Articles Tagged with Real Estate

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We are in a difficult and uncertain time and I hope everyone is staying safely at home.  In the meantime, our office has been receiving daily updates from the New Jersey Supreme Court and the Legislature, concerning delays in Court dates and filing deadlines.  We have been trying to forward this information to our clients as it becomes available.  On March 19, 2020, Chief Justice Rabner signed an Order delaying the filing deadline for local property tax appeals from April 1 to a new date, which will be scheduled for 30 days following the determination that the state of emergency declared by Governor Murphy has ended.

Accordingly, if you believe your property is substantially over-assessed, and you are concerned that you may miss the April 1 filing deadline, you may still have plenty of time to file your appeal.  However, please note that the delay of the filing deadline will only apply to Tax Appeal filings where the filing deadline would have been April 1 or later.  It will not apply to those matters in which the due date for the filing was before the signing of the Court’s Order.   For instance, if your property is in Monmouth County, where the County Tax Board’s filing deadline was changed to January 15, you will not be able to file an appeal with the County Tax Board at that time.  However, if your property’s assessment exceeds $1 Million, we can still appeal the assessment directly to the Tax Court.

 
Coronavirus Related Valuation Arguments Will Not Be Successful In 2020 Tax Appeals

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In a previous article, we discussed the premise that acceptance of rent, following the termination date set forth in a Notice to Quit, would constitute a “waiver” of that Notice, hence requiring the Court to disregard that Notice and dismiss any subsequent eviction action based upon that Notice. To support this theory, Courts often rely upon the famous case of Carteret Properties v. Variety Donuts, Inc.49 NJ 116 (1967)

By way of New Jersey statutory background, all evictions except those based upon non-payment of rent require the service of a Notice to Quit upon the tenant prior to the filing of an eviction action.  In the context of a residential rental, evictions based on lease violations also require the service of a Notice to Cease in advance of the Notice to Quit.  For residential evictions, it is the Anti-Eviction Act that determines which claims require a Notice to Cease, as well as determining the length of the Notice period for the Notice to Quit.  However, for commercial tenants, it is the lease that determines the nature and length of any notice of default that must be served upon the tenant in advance of the Notice to Quit.

Unlike residential tenants, who can only be evicted for good cause, as defined by the Anti-Eviction Act, a commercial tenant can be evicted upon the expiration of a lease, without the necessity of the landlord showing any good cause. However, in these cases, the Landlord must still serve the tenant with a Notice to Quit prior to the commencement of the eviction action.  The Carteret Properties matter involved a commercial tenant, who was alleged to have violated a lease covenant.   The landlord had served the tenant with a Notice of Default, and subsequently filed a Notice to Quit.  Much of the Court’s decision in Carteret Properties was based on the Court’s determination that the landlord’s Notice to Quit was defective.

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justice_srb_2In last month’s blog, our office presented Part One of our discussion on our recommendations to an arbitration board with regard a commercial landlord tenant matter, in which the tenant withheld rent in due to alleged habitability defects.   In this month’s blog, we continue our discussion of our analysis of that matter.

In most cases, the Court is loath to construe the Tenant’s good faith actions to enforce a contract as a default of the contract.   Like most default provisions found in commercial leases, the default in the lease in this matter was not curable. Therefore, in the event that the Tribunal were to declare a default in this matter, it is clear that the Tenant would not only forfeit the tenancy, but would also forfeit the benefit from the substantial investment he made in preparing the premises for the current use. Under the matter of Mandia v. Applegate, 310 N.J. Super 435, 447 (App. Div. 1998), “[l]anguage which may defeat an estate must be strictly construed and always against… a forfeiture.” In the matter of Vineland Shopping Center, Inc. v. DeMarco, 35 N.J. 459, 465 (1961), the Court held that “[i]n a proper case, equity will relieve a Tenant from forfeiture of a lease by reason of non-payment of money where performance has been made.

In the pendent matter, the Tenant defaulted in the lease by failing to pay rent. While the Tenant probably had other mechanisms of compelling the Landlord to make the requested repairs, the Tenant in this matter did not have a lot of good alternatives. Notwithstanding the clear statement contained in the written lease, we were required to determine whether it would be equitable for us to terminate the tenancy of someone who was only trying to compel the Landlord to make repairs that the Landlord was responsible to make. In the matter of Urdang v. Muse, 114 N.J. Super 372 (Cty. Dist. Ct. 1971), the Court held that “the Court may under its equitable powers, as enunciated in Vineland Shopping Center, relieve against forfeiture. This it may do despite the fact that defaults have taken place … The essence of the power to relieve against forfeiture is that equity may intervene to mitigate the inequitable consequences of a breach.”

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Our firm was recently retained to provide an amicus brief to an Arbitration Board, for purposes of helping the arbitrator to resolve a commercial landlord tenant dispute, in which the Tenant had stopped paying rent, ostensibly due to habitability defects, affecting both the leased premises and the common area. The Landlord responded by declaring a default in the commercial justice_srb_2lease and promptly sought eviction based on that default. The questions before the arbitrator were the following:

  1. Who bears responsibility for curing habitability defects to the roof and the common area?
  2. Does the Tenant’s failure to pay rent constitute a Default that would result in termination of the tenancy?
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dollar-sign-1317230-m-150x150In 2018, many towns in Bergen County, New Jersey will undergo re-assessments. The municipalities affected include Carlstadt, Closter, Cresskill, East Rutherford, Hackensack, Hasbrouck Heights, Little Ferry, Moonachie, North Arlington, Oradell, Saddle Brook, South Hackensack, Teterboro, Westwood, and Woodcliff Lake. Additionally, the town of Saddle River will be conducting a revaluation. Revaluations and re-assessments differ only in that revaluations require the services of an outside company, whereas re-assessments are conducted by the assessor’s office. In both cases, however, the new assessments cause a great deal of confusion for some taxpayers, who mistakenly believe that the sudden increases in their assessments will result in a large increase in their tax bills. However, this notion is usually not correct.

Towns that have not been revalued or re-assessed in several years generally have assessments that are based on a small portion of their true market values. As a result of the under-assessments, the municipality annually increases its tax rates in order to satisfy the demands of the municipal budget. Due to the time and expense of conducting a revaluation, a town will generally wait several years before doing so. Then, when a revaluation or re-assessment occurs, one of the goals is to raise assessments up to close to 100% of the true market values of the properties. Consequently, the tax rates will drop commensurately so that, aside from some modest budget increases, the total tax revenue for the town is about the same as it was prior to the revaluation. Therefore, the average taxpayer will not experience any positive or negative effect from the revaluation.

Notwithstanding the arithmetic of the process, there are some taxpayers whose tax burden may change dramatically due to market trends in specific neighborhoods of a town that may result in the assessments of some properties increasing more than others. Therefore, while the net effect of a revaluation or re-assessment is ostensibly “tax neutral,” there will usually be a few taxpayers who will benefit from the revaluation or re-assessment while others are negatively impacted.

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For the past 16 years, our office has been concentrating on just two areas of law – Evictions and Tax Appeals. Our eviction practice, which now spans most of New Jersey, has helped residential and commercial landlords with the removal of more than 10,000 tenants. Our tax appeal practice has been successful in the reductions of assessments by more than $67,000,000. With our county tax appeals concluding by July of each year, and the new assessments not being released yet, we have fielded numerous calls from our clients over the past 4 months, inquiring about tax appeals for 2018. The following information pertains to the release of new assessments and filing deadlines.

Monmouth County

We note that most municipalities in Monmouth County are still subject to the Assessment Demonstration Program (ADP), which often requires re-inspection of houses and buildings, and inevitably leads to yearly adjustments in assessments for the majority of Monmouth County residents. Therefore, even taxpayers who previously had their assessments reduced may find that their assessments for 2018 have been raised again. Accordingly, we have been advising all taxpayers affected by ADP to wait until their 2018 assessments are released before considering whether a Tax Appeal would be recommended. During the next few weeks, all Monmouth County residents should receive their new assessments for 2018. If you feel that your 2018 assessment exceeds the fair market value of your property, please contact us to discuss whether a tax appeal would be worthwhile pursuing. Please keep in mind that the Appeal Calendar for Monmouth County starts on November 18 and ends on January 17. Some towns, including Belmar and Spring Lake have received extensions until February 23. For information on any specific filing deadlines, please contact the Monmouth County Tax Board at (732) 431-7404.

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Each year, our office files more than a hundred tax appeals with the Monmouth County Tax Board and the  Ocean County Tax Board. We also file dozens of appeals for taxpayers in other counties. In the past, we were proud to report that we had obtained reductions in assessments for the majority of taxpayers we represented. However, as the attorney who personally appeared before the County Tax Boards for nearly all of the matters that proceeded to a hearing, I became concerned about the small percentage of matters that we did not win. While we have tried to pre-screen all matters to determine the likelihood of success, there were certain matters where the evidence at trial simply did not support a reduction of assessment. Yet there were other “borderline” matters, where it was likely that the properties were over-assessed, but being able to prove the over-assessments was extremely difficult due to a lack of supporting evidence. These matters were particularly distressing to me, because knowing that a property is over-assessed is sometimes easier than being able to prove it, and yet I have always believed that no one should be forced to pay more than his or her fair share of property taxes. Accordingly, I decided to modify the paradigm in which I prepare and present the data that we use in our tax appeal hearings.

Historically, we have always advised our clients that retaining an appraiser to prepare an appraisal report and testify at the tax appeal hearing always gives the taxpayer the best chance of winning a tax appeal. But we also understand that there are cases where the cost of an appraisal report cannot be justified by the anticipated tax savings of the tax appeal. This may be especially true in Monmouth County, where the majority of towns are mandated to conduct annual revaluations as the result of the Assessment Demonstration Program. So long as the annual revaluations continue, the benefit of a successful tax appeal is only guaranteed for one year, and hence, the single year reduction in taxes must be significant in order to make the cost of an appraisal worthwhile.

For matters where an appraisal is not practical, we have recommended using comparable sales. But in order to maximize the benefit of using comparable sales, we knew we had to improve the way that data was gathered and presented to the Tax Board. When preparing comparable sales data, we check a variety of sources, including data from MLS, as well as lists of closed deed transactions, which can be found by reviewing SR1a records that are filed with the County Tax Board as well as the assessor. We have tried to compare the subject property to similar properties, with houses of similar size and in similar neighborhoods. Most importantly, the properties that we are using as comparable sales must have closed within a year before or within a couple months after the October 1 assessing date. From the data obtained, we have used the most similar comparable sales to demonstrate that the assessment of the subject property must be reduced. But in 2017, in order to improve the paradigm, I started to go to the properties that I am using as comparable sales data and determine whether there are any factors that are not readily apparent in the MLS data or the assessor’s records. At times, I have even found that the information contained in either MLS or the assessor’s records was wrong, and perhaps a factor in the improper assessment of the subject property. One of the most common sources of an improper tax assessment is an error in assessor’s records. This year, we have exposed several of those errors and we have made sure that the assessments were properly adjusted to reflect the actual size and condition of the properties that we were working on.

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