as external factors like location, employment rates, and interest rate changes. The assessor may visit your property to verify the information, rely on existing records, and obtain third-party data.

New Jersey defines True Market Value as follows:

"True market value is the likely price that a property will bring in a competitive market under essential conditions for a fair sale. It assumes that there is a willing buyer and willing seller and neither is negatively Influenced; e.g. selling property to finalize a divorce. Market price is the actual amount that is paid for a property. The actual price paid is not always what the property’s true value is on the real estate market." See How Property is Valued for Property Tax Purposes.

Here is a comprehensive list of factors that affect True Market Value:

• Economic. Purchasing power, wage levels, employment rates, inflation, recession, housing, shortage/surplus, interest/mortgage rates, construction costs for materials and labor.
• Environmental. Geography and location, weather conditions, soil types, waterways, surrounding neighbors, proximity to schools, churches, stores, and transportation.
• Physical Characteristics. Construction quality, age, maintenance level, depreciation, architectural style, lot size or acreage, surrounding properties, comparable properties.
• Government. Public service (e.g., police/fire protection), zoning ordinances, building codes, taxes assessed.

Step 2: Review Your Property Tax Assessment

Timing to file a tax appeal is set on a county-by-county basis. You must contact the county to the specific timeframe!

Real estate owners receive their property tax assessment by Feburary 1, 2024. See N.J. Stat. § 54:4-38.1 (“Every assessor, prior to February 1, shall notify by mail each taxpayer of the current assessment and preceding year’s taxes.”)

Once you receive the property tax assessment, compare the assessed value to the market value. If it’s significantly higher, you might have grounds for an appeal. Check the assessor’s details on your property’s description, size, and condition for any inaccuracies. For instance, recent renovations might not be reflected, resulting in a lower assessed value. On the other hand, if your property has suffered damage or the local market has declined, the assessment could be too high.

Also, research recent sales of comparable properties (“comps”) in your area, as these are crucial evidence for a tax appeal.

Here a thorough checklist to examine your evaluate your tax assessment:

Step 3: Gather Evidence

The Appraisal

Successful tax appeals must be built on solid evidence. The key to succesfully fighting your property taxes in New Jersey is the facts of your case.

The most important piece of evidence for a tax appeal is the appraisal.

An appraisal is an expert evaluation of a property’s market value, conducted to challenge the assessment set by the taxing authority. The appraisal provides a professional, unbiased opinion of the property’s value, and the key factor in determining whether the assessment should be adjusted.

There are three methods of appraisal: the comparable sales method, capitalization of income, and cost. The selection of the appraisal method is done on a case by case basis.

"There are three traditional appraisal methods utilized to predict what a willing buyer would pay a willing seller on a given date, applicable to different types of properties: the comparable sales method, capitalization of income and cost. There is no single determinative approach to the valuation of real property. The choice of the approach to determine value is case specific, as it depends upon the facts of each case and the reaction of the experts to those facts." TD Bank v. City of Hackensack, 28 N.J. Tax 363, 377 (2015)

Let’s detail each method:

The Comparable Sales Method is the most commonly used approach, especially for residential properties. It involves analyzing recent sales of similar properties in the same area to establish a benchmark for value. Adjustments are made for differences in location, size, condition, and amenities to estimate the market value of the subject property, making this method particularly effective when ample comparable sales data is available.

The Capitalization Method is applied primarily to income-producing properties, like rental buildings or commercial real estate. It values the property based on the income it generates, using a capitalization rate that reflects market risks and returns. By dividing the net operating income by the capitalization rate, appraisers estimate the property’s value, making this method crucial when the property’s income potential is a key factor.

The Cost Method estimates a property’s value by calculating the cost to replace it with a similar structure, accounting for current labor and material costs, then subtracting depreciation. This method is often used for newer or special-use properties with limited comparable sales data, providing a value based on the assumption that a buyer wouldn’t pay more than the cost to build a similar property.

The evidence you gather should be comprehensive and well-organized. Start by identifying at least three to five comparable properties that have sold recently in your area. These properties should be similar to yours in terms of size, location, and condition. You can find this information through public records, real estate websites, or by consulting a local real estate agent.

In addition to comparable sales data, other forms of evidence can be invaluable. Photos of your property, especially if they highlight aspects that may negatively affect its value (such as damage or outdated features), can help build your case. If you’ve had an independent appraisal done recently, this can serve as powerful evidence of your property’s true market value.

Finally, keep detailed records of any communications with the tax assessor’s office, as well as copies of all documents you submit. This will help ensure that your appeal is based on accurate and verifiable information.

Step 4: File Your Appeal

Timing of Appeal

Timing to file a tax appeal is set on a county-by-county basis. You must contact the county to the specific timeframe!

For most counties in New Jersey, the deadline to file a tax appeal in New Jersey is the later of: (1) April 1st, or (2) 45-days from the date of the bulk mailing of notification of assessment is completed in the taxing district. NJ Rev Stat § 54:3-21.

Your Notice of Tax Assessment by law must list appeals due date. See N.J. Stat. § 54:4-38.1 (“Any notice issued by the assessor or county board of taxation shall contain information instructing taxpayers on how to appeal their assessment along with the deadline to file an appeal, printed in boldface type.”)

Courts require strict adherence to statutory time limtiation.

Failure to file an appeal on time is a critical error that will result in dismissal of your tax appeal.

Compliance with statutory filing deadlines is a necessary predicate to establish jurisdiction. Strict adherence to statutory filing deadlines is of particular concern in tax matters given the exigencies of taxation and the administration of local government. Filing deadlines are strictly construed and are non-relaxable. O'Connell v. Tp. of Neptune, 32 N.J. Tax 1, 4 (2020).

Courts have recognized that both appealing taxpayers and taxing districts must adhere strictly to the deadlines prescribed by statute. Failure to file a timely appeal is a fatal jurisdictional defect. A petition of appeal with the county board of taxation pursuant to N.J.S.A. 54:3-21 filed after the statutory deadline has resulted in the dismissal of the taxpayer's appeal. F.M.C. Stores Co. v. Borough of Morris Plains, 100 N.J. 418, 425 (1985)

Mark the deadline on your calendar.

Content of Appeal Complaint

A “complaint” for a tax appeal is the formal legal document filed by a property owner challenging the assessed value of their property.

The contents of tax appeal complaint are identified in NJ Court Rule 8:3-5 and include:

Judicial / Administrative Body

Property owners may appeal an annual assessment alleged to exceed the true market value of the property to either: (i) the pertinent county board of taxation; or (2) the Tax Court. 

The County Board of Taxation is a local administrative body responsible for reviewing and hearing property tax appeals within a specific county. The board’s decision can be appealed to the Tax Court if necessary.

The Tax Court is a specialized court that handles cases involving state tax issues, including property tax appeals. It serves as a forum for taxpayers to challenge tax assessments and decisions made by local or state tax authorities, ensuring that tax laws are applied fairly and consistently. Owners can file their complaint directly with the Tax Court if the assesed valuation exceeds $1,000,000.00. N.J.S.A. 54:3-21.

Step 5: Attend the Hearing

After filing, you will be scheduled for a hearing before the County Tax Board.

The hearing is your opportunity to make your case in person. During the hearing, you will present your evidence and explain why you believe your property has been over-assessed, and the local tax assessor will also present their case.

The board will review the evidence, ask questions, decide whether to adjust your property’s assessed value.

Preparing for the hearing involves reviewing all the evidence you’ve gathered and being ready to explain it clearly and confidently. Practice presenting your case and anticipate questions the board may ask. The more prepared you are, the better your chances of success.

It’s advisable to have an experienced attorney or tax professional represent you, as they can help navigate the legal complexities and present a strong case. These professionals are familiar with the appeal process and can help ensure that your case is presented effectively. They can also cross-examine the assessor and challenge any discrepancies in the evidence presented.

Step 6: Decision and Further Appeals

The County Board of Taxation will issue a decision after the hearing.

If the Board rules in your favor, your property assessment will be lowered, and your taxes will be reduced accordingly. This adjustment can lead to immediate financial relief and may even provide a refund if you’ve overpaid based on the previous assessment.

If the decision is not in your favor, you have the option to appeal further to the New Jersey Tax Court.

Should you appeal to the Tax Court?

This next level of appeal is more formal and can be more complex. Carefully consider the costs and benefits of further appeals. While savings from a successful appeal can be significant, the process can be time-consuming with additional legal fees and costs.

Common Mistakes to Avoid During the Appeal Process

Missing Deadlines

Deadlines are non-negotiable in the property tax appeal process. If you miss the filing deadline, your appeal will not be considered, and you will have to wait until the following year to file again. This could mean another year of overpaying on your property taxes. To avoid this, mark all important dates on your calendar and set reminders well in advance.

Lack of Evidence

Without solid evidence, your appeal is unlikely to succeed. Be prepared with comprehensive data and documentation.

Your appeal’s success hinges on the quality of the evidence you present. Simply claiming that your property is over-assessed isn’t enough; you need to back up your claim with hard data. This includes recent sales of comparable properties, professional appraisals, and detailed records of your property’s condition. Weak or incomplete evidence can result in your appeal being denied.

Ignoring Professional Help

An experienced tax appeal attorney can significantly improve your chances of success.

While it’s possible to handle a property tax appeal on your own, the process can be complex and intimidating. An experienced attorney can guide you through the process, help gather the right evidence, and represent you effectively during the hearing and before government officials.

Overlooking Comparable Sales

The most persuasive evidence in a property tax appeal is the sale price of comparable properties. Not all comparable sales are created equal. For your appeal to be successful, the comparables you use must closely match the property.

Property Tax Appeal Attorney

Can you file a tax appeal by yourself in New Jersey?

Real estate owners can file tax appeals in New Jersey by themselves without a property tax appeals attorney provided they are not a corporate entity. Corporate entities (i.e. limited liability company, corporation) must have an attorney in tax court.

Court Rule 1:21-1(c) requires that business entities cannot represent themselves in court and must be represented by an attorney.

"The Court promulgated rules governing who may appear in court. R. 1:21-1. Subsection (c) of that rule prohibits business entities, subject to the limited exceptions contained in the rule itself, from appearing in court unless represented by an attorney. Except as otherwise provided, a business entity other than a sole proprietor shall neither appear nor file any paper in any action in any court of this State except through an attorney authorized to practice in this State." Gobe Media Grp., LLC v. Cisneros, 403 N.J. Super. 574, 578 (App. Div. 2008).

Failure to use an LLC in tax court will result in dismissal of your tax appeal. The court, in Sennna v. City of Wildwood, dismissed a property tax appeal because the properties were owned in the name of LLCs.

"Plaintiff having chosen to conduct business and hold title to property in the name of an LLC must be represented by an attorney. Senna chose the LLC form to organize his businesses and own the subject properties. The prohibition of lay representation of limited liability companies under Rule 1:21-1(c) is clear and unambiguous. Senna chose not to avail himself of the opportunity to obtain counsel to prosecute the tax appeals. He must now accept the consequences of his choices." Senna v. City of Wildwood, 23 N.J. Tax 275 (App.Div. July 27, 2006).

Advantages of Hiring a Tax Appeal Attorney

Should you hire an attorney to assist with a tax appeal?

There are several advantages of having a tax professional in your corner during a tax appeal.

• Knowledge: Experienced tax attorneys have signififcant knowledge of tax laws and regulations, ensuring the appeal is handled correctly.
• Negotiation Experience: Tax attorneys that regularly handle tax appeals have experience negotiating settlements with city, county, and courts.
• Objectivity: Tax appeals can take a fair amount of time, energy, and some costs. An attorney provides an objective and professional case review to make an informed decision about whether to proceed with an appeal.
• Reduced Stress: Legal matters are always stressful. An attorney can help alleviate that burden by answering questions quickly, speaking to the other parties involved in the appeal, and saving you time.
• Increased Chance of Success: A solid tax appeal attorney will increases of lowering taxes.

The Role of a Tax Appeal Attorney

A tax appeals attorney can take the following actions on your behalf:

• Evaluate the Property Assessment: Review current tax assessment to identify potential errors or grounds for appeal.
• File the Tax Appeal: Prepare and submit necessary paperwork in compliance with deadlines and legal requirements.
• Gather and Present Evidence: Collect evidence to win the appeal, such as appraisals, comparable sales data, and income records.
• Represent Client at Hearings: Advocate for you during negotiations with the municipliaty, and in hearings before the County Board of Taxation or the Tax Court of New Jersey.
• Negotiate Settlements: Negotiatione with tax authorities to reach a favorable settlement without the need for a trial.
• Legal Advice: Provide guidance on the tax appeal process, including potential outcomes and risks.
• Handle Appeals in Higher Courts: If necessary, file and argue appeals in higher courts to challenge an incorrect decision.

NJ Property Tax Appeal Attorney Fees

Attorney fees for property tax appeals in New Jersey are normally based on a contingecy fee basis or an hourly rate.

Contingency Fee Basis. A contingency fee basis is arrangement where legal fees are contingent upon a successful tax appeal. The contingency fee amount is normally a percentage of the tax savings over the course of multiple years. The contingnecy basis minimizes financial risk as there is no legal fee paid unless taxes are reduced. This arrangement aligns the attorney’s interests with the client’s, as the attorney is motivated to achieve a reduction in the property’s assessed value to earn their fee.

Hourly Rate. An hourly rate is when the tax appeal attorney charges an agreed amount for each hour rate spent working on the matter. This payment structure provides a transparent breakdown of time spent working on the appeal. The disadvantage is total legal fees may be higher if the appeal takes longer due to unanticipated circumstances.

Conclusion

Appealing your property tax assessment in New Jersey can lead to substantial savings, but it requires careful preparation and attention to detail. Tax assessments can be fought and you can win and lower your real estate taxes. Tax appeal attorney fees in New Jersey can be on a contingency basis and so there is only a small risk to the owner.

Understanding how property tax appeals work in New Jersey, gathering strong evidence, and meeting deadlines are key to a successful appeal. Working with with a knowledgeable attorney helps navigate the process and maximize the chances of success.

For assistance with your property tax appeal, fill in the simple form or call us at (201) 472-0336. Our firm specialists in real estate law and property tax appeals and are here to help you achieve the best possible outcome.