Tag Archives: Freeze Act

Landlord Goes for Broke to Intervene in Tax Appeal by Bankrupt Tenant

The Tax Court decided a case of first impression when it was asked to permit a landlord to intervene in a tax appeal to seek Freeze Act relief after a Bankruptcy Court judge entered an order reducing the assessment of the Subject Property following the entry of a Bankruptcy Court order.  Pathmark, as tenant, filed tax appeals for the shopping center where they were the anchor tenant.  After Pathmark filed for Chapter 11 bankruptcy, the landlord began filing tax appeals to protect its interests.  Pathmark and the municipality came to an agreement on the assessment for the 2010 tax year, which was memorialized in an order entered by the Bankruptcy Court.  Thereafter, the landlord asked to intervene not to challenge the agreed upon value, but to ask the Tax Court to enter a Freeze Act judgment for 2011 in agreement with the Bankruptcy Court’s order.

Because the Bankruptcy Court retained jurisdiction over the 2010 tax appeal, the Tax Court held that it was without authority to enter a Freeze Act judgment for the 2011 tax appeal.  The Tax Court noted that the Bankruptcy Court’s broad authority gave it original jurisdiction to decide real property tax appeals that were timely filed in the Tax Court.  However, the Tax Court also held that a landlord could seek Freeze Act relief for a Freeze Act year even if the tenant obtained the original judgment.  Thus, the Tax Court gave the parties until April 30, 2014, to provide direction or an order from the Bankruptcy Court regarding the entry of a Freeze Act judgment.

A copy of the Tax Court’s opinion in Pathmark Edison, Inc. TT & A of Owner and OTR Associates v. Township of Edison may be found here.

For more blog posts discussing third parties intervening in a tax appeal, please see the following:

Retail Landlord Prevails on Right to Control Tax Appeal

Appellate Court: Contract Purchasers Have Standing to File Tax Appeal

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Morristown Hotel Wins Freeze Act Application and Refund

photo courtesy of expedia.com

The owner of the Morristown Hyatt hotel has prevailed in a challenge to an $8,000,000 “added assessment” for 2009 levied by the Town of Morristown onto the property’s local tax assessment.  The property owner, Fifth Roc Jersey Associates, LLC applied for protection under the “Freeze Act”, N.J.S.A. 41:51A-8, which provides that a successful tax appeal claimant is protected from changes to a reduced property tax assessment for the tax year in question and two years thereafter, unless there are changes in value to the property after the assessment date or the municipality undergoes a town-wide revaluation.

The New Jersey Tax Court granted the owner’s application, thereby precluding the town from raising the property tax assessment from $16,500,000 to $24,500,000, over the town’s objection which was made on the basis that the property owner had not filed a separate complaint challenging the added assessment by the town.  The court rejected Morristown’s contention that Fifth Roc’s failure to appeal its 2009 added assessment deprived the Tax Court of jurisdiction, and found that changes to the property, which was undergoing renovations during the time in question, were either de minimus or took place after the statutory deadline applicable to “added assessments”.

As a result of this decision, the property owner will receive a property tax refund in excess of $200,000.

A copy of the Tax Court’s opinion in Fifth Roc Jersey Associates, L.L.C. v. Town of Morristown is available here.

We previously covered this matter in our New Jersey Property Tax Law Blog in a story regarding a prior year’s application of the Freeze Act.   The prior decision had a similar outcome.

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Appeals Court Upholds Freeze Act Protection From Added Assessment

In an unpublished opinion released last week, Fifth Roc Jersey Associates, L.L.C. v. Town of Morristown, Docket No. A-5643-08T3 (App. Div. June 8, 2010), a New Jersey appeals court upheld a Tax Court decision granting a taxpayer’s application for “Freeze Act” protection against an added assessment. The property in question is a hotel in Morristown’s business district which, after becoming a Hyatt Hotel in recent years, was substantially renovated. 

In August 2007, the parties reached a settlement of a 2007 tax appeal for an assessment of $16.5 million. Thereafter, defendant, Town of Morristown, imposed an $8 million added assessment for the 2008 tax year. In an affidavit the Town’s tax assessor stated that he inspected the property in September 2007 and saw that certain renovations were substantially complete and showed change in value between October 1, 2006 (the date of value for purposes of the 2007 tax year) and December 31, 2008. In February 2009, plaintiff, Fifth Roc, filed an application for judgment under the Freeze Act (a New Jersey statute which “freezes” a tax assessment for two years after a successful appeal or reduction in a tax assessment by settlement), in order to fix the assessment at the $16.5 million agreed upon by the parties in August 2007. The Town argued that Fifth Roc was precluded from challenging the validity of the added assessment because it failed to file a timely direct appeal. The Tax Court proceeded with its review of whether the Freeze Act was applicable, declining to address the reasonableness of the amount of the added assessment. The court determined that Fifth Roc overcame the presumption of validity for the added assessment and that the Town failed to demonstrate a change in value necessary to defeat the Freeze Act application and entered a judgment fixing the assessment for 2008 and 2009 at $16.5 million.

On appeal, the Town again argued that Fifth Roc’s failure to file a timely appeal of the added assessment deprived the Tax Court subject jurisdiction to determine the applicability of the Freeze Act.  The Appellate Division rejected the Town’s arguments and affirmed for the reasons set forth by the Tax Court.

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