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The last six months of 2003 have produced decisions that could affect the assessment of real property in New Jersey, whether it is commercial, residential, farmland or tax-exempt. The following are synopses of key rulings, organized by categories. Chapter 91 Request City of Trenton v. Trenton District Energy Co., Tax Ct. Docket No. 005001-2003 (Jan. 16, 2004). The taxpayer, which in this case is an electric utility, appealed its property tax assessment to the Mercer County Board of Taxation, claiming the property was exempt. While the appeal was pending, the city served the taxpayer with a Chapter 91 request to provide income and expense information. The board subsequently found the property was exempt. The taxpayer then refused to provide the Chapter 91 information, on the basis that the property was found to be exempt. Neither party furnished the Tax Court with a complete copy of the Chapter 91 request. However, the cover letter sent with the request stated that, “The information is needed for the tax year beginning Jan. 1, 2002 and ending Dec. 31, 2002.” By letter dated July 22, 2003, defendant’s counsel wrote to plaintiff’s assessor advising that: Both the Limited Partnership Agreement and the Ground Lease signed by the City and Trigen indicate the type of financial information that Trigen must submit to the City and when it must be submitted. In light of the Freeze Act and the Judgment entered by the County Board of Taxation, Trigen’s assessment may not be increased. Accordingly, Trigen has no obligation to provide the information requested in your letter of June 16, 2003. The Tax Court acknowledged that the owners of income-producing properties for which exemption is claimed have an obligation to respond to a Chapter 91 request, and the purpose of Chapter 91 with respect to exempt property is the same as it is with respect to property which is clearly taxable. However, the court noted the “peculiar posture of this case results from the fact that no Chapter 91 request was made prior to the making of the assessment for tax year 2003.” The court continued by pointing out that a request sent in June of 2003 would be valid only for the next succeeding tax year, 2004, and could not be used by the assessor to make the 2003 assessment which was at issue, citing Westmark Partners v. West Deptford, Township, 12 N.J. Tax 591 (Tax 1992). The court concluded that to invalidate a taxpayer’s claim for failure to respond to a Chapter 91 request after the assessment has already been made does not effectuate the purpose of the statute and, therefore, plaintiff’s motion to dismiss the answer and counterclaim must be denied. Plaintiff’s motion to dismiss the counterclaim on the basis of Chapter 91 information not being provided was denied and the defendant’s cross motion was granted. The matter will proceed to discovery and trial. Tax Refund General Ceramics, Inc. v. Borough of Wanaque, National Beryllia Corp v. Borough of Wanaque and Haskell Properties, L.L.C. v. Borough of Wanaque, Tax Court of New Jersey, (Nov. 6, 2003). Plaintiffs General Ceramics and National Beryllia Corp. have moved for the entry of an order requiring the defendant Borough of Wanaque to provide them with the $12,193.20 balance of a tax appeal refund for the tax years 1999 and 2000, plus statutory interest. General Ceramics Inc. and National Beryllia Corp. are different names for the same entity. During 1999 and most of 2000, General Ceramics was the owner of the subject property and appealed the tax assessments for those years. In September or October of 2000, General Ceramics conveyed the property to Haskell Properties, L.L.C., which then filed property tax appeals for the tax years 2001 and 2002. The same law firm negotiated a settlement for all four years that were under appeal and the Tax Court entered judgments reflecting the settlement. Each judgment reduced the assessment, which resulted in tax savings to both General Ceramics and Haskell. When the law firm received a refund check from the defendant, it was for a lesser amount than the total tax refund. This is due to the fact that the municipality’s tax collector had credited against delinquent taxes that had arisen during Haskell’s ownership of the subject property from the entire refund allocable to Haskell and a sum of money ($12,193.20) to represent the balance of the refund otherwise due to General Ceramics. The law firm wrote a letter to the tax collector requesting payment of this balance of $12,193.20, claiming that General Ceramics could not be responsible for “arrearages which pertain to the later years and a different owner.” General Ceramics argued that, under the applicable statute, N.J.S.A. 54:4-134, a municipality may not set off a refund due to one taxpayer against delinquencies incurred by a subsequent owner for tax years following the years for which the refund is due. In denying the plaintiff’s motion, the court cited the fact that “property taxes are an obligation of the property and not a personal debt of the property owner.” See Freehold Office Park, Ltd. v. Freehold Township, 12 N.J. Tax 433, 440 (1992). The court also cited an amendment to N.J.S.A. 54:4-134 in 1987 which included the phrase “owner or owners.” The court held that the words “or owners” contemplated a change of ownership and allow a municipality to apply, against a refund to which one owner is personally entitled, delinquencies for which a previous or subsequent owner is personally liable. Using this language change with respect to parking and payroll tax refunds and delinquencies, the court held that a municipality’s right to set off property tax refunds against delinquencies should be no less than its rights with respect to parking and payroll tax refunds and delinquencies. Consequently, the court concluded that a municipality has the right to set off refunds of property taxes relating to the period during which one owner holds title against delinquencies attributable to a successor owner. The court also stated that N.J.S.A. 54:4-134 does not contain any requirement for continuity of ownership in order for a municipality to have the right to apply a refund due for earlier years against the delinquency relating to later years. A requirement of ownership continuity is contained in N.J.S.A. 54:4-69.2. However, N.J.S.A. 54:4-134 was enacted in 1983 and amended in 1987, and the Legislature had available to it an existing and related example of a statutory requirement of continuity for ownership, but apparently chose not to incorporate this requirement. The Legislature’s failure to include a continuity of ownership provision in N.J.S.A. 54:4-134, and the inclusion of the phrase “owner or owners,” as discussed above, indicate a legislative intent that the right of setoff provided by this statute should not be dependent on the continuity of ownership. As a result, the plaintiff’s motion to compel the defendant municipality through additional payments for the balance of the refund is denied. Tax Liens Betty Simon, Trustee, L.L.C. v. Chicago Title Ins. Co. v. Third Party Township of Little Egg Harbor, 363 N.J. Super. 582. (App. Div. Nov. 6, 2003). In this case, the buyer of a tax title lien and the title insurer both brought an action against the township for the refund of the purchase price of the tax lien purchase by the buyer, after learning that the lien was on exempt property, which was owned by the state. The Superior Court, Law Division, entered summary judgment in favor of the buyer and insurer, and the township appealed to the Appellate Division. The Appellate Division held that the tax lien and sale were void and thus affirmed the lower court. The state acquired title to this property in 1969, and then it was thereafter carried on the tax-exempt list. However, in 1994, the assessor received a letter from the New Jersey Attorney General’s Office stating that their investigation indicated there was a one-half interest in private parties and that it was not conveyed to the state. The Appellate Division held, however, that the letter never actually stated that the state did not own the property or that the named private individual did own the property. When taxes were unpaid, the township offered for sale a tax title lien, which the plaintiff purchased. When the plaintiff initiated a tax foreclosure action, she learned that title was not marketable because of the state’s ongoing ownership of the property. She then initiated an action against her title insurer, which brought a third party complaint against the township. The title company settled with the plaintiff and continued its action against the township. The court held that the taxes that had been assessed against the property and created the tax title lien were erroneously assessed due to the assessor’s mistake and, as a result, the sale of the tax title lien to the plaintiff was void, and the plaintiff and the title company were entitled to a refund. The township’s argument, which was unpersuasive, was that the plaintiff’s plan for being reimbursed was time-barred by N.J.S.A. 54:3-21, which states that they must have appealed the assessment by April 1 of the tax year. The township relied on the Supreme Court’s holding in New Jersey Transit Court v. Borough of Somerville, 139 N.J. 582 (1995). The Appellate Division found that the township’s reliance on Somerville was unpersuasive. The Appellate Division stated that in the instant case, the state was not called upon to pay tax bills and received none and never received a notice of a change in its assessment status. The court concluded that, “there is no basis to impose such an obligation on the state or other public entities to protect against assessors’ mistakes.” The Tax title lien that was an issue here was void in its inception. It was based on an assessment against purported owners who held no interest in the property and on purported delinquent taxes that were incorrectly assessed against this tax-exempt property. Therefore, with the assessment being void, the tax sale held for it is equally void. Tax Certificates Carabellese v. On Ping Trust Fund, 178 N.J. 31 (App. Div. Oct. 16, 2003). The Appellate Division held that the Chancery Judge did not abuse his discretion in denying the motion of the appellant, who was the property owner. In denying the motion of the appellant to vacate a final tax foreclosure judgment, the Appellate Division held that since the appellant had been served with the complaint and had failed to answer, and knew about the deadline for redemption of the tax sale certificate yet failed to act, it was now prohibited from vacating the final tax foreclosure judgment. The court held that the appellant did nothing to protect its rights in the property at all, other than its efforts after the deadline for redemption to have the tax sale certificate holder agree to an extension of time within which it would attempt to secure funds to redeem the certificate. City of East Orange v. Essex County Register of Deeds and Mortgages, 362 N.J. Super. 440 (App. Div. July 30, 2003). In this case, the City of East Orange brought an action against the Essex County Register of Deeds and Mortgages to stop the Register from charging $15 rather than $3 for recording certificates of cancellation for tax certificates and to recover alleged overpayments. The Superior Court, Law Division, had entered a judgment in favor of the Register. The city had appealed to the Appellate Division. The Superior Court held that a specific statute authorizing a $15 fee controlled over the general statute that authorized a $3 fee. The Register received a legal opinion from Essex County Counsel, which concluded that the correct fee was the higher fee of $15, which had been established for the recording of mortgages. The Appellate Division reviewed the procedures for the cancellation of a tax sale certificate, which are set forth in N.J.S.A. 54:5-111.1 to -111.4. Specifically, N.J.S.A. 54:5-111.4 states that the fee would be the same as the filing or recording of “a certificate of redemption of the lands” and the fee is described in N.J.S.A. 54:5-55, which states the Register shall “be entitled therefor to the same fees as provided respectively for the cancellation of mortgages.” Plaintiff relied on the part of N.J.S.A. 22A:4-4.1 which imposes a $3 fee for the recording of a “tax sale certificate, lien, deed or related instrument by a municipality.” The plaintiff argued that a certificate of cancellation of a tax sale certificate was a “related instrument” to a tax sale certificate. The court ruled in favor of the Register, stating that “where one statute deals specifically with a subject and another statute deals with that subject only generally or inferentially, the specific statute is controlling.” Therefore, the court concluded that the specific provision of N.J.S.A. 54:5-111.4 which mandated the charge of a $15 fee was controlling. Rollback Tax Assessments Braemar at Chester, L.L.C. v. Chester Borough, 21 N.J. Tax 16 (Aug. 12, 2003). The plaintiff taxpayer filed a motion for summary judgment to cancel rollback tax assessments covering the tax years 1998 through 2000. The issue in the case was whether rollback taxes can be assessed by means of an alternate method through N.J.S.A. 54:4-63.31 to -63.40 rather than by the original method under N.J.S.A. 54:4-63.12 to -63.30. The municipality failed to file an application for the rollback assessment with the county board, and instead sent to the taxpayer bills for the years for which it sought rollback taxes. The court ruled that N.J.S.A. 54:4-23.9 states that the assessment of rollback taxes shall be governed by the procedures provided for in assessing omitted property. Procedures for assessing omitted property are provided under N.J.S.A. 54:4-63.12 to -63.30, often known as the original method. Pursuant to N.J.S.A. 54:4-63.13, the municipality must submit a written complaint to the county board of taxation, which grants a hearing on the matter, on at least 15 days written notice to the owner of the property. The municipality contends that the taxpayers’ subsequent appeal of the rollback tax assessment before the county board constituted sufficient notice and hearing pursuant to N.J.S.A. 54:4-63.13. The Tax Court held that the municipality failed to file the application with the county board as required under N.J.S.A. 54:4-63.13. The municipality also contended that the alternate method, N.J.S.A. 54:4-63.31 to -63.40, instead of the original method in assessing omitted property, could be applied in this matter. The court again disagreed, stating that since the alternate method was adopted subsequent to the original method and does not supercede or amend the original method, the original method must be followed by an assessor in rollback taxes, as mandated by the Legislature. Therefore, the court invalidated the municipality’s assessment for failure to follow the mandated procedures. Omitted/Added Assessment Freehold Borough v. Nestle, U.S.A., 21 N.J. Tax 138, (Nov. 10, 2003). In this case, plaintiff Freehold Borough had omitted an assessment, then added an assessment for certain tax years in the fictitious amounts of one dollar, because the borough assessor had not yet made a determination as to completion dates of underlying improvements of the taxpayer’s property. The borough then appealed these $1 assessments to the county board of taxation, which affirmed them, and the borough appealed the county board’s judgment to the Tax Court. The defendant, Nestle, U.S.A., moved for summary judgment voiding the assessments at issue and dismissing the complaints, on the grounds that any increases attributable to improvements made to the subject property should have been included in the regular assessment for the tax years at issue. Nestle further alleged the assessor’s utilization of the omitted and added assessment procedures was an attempt to manipulate and extend the time for municipal appeals seeking an increase in the assessments on the subject property. Apparently, in September of 2001, prior to the deadline for transmitting added assessments to the county board of taxation, the assessor had been advised that its expert had not finished valuing the property, but there had been a significant increase in value over the current valuation of the property. Since the information was not available, the assessor made an omitted/added assessment for 2000 and an added assessment for 2001, each in the amount of $1. Nestle moved for summary judgment, citing Glen Pointe Associates v. Teaneck Township, 10 N.J. Tax 598 (1989), affirmed o.b. per curiam 12 N.J. Tax 127 (App. Div. 1991), in which the Tax Court voided the added assessment for 1985 on that property. Nestle argued that the omitted/added assessment for 2000 and the omitted/added assessment for 2001, each in the sum of one dollar, were imposed solely to extend the time to the plaintiff to contest the value of the improvements and that the plaintiff should properly appeal the regular assessments for those tax years within the time period created under N.J.S.A. 54:3-21. The court stated that Nestle had correctly asserted that the courts in New Jersey prohibited the use of omitted and added assessments to reflect a change in opinion as to the value of property on the regular assessment date. The court held that the omitted/added assessments in fictitious amounts of $1, predicated on the fact that the borough assessor had not made a determination as to the completion dates of the underlying improvements, were invalid. These assessments were made contrary to the statutory scheme for added assessments, which mandates that, after examination and inquiry by the assessor, such assessments are to be made for the tax year in which the improvements are completed or in the next succeeding year, and assessments appealed from were made only with the knowledge that the improvements had been made sometime before the inspection of the subject property in 2001. The Tax Court therefore concluded that the omitted added assessment for tax year 2000 and the added assessment for tax year 2001 must be voided. Presumption of Validity of Assessments Pepperidge Tree Realty Corp. v. Kinnelon Borough Tax Court, 21 N.J. Tax 57 (Aug. 18, 2003). The plaintiff taxpayer appealed the 2001 property tax assessments on two parcels of vacant land in the Borough of Kinnelon. Each lot had over 400 acres and each was assessed in excess of $7 million dollars. Plaintiff presented the testimony of three witnesses: one of the principals of the taxpayer; a civil engineer; and an appraiser. Plaintiff’s appraiser testified as to the value of the subject property using the sales comparison approach and, as to one lot which had been divided into two sections, by also using a subdivision analysis as a check on the sales comparison approach. The defendant only presented one witness, an appraisal expert, whose testimony is limited to a critique of the valuation analysis presented by plaintiff’s appraiser. The defendant municipality presented no affirmative evidence as to the value. In ruling for the municipality, the court cited the well established fact that assessments are presumed valid, and a taxpayer has the burden to establish a right to an assessment reduction using evidence that it is “definite, positive and certain in quality and quantity to overcome the presumption of validity.” The court concluded, however, that the plaintiff’s proofs were inadequate to warrant reduction in the assessment on either lot. The court had several significant concerns as to the comparable sales valuation analysis by the plaintiff’s appraiser. It noted that any one of these concerns, by itself, might not have been sufficient to deny the plaintiff relief. Cumulatively, however, “the concerns were more than sufficient to render plaintiff’s proofs inadequate in quality and quantity to establish the value of the subject property and overcome the presumption of validity.” For example, none of the five comparable sales used by the appraiser sold for a use at its highest and best use. Second, the sale prices for the comparable sales were determined by appraisal and not by competitive bidding in the market place. Also, none of the sales are usable sales for purposes of determining sales ratios. The plaintiff’s appraiser also failed to consider the number of potential subdivided lots, miscalculated the number of potential lots, failed to consider subdivided lot sizes on his comparable sales, made large gross adjustments to several comparable sales, and some of the comparable sales used are remote in time from the valuation date. Taking these factors in their totality, the court felt constrained to affirm the assessments on the properties, as the proofs were inadequate and did not overcome the presumption of validity of the assessments. Water Tank Valuation New Jersey-American Water Co., Inc. v. Borough of Jamesburg, 20 N.J. Tax 637, (May 28, 2003). The Tax Court had to determine the taxability of property that was owned by a public water and sewerage utility company, which property contained a water tank of more than 2,000 tons, which served as a reservoir for storage purposes. The taxpayers sought a summary judgment striking the assessment on the improvements. The municipality also sought a summary judgment to affirm the assessment as indicated on the tax list. The municipality tried to introduce the fact that in 2002, a wireless company had filed an application for approvals to place telecommunication antennas on the subject tank and equipment on a concrete pad at the base of the tank. The Tax Court, however, ruled that it was not relevant to the subject motions in this case, since the application was filed approximately 17 months subsequent to the relevant assessment date of Oct. 1, 2000. The court ruled that the taxability of this property was governed by the provisions of the Franchise and Gross Receipts Tax Act (N.J.S.A. 54:30A-49 to-63). As for the tank itself, N.J.S.A. 54:30A-50(b) defines real estate and specifically excludes “machinery, apparatus and equipment, notwithstanding any attachment thereof to lands or buildings.” The taxpayer contended that the tank was a “reservoir” under N.J.S.A. 54:30A-50(b) or, in the alternative, “equipment,” and therefore qualified as an exclusion to real estate under the definition in the act. The Tax Court agreed with the taxpayer, stating that the tank served as a reservoir for storage purposes and was “machinery, apparatus or equipment” since its use, in addition to storage, was to maintain water pressure and water flow throughout the water system in the municipality. Therefore, the tank is not subject to real property taxation. Spot Assessment Regent Care Center, Inc. v. Hackensack City, 362 N.J. Super. 403 (App. Div. July 22, 2003). The taxpayer Regent Care Center brought an action against the City of Hackensack, alleging that the city’s increase in the assessment of its nursing home property was unconstitutional because it constituted a spot assessment based solely on the sale of the property. The Tax Court affirmed the assessment and the taxpayers then appealed to the Superior Court, Appellate Division. The Appellate Division, in determining whether the increase in the assessment was a constitutionally impermissible spot assessment, noted that the increase did not occur as part of a district revaluation or reassessment and that the nursing home was not the subject of a sale. The assessment increase was the product of the assessor’s assessment maintenance program, in which he reviewed all line items on the municipality’s tax rolls and determined that certain commercial properties dramatically increased in value. At that time, the assessor increased the assessment of about 150 properties, including the plaintiff’s. In this appeal, Regent Care contends that the trial court erred, stating that because the increased assessment was not based on a change in the zoning, change in legal status or physical change in the property, it was a prohibited spot assessment. Plaintiff also argued that the practice of “assessment maintenance” was an unconstitutional device creating spot assessments. The plaintiff further contended that the subsequently adopted amendment to N.J.S.A. 54:4-23, known as Chapter 101, effective June 14, 2001, which requires submission by the assessor of a compliance plan to the county board of taxation and the division of taxation, and approval of such plan, was a prerequisite to changing assessments that are not part of a districtwide revaluation or reassessment, and should be retroactively applied. The Appellate Division concluded that as to the issue of Chapter 101, for the reasons expressed by the Tax Court in its decision in this case, Chapter 101 is prospective only in its application and had no bearing on this case. The Appellate Division found that the reassessment was not incident with a sale of the subject property, but was rather a substantial adjustment in the appraised fair market value of the taxpayer’s property, a nursing home, which was determined by appropriate data, including the sales of nursing homes in neighboring municipalities. Therefore, it was not subject to the Van Decker rule, which prohibits increased assessments based solely on the sale of the property. The Appellate Division went on to state that the increase in the assessment of a property, absent any changing of zoning or legal status, pursuant to a city “assessment maintenance” plan, does not necessarily constitute a prohibited spot assessment. Any such action has to be reviewed based upon the facts of each case. The court reasoned that taxpayers must be treated in a manner which is comparable to other similarly situated taxpayers. In this case, the Appellate Division held that the adjusting of the assessment of this tax property for legitimate reasons, even if it takes place in years between districtwide revaluations or reassessments, is an appropriate exercise of the assessor’s statutory obligation and is not arbitrary or discriminatory. It was based upon the assessor’s objective, nonsales related evidence, such as market value of similarly situated nursing home properties in neighboring communities and, therefore, the Appellate Division held that the increased assessment of Regent Care’s property is not a constitutionally impermissible spot assessment. Phillip Orban and Joan Orban v. Alexandria Township; Stanley Dobis and Laurie Pat Dobis v. Alexandria Township, 21 N.J. Tax 1, (July 8, 2003). Phillip and Joan Orban appealed the judgments of the Hunterdon County Board of Taxation regarding the 2001 assessments on seven vacant building lots that are part of the same 10-lot subdivision. Stanley and Laurie Pat Dobis also appealed the judgment of the Hunterdon County Board of Taxation affirming the 2002 assessment on an eighth parcel of vacant land which they purchased from the Orbans and which is part of the same subdivision. Both the Orbans and the Dobises sought to have the assessments rolled back to the level of the 2000 tax year assessments on the grounds that the contested assessments were spot assessments of the type that were found to be invalid in West Milford Township v. Van Decker, 120 N.J. 354 (1990). The facts surrounding the making of the assessments were common in both of these cases, so the matters were tried together on the issue of spot assessments. The assessor had initially placed assessments on these properties in a range from $80,500 to $115,000. The assessor testified that although he was familiar with the property, he had not visited the subdivision before making his assessments and was unaware that improvements had been constructed which exceeded those required by the subdivision approval. In 2000, the assessor observed that several of the lots were listed in multiple listing services, the prices ranging from $195,000 to $275,000, far in excess of his initial assessment. The assessor also testified that offering prices were substantially higher for other lots in Alexandria Township. The lists were being prepared for 2001 and the assessor had reviewed two recent sales of lots in the subdivision for $215,000 and $220,000. As a result, using computer assisted mass appraisal techniques, the assessor increased the assessment on all 10 lots in the subdivision by $122,000 for the 2001 year. The Tax Court held that the reassessment of lots in this new subdivision just on the basis of their sales would be spot assessments, which would have been invalid under the Equal Protection Clause and Uniformity Clause of the Constitution. However, the court held that this reassessment resulted from the assessor’s review of asking prices for lots as disclosed by the multiple listing service and upon actual December sale prices. The assessor argues that they selected the appropriate unit for reassessment when the figures were obviously incorrect and raised the assessments on all 120 lots in the Orban subdivision. The court cites the conclusion reached in Mountain View Crossing Investors, L.L.C. v. Wayne Township, 20 N.J. Tax 612 (Tax 2003), in stating that the “ Van Decker, Centerino and Brunetti decisions, when read together, hold that a prohibited spot assessment occurs only when the assessor has no basis for revising the assessment other than a sale of the property. An assessor may revise assessments for “legitimate reasons” independent of the sale, even in the absence of a municipal-wide revaluation.” In the instant case, the reassessment of taxpayer’s property resulted from the asking prices that were in a multiple listing service, as those prices were subsequently confirmed by sales of two lots in December 2000. The court pointed out that multiple listing service property descriptions have been held to be valid independent reasons for reassessing property. The court also noted that reassessing a single neighborhood is permissible. It concluded that the assessments and issues here were not made in a vacuum, nor were they based solely on the sales of the subject lots: They were based upon the sales of the subject lots as compared with the sales of other building lots. The court also pointed out that a taxpayer does not acquire a vested interest in an initial assessment. Thorough neighborhood analysis is not complete until information about the new neighborhood is available. An initial assessment may need to be significantly revised when additional information becomes available to the assessor, including sales information. This is simply a good faith effort to assess property as mandated under New Jersey law. Tax Exemption City of Long Branch v. Ohel Yaacob Congregation, 2003 WL 23195464 (App. Div. Dec. 15, 2003). The City of Long Branch appealed from an order of the Monmouth County Board of Taxation exempting property used for house-visiting rabbis and other clergy, and also to store books and furniture. The Tax Court affirmed this case and the city appealed to the Appellate Division. The Superior Court, Appellate Division, held that residential property used by a religious congregation for house-visiting clergy, but that did not qualify for a parsonage exemption, qualified for exemption from property taxes as property used in the work of a religious organization. The city had argued that the use exemption under N.J.S.A. 54:4-3.6 does not apply to the part-time use of the premises for religious purposes, and that the Tax Court erred in holding that a residential property not actually used for religious purposes on a full-time basis could be tax exempt. The city also argued that the holding of the Tax Court improperly circumvented the requirements and limitations of the parsonage exemption under N.J.S.A. 54:4-3.6. This particular property was owned by an Orthodox Jewish congregation located in Deal, Monmouth County, New Jersey. While the year-round membership of the congregation consisted of 60 to 80 families, its ranks swelled to somewhere between 400 and 500 families in the summer months. This particular property was used from May through early October for house-visiting rabbis and cantors who performed additional religious services to accommodate the increasing congregation membership during the summer season. The congregation argued that the additional rabbis attracted additional summer tenants and financial support for the congregation. The cantor of the congregation also testified that the proximity of the subject property to the synagogue was significant, because Orthodox Jewish clergy are not permitted to use motor vehicles on the Sabbath to drive to services. Further, books and other religious personally were stored year round in the garage of the property. The Tax Court held that the “parsonage exemption” under N.J.S.A. 54:4-3.6 did not apply because the property was not “actually occupied as a parsonage” by the “officiating” clergymen of the congregation. However, the Tax Court did determine that the broader exemption under Section 3.6 applied. The court reasoned that, rather than a strict application of the exclusive religious purpose test, it must focus on whether the property is predominantly used as an integral part of the operation of the religious organization, and provision of the residence is reasonably necessary for its proper and efficient operation. See Saint Anne’s Catholic Church v. Hampton Borough, 14 N.J. Tax 88, 99-100. The Tax Court found that the congregation demonstrated that the property was reasonably necessary for its operation when the membership ranks increased and this resulted in the requirement that additional clergy handle their increased demands. Including the additional religious restriction on travel for the clergy, the subject property which is used for the housing of the visiting clergy was indeed necessary for the proper and efficient operation of the congregation, and is not a mere convenience. The Appellate Division affirmed substantially for the reasons expressed by the Tax Court in its comprehensive written opinion. Hayes Home Urban Renewal Corp. v. City of Newark, 2003 WL 23195463 (App. Div. Dec. 23, 2003). In this appeal, the City of Newark challenged the Tax Court’s decision (20 N.J. Tax 528 (Tax Court 2003)), that land owned by the Newark Housing Authority, but leased to the plaintiff Hayes Home Urban Renewal Corp. to be developed for low income housing, was exempt from property taxes for part of the 1998 tax year and the full 1999 tax year. The Tax Court concluded that the land retained its tax exemption for the tax years involved. There was no dispute that the Newark Housing Authority was exempt from taxation and that the project had received a tax abatement upon the issuance of certificates of occupancy. The only issue that was in dispute focused on the property taxes for the period of time between the initial lease between the plaintiff and the Newark Housing Authority and the time that the tax abatements took effect under the agreement between those parties. The city argued that the plaintiff did not have standing to file a tax appeal because it did not own the property and did not include the owner as a necessary party. The city also argued that the Tax Court erred in concluding that the plaintiff did not have to pay land taxes under the abatement agreement. Finally, the city argued that the Tax Court erred in concluding the plaintiff was entitled to a property tax exemption for the years in question and that they shared the same public purpose as the Housing Authority. The Appellate Division held that these arguments were thoroughly addressed in the court’s published opinion and they were satisfied that he had correctly decided the issues presented. For a more in depth review of the underlying Tax Court case, see “ Property Tax Update: January 2003 � June 2003,” 174 N.J.L.J. 176, (Oct. 20, 2003). Community Access Unlimited Inc. v. City of Elizabeth, Approved for Publication (Oct. 6, 2003). Community Access Unlimited Inc. (“CAU”) (formerly known as the Association for Advancement of the Mentally Handicapped) is a tax-exempt nonprofit organization. In this case, they were seeking exemption for three different properties, arguing that the primary use of these properties is to house people with mental disabilities. The position of the municipality was that housing people with mental disabilities alone, or even as a primary purpose, does not demonstrate that CAU is organized exclusively for the moral and mental improvement of men, women and children, or that it is organized for a charitable purpose within the meaning of N.J.S.A. 54:4-3.6. The municipality also argues that even if CAU does qualify under the category, it contends that it may be doing this type of work offsite, and in any event only as a secondary purpose. The facts were not in dispute and were set in detail in the opinion. CAU submitted certifications of its members to describe the individuals who were placed in this housing and the payments received. The Tax Court held that CAU was properly organized for a charitable purpose based upon CAU’s bylaws and articles of incorporation, and applicable case law. The court then turned to the question of whether the subject properties were being used for that charitable purpose. After citing the controlling case law for the subject, the court once again found for the plaintiff. The municipality had contended that CAU’s primary purpose was to house people with mental disabilities and any services it provides that may improve or rehabilitate its members was purely secondary. The court disagreed, stating that CAU provides much more than housing to its members residing at the subject properties. In fact, the court found that the housing itself is secondary to CAU’s main purpose, which is to give individuals incapable of functioning on their own an opportunity to live as close to a normal life as possible. It recognized that rehabilitating the mentally disabled is an important and legitimate governmental concern. Finally, the court noted that CAU solicits private contributions and engages yearly in substantial capital campaigns and that two of the subject properties were donated to CAU for consideration of less than $100. It was obvious to the court that CAU depends on charitable contributions for its support. Accordingly, when the court looked at the totality of facts and circumstances, they found that the subject property was actually and exclusively used in furtherance of CAU’s stated charitable purpose, and since they were properly organized and the properties are not used for profit, they qualify for tax exemption pursuant to N.J.S.A. 54:4-3.6. Senior Citizen Deduction Pat Scarano v. Morris Township, Docket No. A-5724-01T3 (App. Div. July 31, 2003). The plaintiff, Pat Scarano, appealed pro se from an affirmance by the Tax Court of an alleged dismissal as untimely of his appeal to the county tax board. The municipality had denied Scarano’s applications for $250 annual senior citizen deductions on his real property taxes for the years 1999 to 2000 as time barred. Applications for those two years, along with an application for a deduction in 2001, were filed on June 20, 2001. The applications for both years 1999 and 2000 were denied by the Taxing Authority on July 17, 2001. The application for 2001 was granted as being timely. It appears that the record of this case was confusing, as the Appellate Division notes that the Tax Court refers to an appeal by Scarano, but the Appellate Division was unable to verify its existence. They do note an appeal was filed on April 6, 2001, but it only related to Scarano raising an alleged violation of N.J.S.A. 54:4-8.44a. Substantively, Scarano’s claims are governed by the provisions of N.J.S.A. 54:4-8.41 to 8.49, which concern senior citizen property tax deductions. N.J.S.A. 54:4-8.43 requires that a written application for deduction be filed by Dec. 31 of the pretax year. This statute does provide a mechanism for an offset against remaining taxes, if the application is filed and approved late, and for a refund, if all taxes had been paid. However, the statute provides further that “no application for a tax deduction for any previous tax years shall be allowed by any assessor, collector or governing body.” The Appellate Division presumed that the taxing authority relied on this particular statute in denying Scarano’s applications. N.J.S.A. 54:4-8.44 sets forth the facts that were essential for the support of a claim for a deduction. Once the application has been received and approved, the provisions of N.J.S.A. 54:4-8.44a become a factor. That statute requires a person who has been allowed a deduction to file, on or before March 1 of the post-tax year, a statement of his anticipated income for the ensuing tax year and any other information deemed necessary to establish his right to a tax deduction in that ensuing year. The statute provides a type of form as prescribed by the Director of the Division of Taxation, and that it shall be mailed on or before Feb. 1 of the post-tax year to each person by the collector in the municipality. This statute finally states that upon the failure of any person to file this statement within the time provided or submit any proofs as the collector deems necessary, or if it is determined that the income exceeds the income limitation, the tax deduction shall be disallowed. If the deduction is disallowed, notice of disallowance is required to be mailed. Once a post-tax year statement has been filed and the deduction has been allowed, the taxpayer’s claim is deemed to continue in force from year to year. However, the claimant is required to establish by his or her post-tax statement that eligibility remains. The appeals from the disposition of a claim for a deduction are the same as provided for appeals from assessments generally. According to the Appellate Division, the Tax Court appeared to make its decision based on the determination that any appeal to the county board of taxation was not filed by the statutorily prescribed time period. Additionally, the Tax Court found as a matter of law that Scarano’s claims were barred by N.J.S.A. 54:4-8.43. Again, although the record was spotty, the Appellate Division stated that papers submitted by Scarano on this appeal suggest that a deduction in taxes was approved in 1995 and that post-tax year statements were executed by Scarano in 1996, 1997, 1998 and 1999. Scarano claims not to have received in the mail any additional post-tax year statements for execution. Scarano argues that the deduction being approved in 1995 entitled him to receive post-tax year statements thereafter and since he did not receive those statements, his applications for the years 1999 and 2000 should not have been declared untimely. The Appellate Division found that the record on appeal is inadequate to permit a reasoned evaluation of Scarano’s arguments. As a result, the Appellate Division reversed and remanded the matter to the Tax Court and directed it to determine whether Scarano filed a timely appeal to the county board of taxation from the taxing authority’s determination to deny his application for a deduction in the tax years 1999 and 2000, and if so, the resolution of the appeal. The Appellate Division went on to add that if no procedural bar to further action by the Tax Court exists, the Tax Court is then directed to determine, by means of a evidentiary hearing, the status of Scarano’s applications for deductions in the years following 1995; Scarano’s entitlement (or not) to receipt of a post-tax year statement form pursuant to N.J.S.A. 54:4-8.44a; and, if entitlement exists, whether that form was received during the period at issue. If Scarano was entitled to receive the statement and did not, then the Appellate Division directs the court to consider the effect of the nonreceipt on Scarano’s appeal. Tax Valuation New Jersey Metromall Urban Renewal, Inc. v. City of Elizabeth, Tax Court Docket No. 005870-2003 (Oct. 22, 2003). The plaintiff filed an appeal on the 2001 property tax assessment of 10 lots that it owns. In the aggregate, one set of lots contained 28.82 acres with a total assessment of $3,799,000 and another collection of lots, which contained 98.41 acres, was also part of the appeal. The plaintiff appealed the assessments for tax years 1999 and 2000, as well as the 2001 year. The Tax Court indicated that the 1999 appeal was dismissed on the ground no timely appeal was filed before either the county board or the Tax Court and the 2000 appeal was dismissed on the ground that no timely appeal was filed to the Tax Court from the judgments of the county board of taxation. Apparently, the parties also attempted to use the Correction of Errors statute, N.J.S.A. 54:51A-7, which was denied by the Tax Court because of the determination of the proper assessments required the exercise of the asssessor’s judgment as to value. The plaintiff challenged the 2001 assessment on three grounds: � the assessments violated the financial agreement between plaintiff and defendant by including certain improvements to the subject land; � the assessments violated provisions of the financial agreement limiting the assessments to the aggregate amount for tax year 1998, which was $1,601,500; and � the assessments themselves were excessive. The opinion only refers to the first two issues, with the valuation issue to be tried at a later date if necessary. After reviewing a history of both the Large Site Landfill Reclamation and Improvement Law (N.J.S.A. 40A:12A-50 to -.63) and the Long Term Tax Exemption Law (N.J.S.A. 40A:20-1 to -20), the court described the financial agreement that was entered into on July 1, 1998, for a term of 30 years between the parties. In this financial agreement, land taxes would be credited against a PILOT program (payment in lieu of taxes). Plaintiff claims that the assessment on the subject land improperly included improvements in violation of the provisions of this financial agreement. Since the plaintiff presented no proofs at trial in support of this claim, the court denied relief on this basis. The plaintiff’s second claim for relief was that the assessments violate the intention and understanding of the parties as incorporated in the financial agreement that the subject land would be assessed as unimproved and the assessment would not increase significantly over the $1,601,500. Consequently, the plaintiff contended that the 2001 tax assessment should be reduced from an aggregate of $13,758,100 to an aggregate of $1,601,500. The defendant responded by saying its financial agreement did not contain any such agreement and even if it did, the local exemption ordinance does not permit any limitation and, therefore, it is ultra vires and invalid. The court found that the parties did not agree that the property tax assessment would be frozen or otherwise limited and that no such agreement was authorized by the exemption ordinance acted by the municipality. Also, the court found that the Long Term Law (N.J.S.A. 40A:20-1 to -20) does not permit the assessment to either be frozen or otherwise limited on a basis not applicable to all other properties in the city. The court also noted that under the Uniformity Clause of the Constitution, any provision in the Long Term Law which permitted such a limitation would be invalid. Therefore, the court held that the defendant’s assessor had the right under the financial agreement between the parties � and, in fact, the obligation under applicable law � to assess the subject land under the same standard of value as applied to other land in the city. Accordingly, the court ordered a trial date for the determination of the value of the subject land as of Oct. 1, 2000. Offer of Judgement and Counsel Fee Mase Land Co., L.L.C. v. Jim D. Mesalic and Edison Road Realty Inc., and Jim D. Mesalic and Edison Road Realty Inc. v. Dancorp, Inc. and Mase Land Co., L.L.C., Docket No. A-0605-02T5 (App. Div. Sept. 26, 2003). This case involves a sale of approximately 310 acres of land by sellers Jim Mesalic and Edison Road Realty Inc. to buyers Dancorp Inc. and Mase Land Co., L.L.C. On Feb. 2, 2001, Mesalic filed a complaint seeking a declaratory judgment that pursuant to the agreement of sale of the property, which was executed on Sept. 11, 1997, he owed only $43,629.50 of rollback taxes relating to a 50-acre section of the property conveyed. Mase filed its own complaint on Feb. 5, 2001, seeking a declaratory judgment that Mesalic was responsible for all rollback taxes for the entire property. The cases were consolidated by consent order dated March 16, 2001. On Feb. 2, 2001, Mesalic also filed an offer to have judgment entered in the amount of $55,000 pursuant to Rule 4:58-1, but Mase never accepted the offer and following nonbinding arbitration, Mase filed for a trial de novo. Mesalic tendered a second offer of judgment on Feb. 19, 2002, when he offered to take judgment in the amount of $43,629.50 and to settle Mase’s Rule 4:58 liability for attorney fees in cost of $20,000. Once again, Mase never accepted this additional offer. After a trial on the merits, the judge entered judgment in favor of Mesalic based on the contract language which was clear and unambiguous regarding the seller’s responsibility for all rollback taxes that were triggered by a change of use prior to transfer of title. On July 9, 2002, Mesalic moved for an award of attorneys’ fees pursuant to Rule 4:58. The court awarded fees to Mesalic in the amount $66, 934.37 and suit costs in the amount of $2,452.54. The final judgment was stayed pending Mase’s appeal. As to the rollback responsibility between Mase and Mesalic, the Appellate Division affirmed the trial court’s decision regarding the allocation of rollback taxes. Throughout the negotiations, buyer Mase maintained that they never intended to pay any of the rollback taxes. In fact, language was drafted in a form of the agreement in February 1997 that the responsibility would be that of the seller for the payment of rollback taxes. Drafts of the agreement lacked any provision for escrow monies for the rollback taxes, but provided for a lien on the property against unpaid rollback taxes. An escrow provision was first incorporated in a draft in August of 1997. The parties were then in dispute as to any oral agreement as to their responsibility for the rollback taxes. The final agreement of sale included separate provisions for regular payment of real estate taxes as well as for rollback taxes. After a lengthy discussion of the oral and written agreement between the parties, the Appellate Division had determined that the contract was clear and unambiguous and that Mase may have wanted to transfer the obligations to Mesalic to pay the rollback taxes to whenever the use of the property changed, even after title had been transferred from seller to buyer, but the express language of the agreement did not reflect that intention. The Appellate Division affirmed the decision in regard to the issue of rollback taxes for the reasons expressed in the lower court’s opinion. As to the attorneys’ fees and costs that had been entered by a lower court, the Appellate Division reversed the awarding of attorneys’ fees and costs, finding that “the parties agreed to disagree” and they intended to litigate the question of rollback taxes if they could not reach an agreement; an agreement was never reached, they obviously intended to litigate the question of rollback taxes and each acknowledged in an escrow agreement its individual responsibility for its own attorney fees and costs of litigation. The court concluded that “in the face of an unambiguous agreement by each party to bear his cost of anticipated litigation, we hold that Mesalic cannot utilize the offer of judgment rule to derogate his agreement to bear his own attorney fees and costs when the litigation involves the very issue which engendered the agreement.” Brodman is a partner and chairman of the real property tax appeals department at Ansell Zaro Grimm & Aaron of Ocean and. None of the materials contained within this Property Tax Update constitute legal advice.

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