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Rockstone Group v. Lakewood Township

18 N.J. Tax 117 (1999)

TAXATION; FREEZE ACT—The granting of final municipal development approvals, even though contingent on the receipt of other governmental approvals, can serve as an extrinsic factor that raises the value of a property and takes it out of the protection of the Freeze Act.

Pursuant to a stipulation of settlement, a tax court judgment was entered for a vacant lot establishing the assessment for tax year 1997. Immediately thereafter, the taxpayer filed an application to “freeze” the assessment for tax years 1998 and 1999 based upon the Tax Court judgment for base year 1997. The municipality opposed the application, alleging that an external factor which materialized after the assessment date for the 1997 base year substantially increased the value of the property. Specifically, it argued that the land had been granted conditional municipal preliminary and final site plan approval for construction of an apartment complex. According to the municipality, the property “with approvals” was worth substantially more than “without approvals.” The property owner responded that the approvals were subject to, and conditioned by, the need to obtain other approvals such as those required by the Coastal Area Facility Review Act and those from the Department of Transportation. Consequently, it submitted that since the site plan approval resolution required several governmental regulatory approvals and the majority of the approvals and permits were not granted before the valuation date, the property, in essence, had no approvals. Therefore, the owner contended there was no increase in value over that in the base year. The Court found that a municipality bears the burden of proof to show that the tax assessment should not be frozen for two additional years. Preliminarily, the Court examined the municipality’s response that the approvals granted by the planning board, though subject to routine governmental regulations necessary to obtain a building permit, substantially increased the value of the property from the base year to the freeze year. The municipality submitted certifications from its assessor, portions of property appraisals, and other evidence leading to its conclusion that the property had a higher value with the approvals. According to the municipality’s appraiser, municipal site plan approvals are crucial for obtaining construction loans and other permits and municipal land use approvals are the “most time consuming and costly step in the entire improvement process,” after which “other necessary approvals normally follow in due course.” The Court held for the municipality. In its view, final approval under the Municipal Land Use Act does not require that every regulatory approval be granted and every permit be issued or that the developer be ready to put the spade in the ground. Instead, final approval is granted “if the detailed drawings, specifications and estimates of the applicant for final approval conform to the standards established by ordinance for final approval, [and] the conditions of preliminary approval” are satisfied. What the Court found most relevant was that a developer gains certain property rights, such as being protected against rezoning, upon final approval of the site plan. “The economic reality is not whether each and every condition of the final site plan approval has been satisfied, but the perception in the marketplace that a protected right has been conferred on the property and that there is a value attributed to that right.” Consequently, the Court held that the planning board approval constituted an external change subsequent to the assessment date of the base year and that the municipality’s evidence created a prima facie demonstration of a change in value. Therefore, the municipality was entitled to a plenary hearing to determine whether the change in the property’s value was sufficient to deflect the freeze sought by the taxpayer.


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