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New Concepts for Living, Inc. v. City of Hackensack

376 N.J. Super. 394, 870 A.2d 697 (App. Div. 2005)

TAXATION; ESTOPPEL; “SQUARE CORNERS” DEFENSE—A taxpayer who fails to file a tax appeal within the required 45 days may be entitled to relief under the “square corners” defense which require that government, when dealing with the public, must be fundamentally fair and cannot conduct itself in such a manner as to achieve a litigational advantage over a property owner.

A nonprofit corporation owned and occupied a parcel of property. As a result, its property was exempt from local property taxes. Some time later, the corporation moved its offices to another building it owned. It rented the old building to another nonprofit corporation and did not profit under the lease. The municipal tax assessor attempted to contact the corporation at its old address. The letter contained a request that the corporation complete a statement confirming its tax-exempt status. The letter was returned by the post office with the notation “forwarding expired.” The assessor, during a periodic inspection, discovered a sign for the corporation at another address and decided to mail a new letter to the corporation at the new address. The second letter did not contain a copy of the statement the corporation was required to file in order to continue its tax-exempt status. Several months later, the municipality sent the corporation a letter mailed to the old address stating that the property was no longer tax-exempt. The tax collector also sent tax bills to the old address. The municipality then sent the property owner a notice of tax sale to satisfy unpaid taxes. The corporation, through its attorney, began discussions with the municipality to retroactively reinstate the tax exemption. The corporation submitted documentation to show that it was not making money on its lease and was therefore not jeopardizing its tax exempt status. The municipality informed the corporation that it would reassess the situation and agreed to postpone the tax sale. The municipality then notified the corporation that it was not eligible for tax exempt status. The corporation appealed to the Tax Appeal Board, which informed it that it was out of time to appeal since more than forty-five days elapsed since the corporation was advised of the change in its tax status. The corporation sued and the lower court dismissed its complaint due to the corporation’s failure to appeal within forty-five days. The lower court rejected the corporation’s argument that the ongoing negotiations between the municipality and the corporation constituted a promise by the municipality to grant the exemption or waive the forty-five day statute of limitations, and therefore the municipality should be estopped from using a statute of limitations defense. It also rejected the corporation’s “square corners” defense. In New Jersey, there is a “square corners” doctrine which states that the government, when dealing with the public, must be fundamentally fair and cannot conduct itself in such a manner as to achieve a litigational advantage over a property owner.

The nonprofit corporation appealed, and the Appellate Division reversed and remanded. It found that the municipality, during its negotiations with the corporation, never mentioned the statute of limitations and lulled the corporation into believing that its tax-exempt status would be restored only to reverse field and reject it once the applicable statute of limitations expired. The Court determined that the municipality did not act with fundamental fairness with the corporation as required by the “square corners” doctrine, and that the corporation was therefore entitled to have its tax appeal heard.


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