Commercial Property Tax Appeals

Commercial Property Tax Appeals

Property taxes on commercial property in New Jersey, like those on residential property, must be based upon the property’s actual fair market value.  When it is not, property owners can appeal their tax assessments and have them lowered, resulting in significant tax savings.

Our attorneys prosecute property tax appeals for businesses and other owners of commercial real estate.  We first evaluate whether a property owner has ground for a successful appeal.  Then we build the case and pursue the appeal.  In many cases we can also negotiate a reduction in the taxes before an appeal is heard.

Appealing New Jersey Property Taxes

Property taxes on commercial property can be successfully appealed if the equalized assessed value of the property is more than fifteen percent of its actual fair market value.

Any person or business who is “aggrieved” by an erroneous valuation may appeal.  Thus, while of course owners may appeal, tenants who pay the real estate taxes may file a property tax appeal as well.  Mortgage and tax sale certificate holders may also appeal in certain situations.

Generally, however, appraisals of commercial property are far more complex than those for residential property.  Often there is no comparable property.  It is important to have an experienced attorney handling the appeal.  

How New Jersey Property Taxes on Commercial Property Are Calculated

The only variable in calculating property taxes which a property owner can appeal are property assessments.  Assessments must reflect the actual fair market value of the property when equalized using the municipality’sequalization ratio.  This is a requirement of New Jersey’s property tax law.  If the equalized assessment is not within fifteen percent of the fair market value (the “common level range”), it can be lowered on appeal and your taxes reduced.

There is a set formula used to determine what your property taxes will be. The formula includes the tax rate, the equalization ratio, and the assessed value.  Of these, only the assessed value can be appealed.

The town’s tax rate is uniform for all property owners.  It is determined in the local budget and cannot be appealed.  The equalization ration is used to make sure that the town wide assessments (which may have last happened years ago) still reflect fair market value.  It is set by the state and likewise
cannot be appealed.  

The property’s assessment will have taken place during the last town-wide valuation.  It normally changes rapidly, especially in these unsettled economic times.  The equalization ratio (or Chapter 123 ratio) is determined by the State of New Jersey.  The assessment is multiplied by the equalization ratio to make it reflect fair market value.  If it does not reflect fair market value, your taxes may be appealed.

For example, if your commercial property had the following values, we could determine whether or not it was accurately assessed.

Equalization Ratio    80%
Common Level Range    65%-95%
True Value (“fair market value’)    $1,000,000 (FMV)
Assessed Value    $1,000,000
Tax Rate    $5 per 100 of assessed value
Current taxes    $50,000
Ratio    100% this is outside of the common level range
New Assessment    $800,000
New taxes    $40,000
Savings    $10,000 per year

Given these values, your taxes would be reduced by twenty  percent because, while the fair market value of your property is $1,000,000, the assessed value of your property, when taking in consideration the equalization ratio) should be $800,000.00. Your tax rate will not change, but the rate will be applied to a lower assessed value. Your new annual property taxes would be $40,000.00, resulting in a net savings of $10,000 per year.

Additionally, owners of rental properties must submit an income statement at the time of filing. This has a direct bearing on value and may be used by either the taxpayer or the municipality.

Deadlines for Filing Property Tax Appeals

Normally, New Jersey property tax appeals must be filed by April 1st.   However, when the municipality has had a town-wide revaluation the deadline is May 1st.  These deadlines can be extended only in the case where the town has been late in mailing tax assessment notices, when they may be filed 45 days after mailing.

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Call us at (973) 890-0004 or e-mail us to speak with one of our attorneys to find out what we can do to help you lower your New Jersey property taxes.

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