AVR Realty Co. v. Cranford Tp.

• Decision Date: 01 December 1998
• Citation: 316 N.J. Super. 401,720 A.2d 434
• Parties: AVR REALTY CO., c/o Rose, Plaintiff-Respondent, v. CRANFORD TOWNSHIP, Defendant-Appellant.
• Court: New Jersey Superior Court

720 A.2d 434

316 N.J. Super. 401

AVR REALTY CO., c/o Rose, Plaintiff-Respondent, v. CRANFORD TOWNSHIP, Defendant-Appellant.

Superior Court of New Jersey, Appellate Division.

Argued October 27, 1998.

Decided December 1, 1998.

Robert F. Renaud, Cranford, for defendant-appellant (Palumbo & Renaud, attorneys; Mr. Renaud, on the brief).

William J. Sitar, West Orange, for plaintiff-respondent (Mandelbaum & Mandelbaum, attorneys; Mr. Sitar, on the brief).

Before Judges BROCHIN and KLEINER.

The opinion of the court was delivered by KLEINER, J.A.D.

Defendant Cranford Township appeals from an adverse ruling of the Tax Court relating to Cranford's assessment of plaintiff AVR Realty Co.'s property for 1995. We conclude that the Tax Court failed to properly construe a prior decision of this court, AVR Realty Co. v. Cranford Tp., 294 N.J.Super. 294, 683 A.2d 235 (App.Div.1996), certif. denied, 148 N.J. 460, 690 A.2d 608 (1997) ("AVR I"), in which we invalidated Cranford's assessment of plaintiff's property for the tax years 1992 and 1993. AVR I fully analyzed the proper assessment procedure when the assessment for a forthcoming year implicates the Freeze Act, N.J.S.A. 54:51A-8. Contrary to the Tax Court decision, our review of the record reflects that Cranford's assessor followed the statutory procedure of N.J.S.A. 54:51A-8 in his assessment of plaintiff's property in 1994, and that his taxing procedure comports with our prior analysis in AVR I. We therefore reverse the Tax Court decision and remand to implement our decision in this appeal.

I

Although the factual history of this dispute is fully reviewed in AVR I, we will reiterate some salient facts. In 1992, plaintiff's seven-acre property included a brick mixed-use complex comprising office space, a restaurant facility and a motel structure with 180 guest rooms. In October 1992, plaintiff was granted a building permit to construct a one-story building and to convert the motel into a senior citizens' assisted living facility. The new building was designed for use as administrative offices, a reception area, a dining area, and a lounge for use by the residents of the senior citizens' facility. Plaintiff's building permit application estimated the cost of construction as $1,102,325.

On November 4, 1993, plaintiff received a certificate of occupancy and immediately began renting the units to senior citizens. The converted motel was fully occupied by 1994.

In October 1992, at the time the construction began, plaintiff's property was assessed for the tax year commencing January 1, 1993, at $14,884,100. Upon receiving the 1993 assessment, plaintiff appealed its tax assessment. After a trial on June 2, 1995, the Tax Court entered judgment reducing the 1993 assessment to $11,170,000.

In October 1995, plaintiff filed a motion in the Tax Court seeking to have the Freeze Act, N.J.S.A. 54:51A-8, applied to the tax assessment for 1994. Defendant opposed plaintiff's motion contending that plaintiff's new construction and the modifications to its pre-existing building had increased the value of plaintiff's property. The Tax Court concluded that defendant's failure to file a formal complaint alleging a change in the value of plaintiff's property was a jurisdictional defect; thus, plaintiff's motion was granted. Defendant appealed the Tax Court decision. In AVR I, we affirmed the decision of the Tax Court; however, in our decision we concluded that defendant was not required to file a complaint alleging a change of value. Rather, defendant was not entitled to the higher assessment because it could not demonstrate that plaintiff's property had increased in value as plaintiff had not received its certificate of occupancy until November 4, 1993, after the October 1, 1993 deadline for increasing the assessment for the 1994 tax year. Id. at 301-02, 683 A.2d 235.

On October 24, 1996, plaintiff filed a motion to apply the Freeze Act to the assessment of plaintiff's property for the 1995 tax year. Defendant contended that, although it was precluded from raising the assessment on plaintiff's property for the 1994 tax year pursuant to AVR I, it was permitted to raise plaintiff's assessment for the 1995 tax year. The Tax Court concluded that defendant had failed to follow the statutory procedure and disallowed the increased assessment. As noted, we disagree and reverse.

II

The Freeze Act, N.J.S.A. 54:51A-8, provides:

Where a final judgment has been rendered by the tax court involving real property, the judgment shall be conclusive and binding upon the municipal assessor and the taxing district, parties to the proceeding, for the assessment year and for the 2 assessment years succeeding the assessment year covered by the final judgment, except as to changes in the value of the property occurring after the assessment date. Where those changes are alleged, the complaint shall specifically set forth the nature of the changes relied upon as the basis for the appeal. However, the conclusive and binding effect of the judgment shall terminate with the tax year immediately preceding the year in which a program for complete revaluation of all real property within the district has been put into effect.

The purpose of the Freeze Act is to prevent "the repeated yearly increases in the assessed value of property, not related to or justified by any changes increasing its market value and resulting in harassment of the taxpayer, subjecting him to the trouble and expense of annual appeals to the county tax board." Newark v. Fischer, 8 N.J. 191, 200, 84 A.2d 547 (1951).

Applying N.J.S.A. 54:51A-8 to the facts presented, the Tax Court judgment dated June 2, 1995, reducing plaintiff's 1993 assessment¹ to $11,170,000, protected plaintiff from any increased assessment for 1994 and 1995. However, N.J.S.A. 54:51A-8 does provide an exception to the freeze. A taxpayer may not apply the Freeze Act "to changes in the value of the property occurring after the assessment date. Where those changes are alleged, the complaint shall specifically set forth the nature of the changes relied upon as the basis for the appeal." Ibid.

As we noted in AVR I, "the techniques available to a taxing district for asserting a change-of-value claim depends on the timing of the entry of the Freeze Act judgment." 294 N.J.Super. at 299, 683 A.2d 235. Recognizing that an assessor must evaluate a property annually in October preceding the tax year, we noted:

[I]f the judgment for the base year has been entered prior to the assessment date for the Freeze-Act years, the assessor is no longer at liberty to make an independent assessment of value as of that date. Because the Freeze Act is self-executing, the assessor is obliged simply to conform the assessment for the freeze years to the judgment. Should the assessor believe that there has been a change of value as of the assessment date, the Freeze Act expressly requires the taxing district to file a complaint seeking relief from the base year assessment.

[Ibid. (citations omitted).]

The procedure changes, however, when the assessment is made before the entry of final judgment for the base year, as was the situation both in AVR I and in the present appeal:

Obviously, even though the assessor may know that the prior year's assessment has been challenged by the taxpayer, the assessor cannot know what the outcome of the challenge will be and what, if any, will be the base and the freeze years. Thus, until final judgment is entered there is no constraint upon the assessor's exercise of the statutory obligation to assess annually according to true value on the assessment date, and there is neither reason nor opportunity, prior to the fact, to require the assessor to file a complaint in order to increase the prior year's assessment. If a final judgment is entered in the taxpayer's favor after that date, it is then the taxpayer's burden to seek the benefit of the Freeze Act by a motion filed in the original cause. R. 8:7(d). And if the assessor is of the view that a change of value has occurred between the base year assessment date and the freeze year assessment date, the taxpayer's motion can be defended against by the assertion of and, ultimately, by proof of that change.

[Id. at 299-300, 683 A.2d 235 (citations omitted).]

Here, the Tax Court judgment was entered on June 2, 1995. Obviously the date of judgment post dates the assessment date of October 1, 1993, for the tax year commencing January 1, 1994, and also post dates the assessment date of October 1, 1994 for the tax year commencing January 1, 1995. As noted...