New Jersey Real Estate Attorney Blog

Each year, our office fields phone calls from taxpayers who are interested in appealing their tax assessments. Many taxpayers who are eligible for our services ask us what the best evidence is to prove that their properties are over-assessed. For these inquiries, we generally note that an appraisal report, estimating the value of the property as of October 1 of the pre-tax year is usually the best evidence.

There are several reasons why appraisal reports are great evidence in tax appeal hearings.  One of the reasons for this is that the appraiser can apply adjustments to sale prices to account for differences in location, size, quality of construction, and amenities, just to name a few factors.  The appraiser will usually start by looking for the sales that require the fewest monetary adjustments. But sometimes, sales of properties that are really comparable are not available, and therefore, adjustments are applied. The other significant reason why appraisal reports are so helpful is that the appraisers who prepare them are generally very skilled at presenting their data in a way that the County Tax Board or the Tax Court will understand, no matter how complicated the adjustments tend to be.

While there are many advantages of getting an appraisal for a tax appeal, there are a lot of cases where it may not make sense to do so. These cases include matters where there are several identical comparable sales. The best example is an appeal of the assessment of a condominium, in a community where several other identical condominiums have recently sold. Another example of a matter where the taxpayer would not necessarily want to order an appraisal is a property where the anticipated tax savings will not be sufficient to justify the cost of an appraisal. Unlike our firm, which offers tax appeal representation on a contingent fee basis, the appraiser who is retained as the expert witness is prohibited from doing so under the Uniform Standards of Professional Appraisal Practice (USPAP), which sets forth that an appraiser should not have any financial interest in the outcome of the appraisal report that he or she is preparing. Therefore, an appraiser will charge the same flat fee, regardless of whether the case is successful.

A few months ago, during one of our tax appeal hearings before the County Tax Board, a tax assessor began her testimony by telling the Tax Board Commissioner about sales supporting her assessment. During her testimony, she mentioned discussions that she had with a real estate broker relating to the sales. The Tax Board Commissioner then looked at me and asked me if I had an objection to the testimony. I noted, to the Commissioner’s surprise, that the testimony that the tax assessor was presenting, while it was technically Hearsay, was actually permissible under the New Jersey’s laws. My reason for volunteering this information was quite simply because I was going to have my witnesses present similar testimony that day, and an objection at that juncture may have vitiated my ability to do so. More importantly, however, was the fact that this type of hearsay is routinely admissible in Tax Appeal hearings. In today’s article, we will discuss the reasons for this exception.

One of the most misunderstood and misinterpreted rules of evidence is the prohibition against hearsay. Hearsay evidence is generally defined as any out of court statement that is being offered for purposes of proving the truth of the matter asserted. The reason for this restriction is ostensibly to prevent a litigant from testifying about statements made by another party, who is not in Court, and therefore, cannot be cross-examined about the statements. But like most laws, the rules on hearsay have numerous exceptions and exemptions, and in some cases, even the most scholarly judges may differ in their opinions as to which conditions would trigger an exception.

In a tax appeal hearing, an appraiser, when testifying about comparable sales, will very often need to discuss details, not only pertaining to the property, but also to details pertaining to the transaction in which the property was purchased. For instance, an appraiser for a taxpayer might be questioned about the motivations of the parties to a transaction, which may have factored into the purchase price. Undoubtedly, when an appraiser for a taxpayer presents a comparable property that sold for substantially less than the assessment of the subject property, the municipality or the tax board may question whether the sale price of the comparable property truly reflects market value. The appraiser will then begin to testify about discussions that he or she had with the seller, or the real estate broker to demonstrate that the sale was, in fact, an arms-length transaction. These statements, by persons who are not at the Tax Board or Tax Court, are clearly hearsay. However, in Tax Appeal matters, they will still be admissible.

Tax appeal season will be starting again in just a few short weeks. By November 15, Monmouth County property owners will be able to view their 2017 tax assessments and file appeals on those assessments. By February 1, property owners in other counties will be able to view and appeal their assessments. With these deadlines in mind we need to deal with the subject of revaluations (and in particular, Monmouth County revaluations) and how they should affect your decision as to whether to file a new appeal for 2017.

As many Monmouth County taxpayers are aware, the county has adopted the Assessment Demonstration Program, which encourages its towns to perform annual revaluations or re-assessments of all properties on a continual basis. Only a few towns in Monmouth County have, thus far, opted out of this program.   Since properties that have been revaluated or re-assessed are not subject to the limitations of the Freeze Act[1], the following information may apply if you have filed a tax appeal during a prior year:

1. If you currently have a Tax Appeal pending in Tax Court for a prior tax year, please be advised that the reduction in assessment that you may receive when that appeal is finally heard or settled might only be applicable to the tax year for which the appeal was filed. In order for you to preserve your rights with regard to your 2017 assessment, you will need to file a separate appeal for 2017. Please note that in cases where the original assessment of the property is under $1,000,000, the 2017 appeal must originate as a filing in the County Tax Board, before it can be “affirmed” and then appealed to the Tax Court.[2]

As another Tax Appeal season is upon us, we would like to thank our clients and our appraisers for a great season of tax appeals. For the 2016 tax year, we saved our clients more than $12 Million in tax assessments.  Starting on October 5, 2016, our office will begin accepting tax appeals for the 2017 tax year.  Since all final judgments in Monmouth County are under the cloud of the new Assessment Demonstration Program, the following information is essential for all Monmouth County residents.

Monmouth County’s Assessment Demonstration Program was implemented in 2014, ostensibly as a means of ensuring that all taxpayers are paying their fair share of property taxes. Under the new program, property tax assessments are revised annually to bring every assessment to 100% of true market value, as established as of October 1 of the pretax year.   The program also includes provisions to allow for a 5-Year Data Collection Cycle, thereby increasing the frequency at which property data would be collected or verified.

By conducting annual revaluations, the County will effectively remove “fractional assessments.” All properties in Monmouth County will now be assessed at 100% of true market value.  The old system of dividing an assessment by the town’s equalization ration to determine the true value assessment would, therefore, no longer be necessary in Monmouth County.  Similarly, the arithmetic process of adding 15% to the equalization ratio to determine whether the assessment is within the “Chapter 123 corridor” is also not necessary.   However, with annual revaluations comes a consequence for all taxpayers who had previously filed appeals.

Our 2016 Monmouth County Tax Board hearings are now completed. As we prepare for another batch of hearings in the remainder of the County Tax Boards, we will discuss four of the more common errors that taxpayers make that have resulted in dismissals of their matters.

1. Refusal to Allow Access to Premises

When conducting re-assessments or revaluations, tax assessors or employees of the revaluation company may request access inspect houses. Sometimes, even in non-revaluation years, a taxpayer may receive such a request if a tax appeal is pending and the assessor needs to verify his or her information. While you certainly have the right, under the Fourth Amendment to the United States Constitution, to refuse access to government employees, you should expect that the refusal to grant access to the assessor will likely be construed as your affirmation that the assessor’s predetermined information is correct. In other words, if you want to tell the Tax Board that the property information provided by the assessor is not accurate, you should not expect too much sympathy from the Commissioners, once the assessor mentions that you refused access. Notwithstanding the Fourth Amendment, it would not be reasonable to refuse access and then show up at a tax appeal hearing to contest the findings of the assessor.

During the past five months, our office has responded to several hundred inquiries regarding real estate tax appeals for the 2016 tax year.   The initial inquiries mostly concerned Monmouth County properties, where the filing deadline was January 15. A single exception exists for Wall Township properties, where the filing deadline has been extended to April 1, due to the municipal-wide revaluation. Wall Township is the only town in Monmouth County that had not previously undertaken a revaluation since the pilot program was instituted in Monmouth County in 2013.

The revaluation in Wall Township has, however, caused a great deal of confusion among taxpayers, many of whom have the erroneous belief that the drastic increase in their assessments would result in a significant increase in their tax bills. Fortunately, this is not the case. The tax rate for each town is calculated by dividing the municipal budget by total of all assessments. The former assessments, which had been equalized at about 60% of true value, necessitated a very high tax rate. Put simply, when all the properties in town were under-assessed, a higher tax rate was required to ensure that the tax revenue still matched the municipal budget.

Now that Wall Township has undertaken the task of bringing all the assessments back to 100% of true value, the tax rate would need to drop commensurately in order to make the arithmetic work. Of course, any time there is a municipal revaluation, there will be a few property owners who will become over-assessed. While a drastic increase in assessment is not sufficient cause to file a tax appeal, an over-assessment is a very good cause to file a tax appeal. During the next few weeks, our office will continue to field phone calls and emails to answer any questions that taxpayers may have regarding their assessments.