Community Association Property Tax Alert
It is critical that homeowners associations are vigilant of the way in which their municipality assesses taxes on the community's common area. Now that the 2005 property tax assessments are being mailed out, many people may have questions about how community associations should be taxed. An area that community associations should pay particular attention to, is how their common property areas are taxed.
Common areas include clubhouses, pools, and recreation areas such as playgrounds and tennis courts. In New Jersey, towns and municipalities may not tax a condominium's common elements. It is generally believed, but not technically the case, that the common areas of a homeowners association enjoy the same tax protection.
Many associations are improperly assessed taxes on their common areas. Now is the time to review tax assessments and determine whether a tax appeal is warranted. We suggest the following:
1.Get a copy of your 2005 tax assessment. Your tax assessor will send you a small "green card" in January or early February stating the association's tax assessment. If you do not receive the tax card, call the township tax assessor.
2.Review the tax card and determine if common property is being separately assessed. Is the clubhouse being assessed at its full value? Is open space being assessed as a building lot?
3.Review the association's governing documents to confirm that the common property is specifically identified as common property, subject to restrictions on use and transfers.
4.If the common property is being separately taxed, call us to discuss filing a tax appeal. We may be able to help reduce the assessment to a nominal value or no value at all.
5. IMPORTANT: The deadline to file your tax appeal is April 1, 2005.
Should your homeowner association have questions regarding the assessment of its common property area, contact A. Christopher Florio, David J. Byrne or Timothy P. Duggan to discuss your specific matter.
Is there a state law as to how high of %taxes can be raised in 1 year? I have just been raised 33% in one year.
Dear Mr. Diviaio:
I assume you are talking about real estate taxes. If you are, the answer is no. There is no limit on how high taxes can be raised. This is a problem that many people are experiencing, especially if your town has recently completed a revaluation. When a revaluation occurs, all homes and businesses are raised to the fair market value of the property. If a home was under assessed (ie. too low of a value) and is increased to its fair market value, the annual property tax bill will often times increase. I hope this answer helps.
Tim Duggan
Timothy P. Duggan
Stark & Stark, a professional corporation
PO Box 5315
Princeton, NJ 08543-5313
tduggan@stark-stark.com
609.895.7353 (T)
Dear Mr. Duggan:
Thank you for your community association property tax alert dated 2/7/2005. I live in one of these community associations in Bridgewater. I just received my tax bill showing a sizable (over 40%) residential property tax increase due to a recent revaluation to reflect current market value. The last reassessment was done in 2001. Is there anything else I can do other than checking whether the association's common property is being separately assessed?
Thanks for any assistance!
Paul
Paul,
Thank you for your email on property taxes. I suggest you review the Association's records for all common property and determine whether the common property has a separate tax lot and block. Generally, common property will have a separate lot and block number. After you determine the lot and block, determine whether it is being assessed. You can call the Bridgewater Tax Assessor for this information. If it is being taxed at more than a nominal value (ie. over $1,000), double-check to make certain it is in fact common property that is restricted and cannot be sold. If it is being taxed, please give me a call and we can discuss how to appeal.
Tim Duggan
(609)895-7353
My town is about to undertake a revaluation. Now that we are in a real estate downturn how can the appraisal company use comparables from 'before the bubble burst'?
Mr. Miller,
I assume your property is located in New Jersey. For the 2007 tax year (next year), the crucial date is October 1, 2006 - what is your house worth on this date. This is the date used for tax purposes.
In most areas, the market has cooled, but there is little evidence to show that the bubble has "busted" - it all depends upon where you live. The revaluation company may use sales from earlier in the year and make an adjustment for time (either up or down depending on the market). To show that a downward adjustment is merited due to changing market conditions, you will need evidence to show the downward trend and how the trend impacts your property.
It is advisable to start assembling the data now since October 1, 2006 is right around the corner.
I hope this response is helpful.
Mr. Duggan,
I just read this piece about taxation of common property. Where can I find the tax law or code that stipulates how common property is to be assessed?
Thanks,
Elizabeth
Ms. Wilkins:
We are prohibited from giving legal advice over the internet. However, I can point you to several laws and cases which may be of help:
1. Condominiums: N.J.S.A. 46:8B-19 provides that:
"All property taxes, special assessments and other charges imposed by any taxing authority shall be separately assessed against and collected against on each unit as a single parcel, and not on the condominium property as a whole."
Also, see tax court case of Olde Orchard Village Condo Apartments, Inc. v. Pequannock Township, 21 N.J. Tax. 275 (Tax 2004).
2. Homeowners' Associations (not condos): There is no specific law controlling and the cases are tricky. In short, it often comes down to whether the property owners have a perpetual easement over the common property. See case of Lidell v. Mimosa Lakes, 6 NJ Tax 417 (Tax 1984); Tower West v. Town of West New York, 5 NJ Tax 478 (Tax 1982).
I hope this helps.
Tim Duggan
I have recently received the new assessed value of my condominium in Montclair, NJ and it is 4x the amount assessed for 2006. I noticed that I am being taxed for the full land value even though there are 7 other units in the condo. My brother happens to own a studio in the same condo and is being assessed the same for the land as I am. The total land that the building lies in is no more than the property amount of the average house in Montclair. In the previous years my assessed land was $17500 (which I imagine is the total assessed land divided by 8 total units.) My question is: is this usual to assess each unit owner of a condo for the total land...this would mean that they are taxing for the same land x however many owners there are.
Not unusual for condo owners to be taxed for value of land and the improvement. The real issue is if you all are being taxed based on full value 8 separate times as you indicate. If the 8 of you are truly being taxed the same for land that has a nominal value, you do need to bring this up to the tax assessor, or file an appeal.