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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Township’s Error Saves Taxpayer from Tax Increase

The owner of a mobile home park in Fairfield Township, Cumberland County, challenged the 2011 and 2012 tax assessments on the park in the Tax Court following a Township-wide revaluation. The Township filed a “cross complaint” alleging that it reserved its rights to apply added assessments for each of the tax years. The mobile home park consisted of 203 “pads” with water, electrical service, and sewer hook-ups where a mobile home owner could place the mobile home for a monthly rental fee. Other buildings such as an office and shop on the property were used by the owner, and the buildings did not generate a monthly fee.

At trial, both parties presented appraisal experts who utilized the income approach to determine the fair market value of the property which is appropriate for rental properties. However, the appraisers’ methods varied on how they utilized the income approach. The property owner’s expert only examined the actual income generated by the mobile home park without looking to the market place to establish fair market rental values for similar types of property. The Township’s expert located and analyzed nine other mobile home parks to determine a rental market value for the individual pads, and also determined that other types of income would typically be generated by a mobile home park like the subject property which were not actually generated at the subject property. At trial, the Tax Court found the Township’s expert provided a more reliable opinion of value because he went into the market place which provides a more accurate view of how much income a comparable property can generate.

The Township did take an odd approach to how it handled filing its “cross complaint.” The Township alleged that added assessments may be applied as a result of the investigation related to the tax appeals. The Tax Court determined that what the Township filed was not a counterclaim pursuant to R. 8:3-2(b), which might permit the assessment to be increased if the evidence supported one, but a claim to file an added assessment which is a term of art in the Tax Court. An added assessment is filed when work has been completed after the October 1st date of value which would increase the property’s value for the relevant tax year. Here, no such work was discovered, so the Township’s “added assessment” claim was irrelevant.

A copy of the Tax Court’s unpublished opinion in Tip’s Trailer Park, Inc. v. Township of Fairfield can be found here.

For more how determining market value has been addressed previously by the Tax Court, please see the following blog posts:

Court Rejects Property Owner’s Unverified Sales Evidence at Trial–Affirms City’s Value

Taxpayer Fails to Overcome “Presumption of Correctness”

Taxpayer Clears One Hurdle But Trips Over Another

Property Owner’s Appeal Dismissed for Failure to Follow Court Rules

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Pay Now, Litigate Later Upheld

New Jersey law requires that property taxes must be paid as a prerequisite to filing an appeal before the Tax Court. The principle that taxes must be paid first is to insure that municipal reviews are not interrupted while tax appeals are litigated by the parties. Municipalities take advantage of this requirement to seek dismissal of tax appeals where the property owner is not current on his taxes at the time of filing. The Tax Court is permitted, under N.J.S.A. 54:51A-1(b), to relax tax payment requirements in the interest of justice.

In a recent decision, the New Jersey Tax Court denied one property owner’s request to invoke this rule for two COAH mandated units after failing to pay property taxes before filing its 2012 appeals, and dismissed the appeals.

The property owner conceded that the 2011 property taxes were due and owing when the 2012 appeal was filed, but raised several arguments in its defense. First, the argument outlined above, but buttressed with the added argument that the municipality has obtained the benefit of the two COAH units satisfying the municipality’s COAH obligation, so the property owner should be entitled to have the tax requirement relaxed. The Tax Court found the legislature has specifically exempted properties from the tax requirement, and chose not to do so as part of COAH’s legislative scheme. The owner then argued that the taxes were so oppressive as to be confiscatory, and a hearing should be held to determine the validity of the assessment. The Tax Court denied this argument as well by noting that units have always been COAH units, and the units would always be rented for lower than market rates which would make the taxes appear greater when expressed as a percentage. Thus, the Tax Court dismissed the 2012 appeal, but permitted a 2013 appeal to proceed because a tax lien had satisfied the tax obligation for that tax year.

A copy of the Tax Court’s unpublished opinion in Lafayette Navesink View Homes, L.L.C. v. Borough of Rumson can be found here.

For more how the failure to pay taxes has been addressed previously by the Tax Court, please see the following blog posts:

Failure to Pay Taxes at Time of Appeal Proves Fatal to Commercial Property Owner

Changes to Statute Requiring Payment of Taxes Pending Appeal Being Considered

Tax Court Clarifies Taxpayers’ Need to Pay Property Taxes While Under Appeal

No Relaxation For Lakewood Taxpayer

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Secretly Recorded Phone Conversation Fails to Support New Trial Claim

A very routine tax appeal trial took a very unusual turn after entry of judgment in the matter. Plaintiff filed a tax appeal on his single family home in Barnegat Township before the Ocean County Board of Taxation, which reduced his assessment from $300,000 to $283,000. Plaintiff then appealed to the Tax Court challenging the Board’s judgment where, at trial, Plaintiff testified on his own behalf without an expert. The Tax Assessor testified regarding Plaintiff’s sales, including his explanation as to why the sales were not reliable market transactions. The court found Plaintiff’s comparable sales lacked reliability as market transactions, and that the adjustments to the sales prices also lacked credibility. The Tax Court affirmed the County Board’s judgment.

Plaintiff filed a motion for a new trial based on evidence he “uncovered” after trial. Specifically, Plaintiff recorded a conversation he had with a real estate agent regarding a sale the Tax Assessor rejected as being in “pre-foreclosure” at the time of the sale. Plaintiff’s motion paperwork explained that he recorded the conversation because “he knew that regular people were afraid to get involved with court matters. . . .” Plaintiff alleged that the assessor offered perjured testimony to discredit the comparable sale, and that the perjury warranted a new trial or entry of judgment in plaintiff’s favor. Barnegat cross-moved for the imposition of sanctions. The Tax Court denied the motion after finding that, if assumed true, the real estate agent’s conversation with Plaintiff did not support the conclusion that the tax assessor provided false testimony at trial or that the judgment should be vacated. The Tax Court also denied Barnegat’s motion for sanctions because the Plaintiff’s allegations, however fanciful they may sound, did have legal support and did not appear to be made in bad faith.

A copy of the Tax Court’s unpublished opinion in Steven D’Agostino v. Township of Barnegat can be found here.

For more on how pro se litigation issues have been addressed previously by the Tax Court, please see the following blog posts:

Tax Court Requires Inspection Despite Owner’s Prior Protests

Property Owner’s Appeal Dismissed for Failure to Follow Court Rules

Pro Se Litigant Given Another Chance in Tax Appeal

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A Tale of Two Cities . . . Wanting to Tax the Same Property

In a recent appeal, the property owner – a condominium association – filed a tax appeal for its property which straddles the municipal boundaries of South Orange and Maplewood. The condominiums are located on the Maplewood side of the boundary line, and a 1.46 acre parcel containing a driveway, shrubbery, and plantings are located on the South Orange side. The property owner’s complaints alleged that the South Orange portion was not separately taxable from the condominium units because it is excluded from taxation as a common element of the complex, and the assessed value is shared among the individual units. Plaintiff renewed a previously denied motion for summary judgment to settle the legal issue of whether the disputed property qualified as excludable common elements, which South Orange opposed alleging there is no authority for the Township of Maplewood to assess the value of the property located within South Orange.

Common elements are excluded from separate taxation under N.J.S.A. 46:8B-19, which is a section of the New Jersey Condominium Act. Neither party disputed the classification as common elements. However, South Orange argued that it is constitutionally and statutorily obligated to assess the properties within its boundaries. The Tax Court held that, although South Orange is permitted to assess the property, the property is excluded statutorily as a separate taxable item as the common elements of the condominium association. Although potentially an impractical outcome for the parties, the judge did note that her decision did not prohibit the parties from discussing alternative resolutions available by statutes like N.J.S.A. 54:4-25, which permits municipalities to assign who may collect the taxes on a property that straddles multiple municipalities.

A copy of the Tax Court’s unpublished opinion in The Top Condominium v. South Orange can be found here.

For more on how condominium appeals have been handled previously by the Tax Court, please see the following blog posts:

To Conquer, Taxpayer Must Divide

Failure to Fix Report Dooms Expert’s Testimony

Montclair Tax Assessment: Might be Wrong, But Not In Error

Taxpayer’s Challenge to Re-Assessment Out of Time

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