Tax Appeal Plaintiff “Snake-Bitten”

In this appeal, Jaylin Holdings LLC v. Manchester Township, challenging the local property assessments for tax years 2009 through 2012, the court was confronted not only with lawyers and appraisers, but snakes!

This appeal involved five parcels located in the Townships of Toms River and Manchester and subject to regulation by the New Jersey Department of Environmental Protection (“DEP”)  under the Coastal Area Facility Review Act (“CAFRA”).

Prior to the tax appeal, plaintiff had filed a development application with DEP at which time it was discovered that plaintiff’s property could be a suitable habitat for the Northern Pine Snake (pine snake), a threatened and endangered wildlife.

While the court found that plaintiff produced sufficient evidence to overcome the presumption of validity that attaches to the assessment, it held that plaintiff failed to sustain its burden of proof and affirmed the assessments.

Taking center stage in this appeal, other than the snakes, was the highest and best use analysis. There was no dispute among the appraisal experts that the “legally permissible” use of the subject property was commercial development. However the appraisers did not agree on what was “physically possible.”

Plaintiff’s expert concluded that the subject property being a known habitat for threatened and endangered species imposed limitations on development for any use.”

The defendant’s appraiser concluded that commercial development was possible, notwithstanding the environmental constraints and the presence of a threatened and endangered wildlife species. The defendant’s expert relied on comparable sales that had similar environmental constraints but were developed into commercial uses.

The court found that “[w]hile the identification of the existence of the pine snake habitat on the subject property most certainly impacted the extent of the development . . . it in no way prohibited all development as maintained by plaintiff’s appraiser.” The court found that the defendants’ experts’ conclusions as to the highest and best use of the subject property was persuasive and, more importantly, that plaintiff had failed to sustain its burden of proof to alter the assessments.

A copy of the court’s decision may be found here.


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Princeton University Wants Out of Morristown Courtroom

The Times of Trenton reported this week that Princeton University is seeking a change of venue in a challenge to the University’s local property tax exemption.

In the underlying matter the plaintiffs, a group of Princeton residents, argue that because the University is earning hundreds of millions of dollars in patent royalty income and distributing some of that income to faculty, that the school is involved in commercial enterprise and should no longer be entitled to property tax exemptions.  The challenge includes also a claim that some campus buildings, such as the Frist Campus Center and McCarter Theatre, host extensive commercial activity open to the general public.

The matter is currently pending before the Honorable Vito Bianco, a Tax Court Judge who sits in Morristown, New Jersey.  The University filed a motion last week seeking to move the case before the Tax Court in Trenton.  While the case, filed in April of 2011, was originally assigned to Judge Gail Menyuk in Trenton, it was transferred to Judge Bianco in Morristown after the retirement of Judge Menyuk in January 2013.

What makes this change a venue motion interesting is the timing.  Judge Menyuk retired in January of 2013.  After the matter was assigned to Judge Bianco, the University filed a motion to dismiss the challenge, which was denied by Judge Bianco in June of 2013.  Now, more than one year after losing that motion, the University wants out of Judge Bianco’s Morristown courtroom.

In support of its most recent motion, Princeton University argues that it is simply a matter of convenience as the parties, including the Borough of Princeton, are located in Mercer County as is the property that is the subject of the appeal, as well as three of the four attorneys involved in the case.  The plaintiff’s argue that the University is “judge shopping.”

We’ll have to wait and see whether Judge Bianco keeps Princeton in Morristown or sends it packing to Trenton.

A copy of yesterday’s Trenton Times article may be found here.


For more on this matter see:

Lawsuit challenging Princeton University’s tax-exempt status won’t be dismissed, Trenton Times, June 29, 2013

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Tax Court Prefers Quantitative, Not Qualitative Adjustments

Another County Tax Board judgment was affirmed after the property owner and the municipality both failed to overcome the presumption of correctness of the assessment with evidence that was “definite, positive and certain in quality and quantity. . . .” MSGW Real Estate Fund, LLC v. Borough of Mountain Lakes, 18 N.J. Tax 364, 373 (Tax Ct. 1998). The Middlesex County Board of Taxation reduced the assessment on two multi-family homes following evidence presented by the parties. Appeals were filed to the Tax Court, and both parties presented expert witnesses.

At trial, plaintiff’s expert presented three comparable sales that were in the same neighborhood as the subject properties. The expert testified that did not provide adjustments in dollar amounts to any comparables for various elements of comparison on grounds that this was not required when using qualitative adjustments, an accepted appraisal methodology, so that the Subject/comparables will mirror the market. The Township’s assessor utilized the comparable sales approach, also without making any adjustments to the comparables on the grounds that none were required. The Tax Court rejected the methodology applied here, and stated that “what is amorphous to the court is how the expert concluded that $250,000 is that amount. Was it based on his experience and expertise? But courts require an expert’s opinion be based on more than this.” Because the experts failed to provide the “whys and wherefores” of their opinions, the Tax Court affirmed the assessment since there was no credible objective evidence in the record.

A copy of the Tax Court’s unpublished opinion in Ganjoin (34 Highland Avenue) v.Township of Woodbridge can be found here.

A copy of the Tax Court’s unpublished opinion in Ganjoin (308 Avenel Street) v.Township of Woodbridge can be found here.

For more on overcoming the presumption of correctness, please see the following blog posts:

Unreliable Testimony Dooms Taxpayer’s Appeal

Taxpayer Fails to Overcome “Presumption of Correctness”

Appraiser’s Subjective Adjustments Rejected; Owner Loses Appeal

Limited sales data and lack of reasonable adjustments does not doom plaintiff’s appeal

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Rent Receiver Has Standing to Prosecute Tax Appeal

The New Jersey Tax Court this week held that a court-appointed rent receiver has a sufficient interest in a commercial property to prosecute a property tax appeal.  The property, a 90,000 square foot commercial building located in Evesham Township, Burlington County, was assessed at approximately $12,000,000 for 2014.  The owners had failed to make mortgage payments, triggering a loan default and prompting a foreclosure action on the property.  During the foreclosure action, the Court appointed the rent receiver to “take charge of” the property, and the Order appointing the receiver vested broad powers in the receiver with respect to operating the property and responsibility for its income and expenses.

Shortly after the receiver filed a Complaint in the Tax Court challenging the 2014 assessment, the township moved to dismiss the Complaint for lack of standing.  The township argued that the receiver was not a “taxpayer” aggrieved by the assessment within the meaning of N.J.S.A. 54:3-21, and therefore was not entitled to prosecute the appeal.

The Tax Court disagreed with the township’s argument.  It noted that “taxpayers” within the meaning of the statute are not limited to owners of the property in question.  In fact, tenants, mortgagee, the holders of tax sale certificates, and a non-owner spouse have all been held to have standing to file property tax appeals pursuant to N.J.S.A. 54:3-21.  With this in mind, the Court compared the receiver in the case at hand to the mortgagee, and reasoned that while the receiver does not own a property interest in the property under appeal, it does have a fiduciary obligation to protect the property and the Order appointing the receiver was broad enough to conclude that the receiver had a sufficient stake in the property’s assessment to challenge it in the pending appeal.  Accordingly, the township’s motion to dismiss was denied and the appeal was allowed to continue.

A copy of the Tax Court’s opinion in NNN Lake Center, LLC v. Tp. of Evesham is available here.


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Site Improvements on Vacant Land Fair Game for Tax Assessment

A decision this week by New Jersey Tax Court Presiding Judge Patrick DeAlmeida affirmed that the market value of site improvements on a vacant parcel of land must be included in the assessments on the undeveloped parcels.  The case involved an appeal by the owner, Hovbros Cinnaminson Urban Renewal, LLC, the designated redeveloper of a 17 acre parcel of land in Cinnaminson Township that was approved for the development of 205 age-restricted multi-family housing units.  After acquiring the property in 2006, Hovbros installed significant site improvements at the property, including roads, parking lots, curbs, utilities, storm water drainage facilities and sidewalks.  Approximately 25 of the units were constructed and sold, leaving about 180 units (in 10 buildings) to be constructed.

Due to the downturn in the economy, the rest of the units were not constructed and Hovbros filed appeals in 2011 challenging the assessments on each of the 180 units.  Each of those units had a land assessment of $40,000.  Its appeals contended that the site improvements had limited value in the market place, while the assessor disagreed and determined, using a cost approach, that the site improvements had a contributing value of approximately $14,000 of the $40,000 assessment on each unit.

After trial, the Tax Court concluded that the site improvements had value in the market place, noting that a “purchaser in the marketplace intending to complete the project approved for the subject property would place a value on not having to expend resources on the extensive site improvements necessary to support the project.”  One of the comparable sales introduced into evidence specifically corroborated this conclusion.  Accordingly, the Court held that a total assessment of $35,000 per unit represented the equalized value as of the assessment date.  In so doing, the Court held that the use of the cost approach to reach an opinion of value on this component of the property was credible, and was the only evidence before the Court on the issue.  Significantly, the Court also affirmed the assessor’s inclusion of an entrepreneurial profit in arriving at a value under the cost approach was appropriate because it reflected the time, effort and incidental expense of the owner in developing the property.

A copy of the Tax Court’s opinion in Hovbros Cinnaminson Urban Renewal, LLC v. Tp. of Cinnaminson, is available here.



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Turnpike Liable for Roll-back Taxes on Farmland Assessed Property

Under the Farmland Assessment Act, a “roll-back” tax is imposed when farmland assessed property is converted to a non-agricultural or horticultural use.  See N.J.S.A. 54:4-23.8.  The rollback provision of the Farmland Assessment Act is intended to protect municipalities from land speculators who may try to receive a reduced assessment until the time is right to develop the property.  Additionally, there are exceptions for when the State or local government entities purchase farmland assessed property for recreation or conservation purposes.  In a recent Tax Court matter, the judge was asked to determine whether the New Jersey Turnpike Authority should be recognized as the “State” for purposes of this exception.

The Turnpike acquired property to widen and reconfigure a portion of Turnpike between interchange 6 to interchange 9.  The Turnpike was required to “mitigate” the impact on certain protected freshwater wetlands, and acquired property to do so.  For tax year 2010, a portion of the acquired property was assessed as farmland qualified, although it was undisputed that the Subject was not used for agricultural or horticultural or tree production/woodland management purposes after the Turnpike purchased it in 2010.

After a review of the relevant statutes, the court found that the Turnpike did not qualify as the State for purposes of avoiding roll-back taxes.  Because the Turnpike did not satisfy the “State” criteria for the roll-back exemption, the court did not further analyze the effect of the Turnpike’s purchase for mitigation purposes as potentially qualifying as an acquisition for “conservation and recreation” purposes.

A copy of the Tax Court’s published opinion in New Jersey Turnpike Authority v. Township of Monroe can be found here.

For more how the Farmland Act’s provisions have been analyzed previously by the Tax Court, please see the following blog posts:

Change of Use Required to Impose Rollback Taxes on Farmland Assessed Property

BMW’s Farmland Assessment Request Veers Off Course

Court Rejects Another Attempt To Deny Farmland Assessment

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Reasonableness Hearing Requires Access to Assessor’s Files

In a recent appeal, the Borough of Lincoln Park moved to dismiss a property owner’s 2012 tax appeal after the Borough claimed the owner failed to respond to a “Chapter 91” request for income and expense information. Chapter 91, N.J.S.A. 54:4-34, allows a municipal tax assessor to request income and expense information to use in setting assessments for the following tax year, and failing to provide a timely response permits a municipality to move to dismiss a tax appeal in the year under appeal. Here, the court granted the motion subject to a reasonableness hearing, required under Ocean Pines, Ltd. v. Borough of Point Pleasant, 112 N.J. 1 (1988).

The property owner requested any information from Lincoln Park that its assessor relied on to assess the Subject Property, including Chapter 91 information for other similar properties. The Borough objected to this disclosure claiming that Chapter 91 information was confidential, although the Tax Court disagreed and required the information be disclosed subject to a protective order. Ultimately, the tax assessor was able to credibly testify at the reasonableness hearing regarding the data he relied upon, and the methods used, to arrive at the property’s assessment. Thus, the Tax Court dismissed the appeal.

A copy of the Tax Court’s published opinion in 510 Ryerson Road, Inc. v. Borough of Lincoln Park can be found here.

For more how Chapter 91 requests have been addressed previously by the Tax Court, please see the following blog posts:

Property Owners Score in a Chapter 91 Trifecta

False response to Chapter 91 request dooms tax appeal

Chapter 91: Read Instructions Carefully Before Handling!

Two More Taxpayers Victims of Chapter 91 “Litigation Gamesmanship”

No Landlord-Tenant Relationship Means No Dismissal Under Chapter 91

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