Tax Appeal/Condemnation Law Blog

News and Updates in Tax Appeal/Condemnation Law Issues

A blog by attorneys
from Waters
McPherson
McNeill, P.C.

SALE OF PROPERTY IS NOT AN AUTOMATIC BAR TO FREEZE ACT APPLICATION

Posted on Thursday, January 26, 2017 by Robert J. Guanci , Joseph G. Ragno

In a recent Tax Court decision, Ritchie & Page Distrib. Co. v. City of Trenton, (Decided December 8, 2016), the Court ruled that the purchaser of property was not automatically barred from seeking relief pursuant to the Freeze Act where prior owner obtained a Tax Court judgment establishing a base tax year to which the “freeze” was to be applied.  The Court also held that a property owner’s failure to timely respond to a municipality’s Chapter 91 request is not a bar to Freeze Act relief.  

            In the present case, original owner and municipality executed a stipulation of settlement for multiple tax years, (2011-2014), reducing the original assessment of $1,250,000 to $940,900.  Based on the settlement stipulation, the Court entered judgment on June 17, 2016 setting the 2014 assessment at $940,900.  However, prior to the settlement, the subject property was sold on October 21, 2014 for $1,360,000.  The contract of sale was silent as to the whether control of the pending tax appeals transferred to the new owner along with title. 

Subsequent to taking title to the subject property, the new owner filed a Freeze Act application for tax years 2015 and 2016 based on the 2014 judgment.  Therefore, the issue before the Court was whether buyer, (current owner and taxpayer), had standing to file an application for Freeze Act relief based upon appeals filed by prior owner. 

Takeaway Points:

  • The sale of a subject property is not an automatic bar to Freeze Act Relief.
  • The Freeze Act is only barred when there has been a change in value, either internal or external, to the subject property, (e.g. physical renovations and improvements, or zoning changes).
  • A Freeze Act applicant has standing to invoke the Freeze Act if he or she has an interest in the property, regardless of which owner filed the initial appeal, provided the prior owner did not in the process of settling the case, waive the Freeze Act.  Such a waiver would arguably bar the purchaser from invoking the Freeze Act in a subsequent year.
  • Failure to timely respond to a municipality’s Chapter 91 request for income and expense information is not a bar against invoking the Freeze Act.

Things to Consider for Potential Purchasers:

  • If you are considering purchasing property in New Jersey, make sure you investigate, pre-closing, the status of any tax appeals.
  • Negotiate terms in contract to ensure that seller does not waive the Freeze Act or otherwise settle the case in a way which is disadvantageous to you as the purchaser.
  • Make sure seller complies with Chapter 91 so that you as buyer will have the option of filing a new appeal in lieu of invoking the Freeze Act, if circumstances indicate that an appeal is advisable.  

If you have any questions, please contact Robert Guanci at (201) 330-7463 or rguanci@lawwmm.com or Joe Ragno at (201) 330-7465 or jragno@lawwmm.com.



TAX COURT UPHOLDS NJ PROPERTY TAX "FREEZE ACT" BENEFITS NOTWITHSTANDING MUNICIPAL REVALUATION DEMONSTRATION PROGRAM

Posted on Thursday, September 29, 2016 by Robert S. Lipschitz , Robert J. Guanci

       In a recent Tax Court decision, Cobblestone Acquisition LLC v. Twp. Of Ocean, (Decided August 16, 2016), the Court clarified an oft-cited exception to the Freeze Act N.J.S.A. 54:51A-8 when it found against defendant-municipality by drawing a distinction between a “reassessment” and a “complete revaluation/reassessment,” thus permitting plaintiff-taxpayer to “freeze” judgment entered for tax year 2015 in 2016 and 2017. 

       Taxpayer filed an appeal against defendant, Ocean Township in 2014 and 2015 challenging the subject property’s then original assessments of $10,421,000 in 2014 and $7,650,000 in 2015.  The parties eventually settled by reducing the 2014 assessment to $7,650,000 and affirming same in 2015.  Judgments were entered on December 5, 2014 and May 22, 2015.  Thereafter, the municipality increased the subject’s assessment for tax year 2016 to $10,041,400.  Plaintiff appealed the 2016 assessment and moved to invoke the Freeze Act based upon judgment entered for tax year 2015. The Township opposed taxpayer’s Freeze Act motion arguing that the Freeze Act was inapplicable in this instance since Monmouth County was a participant in a Real Property Assessment Demonstration Program, (the “Demonstration Program Law”), which mandated a county-wide revaluation for 2016. 

       For those who have recently successfully appealed their property assessments, the Freeze Act offers taxpayers the ability to “freeze” an assessment for up to two successive years following a tax year for which there is a final judgment of the Tax Court N.J.S.A. 54:51A-8.  However, taxpayers should be forewarned that the statute also provides for an exception where a municipality is undergoing a “complete revaluation,” or “complete reassessment.” Pursuant to the statute, “[t]he conclusive and binding effect of the judgment shall terminate with the tax year immediately preceding the year in which a program for a complete revaluation or complete reassessment of all real property within the district has been put into effect.” Id.  In other words, where a municipality implements a “revaluation” or “reassessment” a taxpayer is barred from utilizing the protections of the Freeze Act.   

       The record in the Cobblestone case shows that Monmouth County took part in a special revaluation program.  The Legislature enacted the Demonstration Program Law in 2013 with the intent of achieving uniformity and cost savings in real property assessments.  Under the 2015 Annual Reassessment & the Impact on Property Taxes plan, Monmouth County created a 5-year schedule in which to implement the program across all 53 municipalities.  In regards to Ocean Township, during year one of the schedule, 2014 assessments were to be “revised by assessor to current ratio,” and 2015 assessments were to be “revised to current ratio – revaluation pending for future years.” During the third year of the program, 2016 assessments were to be “revised to market value by traditional revaluation.” Nevertheless, a traditional revaluation was never conducted for tax year 2016.   

       While the statute appears straightforward in its design, the specific meaning behind the terms “complete revaluation” and “complete reassessment” is somewhat ambiguous.  Therefore, the Court in Cobblestone was tasked with clearly defining the meaning of those terms, and their impact on the Freeze Act.  The Court found, for purposes of the Freeze Act, that the terms “revaluation” and “reassessment” are in fact synonymous and often used interchangeably.  This important decision turned on whether or not the measures taken by the Township in 2016 qualified as a “complete” or “district-wide” revaluation or reassessment.

       The record in the case established that for tax year 2016, Ocean Township had done nothing more than change assessments, in certain portions of the taxing district, to comport to the equalization ratio for 2016 (90.18%).  Based on this record, the Court in the Cobblestone case found for taxpayer and invoked the Freeze Act to set the assessment at $7,650,000 holding that Ocean Township had not implemented a “complete revaluation/reassessment” in 2016.  The lesson for taxpayers and practitioners alike is that, where a municipality implements a partial-reassessment, (i.e. any reassessment involving adjustments to less than 100% of all properties), instead of a “complete-revaluation/reassessment,” (100% adjustments district-wide), the protections of the Freeze Act may remain available. In particular, taxpayers in counties participating in Demonstration Programs, (i.e. a program in which a county is to undergo a revaluation, or plans to in the future), are not automatically barred from invoking the protections of the Freeze Act.

 

*The Tax Court opinion which is the subject of this blog article remains subject to appeal.  We will update this post as events dictate.

Please feel free to contact us if you have any questions.

If you would like to read the full Tax Court Decision, please click the link below.

http://law.justia.com/cases/new-jersey/tax-court/2016/008001-2016.html

Contact Info:

Robert S. Lipschitz, Esq.

Email: rsl@lawwmm.com

Phone: (201) 330-7455

Robert J. Guanci, Esq.

Email: rguanci@lawwmm.com

Phone: (201) 330-7463

 

 

 

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PROFESSIONALISM AND COURTESY - YOUR QUALIFIED IMMUNITY MAY DEPEND ON IT

Posted on Friday, May 13, 2016 by Robert S. Lipschitz

It is often said that “a word to the wise is sufficient.” A recent decision of the Appellate Division of the Superior Court is a clear shot across the bow for municipal officials whose official duties require them to interact with the public.  In a phrase, officials must know their jobs and deal with the public in a professional and courteous manner.  Their qualified immunity from civil liability may well depend on it. 

In a recent Appellate decision, Winberry Realty Partnership et al. v. Borough of Rutherford, et al., (Decided May 4, 2016), the New Jersey Appellate Court reversed and remanded a trial court order granting summary judgment in favor of the municipality and its Tax Collector after a finding of genuinely disputed issues of material fact precluding summary judgment.  

On July 22, 2010, taxpayer filed a six-count complaint against the municipality collectively, Tax Collector individually, alleging, among other things, violation of 42 U.S.C. § 1983, § 1985 and the Fourth, Fifth, and Fourteenth Amendments to the Federal Constitution for denying taxpayer’s right to make redemption payments on a foreclosed property.

This decision, though not yet determinative on legal grounds, should signal a warning to Tax Collectors (and all municipal officials) that the failure to act reasonably in their official capacity could result in the loss of the protections of qualified immunity, as illustrated by particular actions taken by the Tax Collector in the present matter.  Here, the Appellate Court appears to be willing to entertain subjecting the Tax Collector and the municipality to liability for violating taxpayer’s civil rights should taxpayer be able to prove the following allegations:

1.  The Tax Collector, in a 2008 phone conversation, failed to provide an up-to-date redemption amount to the property owner despite the Borough’s acknowledgment that she was required to do so;

2.  That during that same telephone conversation with taxpayer, the Tax Collector improperly indicated that she was not authorized to accept payment after the date of redemption listed on the 2008 order of foreclosure despite clear language from the court permitting redemption up to the date of the filing of the final judgment; and/or

3.  The Tax Collector, despite acknowledging that a subsequent court order permitted redemption of the tax sale certificate, improperly and knowingly indicated to taxpayer that it was too late to tender payment and refused to accept payment by the property owner.

As it stands, a municipal Tax Collector, as a governmental agent, is endowed with qualified immunity shielding them from a suit for civil damages so long as “their conduct does not violate clearly established statutory or constitutional rights of which a reasonable person would have known.” Gormley v. Wood-El, 218 N.J. 72, 113 (2014).  This doctrine balances two important interests – the need to hold the public official accountable when they exercise power irresponsibly and the need to shield officials from harassment, distraction, and liability when they perform their duties reasonably.” Pearson v. Callahan, 555 U.S. 223, 231 (2009). 

The “dispositive inquiry . . . is whether it would be clear to a reasonable officer that his [or her] conduct was unlawful in the situation . . . confronted.” Saucier v. Katz, 533 U.S. 194, 202 (2001).  Moreover, a right is clearly established when “[t]he contours of the right [are] sufficiently clear that a reasonable official would understand that what he is doing violates that right.” Anderson v. Creighton, 483 U.S. 635, 640 (1987).

On the other hand, the Winberry case also demonstrates that a taxpayer has a statutory right to redeem a tax sale certificate within a prescribed redemption period, and a Tax Collector who fails to accept properly tendered redemption payments, provides inaccurate information, or in any way obstructs or discourages said payment may be found to have violated a taxpayer’s civil rights, and thus, may lose qualified immunity.  While the final outcome of the Winberry case has yet to be decided, municipalities should be forewarned that qualified immunity may be unavailable where the conduct of its governmental agents violates clearly established statutory or constitutional rights of which a reasonable person would have known.  

Please feel free to contact us if you have any questions.

If you would like to read the full Appellate Court Decision, please click the link below.

https://www.judiciary.state.nj.us/opinions/a3846-13.pdf

Contact Info:

Robert S. Lipschitz, Esq.

Email: rsl@lawwmm.com

Phone: (201) 330-7455

Robert J. Guanci, Esq.

Email: rguanci@lawwmm.com

Phone: (201) 330-7463

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ADVOCATING FOR PROPERTY TAXPAYERS---IT DOESN’T STOP WITH THE ASSESSMENT

Posted on Thursday, October 1, 2015 by Joseph G. Ragno

ADVOCATING FOR PROPERTY TAXPAYERS---IT DOESN’T STOP WITH THE ASSESSMENT

 

Let’s begin with a simple and obvious reality-the vast majority of taxpayers who seek the advice of real estate tax professionals do so because they are unhappy with the assessed value of their property,  the tax burden levied on the property, or both.  However, lately, a new concern is becoming more and more prevalent among taxpayers and in particular, those who own investment-class properties. This concern is New Jersey’s so-called “Mansion Tax”.

To review, the “Mansion Tax” (N.J.S.A. 46:15-7.2) is a fee imposed upon the grantee of a deed to real estate which is classified for property tax purposes as either Class 2 (residential 1 to 4 family), any other real property conveyed to the same grantee in connection with the sale of Class 2 property regardless of classification, Class 3A (farmland if the property includes a building intended as or suitable for use as a residence), a cooperative unit, or property which is classified 4A (Commercial); AND the property is transferred for consideration in excess of $1,000,000. While the law as originally passed applied only to the transfer of residential property with price tags exceeding $1 million, in 2006, the law was amended to make it equally applicable to commercial properties bearing 4A Classification.

At one percent (1%) of the recited consideration, the impact of the Mansion Tax cannot be overstated. In a significant deal, potential liability for the tax can be a significant factor in the underwriting decision. Often, the focus on the Classification of the property to be sold is not scrutinized until a Purchase and Sale Agreement is signed, and in some cases not until the eve of closing. If the classification of the property is undeniably correct; .e.g. in the case of the sale of an office building bearing a classification of 4A, the tax is paid at time of closing.  If, on the other hand, the property by its classification is plainly not subject to the tax;  e.g.,  an industrial property classified 4B, this fact is certified in the Affidavit of Consideration and the tax is avoided. However, what happens if the property is misclassified? What happens if a 350 unit apartment complex is classified 4A?

Who Assigns the Property Class Code for a Given Property?

The Property Class Code is assigned by the municipal tax assessor and certified for each property along with the assessed value each year on or before January 10.  The New Jersey Administrative Code provides broad definitions as to  how certain types of property should be classified, depending on how the property is used, but the regulations provide little guidance as to how property should be classified when it incorporates two or more uses under one roof ( Ex. A 350 unit apartment building with a small café on the ground floor), or where the property improvements are of such a type that they could fall into one or another category depending on how they are used (Ex. a flex building).

In fairness, it must be stated that the Property Classification has absolutely no impact on assessed value. So, why worry about property classification at all? A property which should be classified as 4B (Industrial) but which bears a Classification of 4A, will be presumed to be subject to the Mansion Tax.  Although an improper classification can be overcome post-closing by appealing to the Director of the Division of Taxation and ultimately litigating the issue in Tax Court, the tax is collected at closing, subject to refund if the taxpayer’s position is vindicated through this time-consuming and costly legal process.        

A Better Way to Address the Issue

We are recommending to our clients that, rather than waiting until they are ready to sell the property to review the Classification assigned to the property, they review it with us now to determine if it is appropriate. In the event it is determined that the Classification is not appropriate, we believe that our clients are better served by appealing the Property Classification in the normal tax appeal cycle by filing a tax appeal with the County Board of Taxation on or before April 1 of a given tax year. A settlement of the issue would result in a judgment correcting the Property Classification which in turn would pay dividends down the road by eliminating the surprise of an inappropriate 4A Classification discovered on the eve of closing.

It is our recommendation that property owners, when they review the assessments of their properties annually, also review the assigned Property Classification. The Classification can be appealed at the same time the assessment is appealed or can even be appealed independent of a challenge to the assessed value of the property. We’d be happy to assist you with the review of your properties’ Classification and to explore with you the various options open to you to seek a change in Classification, where a change is justified.

If you have any questions, please contact Joe Ragno at (201) 330-7465 or jragno@lawwmm.com.

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REVALUATION BULLETIN: CITY OF PATERSON

Posted on Friday, April 10, 2015 by Joseph G. Ragno

REVALUATION BULLETIN: CITY OF PATERSON

42% INCREASE IN PROJECTED PATERSON TAX RATE BREEDS TAXPAYER UNCERTAINTY

 

The City of Paterson is in the final stages of the implementation of its second revaluation in eight years.   Paterson taxpayers have, within the last week or so, received in the mail preliminary notice of their 2015 assessments. In many cases, assessments have remained relatively stable or have even been reduced. In other cases assessments have been sharply increased. However, regardless of whether the proposed 2015 assessment represents an increase or a decrease from the 2014 number, the “elephant in the room” is the municipal tax rate which is being projected by Appraisal Systems, Inc. (“ASI”), the firm hired by Paterson to conduct the revaluation program.  According to the ASI website, Paterson taxpayers should expect the tax rate to jump from 2014’s $2.896/100 to $4.126/100.  This means that even if your 2015 assessment has not increased above the 2014 level, your taxes are projected to increase by over 42%.  http://www.asinj.com/revaluation.asp. There is no mention of this projected tax rate increase in the notices of proposed assessments being mailed to taxpayers.

While the deadline for filing appeals in municipalities is typically May 1, the deadline for Paterson taxpayers may be extended until a later date by the Passaic County Board of Taxation.  For the time being, however, we are advising our clients to work toward the May 1 deadline.  It is imperative for all Paterson taxpayers that they evaluate as soon as possible the true impact of the revaluation for them, as the impacts may vary wildly from property to property.

We are available to assist any taxpayer with questions about the revaluation or its individual impact on them.

If you have any questions, please contact Joe Ragno at (201) 330-7465 or jragno@lawwmm.com.

 

          

 

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Claims for Closing Costs for Displaced Businesses under the New Jersey Relocation Assistance Act

Posted on Thursday, May 15, 2014 by Blake S. Davis

When government seeks to acquire property using the power of eminent domain against a property owner or tenant, or entity in possession, as the case may be, a critical issue is whether those affected by the acquisition are entitled to relocation assistance. The threshold question in such instances is whether the entity or individual is a “displaced person” under the law. N.J.S.A. 20: 4 – 3 (c) defines “displaced person” as: Read Entire Article

  • Comment by

    kmj
    on
    Thursday, May 15, 2014
    FAPS v EDA was also a WMM case - the first to make EDA pay relocation costs

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GETTING YOUR DUCKS IN ORDER- ASSISTING YOUR TAX PROFESSIONAL IN THE EVALUATION OF YOUR TAX APPEALS FOR INCOME-PRODUCING PROPERTIES

Posted on Wednesday, March 5, 2014 by Joseph G. Ragno

The 2014 tax appeal filing deadline of April 1, 2014* is right around the corner and by now you would have (or should have) given some thought to whether or not you should be appealing the tax assessment on your real estate holdings. To save time and ensure that the analysis of your assessments is as accurate as possible, you should anticipate what your tax professional will be asking for and begin to get it together. Responsible tax professionals will not file tax appeals without a thorough review of the critical information. In the case of income producing property such as office, retail, apartment buildings or industrial space, to name but a few, your consultant will need, at a minimum, the following:  Read Entire Article

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RELIEF FROM MORTGAGE INTEREST OBLIGATION UPON FILING OF CONDEMNATION ACTION AND ORDER FOR PAYMENT INTO COURT

Posted on Tuesday, December 3, 2013 by Blake S. Davis

Coordinating the disbursement of funds resulting from a condemnation award—so that the person receiving the award can timely pay its obligations-- is always difficult when litigating condemnation actions especially since, in contested actions, the offer funds are not available until after the property is “acquired” through the filing of the complaint in condemnation and declaration of taking, and the deposit of the offer into Superior Court Trust Funds. For example, minimizing the gap in time between the “taking” and when the money is needed to buy replacement property is sometimes a concern as is the mortgagor’s obligation to discharge any mortgage on the property.  Read Entire Article

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2014 Property Tax News: Monmouth County Assessment Demonstration Program Makes Major Changes to Current Assessment Practice

Posted on Monday, December 2, 2013 by Joseph G. Ragno

As 2013 winds to a close, it’s time to begin thinking about your 2014 property taxes, especially if you own property in Monmouth County. On February 4, 2013, Governor Christie signed into law Chapter 15 P.L. 2013, known as the Assessment Demonstration Program (“ADP”). The ADP takes effect in the tax year 2014, and will be used to compare the current statutory system of property assessment against a new pilot program. The Monmouth County Board of Taxation has elected to be first and only Tax Board in the State to adopt the ADP.  Read Entire Article

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BEWARE: RESPOND TO THAT INNOCUOUS LETTER FROM THE MUNICIPAL TAX ASSESSOR

Posted on Wednesday, July 31, 2013 by Joseph G. Ragno

In the past five years, with the onslaught of tax appeals, there has been a sharp spike in the use by local tax assessors of the Chapter 91 “Request for Information on Income Producing Properties” pursuant to NJSA 54:4-34. Compliance with Chapter 91 should not at all be onerous. Read Entire Article

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WMM Defense of Taking Claims - CRDA Active in New Atlantic City Projects

Posted on Monday, May 6, 2013 by Blake S. Davis

Our firm has a long history of representing property owners in Atlantic City in matters involving governmental acquisition of property through the use of eminent domain. The agency which is involved in almost all such acquisitions in Atlantic City is the Casino Reinvestment Development Authority (“CRDA”). The CRDA was established in 1984, and charged with assisting in community and economic development projects primarily in Atlantic City but also around the state. Read Entire Article

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PROPERTY TAX WATCH

Posted on Wednesday, March 13, 2013 by Joseph G. Ragno

In the past weeks, Tax Assessors all over the State mailed Notices of the 2013 Property Tax Assessment to property owners. This inconspicuous post-card size mailing is all the notice you will receive as to what the assessed value of your property will be in 2013. The Notice of Assessment will not tell you what your Tax Bill for 2013 will be because the tax rate will not be established by the municipalities until June at the earliest and in many cases the Fall of 2013.  Read Entire Article

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