Any Property Tax Relief From COVID-19 Impact?

by Richard De Angelis & Thomas Olson of McKirdy, Riskin, Olson & DellaPelle, P.C.
As 2020 draws to a close (and not a moment too soon) we are all hopeful for a better 2021. Regardless of whether the spread of Covid-19 is slowed, or the civil unrest in our cities calms, the economic pain  of 2020 will likely linger through next year.  No industries have experienced this pain more, in terms of immediacy and impact, than retail stores, restaurants, hotels, and personal service establishments. And while elected officials debate programs to try to lessen the sting, one area rarely discussed is property tax relief.

While business owners and landlords deal with lost revenues and rents, local property taxes remain and, in most cases, will likely increase. But with rent concessions by landlords and increased vacancies comes a depreciation in value that could result in a reduction in the local property tax assessment, thereby reducing the tax burden. But the only way to achieve that reduction is by filing a tax appeal. Before doing so, some here are some important considerations:

1. The earliest you may appeal is 2021. It’s unfortunately too late to appeal in 2020 even if your property value has declined, so you need to focus on 2021.

2. What is the Property’s Current Assessment and “Equalized Value”? Prior to filing an appeal, you need to know and understand the property tax assessment. New Jersey municipalities use an “equalization ratio” to translate the assessment to market value, thereby avoiding the need to reassess properties every year.

The ratio is different in every town and changes every year. Ratios are available on the NJ Division of Taxation’s website. For a ratio at or near 100%, the assessment is intended to represent the current market value. For any ratio less than 87%, you’ll need to do some math. For example, the ratio in Morristown is 77%. As a result, a property assessed at $1,000,000 next year indicates a market value of about $1,298,700. So, if the property is actually worth $1,000,000, it is over assessed. But there is more.

The law provides a cushion to consider if the assessment should be reduced. In other words, it does not have to be perfect. In our hypothetical, to be entitled to a reduction in the assessment, we would have to demonstrate a market value of less than $1,129,300. If the market value is $1,000,000 (equal to the assessment) it would be entitled to a reduction in the assessed value to $770,000 and an annual tax savings of about $6,600.

3. Is the Property Currently Under-Assessed? If a property is losing rents and tenants that alone is not a basis to appeal. The property may be under assessed, and notwithstanding the current economic climate, the assessment could be increased. So, it is critical to understand the equalized value and market value before filing an appeal.

​4. Do you need assistance? Property tax appeals can be complicated and time-consuming. Commercial tax appeals in New Jersey can take a few years to resolve. In order to be successful, it’s important to comply with state-sanctioned deadlines and procedures. In cases where thousands of dollars (or more) may be on the line, it is prudent to seek outside help. An experienced property tax appeal attorney may assist by ensuring your tax appeal is filed and prosecuted appropriately.

If you are interested in appealing your New Jersey real property taxes, please contact us at tolson@mrod.law or rdeangelis@mrod.law or call 973-539-8900 in order to obtain a complimentary evaluation of your 2021 property tax assessment.