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Evans-Francis Estates Associates, LP v. Township of Cherry Hill

012386-2011 (N.J. Tax Ct. 2011) (Unpublished)

TAXATION — Although the Tax Court can relax the requirement that taxes are current before a property tax appeal can be filed, it will not do so when the circumstances preventing the taxpayer from being current are reasonably foreseeable by the taxpayer.

A property owner asked the Tax Court to relax the requirement that it pay its property taxes in order to prosecute an appeal because the municipality was partially to blame for its financial problems arising from the development of the property. The owner alleged that the municipality’s reluctance to allow construction of affordable housing units contributed to its financing obstacles. However, it conceded that the collapse in the tax credit equity market also contributed to delays in starting construction.

As a general rule, a property owner must be current with its property taxes when it files a property tax appeal with the New Jersey Tax Court. If the taxes are not current, the municipality can move to dismiss the complaint. However the Court can “relax the tax payment requirement and fix such terms of payments as the interests of justice may require.” The Court applies a three part test when reviewing a request to relax the tax payment requirement: at a minimum, the circumstances must be: (1) beyond the control of the property owner, not self-imposed; (2) unattributed to poor judgment, a bad investment or a failed business venture; and (3) reasonably unforeseeable.

Here, the Court ruled that the owner could not be excused from the requirement to pay its taxes prior to appealing simply because the property was to be used for an affordable housing project under a local government program. First, the owner had to know that there would be complications in obtaining financing for any affordable housing project subject to the local government program and yet took title to the property without having first obtained the necessary financing. Second, although there was evidence that the local assessor failed to take into account the development restrictions on the property when valuing it, the owner never challenged the resulting assessment. So, while the erosion of national economic conditions may have been out of the owner’s control, the Court found the general difficulties that might arise in acquiring financing were not unforeseeable. This case was similar to any case where governmental approvals are needed before development can begin and this kind of difficulty is always foreseeable.

The Court rejected the owner’s claim that, because the local government had a state constitutional obligation to provide affordable housing, it had a corresponding obligation to reduce any assessment that might get in the way of achieving that purpose. The Court found this simply inconsistent with the fact that governmental financing cannot be used to cover taxes on undeveloped property slated for affordable housing, and that such property is not exempt from taxes after development.

The Court also found the property owner failed to meet any part of the test because the “obstacles encountered by the plaintiff in securing the approvals and financing necessary to construct its project are commonplace and reasonably foreseeable.” It was not persuaded that the municipality’s conduct was a mitigating factor or that the severe economic times excused the obligation to pay property taxes. Thus, the municipality’s motion to dismiss the complaint was granted.

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