Sandy Victims May Have Wait Awhile For New Jersey Tax Appeals

PropertyPilot.com writes: The April 1^st deadline for filing a tax appeal within the State of New Jersey came and went and county boards are receiving a record numbers of appeals from homeowners who believe their property’s values have dropped so precipitously that they should be granted a tax reduction .  This trend is continuing since the real estate market took a dramatic downturn in 2008 and has remained depressed since that time.

Homeowners who suffered significant losses due to damage from Hurricane Sandy in late October and early November, 2012, may be in for even more bad news. They may be left without recourse until next year unless they took early action and filed a appeal by January 10.  Those who missed the deadline but filed under the traditional April 1 deadline will likely be denied any tax relief.

Filing A New Jersey Tax Appeal

A property owner cannot challenge a “tax rate”, but must instead challenge the “tax assessment” laid on their specific property.  Generally, there are two tax assessments for residential properties and commercial properties:

1. land value
2. structure/ building value

The property owner is taxed on the total of these two assessments combined.  But if market value has decreased so significantly, an owner can challenge the assessment.  Each municipality in New Jersey is assigned an equalization ratio, which is a ratio of total assessed value for properties in a community to those properties’ true market values.

The number represents the municipality’s judgment of how closely assessed value matches market value.  If, after applying the applicable equalization ratio to the specific property’s assessment, the owner proves that market value is 15% or more lower, then the assessment will be adjusted accordingly.

Procedures To File A New Jersey Tax Appeal

But there are specific procedures that must be followed in order to obtain this adjustment.

1. Most importantly, a tax appeal must be timely filed on or before April 1.
2. The market value to be proven by the homeowner is the property value as of October 1 of the prior year.

This does not bode well for those who suffered damage in Hurricane Sandy, since the hurricane did not strike until nearly 1 month after October 1.  Normally, a property that decreased in value after October 1 would have to wait until the following year to challenge the assessment.

TAX RELIEF FOR DISASTER VICTIMS

But the law provides a special outlet for those who suffer damage between October 1 and January 1 as a result of a catastrophic storm such as Hurricane Sandy:

When any parcel of real property contains any building or other structure which has been destroyed, consumed by fire, demolished, or altered in such a way that its value has materially depreciated, either intentionally or by the action of storm, fire, cyclone, tornado, or earthquake, or other casualty, which depreciation of value occurred after October first in any year and before January first of the following year, the assessor shall, upon notice being given to him by the property owner prior to January 10th of said year, and after examination and inquiry, determine the value of such parcel of real property as of said January first, and assess the same according to such value. [N.J.S.A. 54:4-35.1.]

The notice to the tax assessor of this special damage has to be provided by the property owner by January 10.  If this was done, a property owner’s application will be heard for a reduction in assessment.  The same rules will apply in that challenge as in a traditional tax appeal challenge (owner must prove that market value is 15% or more lower than the assessed/ equalized value from the municipality).

One of the problems facing sufferers of Hurricane Sandy is that many were unable to fully perform market value analysis prior to January 10. Access to many areas damaged by the storm was limited and the sheer volume and mass scale of destruction placed significant and unparalleled burdens on those who perform these market value analysis tasks.

Accordingly, a well-supported and documented statement of market value was often unable to be provided by the deadline.  There has been discussion of extending the filing deadline from January 10 to sometime later in the year for those who suffered from this particular storm, but to date no such effort has been taken by the Legislature.

Therefore, unless a property owner filed its assessment appeal by January 10, it is unlikely that relief will be available until next year when the owner can file under the traditional procedures.