Updated MARCH 2019

New Jersey Tax Court Analyzes Freeze Act Invocation and Waiver

A recent New Jersey Tax Court opinion analyzed whether a tax payer waived N.J.S.A. § 54:51A-8 (“Freeze Act”) protections pursuant to a settlement agreement that expressly invoked Freeze Act application only for the freeze year immediately following the appealed tax year. In 160 Chubb Properties, LLC v. Township of Lyndhurst, the Tax Court held that the taxpayer did not waive Freeze Act application to the second freeze year because Freeze Act protections must be deliberately and intentionally waived. Although the settlement agreement invoked Freeze Act protections for the first freeze year, the agreement did not expressly mention the waiver of application to the second freeze year. Importantly, the Freeze Act is self-executing, thus, invocation is not necessary for its application. Without any indication that the taxpayer requested or agreed to waive Freeze Act protection rights, application to both freeze years was enforceable. 160 Chubb Properties, LLC v. Township of Lyndhurst, 30 N.J. Tax 613, 624-25 (N.J. Tax Ct. 2018).

Gregory S. Schaffer, Esq.
Garippa, Lotz & Giannuario P.C.
American Property Tax Counsel (APTC)

New Jersey Property Tax Update Archive

Updated december 2018

New Jersey Tax Court Analyzes the Local Property Tax Exemption Cessation Provisions

A recent New Jersey Tax Court opinion analyzed whether, because of the outcome in AHS Hosp. Corp. v. Morristown, the Borough of Red Bank's omitted assessment appeals were proper.

In Borough of Red Bank v. RMC – Meridian Health, the Borough argued that following the decision in AHS Hosp. Corp. v. Morristown, it was entitled to seek to impose omitted assessments on the subject property for the previous two tax years, and to effectively revoke the exemptions previously granted by the Borough's assessor.  The taxpayer argued that the Borough had not proffered any evidence, including any action by the assessor, nor any change in use or ownership.

The Tax Court granted summary judgment for the hospital-taxpayer after addressing multiple issues regarding N.J.S.A. 54:4-63.26 – the tax exemption statute. 30 N.J. Tax 551, 552 (N.J. Tax Ct. 2018).  N.J.S.A. 54:4-63.26 dictates that a change in use or change in ownership must occur before an exemption can be ceased and an assessment can be imposed by way of omitted assessment.  If the exemption cessation statute is triggered, the tax is thereafter imposed on a pro-rated basis.

In addressing what it characterized as the fundamental issue, the Tax Court ruled that the decision in AHS Hosp. Corp., that an unrelated hospital is not entitled to tax exemption because it failed the "profit test", does not satisfy the cessation statute's requirement of a change in use at the subject property.  The Tax Court was also unpersuaded by the Borough's argument that a decision on change in use must await the completion of discovery, as doing so would "eviscerate" the exemption cessation statute.

The Borough is currently seeking leave to appeal this decision to the Appellate Division.

Gregory Schaffer, Esq.
Garippa, Lotz & Giannuario P.C.
American Property Tax Counsel (APTC)

Updated September 2017

New Jersey Tax Court’s Increasingly Heightened “Why and Wherefore” Standard

A recent unpublished New Jersey Tax Court opinion typifies the Tax Court’s trend towards requiring heightened support for evidence of property value. In Benedetto v. Little Ferry Borough, the Tax Court reduced the assessments under appeal subsequent to a lengthy scrutiny of the appraisers' reports/testimony. The Tax Court explained that “the court is faced with the responsibility of applying its own judgment to the evidence presented to determine the true market value of the subject property.” Benedetto v. Little Ferry Borough, No. 006900-2014, 2017 N.J. Tax Unpub. LEXIS 53, at 31 (N.J. Tax Ct. Sept. 6, 2017). For example, the Tax Court rejected plaintiff’s appraiser’s 5% downward market condition/time adjustment to three comparable rentals because “plaintiff's appraiser offered no objective market data or surveys to support his 5% adjustment.” Id at 28.  Although the Tax Court acknowledged that the country experienced an economic recession during such time, accounting “for ‘rapidly declining’ rental rates between [January 2009] and the October 1, 2009 valuation date” was insufficient support for the adjustment. Id.

Additionally, the Tax Court rejected four of the defendant’s comparable sales as accurate evidence of true market value. The Tax Court explained that “defendant's appraiser failed to offer any data or credible market evidence disclosing that a 7.5% downward supportive office adjustment is justified for a warehouse with 20% supportive office… yet no downward supportive adjustment is warranted for a warehouse with 18% supportive office.” Id at 61.

In rejecting the above and other adjustments/comparables, the Tax Court explained that under N.J.R.E. 703, an expert must provide the “why and wherefore” of his or her opinion – an expert’s testimony must be rooted in facts, science, data, or the opinions of other experts. Id at 59.

Although in Benedetto the Tax Court reduced the assessments after its own value analysis, other recent Tax Court cases have simply affirmed assessments under a similar rationale. For example, in VBV Realty, LLC v. Scotch Plains Twp., the Tax Court affirmed the assessments under appeal because neither appraiser adequately justified and supported value opinions upon sufficient information and data. The Tax Court accorded no weight to plaintiff's appraiser's sales comparison approach or income capitalization approach because he did not verify or consult with any individual involved in the transactions/sales of property used to value the subject property. Furthermore, the Tax Court was unable to determine fair market value for the subject property based upon defendant's appraiser's value opinion because he did not provide a base of data to support the value adjustment. VBV Realty, LLC v. Scotch Plains Township, 29 N.J. Tax 548, 553 (N.J. Tax Ct. 2017).

Gregory S. Schaffer, Esq.
Garippa, Lotz & Giannuario
American Property Tax Counsel (APTC)

UPDATED JULY 2017

New Jersey Legislature Looks to Revise Assessment Practices and Requirements

The New Jersey Legislature is currently considering a bill that would revise the dates and deadlines for the administration of real property assessments in order to create a more accurate assessment process. It also proposes re-scheduling the property assessment appeal process to dates prior to the calculation of local property tax rates.

State law requires assessment appeals to be filed with county boards of taxation by April 1. Appeals are then heard and decided by the county boards of taxation in May, June, and July. Current law also requires a property owner who has filed an assessment appeal to continue paying any property taxes and municipal charges due for the current tax year. Under the current schedule, it is likely that a property owner will make the first two quarterly property tax payments for a calendar year, which are due on February 1 and May 1, before an assessment appeal is decided. If the assessment appeal is successful, the municipality is required to refund excess taxes, plus interest, to the property owner. From time to time municipalities have been required to finance the payment of assessment appeal refunds through the issuance of bonds or notes.

The revised property assessment and tax appeal calendar proposed by the bill requires assessment appeals to be filed by January 15 and heard and decided by the county boards of taxation in February, March, and April. In this scenario, a property owner would pay the first quarterly property tax payment before an assessment appeal is decided. While a municipality is still required, if the assessment appeal is successful, to refund excess taxes plus interest, the total amount refunded would be smaller because a property owner has made only one quarterly property tax payment.

The bill also revises the process of notifying property taxpayers of their current year property assessment by changing the method of notification from an individual notification mailed to each taxpayer to a notification provided to all taxpayers through a municipality’s website. If the municipality does not have a website, or if a property taxpayer makes a written request to the municipal assessor, the notice must be provided by posted mail.

Finally, the bill requires a municipal assessor to make no less than three physical attempts to inspect the interior of each property in a taxing district not later than December 31 of the eighth year immediately preceding the year of the implementation of a proposed district-wide reassessment.


Gregory S. Schaffer, Esq.
Garippa, Lotz & Giannuario P.C.
American Property Tax Counsel (APTC)

 

UPDATED SEPTEMBER 2016

Recent Tax Court Decisions

In OM Realty, LLC v. Township of Hillsborough, the Court granted the defendant's motion to dismiss plaintiff's Tax Appeal Complaint because of a failure on the part of the plaintiff's predecessor in title to respond to the tax assessor's request for income and expense information relating to the subject property pursuant to N.J.S.A. 54:4-34, commonly known as Chapter 91.

In Alcatel-Lucent USA, Inc. v. Township of Berkeley Heights, the Court granted the defendant's motions to dismiss plaintiff’s 2015 Tax Appeal Complaint and 2015 Farmland Assessment Complaint for failure to respond to a request for income and expense information pursuant to N.J.S.A. 54:4-34. The court reserved decision on the defendant’s motions to dismiss plaintiff’s 2014 Tax Appeal Complaint and 2014 Farmland Assessment Complaint pending the outcome of a hearing on the false or fraudulent composition of plaintiff’s June 13, 2013 response to defendant’s June 1, 2013 request for income and expense information under N.J.S.A. 54:4-34.

Gregory Schaffer, Esq.
Garippa, Lotz & Giannuario 
American Property Tax Counsel (APTC)

 

Updated June 2016

Environmental Contamination May Be Considered When Valuing "In Use" Property

A recent decision by the Tax Court of New Jersey has revisited the state Supreme Court’s 1988 ruling regarding the valuation of contaminated property. ACP Partnership v. Garwood has taken the previous decision Inmar Assocs Inc. v. Bor. Of Carlstadt a step further in its guidance on valuing contaminated property. Previously, Inmar held that while environmental contamination and subsequent remediation efforts do have an impact on the valuation of real property, the costs associated with said contamination may not simply be deducted from the assessment value. Inmar further stated that there is distinct value in “in use” property and “normal assessment techniques must be utilized in the appraisal process when the property is “in use” regardless of contamination”.

The case law that followed Inmar took two separate paths, delineating between properties considered “in use” and those that are not. “In use” properties had previously been assessed using only “normal assessment techniques”. Much of the reasoning behind this arose out of public policy considerations that owners would receive a windfall benefit through their continued use of contaminated property if it could be considered to have an adverse effect on value.

The Tax Court’s decision in ACP has moved past this differentiation stating that normal assessment techniques must be used for valuing property when they are “in use”, however “such techniques must be tempered by the costs encountered by the taxpayer in addressing the environmental condition of the taxpayer”. While the court did not provide a precise methodology for calculation of the effect contamination has on values, it left the issue open to the “competence of the appraisal community”.

Gregory Schaffer, Esq.
Garippa, Lotz & Giannuario
American Property Tax Counsel (APTC)

 

Updated June 2015

Demolition Permits Not Sufficient Evidence When Demolition Occurs Post-Assessment

Cap et al v. Borough of Belmar. Plaintiffs own the subject property, a lot improved by a single-family home. The house was damaged by Hurricane Sandy in October 2012 and left uninhabitable. In December 2012, the Borough reduced the assessed value of the improvements by 30% based on an exterior inspection in accordance with the Division of Taxation’s Disaster Relief Data Collection Worksheet. In March 2013, Plaintiffs applied to the Borough’s Zoning Board of Adjustment for permission to demolish the home and build a new one with variances. The Board granted a demolition permit in July, noting that the house was extensively damaged and that demolition was more practical than renovation. The assessor informed Plaintiffs that the improvement value could be reduced to $0 if the house were demolished by January 10, 2014. The house was not demolished, so the assessment was unchanged for 2014. On appeal, the County Board asked if the house could be demolished within 45 days. It was, and the County Board received notice of the demolition on February 27, 2014. The County Board affirmed the assessment. Plaintiffs then appealed the decision to the New Jersey Tax Court, arguing that the improvement value should be $0 for tax year 2014.

The Court found that Plaintiffs overcame the presumptive correctness of the assessment. The Court also found that, because the house was damaged and uninhabitable, the assessment could be reduced further than the 30% reduction given by the assessor. However, the Court ultimately found that Plaintiffs failed to prove the value of the home should be $0. The fact that Plaintiffs decided that it was less costly to demolish the house and rebuild it rather than repairing and renovating it does not translate to a conclusion that the improvement was worthless for local property tax purposes. The Zoning Board’s resolution permitting them to demolish the house and build another home on the site does not change this conclusion.

The Court held that, although Plaintiffs could certainly use the post-assessment demolition as evidence to further corroborate a $0 value of the structure, they still have the burden of first proving, by reliable admissible evidence, that there is no value to the improvement. The Court provided three examples of such evidence: 1) comparable sales of homes in the neighborhood or competing neighborhoods, where the sales price was primarily for the land value due to the condition of the improvement (or that the existing improvement was demolished after purchase); 2) an expert report and opinion, with corroborative testimony, containing objective facts to conclude that the subject should be valued as vacant land because the improvements had no contributory value; or 3) an engineer’s/professional’s testimony of estimated costs to cure, and the facts of the structural or other damage to show that the shell of the house was worthless. Because Plaintiffs failed to provide any evidence to establish a dollar amount for the reduction, the court was constrained to affirm the County Board judgment.

Gregory Schaffer, Esq.
Garippa, Lotz & Giannuario
American Property Tax Counsel (APTC)

 

Updated March 2015

The Sentinel Publishing Co. v. Borough of Lake Como, et al.

Sentinel filed an appeal with the Tax Court seeking a voidance of assessments received for seven antennas located on the subject property. On the Case Information Statement, Sentinel identified the case type as Correction of Error.

Sentinel contended that neither defendant (the Borough or its assessor) had the jurisdiction to impose the assessments because the antennas are statutorily exempt from tax as business personal property under N.J.S.A. 54:4-1 (the Business Retention Act).

Following the allegations in its complaint, Sentinel filed a summary judgment motion. Defendants cross-moved for summary judgment contending that Sentinel's remedy in this regard was to have filed a timely appeal, and further that relief is not available under the Correction of Errors statute, N.J.S.A. 54:51A-7.

Sentinel received the assessment notices sometime in November 2013. It filed an appeal with the Tax Court only on October 1, 2014. Thus, under any of the relevant statutory deadlines, it was undisputed that Sentinel did not file a timely appeal. Sentinel maintained that N.J.S.A. 54:3-21(a) did not apply because it was asking the court to void the Borough's illegal or unauthorized assessments for which complaint there is no statute prescribing any time limits.

The court was unpersuaded. First, the statutory scheme does not specifically list or provide that antennas are excluded from being assessed and taxed. Tangible business personal property is not automatically excluded from being assessed and taxed as real property. Rather, in the absence of any countervailing evidence, personal property affixed to real property is presumptively taxable. Thus, Sentinel's assumption that the seven antennas can never be considered as real property is flawed. Second, Sentinel contended that N.J.S.A.54:3-21(a) provides a limitations period to a taxpayer against an assessed valuation but that Sentinel was not contesting the valuation placed by the assessor on the seven antennas and therefore N.J.S.A. 54:3-21 should not apply. However, courts have consistently ruled that challenges to assessments as being illegal, ultra vires, or void, are not immune from compliance with the statute of limitations.

The fact that Sentinel crafted its argument as only challenging the Borough's treatment of business personal property as lacking jurisdiction, did not entitle Sentinel to an unspecified time limit for filing an appeal. Nor did such argument immunize Sentinel from complying with the time requirements of N.J.S.A. 54:3-21(a). The court denied Sentinel's summary judgment motion and granted the Borough's cross-motion.

Gregory Schaffer, Esq.
Garippa, Lotz & Giannuario
American Property Tax Counsel (APTC)

 

Updated December 2014

Chapter 91 - Deficiency In Notice

In 440 Rt 17 Ptrns, LLC v. Borough of Hasbrouck Heights, the Defendant municipality moved to dismiss Plaintiff's 2014 complaint for failure to comply with a Chapter 91 request pursuant to N.J.S.A. 54:4-34 (“Chapter 91”). Plaintiff alleged that its non-response was excused by Defendant’s failure to make the request 45 days before the January 10 deadline for the submission of the assessment list to the county. The request was made, at the earliest, on November 29, 2013. The deadline for submission of the Assessment List was January 10, 2014. It was not actually submitted until February 26, 2014.

Applying a strict deadline, the court held that a deficiency exists where a Chapter 91 request is made more than 45 days in advance of the actual submission of an assessment list, but less than 45 days prior to the statutory filing deadline of January 10. Such a request does not comply with the purpose of the statute. Though, apparently, the Assessor was allowed to make a late submission, there was no formal extension granted by the Bergen County Board of Taxation which was relayed to the public. Therefore, the applicable deadline to this case was January 10, 2014. The fact that the Assessment List was actually submitted later was irrelevant.

Gregory Schaffer, Esq.
Garippa, Lotz & Giannuario
American Property Tax Counsel (APTC)

 

Updated December 2009

April 1st - Crucial Date for All Taxpayers

All property owners in New Jersey should be aware of the fact that the deadline for filing tax appeals is April 1, 2010. Any appeal filed after that date will be dismissed no matter how meritorious the appeal may be. The only exception to this rule is for a revaluation. When a revaluation takes place the deadline to file a tax appeal is extended to May 1, 2010.

The other significant component that must be adhered to in order to perfect the filing of an appeal is that all property taxes must be paid in full at the time of the filing of the appeal. If a taxpayer files an appeal without paying in full the outstanding taxes, the appeal is subject to dismissal by the taxing authority.

John Garippa
Garippa, Lotz & Giannuario
American Property Tax Counsel (APTC)

 

Updated September 2009

It Is Difficult to Catch a Falling Knife

Property values have declined significantly across all types of property in New Jersey over the past 18 months. While this has resulted in record numbers of property tax appeals, actual transactions between buyers and sellers demonstrating this erosion of value are limited. This can be problematical when dealing with finite valuation dates in evidentiary proceedings. Tax court judges will not accept the unsupported opinions of expert witnesses proffering the fact that a property has declined in value without supporting transactions.

An alternative that may be used to support valuation theories may be to use other economic indices to demonstrate an erosion of value. This supporting data may include an analysis of various stock market indices, unemployment statistics, housing statistics, office occupancy statistics, and an analysis of quarterly Federal Reserve statistics.

The point to consider is this: value can continue to erode even if there are no discrete sales available between buyers and sellers. The analogy here is that it is difficult to catch a falling knife.

 

Updated June 2009

Tax Court Filings Increase Significantly

The tax filing season has recently concluded in New Jersey with startling results. According to the New Jersey Tax Court, the number of appeals filed in 2009 increased by over 40% from the number filed in 2008. This is the largest one year increase in the history of the Tax Court. At the same time, the number of sitting tax court judges is not expected to be increased. This will mean that the backlog to resolve tax appeals will be significantly longer than at present. Most probably, it will take a minimum of three years for a case to be reached for trial. This will put added pressure on beleaguered taxpayers. Under state statute, in order for a taxpayer to have standing to appeal, all taxes and municipal charges on a property must be paid in full. This means that even in cases where values have dropped significantly, assessments must be paid in full.

 

Updated December 2008

3 Crucial Steps...

All property must be reviewed annually to determine the effect of market forces on all assets. In conjunction with this process, the following steps should be taken in order to have standing before the Tax Court.

1. Review all assets to determine if there is an intangible component that should not be reflected as real property value in the assessment. Hotels, regional shopping centers and senior living facilities all have significant intangible values.

2. The filing deadline for all appeals in New Jersey is April 1, 2009. At the time of the filing of the appeal, all property taxes and municipal charges must be paid in full in order to have standing to file an appeal.

3. All written requests from the local assessor's office for income and expense information must also have been answered in a timely fashion. Failure to so respond to such a request will result in the dismissal of an appeal.

 

Updated September 2008

Understanding Revaluations

New Jersey taxpayers need to understand the revaluation process and take steps to make certain that the valuation of their property is done according to law. The first step in this process is meeting with representatives of the revaluation firm and examining the underlying data relied upon in setting market value. Just as importantly, taxpayers need to examine whether the revaluation was performed properly under New Jersey law, yielding a uniform valuation for the entire taxing jurisdiction.

In order to accomplish the due diligence necessary in this analysis, any taxpayer may make an "Open Public Records Act" (OPRA) request to obtain underlying data for a revaluation. These documents should include the municipality's revaluation contract and relevant correspondence from the county tax board and the State of New Jersey Division of Taxation. Often there will be correspondence critiquing the revaluation for various errors.

Taxpayers should also request a sales ratio report from the assessor or county board of taxation. This report will demonstrate if the overall level of assessment is at 100% of market value for all classes of property. In order for a revaluation to be proper, both market value and uniformity must be properly addressed.

 

Updated June 2008

Hotel Market Values On a Decline

According to a recent article in the New York Times, the number of hotel deals in the United States during the first quarter of this year plummeted by more than 40%. There appears to be a significant spread between what sellers are asking for hotels and what buyers are willing to pay. At the same time, lenders are writing much smaller mortgages at higher interest rates than they were a year ago.

At the same time, buyers are starting to demand a higher return on their investment. Capitalization rates for hotels, like all other types of commercial property, are rising as well as investors demand a greater return on their investment.

All of this means that current tax assessments on hotels are probably inflated as a result of a general economic downturn throughout the country. Savvy owners should examine current market data to determine if these current market conditions have affected their property assessments.

 

Updated March 2008

Erosion in Commercial Market Begins...

Recent published statistics have confirmed that the commercial real estate market in New Jersey is eroding. Statistics for the 4th quarter 2007 published by Real Capital Analytics indicate that the office vacancy factor for Central and Northern New Jersey is at 17.8%. Other statistics confirm that the entire commercial market has slowed considerably in New Jersey.

This finding is significant for property taxpayers. Under New Jersey assessment law, all property must be valued based on its current fair market value. This means that if a property is leased at $20 per square foot, and the current fair market value is $15 per square foot, the assessor is obligated to ignore the existing lease and value the property based on current economic conditions. At the same time, most property in New Jersey is not reassessed on an annual basis. That means that much of the commercial property in New Jersey is currently assessed at values that are not sustainable in this current economic slowdown. Sophisticated owners need to review these assessments on an annual basis, especially in times of dynamic change.

 

Updated December 2007

Property Revaluations

New Jersey law defines municipal revaluations as the systematic valuation by a qualified firm of all parcels of real property in a given taxing jurisdiction. Because revaluations are expensive, it is not unusual for 10 years to pass between revaluations.

It is important that taxpayers employ due diligence during a revaluation. This means meeting with representatives of the revaluation firm and examining the underlying data relied upon in setting market value. Just as importantly, taxpayers need to make certain that the revaluation was performed properly under New Jersey law, yielding a uniform valuation for the entire taxing jurisdiction. A lack of uniformity or erroneous market value should both be evidential of a poorly performed revaluation.

As part of this due diligence process, taxpayers may make an "Open Public Records Act" request to obtain underlying data for the revaluation. This important exercise by taxpayers will pay dividends into the future.