Perciballi v. Norrie

A-1233-97T3 (N.J. Super. App. Div. 1999) (Unpublished)
  • Opinion Date: June 11, 1999

CONTRACTS; FARMLAND ASSESSMENT—Failure to file for a Farmland Assessment does not trigger rollback taxes; only a change in use will do so. Consequently, a buyer whose purchase itself makes land ineligible for special treatment is responsible for paying the resultant rollback taxes.

A landowner owned two parcels of land, both of which were assessed as farmland for several years. A time came when a municipal tax assessor notified the land owner that the lots would not receive a future farmland assessment due to a failure to file timely application for such treatment. No appeal was filed. Less than a year later, the owners contracted to sell one of the lots. At the time of closing, a question was raised as to the taxing status of the parcel. The buyer’s attorney then contacted the local tax collector and was informed of the change of taxing status and also that rollback taxes would be assessed for two prior years. The buyer insisted that its seller be responsible for the rollback taxes and that the taxes for the current year would have to be adjusted on the basis of a regular assessment, rather than with the farmland assessment. The seller refused to close and no agreement was ever reached with respect to adjusting the taxes. The buyer then delivered a time of the essence notice, to no avail, whereupon it filed suit seeing specific performance, damages, and other relief. The property owner filed an answer and a counterclaim for recission and damages. The lower court held in favor of the buyer and entered an order compelling the landowner to convey title and to be responsible for the rollback assessments as well as to pay a pro-rata share of the regular taxes for the current year. The closing took place, subject to escrow of the sales proceeds so that the appeal could proceed. The Appellate Division affirmed the order for specific performance and the proration of the current years taxes. It reversed the portion of the lower court’s order requiring the seller to pay the rollback taxes for the two prior years. It is well settled that contracts for the sale of real property are specifically enforceable by the purchaser. Under a specific provision of the contract of sale, the parties were required to adjust taxes as the closing date. Annual property taxes are deemed to be a lien as of the first day of the year even though neither the amount of the assessment nor the tax rate is known at that time. In New Jersey, where a contract for sale of realty is silent regarding the apportionment of taxes, taxes are to be apportioned according to N.J.S. 54:4-56 which essentially calls for proration based upon a full calendar year, based upon the prior year’s taxes. Inasmuch as the property had lost its farmland assessment for the prior year, the adjustment of taxes was to be based on the regular taxes. The seller’s refusal to make the required adjustment constituted a breach of contract, particularly given its knowledge that the property would not be assessed as farmland for the year in question. As to the rollback taxes, the Farmland Assessment Act provides for the assessment of real property at the lower farmland tax rate in certain circumstances. When land assessed under the provisions of the Act is returned to a use that is not agricultural or horticultural, it becomes subject to rollback taxes for the year in which the change in use occurred and for two preceding tax years in which the land was assessed as farmland. The Act has been interpreted to provide that liability to rollback taxes is not triggered until there is a change in the use. Rollback hinges upon a change in use and not on the filing of application forms. The annual filing of an application only goes to the issue of eligibility for farmland assessment in the year for which the assessment is made. Thus, “an actual change in use must be demonstrated to justify the [municipality’s assessment of rollback taxes] regardless of whether any assessment applications were timely filed.” No such finding was made in this case. Thus, case law supported the seller’s contention that the lower court erred in finding that its failure to timely file for farmland assessment triggered the imposition of rollback taxes. In addition, in this particular case, when the lot was sold, it comprised less than five acres. Hence, it was too small for farmland assessment, even if the new owners continued to apply it to agricultural or horticultural use. In other words, acquisition of title by the buyer triggered the assessment of rollback taxes for the previous two years. According to the Court, however, if parties desire to specifically allocate responsibility for payment of such taxes to the seller, it is imperative that they so agree. Until the buyer acquired the property, it was not subject to rollback, though subject to full current year taxes because of the seller’s failure to file. The buyer was charged with the knowledge that the farmland assessment might be lost and it was its responsibility to negotiate an appropriate provision in the contract. The Court refused to rewrite an agreement to provide the protection which the buyer failed to obtain for itself. Consequently, while specific performance was properly ordered, the buyer was liable for the rollback taxes. Given the Court’s holdings as to a specific performance and rollback tax liability, there was no basis for the rescission remedy sought by the seller. The seller received the benefit of its bargain.