First, the positive news. The New Jersey Star-Ledger conducted its annual study of New Jersey property taxes and found that property taxes increased by an average of 1.4% from 2011 to 2012. The article can be found here.  That is the lowest annual increase since 1991 and a significant improvement over the 2.4 increase from 2010 to 2011.

On the other hand a recent article  in the New York Times indicates that taxpayers in areas hit hard by Hurricane Sandy have much to worry about. As discussed in an earlier post, this article talks about how the property damage that occurred due to Sandy means that towns will be receiving much less tax revenue at a time when they need it most. Typically, towns make up for lost revenue by increasing the tax rate on the remaining property. That means that the taxpayers who were lucky enough to get through Sandy without much damage may still have to deal with huge tax increases.

Regardless how your tax bill changes from year to year, the simplest way to keep your tax bill in check is to make sure your property is assessed correctly and to file a tax appeal if it is not. If you have any questions in that regard, please contact us here .

But wait, you say, didn’t Governor Christie promote legislation capping the amount by which property taxes could go up in any given year. He did. But as discussed in an earlier post , the law has a number of exceptions including increases due to emergencies.

There are two primary reasons why property taxes are likely to rise in areas impacted by the storm. First, as Governor Christie said, the money to pay for the massive cleanup and repairing infrastructure must come from somewhere and after federal funds are exhausted, it is likely to come from local property taxes. Second, in addition to the public costs, the storm caused tremendous damage to private property. That property will take a considerable time to rebuild and there is a chance that certain properties may never be rebuilt. Put simply, the total value of assessable property within many towns has decreased. The only way to make up for that loss is to raise the rate on the remaining property. For example, if a town had $100 million dollars of assessed value and its annual budget was $2 million, that town would normally have a 2% tax rate. If Sandy did $5 million in damage so that the same property is now worth a total of $95 million, the town would have to raise the tax rate to 2.105% to meet its $2 million budget.

Because property taxes are likely to rise as a result of Hurricane Sandy, it is more important than ever that property owner ensure that their property is assessed correctly. If you have any questions or concerns, feel free to contact me.

With regard to those that suffered significant damage to real property, whether residential or commercial, you should be aware that there is a statute that allows you to request a reduction in your assessment that reflects the loss of value to your property.  The statute is not limited to natural disasters – it would apply if a property owner intentionally demolished an old building with plans to build a new one in its place – but we suspect that it will apply to a larger number of people than usual due to Hurricane Sandy and its aftermath

As a general rule under New Jersey law, the assessment for a property in a given year is supposed to reflect its value as of October 1 of the prior year.  So, for example, the 2013 assessment for a property is supposed to reflect its value as of October 1, 2012.  However, under N.J.S.A. 54:4-35.1, when the value of a property has “materially depreciated” between October 1 and January 1, the valuation date may be changed to January 1.  A copy of the statute can be found here.

If Hurricane Sandy caused significant damage to your property, you should notify the tax assessor in writing as soon as possible to provide him or her with time to inspect the property before assessments are finalized as of January 10.  Though your assessment will be adjusted upward once the restoration is substantially completed, your tax bill will be reduced for the period that the improvements did not exist or were not usable.

If you have any questions regarding this statute or any other property tax matter, please feel free to contact the Law Offices of Elie Fink.

“As a consequence, Chapter 91 motions have increasingly become matters of litigation gamesmanship. It has become apparent that many municipalities do not use Chapter 91 requests as a tool for making assessments, but, rather, use the sanction imposed by Chapter 91 as a weapon in the litigation arsenal for the purpose of dismissing complaints at the earliest possible stage. In turn, plaintiffs comb through the copies of the Chapter 91 requests included in the motion papers for anything that could be construed as an ambiguity in either the identification of the property owner and/or the property and/or in the instructions for completion of the form.”

Regardless of the impact Chapter 91 motions have had on litigation strategy, the safest strategy of all is to comply with the request and avoid facing a motion to dismiss.  If you have received a Chapter 91 request and have any questions about whether you should respond or how, feel free to contact me.

Though residential properties are typically valued based on comparable sales, commercial properties are frequently valued (and assessed for property tax purposes) based on the income they are able produce.  Because income and expense information is not available publicly like sales information, New Jersey law provides a procedure by which assessors are able to request such information from commercial property owners within their jurisdiction.  When a property owner ignores an income and expense request before the assessment is finalized, an appeal filed after it is finalized may be dismissed.

If you receive an income and expense request and have any questions about it or any other property tax matter, please feel free to contact me.

Despite whatever the politicians may say, the statistics are the result of a multitude of different influences.  I will leave it to them to argue over who deserves credit for all the perceived victories and blame for the casualties.  I will say however that property taxes in certain areas of New Jersey are already very high and small increases do not offer struggling taxpayers much comfort.  In addition, despite the relatively small increase in taxes in absolute dollars, tax rates as a percentage of property value will continue to rise until the real estate market improves.  There are currently a significant number of municipalities in New Jersey where property owners must pay in excess of 3% of the total value of the property on a yearly basis.

 Also worth noting, the cap on tax increases has exceptions relating to states of emergency, debt service costs and employee pensions and health benefits payments.  Unfortunately, New Jersey has had to deal with a relatively high number of catastrophic storms (not attributable to Democrats or Republicans) in recent years.  More importantly, the exceptions for debt service costs, pensions and health benefits, tend to limit the impact of the legislation in the areas that are suffering from tax increases most.  In other words, it helps least those who need it most.  All in all, the statistics are a positive sign but there is still much room for improvement.

Some of you may be asking, “How does the Freeze Act help me if I accept a settlement offer?  I thought you said that it applies only when there is a judgment.”  The answer is that every settlement between an assessor and taxpayer must be approved by a judgment of the County Tax Board or Tax Court.  This is similar to the requirement of court approval in a plea bargain in a criminal matter or class action settlement where there are outside interests that may be affected by a settlement between the parties.

A recent case, Fifth Roc Jersey Associates, LLC v. Morristown illustrates the Freeze Act in action.  The case involved many other issues but I will focus on the facts that are relevant to our discussion.  In August 2007, the parties settled an appeal regarding the 2007 assessment for a Hyatt Hotel in Morristown.  In February 2009, Fifth Roc filed a motion with the Tax Court seeking to enforce the Freeze Act against Morristown for the 2008 and 2009 tax years. Morristown had increased Fifth Roc’s assessment from $16.5 million to $24.5 million. Morristown objected to the application of the Freeze Act arguing that the change was an added assessment as a result of improvements made to the hotel.  Ultimately, the Court ruled in favor of Fifth Roc because the vast majority of the improvements that were the subject of the added assessment had been completed in 2006, the year before the settlement agreement.  Because the appropriate time for an added assessment would have been before the settlement and before the freeze period began, Morristown could not bypass the Freeze Act after the settlement. 

 Although the case above related to a hotel and millions of dollars were at stake, the Freeze Act applies to all properties, commercial and residential.  If you ever need to enforce the Freeze Act against a municipality, the Tax Court website provides a one-page form to do so, no lawyer required.  (The form can be found here.)

In the recent case of Englishtown Synagogue, Inc. v. Township of West Orange the Superior Court, Appellate Division (the court to which Tax Court Decisions may be appealed) reaffirmed its position[1] that a municipality may not deny an otherwise valid application for a tax exemption simply because the exempt use of the property is in violation of zoning rules. 

NJSA 54:4-3.6 grants an exemption from property taxes where a property is used for a variety of tax exempt purposes including houses of worship.  As interpreted by the courts, there are three criteria for exemption under the statute: (1) the owner of the property must be an entity organized for tax exempt purposes, (2) the property must actually be used for tax exempt purposes, and (3) use and operation of the property must not be for profit.

In the Englishtown case, the municipality conceded that each of these criteria was met. West Orange denied the exemption, however, because plaintiff had failed to obtain zoning approval to use of the property as a house of worship. 

The Appellate Division held that the violation of zoning regulations does not constitute grounds for denying a tax exemption.  First, though the statute provides other criteria for tax exemption, it does not include a requirement that the property comply with zoning rules.  Second, the purposes of tax exemption laws are different from those of zoning rules and each has its own mechanisms for enforcement.  In fact, Englishtown Synagogue had been fined for its violation of zoning rules and had long since received zoning approval.  Denial of its tax exemption as an additional penalty was deemed to be inappropriate.  The Appellate Division reversed the decision of the Tax Court.

The practice of getting farmland assessment on huge estates is not limited to rock stars.  Others that have been cited include CEOs, politicians and an assortment of familiar names.  Click here  to see an older news story that names names.  From time to time, after a story runs, a client will ask me how they can qualify.

The answer for every client that has asked so far has been that they cannot. One must have a minimum of five acres dedicated to agricultural or horticultural use, so your backyard vegetable garden will not work.  Land under and adjoining the “farmhouse” is not counted toward the five acre minimum and, in fact, such property is taxed at the same rate as we non-farmers pay.  The land must have been devoted to the agricultural or horticultural use for two years preceding the tax year for which the exemption is sought.  Lastly, the farming activities must result in sales or payments of $500 for the first five acres and five dollars to as little as fifty cents for each additional acre depending on how it is used.

Is this a scam, you ask?  Well it depends on how you look at it.  Clearly, the celebrity owners that the news stories focus on are not farmers.  It sounds inherently wrong that this tax break meant to allow New Jersey farms to survive is benefiting some of the state’s richest residents.  On the other hand, most of these super-rich owners employ professional farmers and growers because, in order to qualify for farmland assessment, one must actively manage the land and not just harvest what grows naturally.  Even so, I doubt these professionals match up with our idealized vision of a farmer that toils day and night on land that has been in the family for generations.  Proponents of the tax break also argue that these tracts serve to reduce congestion and typically cost the municipality very little in terms of services.  Again, zoning rules can address some of those concerns and I’m not sure it justifies assessing land at far less than its fair market value.

Either way, it seems unlikely that the rules are going to change any time in the near future.  Still think you may qualify?  You can find a copy of the application at http://www.state.nj.us/treasury/taxation/pdf/other_forms/lpt/farmland.pdf.

 In that case, the defendant township made a motion to dismiss a tax appeal because the plaintiff had not paid its property taxes in 2011.  N.J.S.A. 54:51A-1(b) provides that all property taxes must be paid at the time the tax appeal is filed.  The statute does allow the court to relax the requirement that all taxes be paid “as the interests of justice require.”

 Though a prior version of the statute cited above did not allow the Tax Court the authority to hear cases when the taxes were not paid, the statute was revised in 1999 to allow the court to make exceptions in the “interests of justice.” 

 The plaintiff, a developer that was planning to build affordable housing as required under New Jersey’s Mount Laurel Doctrine[1] and the Fair Housing Act, argued that the court should make an exception because it had been unable to secure financing due to unexpected changes in the economy and the defendant township’s reluctance to allow for the building of affordable housing as required by law.

The courts have developed a three part test to determine whether to hear an appeal even if the plaintiff has not paid its taxes.  Under the test, the court must ask whether the circumstances leading to non-payment were (1) beyond the control of the property owner, (2) not the result of bad judgment or investment, and (3) reasonably unforeseeable. 

Because the construction of affordable housing is an “endeavor fraught with complications, both legal and financial,” the court found the plaintiff’s predicament was the result of its own business decisions and was foreseeable.  The plaintiff’s case was dismissed.

Since the change in the statute, numerous taxpayers argued that the interests of justice required relaxation of the rule that all taxes be paid.  Very few have succeeded.  As a result, the most prudent course is to pay your property taxes as billed even if you are confident they will be adjusted later on.