How to file a Property tax appeal
PResenter: Bill Askin
Note: Askin & Hooker Law produced and recorded this webinar for the ear and it was designed to be watched and heard. If you are able to, we strongly recommend watching the webinar which will include emotion and emphasis that isn’t obvious when reading a transcript. Our transcripts are generated using a combination of speech recognition software and humans and may contain errors. Please check the corresponding audio before quoting in print. This is not meant to be legal advice.
Good evening, everyone. My name is Bill Askin. I am a partner at the law firm of Askin & Hooker in Sparta, New Jersey. Tonight is our seminar. We’re going to present on real property tax appeals. I’ve been practicing law now for, this is my 30th year practicing law. Most of that time has been involved in practicing real estate law, real property law. Our firm also handles a lot of general business law, business transactions and business formations, business succession planning, anything to do with buying or selling businesses. We do a lot of civil litigation, commercial litigation. We handle personal injury matters, motor vehicle accidents, slip and falls, those types of matters. Heavily involved in a lot of environmental law. My partner Todd does some pretty sophisticated and significant environmental litigation. We handle wills and trusts and estate planning and estate administration, and real estate law.
Obviously, tonight we’re focusing on one area in the area of real estate law, which is real estate property tax appeals. During the presentation, there’s not an easy way to have back and forth colloquy, like we do at live seminars, which I wish we could do and we’ll hopefully be doing again soon. So after the seminar, we’re going to send out an email to everybody that’s here tonight and signed up for the seminar. The email will contain a link to the slides that you’ll see tonight, so the actual presentation itself and the information that’ll be on all the slides will be available to you to download if you want, or to look again at your convenience on your computers.
The email will also ask if anybody had any questions following the seminar tonight. We have got a lot of area to cover in about an hour or so. If you do have any questions or if you have anything specific you want to ask us about your particular situation or your particular piece of property, we’re happy to take a look at that and reply to you rather quickly. So questions via email once you get that email from us later tonight or tomorrow morning.
We do a lot of seminars. We have historically, our firm here in Sparta, we do five or six seminars every year. This year, due to the circumstances, we’re converting them to webinars. This is the first one for this year, is the property tax appeal seminar, but upcoming we do one every other month. Our next one is coming up in April. We’ll send out email, a little information about that as well. It’s a real estate-related seminar again, more transactional-based, about buying and selling real estate, with a focus on distressed properties. We’ve had a lot of clients interested in pursuing opportunities with purchasing distressed properties, foreclosures, divorces, bankruptcies, bank-owned properties, any of that kind of stuff, so that’ll be coming up in April.
We also do seminars on estate planning and estate litigation and wills and elder law, things like that. And then in the summer, we do another one on business law, business succession planning, and different business formations, anybody buying or selling a business, things like that. And then finally, in the fall we do one on Social Security and Medicare and open enrollment. Those are upcoming seminars, so look for those to come in the coming year.
But real estate tax appeals. Out of all the seminars we do, it’s been one of our most popular ones, most well attended, and I think it’s obviously as a result of there’s a lot of people that think they pay too much property tax. It’s very common. I hear that all the time. How can I lower my property taxes? The title, Real Estate Tax Appeal, is a little bit misleading. People think that they can go out and appeal their taxes, and reality, you cannot do that. But the good news is, you can appeal your tax assessment.
And if we look at the big picture in the planning process, how do towns come up with how much tax we pay on real estate that we own in a particular town every year, it’s really a result of the town’s budgeting process. Each year, the towns are required to balance their budgets, and every municipality balances the budget. And then they look at the total real estate in that particular municipality, and then they just basically divide the total assessed value of properties in the town divided by the budget and that gives you a percentage. Percentage is the tax rate. So your property taxes are a result of the budgeting process in the town and the factoring of the real estate assessment on your particular piece of property, then they apply that year’s tax rate.
Property assessments generally do not change every year. Towns don’t reassess every property in every town every year. They’ve got a statutory duty to do that about every 10 years. So the good news is, your property assessment generally stays the same every year. But obviously, we all know that our taxes go up, and how does that happen? Well, that’s because the tax rate goes up every year. And again, that’s based back, again, on the town’s budgeting process. And the tax rate goes up, generally. Doesn’t go down very often, unless it’s a year of a municipal-wide tax revaluation process. That’s the process I explained earlier where the whole town is reassessed, and again, that’s done about once every 10 years or so.
Today, the property taxes in Sparta Township, where we’re based and where a lot of our clients are, are based upon a reval that occurred in 2015, and the assessment on your property, if you’re in Sparta at least, it was established and first put on your tax record card in 2016. If we could maybe move to the next slide.
I explained just a minute ago that you can’t appeal your taxes. You cannot appeal the tax rate. Everyone, every property owner in every municipality, pays the same tax rate, and there’s really nothing that we can do about that. But we can appeal our tax assessment. Again, that’s the value that the municipality in which the real property exists, it’s the value that the municipality believes that that property is worth. Your property tax rate, going up every year, times your assessment, results in your actual tax assessment or taxes that are owed on that property.
To file a real property tax appeal or to appeal your property taxes, what we really have to do is look at your assessment, because again, you can’t appeal the rate, you can’t appeal the tax, but you can appeal what the town believes your property is worth. If you want to know what that is, every real property owner in Sussex County, in the State of New Jersey actually, should have received, let me see if I can get that up there, one of these green cards that comes out every year. The towns have to mail this out by the end of January. And on that, if you look at that green card, it’ll have your assessment for the year 2021. In most all cases, that assessment should not have changed over the past year. This particular card I have here has got the same assessment for 2021 as it did for 2020.
Generally, the only time you’ll see an assessment increase is if there was an added assessment in the prior year. How do you get an added assessment? An added assessment occurs when there is a permit pulled to do a renovation or an addition to a structure on the real property. If, for instance, the owner put a new deck on the property, or they did a major bathroom or kitchen renovation, or they added a fourth bedroom or fifth bedroom, or they raised the house, anything like that results in an added assessment for which you will see an increase in your assessment for the next calendar year. Other than that, it remains the same.
There is, if you look on the slide, also a presumption of correctness, and that means if you want to challenge or appeal your property taxes, or technically your property tax assessment, the county tax board presumes that the assessment that appears on your little green postcard is correct. They, they presume that the town has done their job correctly and that their assessment is accurate.
It’s up to you as the taxpayer or the property owner to provide evidence that the assessment is not correct. So that’s what we’re going to talk about here this evening, is how do you file the case and how do you provide evidence and hopefully win a case to prove that the town, the municipality, is wrong in the assessment that they arrived at for your property. The deadline this year and every year for filing real property tax appeals is April 1st. Thus the timing of the tax appeal seminar that we do every year at this time. Now is the time that we are gearing up to get all of our appeals filed in the month of March. If you do want to have us look at your property, I would suggest you reach out to us via email.
And again, that can be a question. If anybody wants us to take a look at any real estate, we’ve got a pretty good eye for it, and can get back to you within a day or two, with respect to whether or not we think it might be worth pursuing or not. But if you want us to do that, we really need to know in the next few weeks. I try not to take on any new business after March 15th, just because the time crunch gets to be a little bit tough to meet that April 1st deadline. Last year, due to the pandemic, and I guess that was the beginning of the pandemic, they did extend that filing deadline to May 1st, but I do not believe that’s going to happen this year. It hasn’t been any information relayed to that effect, so I think it’s probably going to be a hard and fast black and white deadline of April 1st. And it is a black and white deadline. If you miss it, you’re done for another year. Can’t do it again until the following year.
Another reason, I think, that this seminar and property tax appeals are kind of a hot topic might be obvious to most of us that live in New Jersey. New Jersey is one of the highest-taxed states in America. If you add all the taxes that we pay, add them all up together in terms of taxpayers, so your income tax and excise tax, sales and use tax, and property tax, we are the seventh highest taxpaying state in America. If you just look at property taxes, it’s worse. We are the third highest property taxpaying state in the union. For that reason, it is a hot topic. It gets a lot of press. The best tax advice I think I can give to our clients, unfortunately, better or worse, is to move to another state, because it’s not likely that any or many of the taxes are going to be changing in New Jersey anytime soon. I will not be leaving. I’m here and here to guide you through property taxes, if anything we can do to help.
As far as the merits of residential or commercial tax appeals for the year 2021, there’s some good news and some bad news. The good news I mentioned briefly is that in most of the towns and municipalities in Sussex County, the assessments have remained the same. There are a couple of towns who did a property reval, a municipal-wide revaluation of the property taxes or property assessments last year. But although the assessments remain the same in most towns, the bad news is obviously that the tax rate will go up again this year.
And the other good news is for homeowners and property owners, the good side of the current real estate economy at least is that prices have seemed to increase. The real estate market has improved over the past year. More so in some towns than others, but we’re really not seeing any depreciation of property value anywhere in Northwest Jersey over the past year. So that’s great news if you own property. Your values most likely have increased over the past year. But again, the bad side of that is that makes it more difficult to come up with evidence to prove that your assessment is wrong. So for that reason, we have to look a little bit harder at filing tax appeals and tax property tax assessment appeals this year, because of the current market conditions.
The deadline, if you are in a municipality that did a municipal-wide revaluation of your property taxes over this past year, you do get an extra 30 days, and your filing deadline would then be May 1. And I know there’s a couple of towns in Sussex County that had a reval this past year, so your deadline is extended to May 1st. If by any chance, as I mentioned earlier, an added assessment for an improvement to a structure, usually your house, if you do get an added assessment, that would be a separate little green postcard that says “added assessment.” And there will be a number on there with the added assessment for your property. Sometimes they come out after April 1st, so you could get an added assessment any time during this year.
If you get an added assessment any time during the year, we’re 2021 now, the deadline for appealing just that added assessment, not the original assessment on the property, but maybe you got an added assessment for $30,000 for putting a deck on your house, you can appeal that as well. The deadline for those appeals every year is December 1st. So take a look at that. If you have any questions about added assessments or if anything that’s happened over the past year that you want to talk to us about, or again have any questions, let us know. We’ll go to the next slide, please.
I mentioned, in Sparta Township at least, if you live in Sparta Township, the last time we had a municipal-wide revaluation was 2015, so our current assessments are based on what the town’s revaluation study in 2015 determined were the property values. The way to establish evidence for a property tax appeal for this year, for 2021, is to establish what your real property was worth, the standard is, on October 1, 2019. Obviously, real property values change, not only year to year, but season to season or even month to month. So you could think your property is worth $300,000 last spring or summer, and then by last fall, it was worth $310,000, and by January was worth $320,000. That’s the market we’re in right now. If you’re looking at real estate transactions, we do a lot of representing buyers and sellers and multiple offers, property values in certain areas are increasing rapidly.
If you want to appeal your property tax assessment, you have to know what exactly is the measuring date for when you have to prove the value or provide evidence of a value for what your house or your commercial property is worth. And that date every year again is October 1st of the calendar year preceding the appeal year. So right now, we’re appealing the property tax assessments that went out for 2021. The measuring date to appeal the value for this year is October 1, 2020. That’s the evidence that’s needed to substantiate the value of the property for tax appeals for this year.
Now, what kind of evidence is admissible and probative of a property tax assessment potential reduction in order to establish that your house was worth less than your assessed value on October 1, 2020? That best probative evidence of establishing value are what are called comparable sales. A comparable sale is a sale of a similar property, that being residential if it’s a residential, commercial if it’s commercial, industrial if it’s industrial, a similar property in a similar location. And with location, the closer you get to your property, the better. So you look for properties that have sold on your street, in your neighborhood, and if not in your neighborhood, in your town, and again, as close to your property, in terms of proximity, as you can possibly get.
So similar type of property, similar location, then you look at similar size. You want to have a most similar in size as you can possibly get. And then finally condition. You want to measure your property against other properties that are of similar condition to yours. And then you have to only look at properties, the tax board will only consider properties, that sold in the one year leading up to October 1, 2020. So again, if you look on my slide, it says comparable sales from October 1, 2019 through September 30, 2020. Those are the sales that will be used to establish the value of your property on October 1, 2020, and that’s the value that, again, you’re measuring your 2021 tax assessment against.
One of the best ways to prove your case, and we’ve done a lot of appeals for people that have actually purchased their property in that one year window preceding the appeal year. Anybody that purchased your property, again, whether it’s residential, commercial, or industrial, if you purchased that property between October 1, 2019 and September 30, 2020, and you paid less than the assessed value, that is in most cases the single best representation of fair market value, what the assessed value should be. For instance, if you bought a property and you paid $300,000, and you bought it in June of 2020, and you got your assessment card and you’re assessed at $350,000 or $400,000, again, what’s the most similar in terms of location, size, and condition to your property that you want to appeal on? What’s more similar than your own property? It’s the perfect evidence, as long as it was an arm’s length transaction, and we’ll talk a little bit more about that here in a few minutes.
Property values themselves, we mentioned that again briefly, the values increase or decrease at differing rates. I’ll take Sparta Township again, for instance. When we established the new assessed values in 2015, which became effective in 2016, those values at that time were supposed to represent current fair market value of the property. But since 2016, what has happened to most real estate? The value of most real estate obviously has increased. So because assessments are not adjusted annually, a deviation from 100% of true market value occurs. The property I showed you this little green card before, these people purchased this home in 2014. It was assessed in 2015 during the revaluation in Sparta for a total of $250,900. I can tell you, I think this property, it’s worth a lot more than $250,900 now. It’s worth over $300,000.
So the assessed value does not necessarily, and in most cases does not, reflect fair market value. What happens there, and what is this common level range, and how do we adjust for that? The common level range is a factor of how does real estate appreciate at different rates. Real estate market is not a situation where the rising tide necessarily lifts or raises all the boats, at least not to the same level. Certain neighborhoods appreciate at different rates from others. Certain sized homes, we’ve seen in Sussex County, appreciate at faster rates than other sized homes. It’s interesting over the past 10 years or so that smaller and medium sized homes have been appreciating much faster than some of the larger homes and estates that are a little further from town centers.
There’s been kind of a flock over the past 10 years of movement away from big homes and back into smaller, medium sized homes and homes with newer features and newer bathrooms and kitchens. People were chasing new and modern and getting away from big and bulk and all that kind of stuff. But I’m curious to see what happens in this coming year, and we may have started to see it already, that the new work-from-home phenomenon, work-from-home people want to have offices at home. People want to have gyms at home. I think we’re starting to see property values in that higher-end home and that larger home market begin to increase. I’m curious to see if that’s a trend that will continue. I wouldn’t be surprised. Sure seems like the work-from-home model and the exercise-from-home model is something that’s going to be around for a while.
But in any event, we do need to, in most cases, work with a licensed professional or a licensed appraisal to help us establish evidence for the tax board, to provide evidence of value of the property. Go to the next slide, please. We’re talking about the common level ranges. Two sides here. The left side of this slide talks about municipal property assessments, basically they’re set by a reevaluation company, and then they’re monitored every year by the local tax assessor. The revaluation companies, other than the year of the revaluation itself, and the local tax assessors, believe it or not, they’re not held to a extremely high standard where they have to be exactly correct on the dot with the value of every property every year. In fact, they’re given a pretty wide range within which, if the tax assessor, the municipality, can prove that your property falls within this range of value, you lose your tax appeal.
And that range I mentioned, it’s pretty generous. It’s 15%. If your tax assessment is within 15% of what it should be, basically, generally in theory, you lose your case. So you need to prove and convince the tax board that not only is the assessment incorrect, but it’s incorrect by more than 15%. That’s a tough burden. That’s a tough thing to prove. I’ll use the example on the right, and I just did this all based on Sparta real estate, because that’s where my law firm is and that’s where we live. $400,000 is the median home sale price in Sparta Township over the past six months or so, so 50% of the sales were higher than $400,000 and 50% were lower than $400,000.
But if your assessment on your property is $400,000, 15 per percent below that, given a 15% margin of error, means that your property could be worth anywhere down to $340,000, and the assessment is still correct. Or it could be as high on the high side as $460,000. That’s the standard 15% high or low that the tax assessors and municipalities are held to. And again, on a $400,000 house, all the tax assessor has to establish is that it’s worth somewhere between $340,000 and $460,000. Doesn’t really seem fair, does it? Maybe it’s not, but again, it’s a process and a system designed so that not every taxpayer appeals their taxes every single year. I guess the towns just are not prepared and armed or have the resources to handle that many appeals every year.
And that range, if you get into to researching, and if you end up filing your own tax appeal, you’ll hear this phrase, that range is called the common level range. And again, to win your appeal, you need to prove that your assessment is at least 15% high. And in this case, you need to establish with evidence that the property is worth $340,000 or anything less than that in order to win an appeal. Now, like I mentioned earlier, and again I’m just using the Sparta example, the assessment on this property, this is just a made-up property here as an example, is $400,000. But that assessment was established when? Again, that assessment was established as a result of the 2015 Sparta Township-wide revaluation that resulted in the assessments that came into effect in 2016. But in all likelihood, that assessment, that value of that property, has increased over the past four or five years. Most properties in the county have.
So because $400,000 does not represent fair market value, the town does a proration between assessed value and fair market value every year. What the townships do, and what they’re required to do, is come up with percentage there that you see in this case, that 0.9202. That’s the factor, that’s the ratio that is applied to all property assessments to establish fair market value for purposes of appeal and tax value or tax assessment value every year. In this case, $400,000 divided by 0.9202, and that’s the Sparta tax ratio, results in what the township believes or what the evidence should show to justify that appeal, that the property’s worth $434,688. Now, why is that important? Because in many cases, it’s a little bit easier to prove the assessor is wrong in using that common level range of 15%, using that higher number. Using that higher number, and I didn’t do the calculations on that, instead of having to prove your property is only worth $340,000, it would be more like $355,000 maybe, $355,000 or so.
That common level range, how is that established? Again, it’s a factor of the budgeting process. The towns basically set, their budget is $10 million for the year. Then they take all the total real property assessed values and they divide it by the real estate sales that occurred in the past year. They take the ratio between property that has sold and the total assessed value of those properties, and they come up with that factor, that ratio, that 92.02%. And again, that is the ratio that is used for Sparta Township. You can look up, if you Google Sussex County tax ratios, you’ll find it for your particular municipality. Again, if you need help finding what your particular ratio is for your municipality, you can just shoot us an email and we’ll tell you what that is. But in any event, that is oftentimes something that helps us in terms of winning tax appeals, because it makes our job a little bit easier. All right, next slide.
Oh, the tax rate, by the way, in Sparta is for 2020, it’s actually 2020, is 3.4%. If you look at your assessed value on your green postcard, multiply that by 3.4%, that’ll give you your actual taxes that are paid. And again, assessments don’t go up every year, but in general, that tax rate goes up every year. The past several years in Sparta, it’s gone from 3.1 something to 3.2 something to 3.3 something to this year, 2020 rate it’s 3.40. And one of the many crazy things about taxes in New Jersey is that the tax rate for 2021 will not be announced or set until sometime towards the end of July of this year, so your first two quarter tax payments of 2021 are based on the 2020 tax rate. And then, if you’ve been paying property taxes in New Jersey for any number of years, you probably know that your third and fourth quarter tax bills usually tick up a little bit, and that’s to make up for the shortfall in the tax for the first two quarters that occurs because they raised the rate in July retroactive to January 1st. So again, one of those unique little nuances about New Jersey.
If you do file a tax appeal, you can represent yourself. You can do it on your own, unless the property is owned by a business entity, by a corporation or by a limited liability company. If it is any kind of a business entity that owns the real estate, that business entity is required to be represented by an attorney. The property tax hearings, again, the deadline for filing the appeal is April 1st. Some of the really good news about tax appeals is generally from start to finish they only take a few months, unlike filing an appeal in court, which can go on, as you might know, for years, especially in the current environment where the courts have been basically closed for several months and now only remote proceedings for several months, and now there are very limited in-court appearances. They’re going to go on for quite a while.
The tax appeal process is relatively quick. In fact, any appeals that we file this year on or before April 1st, we should have hearing dates by late May or early June. The taxing district is represented by the municipal attorney, so if you’re curious to know who your adversary would be or who would represent your adversary, basically your adversary is the municipality within which the property exists, and their attorney is the municipal attorney for that town.
Expert testimony, not required, but if you don’t have an expert, you are the expert. As attorneys, we cannot testify. I cannot opine as to the value of your property. Only a witness can, and obviously an attorney can’t also be a witness in the same case. My role, the attorney’s role, is to organize, orchestrate, and conduct the proceeding and represent our clients and advocate for our clients. But we cannot put in evidence by way of our own testimony.
For that reason, we highly recommend that you engage with an appraiser. We work with a number of different appraisers. Generally, you’re looking at about $500 to get an appraisal report done on the property to support the tax appeal, and you’re looking at another $500 or so to get the appraiser to come to court and testify. Oftentimes, if it is a meritorious tax appeal and we have a good appraiser and a good report, we are able [inaudible 00:36:09] the tax appeal without necessarily having to appear for the hearing. A lot of them, like in the regular New Jersey State Superior Court litigation, a lot of cases are actually settled prior to the hearing date and in many cases settled rather quickly.
But if we are not able to settle, they will have a hearing, again, sometime by the end of May or beginning of June. We haven’t heard yet if the hearings are going to be live and in person this year or not. They were not this past year, they were remote on Zoom, just like our presentation tonight. I would expect that might be the case again this year. If that’s the case, we can operate here from our office. We’d need you to also be available to be on a Zoom hearing, unless you have a expert. If you do have an expert appraiser, believe it or not, you don’t even have to go to the hearing. You don’t even have to attend or testify. You can, but it’s not required if you have an appraiser.
And again, expert testimony is highly required, highly recommended. I went over the fees. If you’re looking for any referrals or recommendations, again, you can email us or speak to us. One little caveat to remember, everybody, you have to be current on your tax payments. If we go to the hearing at the end of May and you haven’t paid your second quarter tax payment, which is due May 1st, your case will get thrown out of court and you’ll lose. Open and shut, no questions asked. So please remember that. Some people get kind of excited and adamant that they’re not paying their taxes because they’re not fair. And they haven’t paid for months or quarters at a time, and sometimes for a year or more, because they don’t think it’s fair. Well, you’re not going to win that way. You’re going to end up losing your house in a tax sale certificate and tax sale foreclosure. Taxes have to be paid in order to proceed with a tax appeal. That’s it for that slide. Going to move that to the next one.
I talked about evidence. The best evidence to have is an expert, have an appraiser ready to testify, have an appraisal of the property. Hopefully that’ll be enough to convince the town and the town’s assessor and the attorney to settle the case, but if not, what else can we present to the tax board? Photos of the property are very important, inside and out. Again, when you’re talking about comparing your house or your piece of real estate to any other house or piece of real estate in the community, it’s good to have photos of both and be able to pinpoint exactly how your house measures up to the house that you’re comparing against. You don’t necessarily have to have houses that are much nicer or with more features or in better condition than yours. Sometimes showing how houses that are maybe smaller or less features or not in as good condition can be probative of what we’re trying to establish as evidence for the value of your particular piece of real estate.
I covered earlier, again, the date that we’re looking for the value, we have to prove value as for this year, is October 1, 2020. That’s the reason why we need a special appraisal for the real estate tax appeal purposes. We’re often asked by our… if they can use the appraisal that was done when they purchased the house. If you purchased the house last year, and you want to use that appraisal as evidence for a tax appeal, the answer is, generally it’s not good evidence. An appraisal that’s done for a mortgage company is very different, different standards, different comparable sales that are used, and different formulas that are used to establish a value on an appraisal for a mortgage company than the appraisal that has to be used for a tax appeal.
One of the obvious things is the date of the value. If you’re doing a mortgage appraisal, that’s an appraisal of the value of the property on the date that appraisal is done. The appraisers that we need for tax appeals, they’re not appraising the value of your property today, and that’s probably a good thing, because in my mind, values have done nothing but gone up since October 1. And again, the date on the appraisal and what our appraisers would do is establish value. What was your house on October 1, 2020, based upon comparable sales between October 1, 2019 and September 30, 2020? That’s the one reason why I think this is a critical, critical year to file tax appeals, because the real estate market in general didn’t really begin to heat up, and we didn’t begin to see sales close for escalating value, until June or July last summer.
There’s a pandemic effect on appreciation in value of real estate out here in Sussex County, where social distancing is really a way of life. We’ve always been kind of social distancing. A lot of people from east of here in the City or eastern parts of New Jersey are moving out this way, and we’ve seen a pandemic inflation in the real estate values out here. We can still use comparable sales that closed before that extra artificial inflationary cause began to hit the market. And that is sales that occurred between October 1, 2019 and all the way through March, February, April, and May of last year. Those are still probative of value.
A lot of the sales that resulted from people relocating to this neck of the woods that helped to increase values, they didn’t close until late in the summer, or maybe even the fall. And maybe they’re not quite available to use as comparable sales. We’ll see, but a year from now on this, I think it’s going to be much more difficult to come up with comparable sales to justify an over-assessment on a property. I think this year between October 1, 2019 and last spring and summer, we can hopefully find some good sales that would justify a reduction in an assessment.
We do need to have at least three, better is to have four or five, comparable sales. What usually happens at the hearing at the tax board is the tax commissioners ask us, ask our appraiser to tell the board what the single best comparable sale is. That’s usually where the testimony and the hearing focuses on one sale. What is the best property and the best location, the best condition, the most similar property to the property that we’re appealing on? We kind of focus on that. But to get a feel for the range and a feel for the market, they require at least three. They prefer to have four or five comparable sales within that one year window preceding the tax year that’s being appealed.
Also good evidence, deeds, MLS listings, realtor flyers, other testimony. We’ve had cases where we’ve brought in multiple witnesses, listing agents, the selling agent, neighbors. You can use realtor flyers. You look at how long a property’s been on the market. You look at MLS listings, deeds from other sales. All that documentary stuff can be introduced as evidence. And again, the final piece of evidence is the expert testimony, which again would come in through an appraiser. All right, next slide.
There are unfortunately a number of sales that are not permitted to be used pursuant to the rules that apply to tax appeals, and those are non-usable sales. They fall into multiple categories, but these are most of them. You own a house at 10 Main Street, and your neighbor at 12 Main Street didn’t pay his mortgage for a couple years. And then it went into foreclosure and then it became bank-owned. And then it became on the market listed with a realtor, and then it sold for, say your house is $300,000, it sold for $150,000. And you want to now appeal your $300,000 assessment, because your next door neighbor’s house sold for $150,000.
You can use that sale as testimony, but the sale and the sale price itself is not admissible as evidence of a comparable sale. You can mention it, you can bring it up, you can ask the commissioners to consider it, but it is not a determinant comparable sale that’s allowed to be used. Why? Because it was a distressed sale. It was not an arm’s length or a fair market transaction. That’s the same thing with any foreclosure sale, any bank-owned sale, a short sale where the owner sold it but didn’t pay off the mortgage completely, a divorce situation, any type of distressed sale. The commissioners, they’ll hear you on that, but the sale itself is not probative of value, unfortunately. The only sales that are admissible as evidence of sale price itself are arm’s length transactions.
The commissioners will look to see if it was entered into the MLS, and how long was it on the market, and what did it look like? And they do, they check [inaudible 00:46:27], they check the foreclosure records, and they make sure, it’s actually the town’s assessors that make sure, that whatever’s being used as evidence was an arm’s length transaction. Next slide.
There are special rules for commercial property. Commercial property, if it is income property, generally we do not use and the commissioners won’t listen to the comparable sales approach to value. They look at the rental income approach to value, and they require that rental income properties require an income statement. How do they know what your rental income is? Good question. Well, you could say whatever it is at the hearing, and if the town doesn’t have any other evidence, you have good evidence to show leases and income statements and financial reports from a property, that’s all probative and that’s all admissible.
But the towns are allowed to ask you as a income property owner, a commercial property owner, to produce your income from that property, your financial records from that property, every year. And that’s what’s called, down at the bottom on the right hand side of this slide, is a Chapter 91 request, the silent killer. Every year in or about August in the summertime, local tax assessors mail out Chapter 91 requests for the financial records of the owners of income or commercial property.
If you get such a letter addressed to you as the owner of an income property or commercial property, it is a duty, not an obligation, but it’s suggested that you provide that financial information to the municipal tax assessor. The municipal tax assessor looks at the income information, runs it through the income approach to come up with a fair market value of the property. And then they’ll make an adjustment on the tax assessment, up or down, more likely up, but could potentially be down.
The silent killer about that, and the reason I’d like to highlight this in our seminars, is that the risk if you don’t send that information back to the assessor, they really don’t care. Nobody will come knocking on your door. You don’t get fined. You don’t get any punishment. Nobody comes looking for you, unless you want to appeal your taxes. The tax assessor, the Chapter 91 request letter, requests that you send that information within 45 days. If you miss that 45-day window, it’s too late, but there’s no penalty. Nobody comes looking for you, no fines, no penalties. But if the next year you go to appeal your property taxes, you get thrown out of court. You can’t do it, simply cannot do it.
Now, in every municipality, every municipal tax assessor has the option, not the requirement, to send out these Chapter 91 requests. Some years they’ll send them out to all commercial properties. Some years they’ll send it out to none. Some years they’ll just send it out to a handful. An important thing to discover before I take on any commercial or income property tax appeals this year, or every year, is did you receive a Chapter 91 request for income information last summer? If not, great. If so, did you reply within 45 days?
A lot of times our clients will say, “Well, I don’t remember. I don’t know if I got one or not.” Then I simply call the tax assessor and find out. And they’re usually up front and honest. They say sometimes say, “No, we didn’t send out any last year.” Say, “Great. We’re going to file an appeal.” Great. Or they say, “Yeah, we sent them out.” You say, “All right, did you send one to this particular property?” And we’ll find out. So if you got one of those this past year, make sure you return that before you think about filing an appeal on a commercial or income property. If you get one this coming year, it’s a good idea to send it back. All right, next slide.
Results and notification. Another really great thing about real estate tax appeals as compared to other types of litigation and court action is that we get your results pretty quickly. It varies by county, but generally in Sussex County they give you their decision that day, while we’re there in court. We usually know before we leave the building, whether you win or lose or get any relief at all. In Morris County, it takes a while. It takes a few weeks to get a decision. They send a written decision out. Other counties operate in different ways. So good news there. We get the notification generally pretty quickly or at the hearing itself.
Whether you like the result or not, you do have the option of appealing the initial decision of the county tax board. Like most types of litigation, there is an appeal process. If you want to appeal an unfavorable result, a result that you’re not happy with, you have 45 days from the date of the mailing of the judgment affirming the new assessment for your property. The new assessment might be the same assessment, but whatever the date is of the mailing of that judgment, 45 days from then to file an appeal. And the appeal goes to the New Jersey State Superior Court Tax Division, and there are only in this area two tax judges.
I told you before that certain types of litigation can take several years to resolve, either through settlement or trial. Tax appeals are about the worst. Tax appeals that go to the New Jersey Tax Court, we handle them, but they take years. I mean, at this point, I would expect that a tax appeal that we file with the New Jersey Tax Court, if it doesn’t settle, and they’re very difficult to [inaudible 00:52:50], take four, five, six years without a doubt, because if you file it, you can file each successive year and eventually after six years get a refund if you win the case for all the years that you’ve been waiting. And you do have to file three years at least, to protect your rights.
But don’t expect a quick result. I settled one last fall, just this past fall, that we’d been prosecuting for four and a half years, and that was before COVID. So you can imagine, it could be many, many years before we get any results. So I recommend to our client, if we can get any kind of a reasonable settlement at the county level, we settle at the county. If we’re any reasonable success at the tax board, and we get a reasonable judgment from the commissioners, accept it. If it’s something that’s just so outrageous that we think merits filing an appeal, like I’ve said, we’ve done dozens and dozens over the years, but I’m just laying out the expectations. It’s a grueling, grueling, frustrating process. All right, next slide.
I don’t know how much more we have. We got much more? No, look at that. Facebook, LinkedIn, there’s all our contact info. If you have questions. I think we have another slide. There’s our attorneys. We have another attorney joining us in another couple weeks in the firm. Now we have five attorneys and another 10 or 11 support staff. We are a relatively full service firm. Most of our work in this type of work is in Sussex County, although we do expand beyond into the other counties in Northwest New Jersey. We have a good presence, a lot of presence in Sussex, and that’s where most of our tax appeal work is done. But if you do have any questions about anywhere in New Jersey, we can answer questions and consider any options anywhere in the state.
Thanks, everyone. I hope you enjoyed the seminar. We’re just right on about an hour, and we wanted to try to keep it to an hour. Look forward to hearing from anybody that might have any questions and assisting in any way that we can in the future. Good night, everyone.