The purpose of this alert is to give an overview of a revaluation program in New Jersey, and also provide the taxpayer with information that should help mitigate potentially adverse affects of a new assessment.
A revaluation is a program conducted by an outside appraisal firm that is designed to adjust and update property values throughout a municipality. However, it is essential to understand that a revaluation is not a reassessment, even though both can result in the reapportionment of the tax burden among property owners. Both are intended to adjust and update property values, however, a revaluation is performed by a pre-qualified appraisal firm, while a reassessment is conducted by the in-house municipal assessor and staff.
In New Jersey, a municipal-wide revaluation is a process that a taxpayer should not take lightly or ignore. By being proactive, a taxpayer can lay the groundwork for a successful appeal, or even avoid an appeal entirely. A revaluation can occur for a single reason or a number of reasons, but ultimately the driving force behind one is the conclusion by the State Director of Taxation that assessed values of properties in a municipality are exceedingly inaccurate. Therefore, a revaluation’s stated purpose is to reset assessments and spread the municipal tax burden fairly so that, in theory, every taxpayer is paying their fair share. By the very nature of the process, however, a property’s taxes can be significantly changed, and not necessarily for the better.
An impending revaluation receives much attention in the media, and for good reason. Every taxpayer in a municipality will be impacted, because the table for all assessments will be reset. Considering that a revaluation must be conducted by a third party appraisal firm, municipal officials can be confronted with a pricey item for the municipal budget, as costs for a revaluation can easily approach $1 million. Subsequently, the taxation system can propel a municipality into a revaluation, often times against its will. A revaluation firm is selected through a competitive bidding process and, once a firm is selected and a contract awarded, the revaluation begins.
In the spring of the pre-tax year, the revaluation firm first sends a letter that is approved by the municipal assessor to every taxpayer. This letter describes the revaluation and what a taxpayer should expect from the process. This is the formal start of the revaluation process. Following the letter, inspections of every property are made, usually starting with residential or Class 2 properties. By law, the revaluation company must provide notice to a taxpayer three (3) times indicating a desired inspection date and time. After three notices with no response, the revaluation firm can value the property without its inspection.
Shortly afterwards, the revaluation company and the municipality assessor coordinate a mailing of Chapter 91 requests to owners of commercial properties that can, but may not necessarily, produce income. The Chapter 91 form asks for income and expense data relating to only the real property. It is very important for the taxpayer to file this form within the 45-day timeframe required. If this request is ignored, the form is filed late, or the form is not completely filled out, the taxpayer will likely lose valuable appeal rights and be unable to contest the new assessment.
By this time, the revaluation company will be collecting records of sales, leases and other information in order to develop a database to establish values for properties. The company will use this data along with the information about the specific property it will evaluate. The revaluation company should take into account the overall market, as well as factors and information pertaining to the particular property being valued, in order to arrive at a fair assessment.
The revaluation company is required to complete its evaluation of all properties and arrive at a value and an assessment for each property by November 1st. Once this stage has been reached, the company is required to send a letter to the taxpayer, prior to November 10th, to inform the taxpayer of the proposed new assessment.
Additionally, the letter must advise the recipient that the taxpayer or the taxpayer’s agent may request a meeting to review the revaluation company’s decision, as well as the data it relied on in setting the new assessment. This meeting, therefore, is a not-to-be-missed opportunity to probe the revaluation company’s findings and data. It also gives the taxpayer the chance to bring information bearing on the property’s condition and value to its representative’s attention. These meetings, which must be concluded by December 15th of the pre-tax year, can sometimes lead to reduced assessments. After the meeting, the revaluation company must provide written notification to the taxpayer of its decision within four weeks.
Once these meetings conclude and the letters have been mailed to the taxpayers, the municipality’s list of assessments is finalized and its assessor will submit a certified list to the County Board of Taxation. From there, the Board will approve or revise certain assessments on the list.
At this point, the taxpayer’s sole recourse is to file an appeal with the County Board of Taxation or the State Tax Court, but only with assessments of $1 million or more. In revaluation years, the appeal deadline is usually May 1st. However, there are exceptions, like Monmouth County’s deadline, which occurs much earlier, so it is wise to verify the appeal date. Additionally, the county tax administrator has the discretion to extend any of the deadlines previously referred to in this article.
The taxpayer should check the notice, which is typically the size of a postcard, they received in early February, which provides both the new assessment and the date of the appeal deadline. The notice will be mailed to the address on file with the assessor. Unfortunately, it is often hard to prove that such a card was never mailed, so a taxpayer should be vigilant and proactive in protecting their appeal rights. We recommend that the taxpayer contact the assessor’s office by early March if they have not received the notice. If the taxpayer decides the property is over-assessed an appeal should be strongly considered, as the Chapter 123 rule does not apply, and a taxpayer merely needs to show tax discrimination, unlike most other years where discrimination in excess of 15% must be shown.
Once a municipality has decided to implement a revaluation program, the taxpayer should look at it as an excellent opportunity to properly manage the size of the new assessment and a property’s resultant tax burden. There are several things a proactive taxpayer can do:
- Assemble data that will accurately reflect the condition of the property. For example, the taxpayer should provide estimates for a property undergoing substantial repairs or maintenance to the revaluation company;
- Walk through the inspection and take notes. It’s recommended that a taxpayer should offer to respond to questions in writing, which will assure the revaluation company accurately records your comments on the property’s condition;
- Complete a timely Chapter 91 request for income and expense information to preserve appeal rights. As a further note, the response should be complete, but only information related to real estate, not business, income and expenses is required;
- Consult appraisers and attorneys who specialize in the field throughout this process, but particularly in October, as the valuation date for assessments is October 1st of the pre-tax year; and
- Take advantage of any informal meetings typically held starting in early December by participating through an experienced representative or yourself.
In closing, a revaluation is an event that must not be ignored. Because real property tax law, especially with valuation of real estate, is challenging and complex, a taxpayer should consider retaining professionals who practice in the field. While the core professional team usually consists of an appraiser and an attorney, employment of other professional disciplines at times is called for, particularly when there are zoning, other development and environmental issues affecting the property. Since revaluations occur infrequently, in many cases in excess of a dozen years, a taxpayer should seize the opportunity and be engaged in the process.
For more information on Chapter 91 requests or tax appeals, please contact Stark & Stark or visit www.NJLawBlog.com.