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In the current economic climate, with substantial declines in the real estate market, the pursuit of a real property tax appeal has probably never been more compelling. Adjustments to assessment levels were justified in many cases in 2009, and this will continue to be the case in 2010. Consequently, for those who take action, there is now a real opportunity to reduce real estate taxes. Property owners should therefore quickly move to schedule an appointment with an attorney experienced in this area in order to determine the merits of a possible appeal. By taking this simple, but important, step, a property owner can ensure that it is paying only its fair share of the municipal real property tax burden.

If you feel a property tax appeal may be warranted for your property, please schedule a free consultation with us. Our attorneys at Earp Cohn P.C. can help you make a preliminary determination of whether an appeal would be advisable and, if so, at your direction we will then file and pursue an appeal on your behalf.

By February 1 of each year, municipal tax assessors are required to send the owner of each parcel of real property in the municipality a notice of the tax assessment for the property for the current year and the amount of taxes billed against the property in the preceding year. The notice is typically a white postcard with blue and black print. Subject to certain exceptions, a property’s 2010 assessment should reflect the fair market value of the property as of October 1, 2009. Reflecting fair market value, however, does not mean the same thing as equaling fair market value.

Assessments throughout an entire taxing district are initially established by a municipal-wide revaluation. For example, Haddonfield completed a revaluation in 2008. When a municipality performs a revaluation, it retains the services of a revaluation company to inspect each property and determine its full current fair market value. Because revaluations are costly and time consuming, municipalities generally perform revaluations only once every seven to ten years.

Between revaluations, the initial assessed value of a property established by the most recent revaluation is generally carried forward from year to year. However, although a property’s assessment may remain unchanged from year-to-year; market values of real property are constantly changing. To account for those changes, each year a study is performed for each municipality which compares the prices achieved by properties sold in the municipality in the past year to the assessed values of those properties. Based on this study, an “Equalization Ratio” is established for each municipality, which reflects the average ratio of assessed value to then-current true value of all real property in the municipality. For example, for 2010, the Equalization Ratio for Cherry Hill is 48.11. That means that the New Jersey Division of Taxation has determined that as of October 1, 2009, the assessed value of all real property in Cherry Hill was, on average, 48.11 percent of its true value. The Equalization Ratios for specific municipalities can be obtained from the assessor or County Board of Taxation.

By applying the Equalization Ratio to the assessed value of a property, one can determine the true assessed value or “Equalized Value” of a property. For example, a $300,000 assessment in Cherry Hill reflects a true assessed value or “Equalized Value” of $623,570.98 ($300,000 divided by 48.11% equals $623,570.98). If the actual fair market value of that property is too far from its true assessed value or “Equalized Value”, the owner may be entitled to have the assessed value of the property reduced.

Remember, a municipality’s Equalization Ratio is an average ratio. It won’t be the actual ratio of assessed to true value for every parcel of real property in the municipality. For each year, some assessments will be too high and others too low. Recognizing this, some leeway is written into New Jersey’s real property tax laws. The law provides that an assessment is valid if the property’s actual fair market value falls within a range of 85% of the property’s Equalized Value and 115% of the property’s Equalized Value.

For example, in Cherry Hill, the assessment on a property that has a fair market value of $500,000 will be sustained if its assessed value is between $276,632.50 ($500,000 times 48.11% times 115% equals $276,632.50) and $204,467.50 ($500,000 times 48.11% times 85% equals $204,467.50). If the owner of that property appealed its assessment, an assessment above $276,632.50 would be reduced to $240,500 ($500,000 times 48.11% equals $240,500). Likewise, an assessment below $204,467.50 would be increased to $240,500. A real estate tax appeal may be warranted where the assessment of a property is above the upper limit of assessment based upon applying the Equalization Ratio to the assessed value.

Appeals of 2010 assessments must be filed on or before April 1, 2010 (although in a taxing district where a municipal-wide revaluation or municipal-wide reassessment has been implemented, the deadline to file the appeal is May 1, 2010). Appeals of assessments below $1,000,000 must be made to the County Tax Board. Appeals of assessments which equal or exceed $1,000,000 may be filed with the State Tax Court in Trenton or the County Tax Board.

DISCLAIMER: This advisory is for general information purposes only. It does not constitute legal advice, and may not be used and relied upon as a substitute for legal advice regarding a specific legal issue or problem. Advice should be obtained from a qualified attorney licensed to practice in the jurisdiction where that advice is sought. Attorney Advertisement: Before making your choice of attorney, you should give this matter careful thought. The selection of an attorney is an important decision. If this information is inaccurate or misleading, you may report this to the Committee on Attorney Advertising, Hughes Justice Complex, CN 037, Trenton, New Jersey 08625.