Tag Archives: Tax assessment

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A copy of the Tax Court’s unpublished opinion in The Top Condominium v. South Orange can be found here.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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Comparable Sales From Neighboring Town Not Persuasive Evidence

A Tax Court judge affirmed a property owner’s assessment because the owner only provided comparable sales information from a neighboring municipality without demonstrating how the real estate markets in the two municipalities were either alike or different.  Specifically, the property owner presented four comparable sales from neighboring Ocean Township, which was “six steps” away from the Subject Property.  In fact, the homes across the street from the Subject were in Ocean Township.  Additionally, the property owner testified that he would not market his home as being in Ocean Township because his town had a better reputation.  When questioned why comparable sales were not used from Interlaken, the property owner testified that they were “not within [his] range” because they sold for an amount higher than he was seeking to prove.  The municipality moved to dismiss the case at the conclusion of the property owner’s proofs claiming that the evidence submitted did not overcome the presumption of correctness of the County Board judgment affirming the assessment.

The Tax Court judge held that the comparable sales from the neighboring municipality were not persuasive evidence of the subject property’s fair market value because there was no evidence that the real estate market for single family homes in the borough is the same or very similar to the market in Ocean, and further that the comparable sales were dissimilar from the subject property in age, lot size and quality of location.  The judge also rejected the property owner’s method of averaging the sales prices of the comparables to determine a fair market value and assessment for the Subject Property, so the assessment was affirmed.

An assessment can only be reduced after a property owner rebuts the presumption of correctness granted to the assessment.  To be successful, the property owner must present sufficient evidence to rebut the validity of the assessment, and then the burden is on the taxpayer to prove, by a preponderance of the evidence, that the assessment is erroneous.  Ford Motor Co. v. Twp. of Edison, 127 N.J. 290, 312-315 (1992).  The municipality is then afforded the opportunity to present its own evidence to support its value of the subject property before the judge weighs the evidence to decide which witness presents the more credible evidence and establish an assessment based on the information before the court.

A copy of the Tax Court’s unpublished opinion in Gentile v. Borough of Interlaken can be found here.

For more on how the presumption of correctness has been addressed by New Jersey’s courts, please see the following blog posts:

Taxpayer Fails to Overcome Presumption of Correctness
Appraiser’s Subjective Adjustments Rejected; Owner Loses Appeal
Taxpayer Clears One Hurdle But Trips on Another
Apartment Complex Wins Assessment Reductions at Trial

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Tax Court: No Show, No Go!

In Harshad Patel v. Township of Maple Shade, the New Jersey Tax Court granted Maple Shade’s motion to dismiss plaintiff’s 2012 tax appeal complaint for lack of prosecution because plaintiff failed to appear at the scheduled hearing before the Burlington County Board of Taxation.  The facts were not disputed by the parties.  Plaintiff’s attorney faxed a letter to the County Board, with a copy to Maple Shade’s assessor, requesting that the assessment be affirmed without prejudice because a 2011 appeal was pending before the Tax Court. Plaintiff’s attorney did not fax a copy to Maple Shade’s attorney.  One day before the hearing, Maple Shade’s attorney left a message with a staff member at plaintiff’s attorney’s office that Maple Shade did not consent to an affirmance without prejudice, and no written letter followed the phone call.

The judge noted that, although it is the common practice to affirm matters that have multiple years pending so the matters may be resolved by one tribunal, a party is not entitled to an affirmance by right.  The court reasoned that municipalities have an interest in attempting to resolve matters at the county board level to potentially avoid further litigation expenses at the Tax Court level.  The Tax Court found plaintiff deliberately failed to appear at the hearing even though he had not received word from the board that it agreed to affirm the assessment without prejudice, and the failure to appear supporting dismissing the 2012 appeal for lack of prosecution.

A copy of the Tax Court’s unpublished opinion in Harshad Patel v. Township of Maple Shade, (December 4, 2013), can be found here.

For more on lack of prosecution and county board issues in tax appeal cases, please see the following blog posts:

Another Bite at the Apple For Taxpayer?

Raw Deal by County Tax Board Overturned by Tax Court

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

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All or Nothing: Appeals Dismissed for Failure to Challenge Overall Assessment by Tenant

Plaintiff/Tenant Brunswick Hills Racquet Club timely filed tax appeals for tax years 2011, 2012, and 2013.  East Brunswick Township moved to dismiss all years under appeal after plaintiff conceded that it was not contesting the total assessed value of the shopping mall where it was located, but was instead only challenging the values allocated to its specific building as part of the overall assessed value.  The Tax Court granted defendant’s motion to dismiss plaintiff’s complaints for the pending tax years because plaintiff was not an aggrieved taxpayer for purposes of N.J.S.A. 54:3-21, and that plaintiff’s complaints should be dismissed as failing to state a claim for which relief could be granted.  Apparently, the Tax Court concluded that the appeal was an “all or nothing” venture.

For the Tax Court to have jurisdiction over a tax appeal under N.J.S.A. 54:3-21, a complaint must be filed by a “taxpayer feeling aggrieved by the assessed valuation”.  Under New Jersey law, a tenant is permitted to file a tax appeal on property occupied by the tenant to challenge the overall assessed value of the property.

A copy of the Tax Court’s unpublished opinion in Brunswick Hills Racquet Club v. East Brunswick Twp., (October 2, 2013), can be found here.

For more on landlord-tenant issues in tax appeal cases, please see the following blog posts:

Wegman’s Ducks Landlord’s Attorneys’ Fee Claim Following Successful Tax Appeal

Court Confirms Tenant’s Right To Control Tax Appeal and to Refund

Retail Landlord Prevails on Right to Control Tax Appeal

Tenant Entitled to Tax Refund, But No More

No Landlord-Tenant Relationship Means No Dismissal Under Chapter 91

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Hilton Hotel Assessment Reduced Following Trial

In this commercial tax appeal involving a Hilton hotel, the taxpayer challenged the assessments on its property for the 2010 and 2011 tax years.  The subject property operates as a 355 guest room Hilton Hotel and executive conference center.  The standard method for valuing a hotel’s real property component is the income approach, which takes a property’s net income (gross income minus gross expenses) and capitalizes it into an estimate of value.  However, this basic approach has been found deficient to capture a hotel’s true value.

Valuation experts, like those employed by the parties in this matter, frequently rely on the “Rushmore Method” of valuation to determine the market value of a hotel based on its component pieces.  The four separate components comprising a hotel are the land, improvements, personal property, and the going business concern.  The Rushmore Approach separates the business component by deducting management and franchise fees from the hotel’s stabilized net income.

The court found that plaintiff produced sufficient valuation evidence to overcome the presumption of validity attached to the assessments.  Examining the information provided by each expert, the court chose the most reliable calculations from each report to establish a new market value which reduced the assessment for each year under appeal.

A copy of the Tax Court’s opinion in BRE Prime Properties LLC v. Hasbrouck Heights may be found here.

For more blog posts on tax appeal litigation involving hotels and casinos, please see the following:

Morristown Hotel Wins Freeze Act Application and Refund

NJ Supreme Court: Failure to Name Correct Plaintiff Not Fatal to Tax Appeal

$54M Property Tax Credit Coming to Trump In Atlantic City

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Despite Threat, Jersey City Reval Still Not Cancelled

Despite threatening to cancel the city-wide property revaluation in Jersey City, Mayor Steven Fulop has not followed through with any formal action to cancel the City’s first revaluation since 1988.  Fulop had voted against the revaluation contract in 2011 as a member of the Jersey City Council, at which time the revaluation company had a former City business administrator on its payroll.

According to Hudson County spokesman Jim Kennelly, the formal process would involve the Mayor writing a letter to county tax officials seeking approval from the state Division of Taxation to cancel the revaluation.  No such request has been sent to date.

The average equalization ratio, used to translate the assessed value to market value, for 2013 is about 33%, meaning that a property assessed at $100,000 has an indicated true value of approximately $300,000.  The average assessed value of a property in the city is about $93,000. The average annual property tax bill is about $6,500.

We’ll keep an eye on this story as the situation develops.  For more on this story, please see the following articles:

Jersey City Mayor Fulop has not officially canceled property revaluation two months after promising to do so

Jersey City mayor-elect Fulop putting halt to property revaluation

For more on revaluations, please see the following blog posts:

Mercer County Board of Taxation Orders Four Municipalities to Undertake Revaluations

Monroe Township Ordered to Undertake Revaluation

Municipalities Reassessing Properties Despite Recent Revaluations

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Mayor Voting with His Feet: Selling house because his taxes are too high

The mayor of Egg Harbor Township is selling his home after a revaluation in his municipality caused his taxes to increase 60% to over $31,000.  The home was assessed in 2012 for $463,800, which equated to a market value of roughly $750,000.  The new assessment values the home at $1,100,400.  Currently five homes are on the market in his neighborhood with an average price of $1.3 million which suggests that the new assessments may be too conservative because the asking prices are about 60 percent higher than the new assessments.  McCullough plans to look for a place in Egg Harbor’s West Atlantic City section, but has a back-up plan in place—relocating to his 1,200-foot waterfront condominium in North Palm Beach, Florida where the taxes are only $2,569.

For articles discussing the topic, please see the following:

Egg Harbor Township mayor priced out of home by taxes

Egg Harbor Township mayor is selling his home because taxes are too high, report says

Sandy damage complicates Egg Harbor Township revaluation; even the mayor has filed an appeal

For articles discussing actions taken by other property owners because of high property taxes, please see the following:

High property taxes force owner of historic Ocean City mansion to knock it down – Star Ledger

High taxes force demolition of Ocean City estate – Press of Atlantic City

For previous blog posts on property taxes, please see the following:

Will Income Tax Be Used to Offset Property Taxes?

Senate Passes Tax Appeal Reform for Monmouth County

Property Owner Keeps Tax Abatement After Municipality Failed to “Turn Square Corners”

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Ailing Seller Not Considered Arms’ Length Sale Participant for Comparable Sales Analysis

The Appellate Division of the New Jersey Superior Court recently affirmed the decision of a Tax Court judge which held that a subject sale was not an arms’ length sale because the seller was ill and accepted the first offer made by the buyer.  Following a trial on the issue of valuation, the Tax Court issued a written opinion which found the seller was not a willing seller, and was compelled to sell the property as quickly as possible.  Relying on the Tax Court’s factual findings, the Appellate Division found the house had been sitting vacant and the MLS listing noted that the house needed fixing up.  The seller, in a nursing home and selling the house through his daughter by power-of-attorney, accepted the buyer’s offer without negotiation.  Thus, the buyer failed to prove by a fair preponderance of the evidence that the property’s assessment was incorrect.

A copy of the Tax Court’s unpublished opinion in Gibbons v. City of East Orange, Docket No. 019151-2010 (Tax Ct. January 17, 2012) can be found here.

A copy of the Appellate Division’s unpublished opinion in Gibbons v. City of East Orange, A-3180-11T2 (App Div. June 18, 2013) can be found here.

For more discussion on New Jersey property tax appeal procedure, please see the following blog posts:

Tax Court to Municipality: Enough is Enough!

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

Wayne Township Owner Misses the Boat on Property Tax Error

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Town’s Failure to Treat Property Owner Fairly Leads to Reversal by Appellate Division

A New Jersey appellate court recently reversed a trial court’s dismissal of a tax appeal, and found that the City of North Wildwood failed to act fairly in litigation with the property owner.  The property at issue is improved with a seven-story mixed-use tower, a 160-slip marina and a 3900 square-foot marina services building, and a one-story restaurant.  Plaintiff Beach Creek owns the land underlying the Towers but not the condominium units. The owner of the tower has a ninety-nine-year lease for the land underlying the Towers, and the rent is income to Beach Creek.  Following a revaluation in 2006, the City increased the assessed value of Beach Creek’s property from $1,526,200 for 2005, with an equalized value of $3,225,247, to $14,612,900 for 2006. The City assessed the property at $14,288,900, for 2007 and 2008. Beach Creek filed a timely challenge to its 2007 assessment on March 15, 2007 and a timely challenge to its 2008 assessment on March 24, 2008.  Beach Creek filed tax appeals for 2007 and 2008, and an action in the Chancery Division to challenge the 2006 assessment.

In connection with the pending Tax Court actions, the City obtained an appraisal report from its expert on March 12, 2009 which concluded that the “retrospective market value of [Beach Creek's] property for 2006-2009 tax years” was $4.6 million.  The City provided its appraisal to Beach Creek in discovery and filed it with the Tax Court.  As of March 2009, the City had information that the full and fair value of the property in 2007 and 2008 was nearly $10 million lower than the assessed value for those years, and the City thereafter assessed the property at $4.6 million for 2010.

At trial before the Tax Court, Beach Creek’s expert separately valued the different uses on the property after determining that the most reliable appraisal would be one reached by using the valuation method most appropriate for each of the property’s several components.  Beach Creek’s expert used the income approach in valuing the marina and the land underlying the Towers, the cost approach to value the marina services building, and the sales comparison approach to value the restaurant. The value he assigned to the entire property for 2007 and 2008 is the total of the separate values of the components in each of those years.

At the conclusion of Beach Creek’s case, the Tax Court granted the City’s motion to dismiss concluding that Beach Creek had not produced evidence sufficiently definite, positive and certain in quality and quantity to overcome the presumption of validity that attaches to the assessment under New Jersey law. R. 4:37-2(b); Pantasote Co. v. City of Passaic, 100 N.J. 408, 412-14 (1985).  The court first determined that the hybrid approach used by Beach Creek’s expert of “taking one approach for each of the three or four aspects of the property and then somehow just adding them together and coming up to value,” was unprecedented.  Next, the court found Beach Creek’s expert’s application of the cost and comparable sales approaches flawed, and therefore the court had no basis for assigning a true value to the property based on Beach Creek’s evidence.

On appeal, the Appellate Division found Beach Creek’s evidence was adequate to withstand the City’s motion. As to a lack of precedent for the hybrid valuation approach, the Appellate Division cited to Livingston Mall Corp. v. Livingston Twp., 15 N.J. Tax 505, 508-09 (Tax 1996), where the court was faced with valuing a mall that included three anchor department stores and non-anchor mall stores that were leased. The Livingston Mall court concluded that the income approach failed to capture the value of the anchor stores because of a lack of data, and therefore it would be appropriate to use the cost approach for the anchor stores, and the income approach for the non-anchor stores which were leased.

Finally, the Appellate Division found the City’s moving for dismissal based on Beach Creek’s failure to overcome the presumption of validity raised a serious question about the City’s performance of its obligation under F.M.C. Stores Co. v. Borough of Morris Plains, 100 N.J. 418, 426 (1985), to “turn square corners” in litigation.  The City, intending to rely on the $4.6 million appraisal at trial, was in possession of evidence that the 2007 and 2008 assessments were grossly erroneous. The Appellate Division found the City’s actions were inconsistent with its obligation to “comport itself with compunction and integrity.”  Thus, the Appellate Division rejected the court’s conclusion that Beach Creek failed to overcome the presumption of the validity afforded to the quantum of these $14.3 million assessments for 2007 and 2008.  The undisputed evidence in the City’s report established that the $14.3 million assessments for 2007 and 2008 were well off the $4.6 million report value, and that sufficient to overcome any presumption that the assessments’ quantum was valid.

As outlined in F.M.C. Stores, the square corners doctrine requires that no government action be taken in litigation with the aim of gaining an unfair advantage over a private citizen.  Thus, the government may not “conduct itself so as to achieve or preserve any kind of bargaining or litigational advantage” over a member of the public.  As the F.M.C. Court observed, this means that “government may have to forego the freedom of action that private citizens may employ in dealing with one another.”Litigation strategies and actions that may be expected in litigation between two private parties will be scrutinized when taken on behalf of a government agency in litigation with a provide citizen.

The property owner in Livingston Mall Corp. v. Livingston Twp., 15 N.J. Tax 505, 508-09 (Tax 1996) was represented by Thomas Olson, Esq. of McKirdy & Riskin, P.A.

A copy of the Tax Court’s opinion in Beach Creek Marina v. North Wildwood City may be found here.

For more blog posts on appraisal report issues, please see the following:

Experts’ Opinions Accepted Over Town’s Objections

Real Estate Tax Appeal Evidence: Admissible in Eminent Domain Case?

Expert’s “Gut Feeling” on Costs Survives Dismissal Claim

Court Disapproves Averaging of Comparable Sales

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Towns Losing Millions in Property Tax Relief From Utility Taxes

NJ Spotlight recently reported how the New Jersey State budget will continue to divert funds from a pool of taxes collected from utilities.  As noted in the article, available here, various statutes provide that the majority of the energy taxes be distributed to local governments for property tax relief.  However, since 2008 more than $270 million has been used to balance the State budget.

Originally, local governments assessed and collected the taxes from the utilities to compensate towns for the benefits that utilities derived from their use of public rights of way.  In the 1980s, the State began collecting the taxes formerly done by local governments, and the diversion of funds away from targeted programs such as this one has increased as the State seeks to balance its budget every year.

For more blog posts on the effect of property taxes in New Jersey, please see the following:

Star Ledger Reports: Finally Some Property Tax Relief!

Atlantic City Borrowing to Pay Property Tax Refunds

Property Tax Appeal Floodgates Open

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