As the famous quote says, one thing we can be certain about in life is paying taxes. However, when it comes to the property tax arena, it is possible to reduce the effect this certainty can have on our wallets. Enter the property tax assessment appeals process. This process allows homeowners to appeal the tax assessment that has been placed on their property and potentially lower the amount they have to pay.
In the world of community associations, property tax appeals can be filed by just one unit owner or by multiple owners at the same time. Associations can aid homeowners by making them aware of their potential savings and providing information. Associations can also recommend or suggest that owners take advantage of the appeals process.
In Pennsylvania and New Jersey, associations cannot file a property tax assessment appeal on behalf of the unit owners. “Every tax appeal is only permitted by the owner of the property. The appeal must be in the name of the owner,” noted Attorney Donald Weiss of Donald J. Weiss Esquire, PC in Chadds Ford, Pennsylvania.
Homeowners can file individual appeals or file as part of a class of owners, said Attorney Alexander DiSanti of Forbes Bender Paolino & DiSanti, PC in Media, Pennsylvania.
Weiss explained that in order to file as a class, the class must be made up of at least two homeowners who own similar properties. For example, a group of one-bedroom unit owners might apply as one class, while a group of two-bedroom owners might apply as another class. However, Weiss noted that it is very difficult for classes to be approved.
With that being said, DiSanti pointed out that it is easier for owners of condominium units to prove their properties are similar than owners of single family homes within a community because condominium units are usually more uniform than houses.
Whether or not property owners are each filing individual applications or appealing as part of a class, according to Weiss, it makes the most sense for as many owners as possible to file at the same time. “Doing so typically saves money on appraisal fees as well as attorney representation fees,” he said.
DiSanti explained that appraising a group of properties at the same time can be less expensive per person than the cost of just appraising one property. For example, if the appraiser comes out and appraises 20 houses in one day versus one house, he or she will most likely be willing to charge less per property, noted DiSanti. He said the appraiser would be using the same comparables (comps) to gather his or her data, and the reports being generated won’t be dramatically different.
From the property tax assessment appeals board’s standpoint though, more people filing at once doesn’t necessarily mean they will win. “Generally speaking, the chances of a successful appeal aren’t enhanced because more people are involved,” said DiSanti. “What you’re probably going to see though, are more uniform results if it’s done that way.”
What might lead community association members to believe they are overpaying for taxes in the first place? According to DiSanti, sometimes older properties don’t have current assessments, especially if a sale hasn’t occurred recently within the community. He explained that tax assessments are based on the fair market value of the property. A certain, pre-determined percentage (millage rate) is applied to the assessed value of the property and that’s how the tax amount is calculated. Homeowners can find out if their property has been over-assessed by hiring a certified appraiser to determine the fair market value. The appraisal process involves a combination of inspecting the property and looking at comps of similar properties, noted DiSanti.
Comps may be affected by uncommon factors, such as short sales or foreclosures. When a home is sold through the short sale or foreclosure process, it is typically sold for significantly less than its perceived value. Therefore, it may appear that the value of property in question is less than it should be. Because of this, DiSanti said, the tax appeals assessment board may not take comps from short sales and foreclosures into consideration when making a decision.
When determining property values, it’s important to note that common elements are typically not included in the assessment. In Pennsylvania, for example, common elements have a “zero” value, said Weiss. “Common elements cannot be sold, and therefore, they have no value,” he said.
Therefore, in Pennsylvania specifically, common elements aren’t taxed. This includes common areas. “Only individual properties are taxed,” noted DiSanti.
So, how does the appeals process work? In Pennsylvania, tax appeals should be filed each year between March 15th and August 1st, said DiSanti. The hearings related to those appeals will typically happen in September/October, and the decisions are usually delivered in November. Each appeal is filed with the local tax assessment office. A hearing is then scheduled with the board of tax assessment appeals. The property owner and/or attorney appears at the hearing with proof of the current value, which includes the appraiser’s report. The appraiser often testifies as well and answers any questions from the board. Then the board considers the information provided to make its decision, DiSanti explained.
According to Weiss, in New Jersey, the timing is a little bit different, as the deadline to file is April 1st of each year.
With regard to deadlines, DiSanti pointed out that there is one way to get around them and that is with new construction. “If you didn’t assume ownership of the property from the builder until the deadline has passed, you can request an interim review,” he said.
Both DiSanti and Weiss agree that property owners can, but should not file tax appeals without counsel. The advantage of an attorney is that he or she knows the process, is experienced in appearing at hearings and can prepare properly for them, said Weiss.
He noted that property owners should consider filing a tax assessment appeal every year. Homeowners can do a preliminary check to see if they might be over-assessed by using an online property tax calculator. This can give the property owners insight as to whether they have the basis to pursue an appeal. Weiss said that associations can choose to hire a professional to make a pre-determination on behalf of the homeowners so that they can advise them of potential savings. “If they can help all the residents, both the association and the community as a whole is better off,” he said.
What happens when an appeal is successful? According to DiSanti, in Pennsylvania, the savings is applied prospectively, not retrospectively. Therefore, the decision affects the taxes for the following year. “Your bill goes down because your fair market value is lower.”
Weiss noted that in New Jersey; however, savings from successful appeals that had been filed by the April 1st deadline are applied retrospectively back to January 1st of that year.
Besides saving money, filing a tax appeal can be beneficial to property owners in other ways. “In my opinion, if your taxes go down, your property value goes up because your house is more appealing to buyers,” said Weiss.
Does a property owner have a better chance at winning an appeal if his or her neighbor pays less in taxes? According to Weiss, “it’s irrelevant what your neighbor is paying in taxes. It’s all based on value.”
He explained that property values periodically change. For example, if a homeowner filed a tax appeal when the real estate market was down during 2007-2009, the property may have been assessed at a lower value than it would be today.
On the other hand, if the homeowner can demonstrate to the tax assessment appeals board that his or her property is similar to another property which has recently filed an appeal, there could potentially be some advantage, said DiSanti.
Either way, a person cannot just say “I know my property is worth less than its assessment, but I don’t know how much,” explained DiSanti. “You have to give a number. This property is worth $225,000,” for example.
Therefore, DiSanti said it is advisable for the property owner to obtain a formal appraisal, which will take recent sales and other recent tax assessment appeals into consideration in order to come up with that value. For example, if a property is assessed at $260,000, but the appraiser has deemed its worth to be $225,000, the appraiser’s report will show the tax assessment appeals board how this value was reached.
“It is my opinion that if you want to win at the board level you need an appraiser, although not legally required. I never go in without an appraisal and that’s why I win 90% and only 90% with an appraisal,” said Weiss.
Overall, the property tax assessment appeals process is not a difficult one, said DiSanti. Filing in a timely manner, acquiring a certified appraisal and representation by an experienced attorney are all important components of the process.