Opinion
Docket No. 006680-2016
07-05-2016
Re: OM Realty, LLC v. Township of Hillsborough
William J. Sitar, Esq. Sitar Law Offices, LLC 1481 Oak Tree Road Iselin, New Jersey Martin Allen, Esq. Kevin A. McDonald, Esq. DiFrancesco, Bateman, Kunzman, Davis, Lehrer & Flaum, P.C. 15 Mountain Boulevard Warren, New Jersey 07059-6327
NOT FOR PUBLICATION WITHOUT APPROVAL OF THE TAX COURT COMMITTEE ON OPINIONS William J. Sitar, Esq.
Sitar Law Offices, LLC
1481 Oak Tree Road
Iselin, New Jersey Martin Allen, Esq.
Kevin A. McDonald, Esq.
DiFrancesco, Bateman, Kunzman, Davis,
Lehrer & Flaum, P.C.
15 Mountain Boulevard
Warren, New Jersey 07059-6327 Dear Counsel:
This is the court's opinion with respect to defendant's motion to dismiss the Complaint because of a failure on the part plaintiff's predecessor in title to respond to the tax assessor's request for income and expense information relating to the subject property pursuant to N.J.S.A. 54:4-34, commonly known as Chapter 91 (L. 1979, c. 91). For the reasons explained below, the motion is granted, subject to plaintiff's right to a reasonableness hearing. See Ocean Pines, Ltd., v. Borough of Point Pleasant, 112 N.J. 1, 11 (1988).
I. Findings of Fact and Procedural History
This letter opinion sets forth the court's findings of fact and conclusions of law based on the submissions of the parties on defendant's motion.
Plaintiff OM Realty, LLC is the owner of income-producing real property in defendant Hillsborough Township, Somerset County. The property is designated in the records of the municipality as Block 182, Lot 38.10, and is commonly known as 349 Route 206.
On or about June 25, 2015, the municipal tax assessor mailed to RFDC Realty, LLC, the then-owner of the subject parcel, by certified mail, return receipt requested, a request for income and expense information relating to the property. Because the clarity of the request is at issue, the request is set forth below: TOWNSHIP OF HILLSBOROUGH
County of Somerset RFDC REALTY, LLC
6 CEDAR GROVE ROAD
SOMERVILLE, NJ 08876 Re: Income and Expense Report
Property Location: 349 Route 206 Block 182 Lot 38.01
Class 4A Dear Owner of Income Producing Property:
In accordance with N.J.S.A. 54:4-34, you are hereby requested the appropriate income and expense data requested on the attached forms. The assessor, in determining the assessment on your property for the Tax Year 2016, will utilize this information. The requested information MUST be returned to this office within 45 days from the date this letter is received.
For property that is Owner Occupied, please indicate that no rent is collected on the income side of the form and complete Part II to the best of your ability. If you have any unusual circumstances pertaining to the subject property, please write them down and include such information with the attached forms.
If you have any questions with regard to this request or require any clarification relating to the information, please contact our office at (908) 369-4313, ext. 146. Our office hours are, 8:00 a.m. to 4:30 pm, Monday through Friday. Sincerely, Township of Hillsborough Debra L. Blaney
Assessor att:
DLB:dmr
Enclosed with the request was a copy of Senate bill No. 309, which was enacted as N.J.S.A. 54:4-34, as well as four pages of forms. The forms seek information regarding leases, lease dates, leased areas, rents, expenses, and other matters. The first form identifies the period for which information is sought as follows:
GENERAL INFORMATION
Fiscal Period from: ___ to ___
1/1/2014 to 12/31/2014 and Current
Plaintiff does not dispute that the assessor's information request was delivered to its predecessor in title. Nor did plaintiff offer any evidence that its predecessor in title responded to the request, or made an inquiry of the assessor to clarify the information she sought.
Having received no response to her request, the assessor set the assessment on the property for tax year 2016 at $2,439,200. Hillsborough Township implements annual reassessments. As a result, the assessment reflects 100% of true market value.
On March 1, 2016, plaintiff purchased the subject property from RFDC Realty, LLC. According to plaintiff, the purchase price was significantly below the assessed value.
On March 30, 2016, plaintiff filed a Complaint challenging the tax year 2016 assessment.
On April 6, 2016, the municipality filed a Counterclaim, alleging that the assessment was below the true market value of the property.
On April 27, 2016, the municipality moved to dismiss the Complaint pursuant to N.J.S.A. 54:4-34 based on the prior owner's failure to respond to the assessor's information request. Plaintiff opposed the motion. The court thereafter entertained oral argument from counsel.
II. Conclusions of Law
N.J.S.A. 54:4-34 provides
Every owner of real property of the taxing district shall, on written request of the assessor, made by certified mail, render a full and true account of his name and real property and the income therefrom, in the case of income-producing property . . . and if he shall fail or refuse to respond to the written request of the assessor within 45 days of such request . . . the assessor shall value his property at such amount as he may, from any information in his possession or available to him, reasonably determine to be the full and fair value thereof. No appeal shall be heard from the assessor's valuation and assessment with respect to income-producing property where the owner has failed or refused to respond to such written request for information within 45 days of such request . . . . In making such written request for information pursuant to this section the assessor shall enclose therewith a copy of this section.
"The purpose of Chapter 91 is to assist the municipal tax assessors, who are charged with the responsibility for property valuations, by affording them access to fiscal information that can aid in the valuation of property." Lucent Techs, Inc. v. Township of Berkeley Heights, 405 N.J. Super. 257, 263 (App. Div. 2009), rev'd in part, aff'd in part, 201 N.J. 237 (2010). "The correct and timely availability of this information to the tax assessor 'avoid[s] unnecessary expense, time and effort in litigation.'" Ibid. (quoting Ocean Pines, supra, 112 N.J. at 7 (internal quotations omitted). A property owner's failure to respond to an assessor's request for information precludes the property owner's subsequent appeal of the assessment set by the assessor.
In Ocean Pines, however, the Supreme Court held that a property owner who fails to comply with N.J.S.A. 54:4-34 may nevertheless seek a "sharply limited," and likely summary, review of the reasonableness of the assessor's valuation based upon the data available to the assessor when the valuation was made. Such an inquiry would be limited to "(1) the reasonableness of the underlying data used by the assessor, and (2) the reasonableness of the methodology used by the assessor in arriving at the valuation." 112 N.J. at 11.
Plaintiff seeks to avoid having its appeal limited to an Ocean Pines reasonableness hearing by arguing that: (1) the assessor's information request is ambiguous; (2) it is inequitable to penalize plaintiff for the actions of its predecessor in title; and (3) that the sale of the subject property in March 2016 in an arms' length transaction at an amount below the assessed value precludes application of N.J.S.A. 54:4-34. Plaintiff's arguments will be addressed in turn. A. Clarity of the Assessor's Request.
Plaintiff argues that the assessor's request is ambiguous, and therefore void, for several reasons: (1) the first sentence of the request is not a complete sentence; (2) the first page of the forms enclosed with the request contains confusing information with respect to the time period of the information sought by the assessor; and (3) pages 3 and 4 of the forms enclosed with the request are labeled "Tax Year 2016 Rental Information Sheet," when, in fact, the assessor was seeking income and expense information from 2014 and/or 2015.
In support of its argument plaintiff relies on Tax Court opinions in which the court found that the appeal-limitation provision of N.J.S.A. 54:4-34 did not apply because the assessor's information request was vague or ambiguous. See Town of Phillipsburg v. ME Realty, LLC, 26 N.J. Tax 57, 67-68 (Tax 2011)(holding that Chapter 91 appeal-preclusion provision did not apply because the assessor's request for information for "tax year ending December 2008/2009" did not "clearly and unequivocally indicate what information is sought."); Cassini v. City of Orange, 16 N.J. Tax 438, 453 (Tax 1997)(holding that Chapter 91 appeal-preclusion provision did not apply because the assessor's requests sought information through December 31st of a calendar year that had not yet ended, noting that the "government must speak in clear and unequivocal language where the consequence of non-compliance [with a Chapter 91 request] is the loss of the right to appeal assessments.").
The court notes that defendant cited, and plaintiff attempted to distinguish, three unpublished Tax Court opinions. Those opinions do not constitute precedent and may not be cited by this court. R. 1:36-3.
These trial court precedents, however, were issued prior to the Appellate Division's recent holding in Waterside Villas Holdings, LLC v. Township of Monroe, 434 N.J. Super. 275 (App. Div.), certif. denied, 217 N.J. 589 (2014). In that matter, a property owner challenged the dismissal of its Tax Court Complaint as a result of the property owner's failure to respond to an assessor's Chapter 91 request, arguing that its failure to respond should be forgiven because the request "was not clear and unequivocal" and the "taxpayer is left to guess whether the assessor is looking for the most recent [twelve] months of information (August 2009 - July 2010) or January to December 2009." Id. at 281 (internal quotations omitted). The court unequivocally rejected the notion that a property owner faced with what it views as an ambiguous request from an assessor may simply ignore the request and avoid the appeal-preclusion provision of Chapter 91.
The court's holding is clear:
However, where the taxpayer receives a Chapter 91 request that it deems improper in some fashion, it may not simply ignore its statutory obligation to respond. Rather,
the taxpayer must take action to challenge the request within the forty-five day statutory time limit, and to put the municipality on notice of its contention. In any event, the taxpayer cannot just sit by and do nothing until the assessment is finalized, as this taxpayer did, and thereafter seek to appeal the assessment by plenary review. Such conduct results in "unnecessary expense, time and effort in litigation." See Terrace View [Gardens v. Township of Dover, 5 N.J. Tax 469, 471-72 (Tax 1982), aff'd
o.b., 5 N.J. Tax 475 (App. Div.), certif. denied, 94 N.J. 559 (1983).]
[Tower Center Assocs. v. Twp. of East Brunswick, 286 N.J. Super. 433, 438, 669 A.2d 829 (App. Div. 1996).]
As the court noted,
Accord H.J. Bailey v. Neptune Twp., 399 N.J. Super. 381, 389-90, 944 A.2d 706 (App. Div. 2008); Morey v. Wildwood Crest Borough, 18 N.J. Tax 335, 340 (App. Div. 1999), certif. denied, 163 N.J. 80, 747 A.2d 287 (2000).
[Id. at 283.]
Refusals on the part of taxpayers to cooperate with local property assessors cannot be tolerated by this court. Legitimate requests for information by assessors to prepare assessments are actions which should be encouraged by this court. Taxpayers frequently complain of local property tax assessors and their work. Here the taxpayer had an opportunity to supply to the assessor information pertinent to the assessor's work. It failed and refused to do so without any explanation, and its attitude in failing to even respond to the assessor's legitimate statutory request is inexcusable.The Waterside Villas court also reaffirmed the Appellate Division's prior holding that
[Id. at 284 (quoting Terrace View, supra, 5 N.J. Tax at 474-475).]
[w]here the request is thought not to be "legitimate," in whole or in part, the taxpayer must do something to assert that contention before the assessment is imposed to avoid the statutory bar to appeal embodied in N.J.S.A. 54:4-34. Thus, as in Ocean Pines, "plaintiff's failure to respond in any fashion to the assessor's request precluded plaintiff from asserting a 'good cause' claim." Ocean Pines, supra, 112 N.J. at 9.
[Ibid. (quoting Tower Center Assocs., supra, 286 N.J. Super. at 439).]
The only exception recognized by the court is in "cases in which, for example, the request is so egregiously ambiguous in its identification of the property or in the instruction to the taxpayer that due process principles are offended." Id. at 284-285, n.3 (citing Middletown Twp. Policemen's Benevolent Ass'n v. Township of Middletown, 162 N.J. 361, 367 (2000)). The court cautioned, however, that "[w]e expect that such a case would be rare." Ibid.
Application of the holding in Waterside Villas to the present facts leads to the conclusion that the municipality's motion must be granted. There is a noticeable absence in the record of any evidence that the assessor's information request was actually read by a principal or agent of the prior owner of the property. There is, therefore, no evidence that the text of the request or content of the enclosed forms actually caused confusion on the part of the reader, resulting in a failure to respond. Surely, if the assessor's request had, because of its ambiguous nature, left the reader confused, one would expect that a certification from the reader detailing this fact would have accompanied plaintiff's opposition papers. This evidentiary void might reasonably be interpreted as suggesting that the assessor's information request was discarded, misdirected, or overlooked, or that the legal significance of failing to respond to the request was not fully appreciated by the reader, despite the inclusion of the text of Chapter 91 with the request.
Plaintiff argues that it cannot produce evidence with respect to whether the assessor's information request was read by a principal or agent of the prior owner of the property, as it has no control over that entity. The motion record, however, contains no evidence suggesting that plaintiff attempted to obtain information from RFDC Realty, LLC about the handling of the assessor's information request or that the prior owner refused to cooperate with plaintiff in opposing defendant's motion. Nor would evidence of non-cooperation on the part of the prior owner necessarily warrant denial of defendant's motion, as a party's inability to obtain evidence in support of its position does not ordinarily preclude the award of relief against that party.
The court need not, however, determine whether the assessor's request was read by a principal or agent of RFDC Realty, LLC and found to be ambiguous by that party. There is no dispute that the prior owner of the property did not respond to the request or reach out to the assessor to clarify any perceived ambiguities. Given the Appellate Division's unequivocal holding that a property owner must "do something" in response to an assessor's information request "before the assessment is imposed to avoid the statutory bar to appeal embodied in N.J.S.A. 54:4-34," Waterside Villas, supra, 434 N.J. Super. at 284, defendant's motion must be granted.
Nor can the court conclude that this is one of the "rare" instances in which the assessor's request is "so egregiously ambiguous in its identification of the property or in the instruction to the taxpayer that due process principles are offended." Id. at 284-285, n.3. The first sentence of the assessor's request plainly is incomplete. The sentence provides: "In accordance with N.J.S.A. 54:4-34, you are hereby requested the appropriate income and expense data requested on the attached forms." It appears that the assessor omitted "to provide" or a similar infinitive. The next sentences in the request, however, provide context to the first, incomplete sentence: "The assessor, in determining the assessment on your property for the Tax Year 2016, will utilize this information. The requested information MUST be returned to this office within 45 days from the date this letter is received." These sentences clearly indicate that the property owner is being asked to return information to the assessor within 45 days and that the information, once returned, will be used to determine the assessment on the property owner's parcel. While there may be ambiguity in assessor's request, the court concludes that there is sufficient clarity to put the property owner on notice that that assessor is requesting a response and to trigger the property owner's obligation to call the assessor's office to address "any questions with regard to this request" or to seek "any clarification relating to the information," as stated in the final sentence of the assessor's request.
The court reaches the same conclusion with respect to the identification of the time period covered by the request on the first page of the forms enclosed by the assessor. The identification appears in the right-hard corner of the form as follows:
GENERAL INFORMATIONThe period for which information is sought is not evident. It is not clear whether the property owner may fill in the blanks and provide information for any fiscal period it chooses, must provide information for the period 1/1/2014 to 12/31/2014, must provide current information (which is problematic, given that the information requested on the forms appears to be on an annual basis and current information for a June 2015 request would not reflect annual totals), or some combination of these periods.
Fiscal Period from: ___ to ___
1/1/2014 to 12/31/2014 and Current
This ambiguity was not so "egregiously ambiguous" as to offend due process and could easily have been addressed in four ways. The prior owner could have: (1) provided income and expense information for any fiscal period and filled in the blanks; (2) provided income and expense information for the period 1/1/2014 to 12/31/2014; (3) provided current income and expense information for whatever period such information was available at the time of a response to the request; or (4) reached out to the assessor to clarify the period for which information was sought. The prior owner took none of those steps.
The same is true with respect to the fact that two of the forms enclosed with the assessor's request are entitled "Tax Year 2016 Rental Information Sheet." The court concludes that these forms are not ambiguous. It is well established that all real property in the State is assessed yearly. The assessed value is determined as of October 1st of preceding the tax year. N.J.S.A. 54:4-23; Aperion Enterprises, Inc. v. Borough of Fair Lawn, 25 N.J. Tax 70, 86 (Tax 2009). In addition, the assessor quite clearly explains in her information request that she is seeking information to be used "in determining the assessment of your property for the Tax Year 2016 . . . ." Plaintiff suggests that the prior property owner may have mistakenly thought that the assessor was seeking information relating to 2016 rental income, which could not be provided because the request was made in June 2015. There is no proof of this confusion, which, if it existed, could have been addressed through inquiry to the assessor. B. Effect of Prior Owner's Acts.
Plaintiff contends that it is unfair to saddle it with the consequences of the appeal-limitation provision of N.J.S.A. 54:4-34, when it is the prior owner that failed to respond to the assessor's information request, not plaintiff. It has long been established, however, that a property owner may be foreclosed from pursuing a tax appeal because of a prior owner's failure to comply with Chapter 91. See Carriage Four Assocs. v. Township of Teaneck, 13 N.J. Tax 172, 180 (Tax 1993)(holding that a receiver who took title to property after the prior owner failed to respond to a Chapter 91 request is precluded from filing appeal because the "chapter 91 defect runs with the land, it is not personal to any given owner."); ADP of New Jersey, Inc. v. Township of Parsippany-Troy Hills, 14 N.J. Tax 372, 377 (Tax 1994)(holding that purchaser from prior owner "stands in the shoes of the prior owner" for Chapter 91 purposes).
Under these precedents, plaintiff stands in the shoes of RFDC Realty, LLC, from which it obtained title to the subject property. RFDC Realty, LLC failed to respond to the assessor's information request and failed to reach out to the assessor to clarify any ambiguities it may have perceived in the request. Plaintiff obtained title to the subject property in March 2016, after the tax year 2016 assessment had been set. It was incumbent on plaintiff to inquire as to the tax status of the property and to take whatever steps necessary to protect its interests when negotiating its contract to purchase the subject property. See Mobil Administrative Serv. Co. v. Township of Mansfield, 15 N.J. Tax 583 (Tax 1997)(holding that purchaser of property has opportunity to protect its interest in challenging local property tax assessment when negotiating purchase agreement for the property). Plaintiff must bear the burden of RFDC Realty, LLC's actions.
The court is well aware of the drastic penalty suffered by a taxpayer who fails to respond to an assessor's information request and thereafter feels aggrieved by the assessment placed on its income-producing property. The Appellate Division's holding in Waterside Villas, however, is clear. Judge Crabtree plainly stated the obligations of this court to follow controlling appellate precedents. "Trial courts are free to disagree with appellate opinions; they are not free to disobey." Tuition Plan v. Director, Div. of Taxation, 4 N.J. Tax 470, 485 (Tax 1982)(citing Reinauer Realty Corp. v. Borough of Paramus, 34 N.J. 406 (1961); Dunham's & Co. v. Dzurinko, 125 N.J. Super. 296 (App. Div. 1973)). Accord Weir v. Market Transition Facility, 318 N.J. Super. 436, 448 (App. Div.)("The trial court may disagree with our published decisions but it is obligated to comply with the procedures we mandate within them."), certif. denied, 160 N.J. 477 (1999). It is quite plain that the Appellate Division's holding is intended to encourage compliance by property owners with Chapter 91's mandate that they respond to requests for information from tax assessors. C. The Assessment on the Subject Property.
Plaintiff argues that the appeal-limitation provision of N.J.S.A. 54:4-34 should not apply because the amount that plaintiff paid to purchase the property in an arms' length transaction in March 2016 is well below the tax year 2016 assessment on the property. The sale of the subject property in an arms' length transaction is precisely the type of evidence that would be admissible and highly relevant in a challenge to the assessment. Yet, it is quite plain that the Legislature intended to limit the appeal rights of a property owner subject to the appeal-limitation provision of N.J.S.A. 54:4-34. Plaintiff provides no cogent argument in support of its contention that it should escape the appeal-limitation provision of N.J.S.A. 54:4-34 because it has what may be credible evidence that the assessment exceeds the subject property's true market value. If plaintiff's position was adopted by this court, the appeal-limitation provision of N.J.S.A. 54:4-34 would effectively be nullified. Under plaintiff's rationale, any property owner who failed to respond to a Chapter 91 request could avoid the appeal-limitation provision by producing evidence that the subject property has a true market value below the assessed value. There would, in effect, be no appeal-limitation provision, as any property owner would have an opportunity to establish true market value, regardless of whether the property owner complied with the assessor's information request.
The Supreme Court unequivocally held that where an assessor's request for income and expense information is not fulfilled in accordance with N.J.S.A. 54:4-34, the property owner is limited to a reasonableness hearing. See Ocean Pines, supra. The production of evidence of true market value by the property owner cannot defeat the statutory penalty for failure to respond to the assessor's information request.
The court notes that plaintiff's assertion that the March 2016 purchase price for the subject property was the result of an arms' length transaction has not been tested in an adversarial proceeding. The court makes no finding with respect to the credibility of the purchase price as evidence of true market value. --------
Very truly yours,
/s/Hon. Patrick DeAlmeida, P.J.T.C.