Every year it seems your property taxes go up. And there’s nothing you can do about it.
Wrong. Every property owner or even a tenant can file a property tax appeal.
In the beginning of the year, you will receive a postcard telling you what your new assessment will be (this postcard is sent to the registered property owner so a tenant will have to ask for a copy). If you have done any renovation, you may also receive a postcard for an Added Assessment in the fall.
Sample of annual assessment “postcard”
The assessment is the basis for your tax bill. You must usually file a tax appeal by April 1 (or December 1 for Added Assessment).
The filing deadline cannot be missed. There is no exception. You can file an appeal the next year but for the current year, it’s too late.
Filing a tax appeal petition with the County Tax Board is easy and you do not need a lawyer (unless your property is owned by a business or other than a sole proprietor). For a residence, you will have to provide 3 to 5 comparable sales to the municipality and County Tax Board at least 7 days before the scheduled hearing date.
This is the tricky part: using these comparable sales, determine what your house would have sold for on October 1 of the year before you filed the tax appeal.
Let’s say in the example with the postcard above, other similar houses were selling for $650,000, $700,000 and $725,000 -all between Oct 1, 2018 and Oct 1, 2019. The one that sold for $700,000 is almost identical in size, age, quality, location and other factors. So let’s say that if we sold this house on Oct 1, 2019, it would have sold for $700,000.
So we divide the assessment ($782,900) by the estimated market value ($700,000). This give us a ratio of 111.84%. Every town gets a new “Chapter 123” ratio every year. For Fort Lee in 2020, the Chapter 123 ratio is 90.20%. If the ratio we got by dividing the assessment by the estimated market value is within 15% of the Chapter 123 ratio, we lose the appeal and everything stays the same. In this case the ratio (111.84%) is more than 15% above the Chapter 123 ratio (in this case 103.73% -but 100% is the maximum) so we would win the tax appeal and the estimated market value ($700,000) multiplied by the ratio (90.20%) giving us a new assessment of $631,400. Assuming the tax rate is 2.353%, we would get a refund or credit of $3,564.80 in 2020. Unless there is a revaluation or some other reason why the assessment would change in the next two years, the reduction in assessment would be frozen for the next two years.
If however the ratio is less than 15% below the Chapter 123 ratio (in this case 76.67%), then the assessment will be increased. For example if the comparable sales instead showed that the property would have sold for $1,025,000, the ratio would be 76.38%. This is less than 76.67% so in this example the new assessment would be $1,000,000 multiplied by 90.20% or $902,000 -which would result in an annual increase of $2,802.
With a commercial property, the appeal is typically heard at Tax Court and not the County Tax Board. The procedures are more formal and income approach is the typical way to find value. Often an appraisal report will have to be commissioned. For tax appeal purposes, only an appraisal report prepared by a certified appraiser is accepted and bank financing appraisals are not considered good evidence. Due to the complexity of the appeal process, it would be advisable for even sole proprietors to hire an attorney familiar with property tax appeal process.
Typically an attorney will handle your tax appeals on a contingent fee basis. This firm will charge 1/3 of any savings plus any fees such as filing fee and appraisal fee. A typical residential tax appeal before the County Tax Board would be settled through negotiations so the fees would usually be limited to the appeal filing fee which is less than $150. Most commercial tax appeals are also settled through negotiations but sometimes the municipality would ask for an appraisal before they settle the appeal. A commercial tax appeal appraisal will cost around $4,000 to much more for complex appeals -especially if there are environmental issues.
Please keep in mind that while property tax appeals are relatively straight-forward, not all attorneys are familiar with the practice. If you wish to hire an attorney to handle your tax appeal, you may get a more favorable result if you retain an attorney who is both experienced in tax appeal and has relationships within the tax appeal community -particularly your municipality’s Assessor.
If you are interest in hiring this firm to handle your tax appeal, please keep in mind that we represent many municipalities as their Tax Appeal Attorney and one of the member of this firm is the Assessor in Bergenfield and Guttenberg so we cannot represent you in these towns.