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.