New Jersey Real Estate Taxes
The State of New Jersey is notorious throughout the United States for many things, none of which is flattering.
However, the one thing that even most New Jerseyans don't know about our state is that New Jersey has the highest real estate taxes in the United States.
If you doubt this, visit the Tax Foundation's website to see where New Jersey ranks for a wide variety of taxes, including being number one on the list of the states with the highest real property taxes in the country.
And while many Garden Staters have adopted a "grin and bear it" attitude toward our state's confiscatory level of taxation, commercial real estate investors have a greater interest than most to control the amount of real estate tax they pay.
How Real Estate Taxes Impact Property Value
The majority of commercial real estate uses are income-producing properties. Thus, the value of income-producing real estate is determined by its ability to produce net income for its owner; consequently, the higher the net income a property generates, the higher its value and vice versa.
And, because it's the goal of commercial real estate property owners to maximize the value of their property, they must maximize their net income, which, in general, is accomplished by maximizing rental income and minimizing operating expenses.
But, as responsible commercial property owners know, there are only so many expenses that can be reduced or eliminated without jeopardizing the desirability of a property due to the quality of property maintenance.
However, the one operating expense that most New Jersey commercial real estate owners complain about, yet do virtually nothing to reduce, is their real estate taxes. And, the unfortunate part about this oversight is that the benefit of a reduction in real property taxes goes straight to an increase in the property's net income, which, in turn, increases the property's value.
So, how do you reduce your real estate taxes? Let me explain...
The Real Property Tax Appeal
A New Jersey real estate property owner (and, sometimes a tenant) has the legal right to attempt to reduce their real estate taxes through the process known as a real property tax assessment appeal; most people call it a "tax appeal."
This is because a property's tax bill results from applying the tax rate to its assessment, and when the assessment is reduced, the tax bill gets reduced.
Tenants Filing Tax Appeals
If you are a tenant in a commercial property, depending on the terms in your lease contract, you may have the authority to file a tax appeal on the property you are leasing. However, filing a tax appeal without first consulting with a professionally competent real property appraiser and an experienced tax appeal attorney at law may result in an increase in the tax assessment, thus the real estate tax bill.
And, if you are a property owner with commercial tenants, because of the unintended consequences of an irresponsibly filed tax appeal by a tenant, your property may suffer an increased tax assessment, thus an increase in your property's real estate taxes.
Therefore, a landlord should be very cautious and discuss with their lawyer about including a lease provision that prevents tenants from filing a tax appeal without first obtaining the landlord's written consent, if at all.
Summing it Up
The real property tax assessment appeal is a legal process to seek relief from an unfair burden of taxation based on an over-assessment. Consequently, tax appeals are a highly specialized area of the law and in real property appraising.
Filing a tax assessment appeal without first consulting with a professionally experienced tax appeal lawyer and a real estate appraisal professional experienced in appraising real estate for tax appeals in New Jersey and experienced as an expert witness in a tax appeal trial will almost certainly end badly.
With decades of experience appraising all types of commercial real estate throughout New Jersey for tax appeals and also having extensive experience as a qualified expert witness before the Tax Court of New Jersey, I will review your property assessment and tell you whether I believe you should file a real property assessment appeal. I offer this service to commercial property owners free with no obligation.
I've also worked with many of the top tax appeal lawyers and law firms in New Jersey and will gladly refer you to them.
Contact me and let's discuss your property tax situation. Don't delay. Filing deadlines must be met or you will lose this opportunity.