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City of Newark of the County of Essex v. (148) Block 1861, Lot 24

A-5494-08T1 (N.J. Super. App. Div. 2010) (Unpublished)

TAXATION — The real property tax exemption for properties actually used for religious purposes is not available where the activities claimed to be conducted are not permitted by the building’s certificate of occupancy because, per se, without the certificate of occupancy, the building is still incomplete.

A religious organization purchased a vacant warehouse with office space. It was in an urban area. The building, 20,000 square feet in floor area, was previously used for the storage of vehicles and other equipment by a telephone company. The warehouse space was thought to be structurally intact, but the front building offices turned out to be unusable due to roof leakage and dangerous wiring. The organization had purchased the property intending to renovate it for church activities, but delayed all work due to the costs involved.

The municipality eventually sued under the In Rem Tax Foreclosure Act because of unpaid property taxes. It assessed delinquent taxes and redemption fees of more than $120,000. The organization answered the complaint, arguing the property was tax exempt, although not being used pending funding for renovations.

The organization’s application for exemption from property taxes was denied. An appeal to the county board of taxation, though resulting in a reduction in the property’s assessment, did not result in an exemption. The matter was further appealed to the lower court, where the organization now alleged that the warehouse portion of the property was being used for meetings related to church activities and for other prayer services, but it was not open to the public for regular church services. The lower court granted the municipality’s motion for summary judgment, concluding the property was not exempt from taxation because the organization did not have a certificate of occupancy authorizing its use for religious or other activities, and it was not open to the public for religious uses or activities. The organization appealed.

The Appellate Division affirmed, finding that, under the relevant statute, a state tax exemption exists for properties that are actually used exclusively for religious purposes, including religious worship or charitable purposes, and that the municipality had properly denied the exemption on the ground that the property was not in actual use for religious purposes. It held that because the organization had yet to receive a certificate of occupancy for its activities, the property could not be viewed as actually in use for religious activities. The Court also found that the organization would have little incentive to complete construction in order to receive its certificate of occupancy should it be entitled to a tax exemption on an incomplete church building.

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