In a recent case decided by the New Jersey Tax Court, a municipality asked for reconsideration of a decision reducing a commercial property's assessment. The property in question was a mixed-use retail and warehouse building, with some mezzanine space in both the retail and warehouse areas. The main issue on reconsideration involved whether the Tax Court should have included the value-in-exchange of the mezzanine space value in the rent for gross leasable area, or given it a separate rent. Since there was no evidence of the value of the mezzanine, argued the municipality, the Tax Court had to affirm the assessment. The Tax Court rejected this argument, finding that the mezzanine space was properly included in the rental value of the main area.
However, this is a case where the issue isn't really the issue. In general, reconsideration motions are a long shot, and not undertaken lightly. In this case, at the time of the trial, the town withdrew its counterclaims and rested on the assessment without presenting any affirmative evidence. This wasn't necessarily the plan, as they had an appraiser present at trial and ready to testify to an appraisal report. Was it a good idea to rest on the assessment? With the number of tax appeals and the cost of commercial appraisals, balancing the risk of resting on the assessment or presenting affirmative evidence is a delicate decision for a town attorney that can cut both ways. Let's explore that issue a little further; but first, let's take a step back.
In a normal tax appeal, the burden of proof rests on the appealing party. That means it's the party that wants to see the assessment changed (usually the taxpayer) who has to provide proof that the assessment is wrong. That proof typically comes in the form of an appraisal and the testimony of a duly accredited appraisal expert. The defending party, on the other hand (usually the municipality), can present evidence of value, but they're not obligated to do anything. Rather, they're entitled to rely upon a legal construct typically referred to as the "presumption of correctness" to which municipal assessments are entitled. This presumption operates on the assumption that municipal officials do their jobs correctly, and therefore the assessment should be right. The defender of the assessment also has the added protection of another hurdle to changing the assessment - a range of value in non-revaluation years where, if the Tax Court or Board of Taxation finds value in that range, the assessment is affirmed. This range of value, set by statute and commonly called the "corridor," allows assessments to be imprecise, but still not subject to revision. Finally, the Tax Court has become increasingly demanding in recent years, making it difficult for appealing parties to carry their burden of proof to alter the assessment in question.
With these legal protections for the assessment, it's easier to see why a defending municipality may choose not to get an appraisal. First, if they have a lot of appeals to defend, the cost of expert reports and testimony can explode, and it might even cost the town less to have a judgment entered than get an appraisal in some cases. Second, the court may not find value if there are significant gaps in the taxpayer's proofs; it's not unheard of for the town's appraiser to fill those gaps with their testimony and enable the court to reach value if they testify. Finally, it's also possible for the town's expert to find value below the assessment. This last scenario raises some difficulty for the town; while they may want to preserve the tax revenue, the town can't simply sit on an appraisal substantially below the assessment and push for the taxpayer's case to be dismissed.
On the other hand, the court may find its way to value without the town's proofs. Those proofs, if entered into the trial record, might increase the court's value conclusion and even potentially sustain the assessment. If the town has already expended the funds for an appraisal, and that appraisal supports or exceeds the assessment, it may not be worth the risk of having the Tax Court bridge the gaps in the taxpayer's appraisal unexpectedly and result in an adverse decision.
Of course, if the case is a residential matter, the taxpayer hasn't retained an expert, or retained an expert unfamiliar with property tax practice in NJ, it's not a great risk. Particularly in smaller cases, the cost of an appraisal, expert or assessor testimony and trial preparation by the attorney may vastly outweigh the cost of any judgment. However, at the end of the day, deciding whether to rest on the assessment is a litigation strategy that demands careful consideration in any case.
Read the Tax Court's opinion here.
On March 19, in light of the COVID-19 outbreak and the resulting public health emergency, the Chief Justice of the New Jersey Supreme Court entered an order extending the filing deadlines for 2020 property tax appeals with the County Boards of Taxation and the New Jersey Tax Court. Instead of April 1, 2020, the filing deadline has been extended to the *later* of either a) May 1, 2020, or b) 30 days after Governor Murphy declares and end to the state of emergency in effect under Executive Order 103. This order does *NOT* toll or extend the statute of limitations for deadlines that have already passed, e.g. the January 15th deadline for Monmouth County Board of Taxation appeals. The March 19th Order is accessible here:
March 19 Order
Subsequently, the Supreme Court entered an Omnibus order confirming this order, accessible here:
On April 7, the Court entered a further clarifying order, confirming that the filing deadline extension applied not only to original appeals of matters to the county boards of taxation and the Tax Court, but also appeals from judgments of the county boards of taxation participating in the Assessment Demonstration Program (at this time, only Gloucester and Monmouth) retroactive to the Court's March 19th Order. The clarifying order is here:
As of now, the State of Emergency declared by Governor Murphy will expire on
It's been a big week for taxpayers in New Jersey - three significant property tax cases came down from the courts in the last week. First, the Appellate Division granted a property tax exemption to the operators of an upscale restaurant on a university campus, reversing the Tax Court's decision below granting summary judgment to the municipality. A published opinion involving a tax case is rare; one reversing the Tax Court even more so, so it's worth taking notice. It's interesting to see the Appellate Division balancing the interests between state higher education and the needs of local government.
Next, the Tax Court re-affirmed the protections afforded by the Freeze Act, ruling that a sale of the property was not grounds for finding a change in value that would void the Act's protection per se. As in many cases, some of the most interesting comments are reserved for footnotes. It's good that taxpayers can rely on the Freeze Act with confidence, particularly given the rise in rolling reassessments and more frequent revaluations. If the Act applies, the town really has a hurdle to get over to prevent its application.
Finally, the Tax Court gave a massive reduction in assessment to the owners of a former corporate headquarters, finding that the property wasn't special use and could be valued as a single-tenant office building. It goes to show that if you can bring the court with you in your highest and best use determination, you have a good opportunity to win your case. It reminded me of a similar case with far more divergent opinions of highest and best use involving a Jersey Shore hotel. Curious folk can read that case here.
What does all this mean? Call me biased, but I think it means it's a good time to make sure you're only paying your fair share of New Jersey property taxes.
Here are the opinions:
Gourmet Dining, LLC v. Union Township et al
160 Chubb Properties LLC v. Township of Lyndhurst
ML Plainsboro LTD Prntshp/Gomez v. Township of Plainsboro
Both in the trial courts and in the appellate division, oral argument is an opportunity to marshal your best arguments, look the court in the eye and make the case why your client should prevail. However, in a time when it seems that every cost is closely scrutinized, is there still a place for a trip to court to say something already captured in writing? In short, yes. A recent published appellate decision affirmed both the explicit and implicit importance of oral argument.
In this tax foreclosure action, the trial court denied a prior lienholder's request for oral argument in opposition to a dispositive motion to enter final judgment. The trial judge denied the request with a one-sentence explanation, relying on an opinion involving a rule governing family matters. The appellate court found that such a request should have been granted as of right for the dispositive motion at issue, and reversed the trial court's decision.
In an interesting twist, the defending lienholder raised a second basis for reversal for the first time at oral argument. While the court declined to reverse on that issue, the fact that it was mentioned in the court's opinion at all suggests that it had some persuasive force. While it's better to brief every point of argument if you can, better raise it late at oral argument than never. Would the same result have be reached here without that issue being raised at argument? We'll never know, but it's still a good reason to request oral argument.
The decision can be accessed here:
CLARKSBORO, LLC VS. MARK KRONENBERG, ET AL. (F-031537-16, MORRIS COUNTY AND STATEWIDE
Every year, owners of commercial and multifamily residential real estate in New Jersey may receive letters from their municipal assessors requesting income and expense information. These information requests, commonly called “Chapter 91” requests after the law authorizing them, are permissible and there may be consequences for failing to respond. The question becomes – how should a property owner respond to the tax assessor’s request for income and expense information?
One important consideration is the potential consequences of ignoring the request. Failing to respond to a Chapter 91 request may result in a severe limitation on your ability to challenge the property’s tax assessment in the year after the request is made. This is crucial to remember, particularly if your town is planning a revaluation. If your property is over-assessed in the revaluation, you may lose the ability to effectively challenge that figure for a year. Even if your town isn't planning a revaluation, with ever increasing property tax bills, losing the ability to appeal even one year can have significant tax consequences.
Another important consideration is how you should respond to the request. Many Chapter 91 requests are looking for every detail possible about your property. What is really required for a sufficient response? Is your property actually owner occupied, or will the Tax Court consider it to be income producing? Is the request actually a valid Chapter 91 request? The answers to these questions will determine whether you can safely shortcut a burdensome request, or whether you need to provide more information.
Finally, always remember the time limitation. There must be some response within 45 days of the date of the Chapter 91 request. If the final response can’t be provided within 45 days, there must be a good reason. That reason must also be communicated to the tax assessor within those 45 days.
Ultimately, how you handle your tax assessor’s request for income and expense information could be determinative as to your tax liability for the following year. The Englert Law Firm offers no-cost consultation on responses to Chapter 91 requests to help property owners respond efficiently while preserving their appeal rights.
In a recent unpublished opinion, the Appellate Division of the New Jersey Superior Court affirmed the dismissal of a complaint seeking leave to impose omitted assessments on Riverview Medical Center, now owned by Meridian Health Corporation, in Red Bank, New Jersey. This unusual situation grows out of a 2015 Tax Court decision entitled AHS Hospital Corp v. Town of Morristown. In that case, an exempt hospital had its exemption revoked due to an alleged change in use and lost its challenge to the assessments imposed by the municipality thereafter.
In this case, the municipality filed petitions at the county board of taxation, and later at the Tax Court, seeking to impose omitted assessments for 2014 and 2015. Notably, the petitions were filed after the AHS Hospital Corp. opinion was issued, after the 2015 deadline for filing appeals. The Tax Court found that the omitted assessments would be improper as there had been no showing of a change in use, and no timely appeals had been filed.
The Appellate Division affirmed for substantially the same reasons as the Tax Court. The Appellate Division agreed that the Borough's request for discovery to explore the property's use was a "fishing expedition", and that they had no evidence of a change in use.
While this ruling is helpful for hospitals in that it affirms the requirement of a predicate change in use to trigger a removal of an exemption and subsequent omitted assessment, the underlying rationale for the denial of an exemption announced in AHS Hospital Corp. is unchanged. Nevertheless, the procedural and process safeguards should not be overlooked. The Appellate Division's decision can be accessed below.
The course to economic rent before New Jersey's Tax Court seems straightforward, but taxpayers and municipalities alike continue to run aground on shoals both old and new.
The recent decision in Burr Corporate Center, LLC v. Township of Westamption considered four years of appeals on a "flex (office/warehouse) complex consisting of two buildings totaling about 78,000 square feet.
The taxpayer's expert relied primarily on the subject leases, but failed to articulate the particulars of his analysis and had no market data to support his conclusion that the rents reflected the market. The Court rejected the argument that the subject's rents should constitute the presumptive economic rent, as is assumed of the income derived from apartment buildings and hotels.
The municipal appraiser fared no better. The appraiser failed to articulate a methodology for arriving at the adjustments to the comparable leases utilized in the analysis. In addition, the quantum of the gross adjustments (25 - 50%) to the leases utilized by the appraiser were such that the Court was forced to call into question their comparability.
With no viable conclusion of economic rent, the Tax Court affirmed the assessment. After eight years of litigation, it is a disquieting and unsatisfactory result. However, it is one that happens all too frequently. The Tax Court's full opinion is linked to the button below.
New Jersey law requires drivers of motor vehicles to be in possession of their driver's license, vehicle registration and proof of insurance while on the road.
In the case of an insurance card, the law allows you to show the proof of insurance in "electronic form", which includes showing an image of the card on a tablet, smart phone or laptop. Unfortunately, the exception only applies to your insurance card, so make sure you have your driver's license and vehicle registration when driving.
So, snap a picture of your insurance card or keep an electronic copy accessible on your smart phone. That picture may save you a trip to court and fines and costs of up to $200 or more!
At about 3:30 p.m. on March 31, the local property tax filing season is almost finished for the year. However, the door isn't completely closed. Since April 1 falls on a Saturday this year, that means there is a weekend ahead, and last minute filers can scramble to get their petitions or complaints in on Monday, April 3, 2017.
There are also many municipalities that have conducted reassessments or revaluations, where you can file an appeal as late as May 1, 2017. If you're not sure about the deadline for your municipality, feel free to send me an email and I'll be happy to check it for you.
Of course, if you own property in Monmouth County, you have an entirely different situation. If your assessment is $1,000,000 or less, your chance to appeal for 2017 ended on January 15! Any property over $1,000,000 can still be appealed directly to the New Jersey Tax Court.
Beyond that, what's left? Well, if you think that there was an typographical, trans-positional, or other mistake in your property tax assessment that doesn't have to do with the value of the property, (such as size), there may be an alternative open to you. If you think that may be your case, hit the 'Contact Us' button and describe your situation, and I'll be happy to see if there was a correctable mistake made in your assessment.
Finally, since property tax assessment appeals can be filed annually, there is always 2018!
N.J.S.A. 54:4-34, the statute commonly known as Chapter 91, is a tool in the municipal assessor's repertoire to gather data to set assessments. If a taxpayer fails to respond properly, the appeal is subject to dismissal, subject only to a summary hearing to test the ‘reasonableness’ of the assessment, unless good cause is shown which excuses the taxpayer’s failure to provide the information in the time allotted by the statute. A recent case raises the question again of what does or does not constitute ‘good cause’ for failing to respond to the assessor’s information request.
In Golden Eagle Foundation, Inc. v. Borough of Highland Park, an unpublished opinion issued on December 30, 2016, the Tax Court questioned whether ‘good cause’ existed for a taxpayer to fail to provide income information from a time period when it did not own the property. The assessor sent a Chapter 91 request seeking income information for calendar year 2014, when the taxpayer, a New Jersey corporation, did not own the property. Four days after receiving the assessor’s request, the taxpayer faxed back a reply, indicating that it did not have information from 2014 because it did not own the property at the time. However, the entities did share principals, and the property transferred for minimal consideration.
In opposition to the municipality’s Chapter 91 motion, the taxpayer argued that there was a response provided, and that the reply was not a false account of the property’s income. The Borough argued that the taxpayer had access to the income information and could have given the requested information. The Tax Court agreed that the response which was not false, but ordered a plenary hearing to determine whether ‘good cause’ existed for the new entity to fail to provide the income information.
This case is another study for commercial property owners to carefully consider their responses to Chapter 91 information requests from their local assessors, and to quickly seek help in formulating a response that will preserve their right to appeal.