In a July 3 unpublished opinion, Omega Self Storage v. Township of Lawrence, A-1755-12, the Appellate Division violated long-held principals of standing and due process as related to real property tax appeals.
The Law Journal listed the plaintiff, a contract purchaser of real estate, as among the winners in its “Winners and Losers” column on July 8. It failed to list sellers and owners of real estate, actual taxpayers and the well-developed concepts of standing, freedom of contract and predictability as big losers.
The facts of the case, according to the Tax Court and Appellate Division, are not complex.
Omega Self Storage of N.J. contracted to buy property from Lawrence Station Storage LLC on Dec. 21, 2011, and title and ownership were transferred on May 30, 2012. It appears that the contract was silent on which party had the right or obligation to file a tax appeal for tax year 2012. Thus, those rights and obligations would be covered by existing law.
The taxes were assessed against Lawrence. However, on March 29, 2012, a few days before the April 1 filing deadline, Omega filed an appeal in its own name without apparently giving formal notice to the owner. Lawrence would have been liable to pay the first quarter’s taxes on Feb. 1, 2012. The liability to pay second quarter taxes on May 1, 2012, would have arisen before title passed to Omega.
On Lawrence Township’s challenge to Omega’s lack of standing, the Tax Court ruled that although Omega clearly had an interest in the total tax assessment as a future owner, it lacked standing to bring suit at the time and thus dismissed the case.
The Appellate Division reversed, finding Omega’s future interest conveyed standing vis à vis the municipality. This was not an unjust result as the municipality clearly knew the identity of the property and the quantum of the challenged assessment. But the appeals court failed to recognize the rights of the absent property owner and the person responsible for payment of taxes until title passed.
Had the seller received timely notice of the appeal and an opportunity to appear in the proceeding and share in the benefits of any refund of taxes for which it had paid for two of the four quarters, the determination would not have violated Lawrence’s due process rights to notice and an opportunity to be heard.
Had the parties agreed who would have the rights to prosecute and reap the benefits of a 2012 tax appeal in the name of the proper party, Lawrence, at the time of the filing of the appeal, there would be no problem with the Appellate Division’s suggestion in its footnote that the complaint’s defects could be cured by the simple amendment of the named plaintiff.
The Appellate Division has created a new right for a future property owner, in certain circumstances, to bring a tax appeal. Under prior law, that right belonged exclusively to the statutory “taxpayer,” defined by case law as the current title holder and net lease tenant. In extending the definition, the court has failed to adequately consider the rights of the “taxpayer” who has already paid taxes for two of the four quarters of the challenged assessment.
The ruling interferes with the seller’s right to let the assessment stand so as not to allow the purchaser (who seems to have bought the property for substantially less than the equalized tax assessment) to argue for a reduction in the purchase price.
The court has modified a contract of sale, which could have disposed of the rights and obligations of the parties regarding tax appeals, by inserting its idea of what would have been a fair allocation of those rights. (Perhaps one party, relying on existing law, didn’t want to raise the issue and hoped to have existing law prevail in the absence of a contrary contract provision.)
The ruling has put a very heavy thumb on the scale of justice and freedom of contract without even giving notice to the contract seller and thus not having given the actual taxpayer an opportunity to be heard.
At a minimum — if the contract purchaser is to be given a right to take an appeal — the courts and/or the Legislature must provide that the owner be given notice and an opportunity to be heard.
This is the case when a tenant responsible for payment of taxes under a lease may bring an appeal in the owner’s name if it gives notice to the owner, as noted in Village Supermarkets v. Twp. of West Orange, 106 N.J. 628 (1967), and Rule 8:5-3 (8).
Everyone with an interest in a dispute doesn’t have standing to file a complaint. When the courts create standing for new classes of taxpayers to challenge tax assessments, they must not forget to give notice to the old classes who paid taxes for which a refund may be due. •