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Shore Landings, L.L.C. v. Borough of Highlands

A-6921-00T5 (N.J. Super. App. Div. 2002) (Unpublished)

SPECIAL IMPROVEMENT DISTRICTS— A Special improvement district may distinguish between rental apartment buildings and similar structures that are owned as condominiums.

This appeal raised “the question whether a municipality may, by Special Business Improvement Ordinance (S.I.D) ... subject an income-producing residential apartment house to special S.I.D. assessment while exempting from such exception a similarly located residential apartment complex organized under condominium ownership.” Here, the rental apartment building was within an S.I.D. created by an ordinance that exempted residential properties from the special assessments permitted by law. A New Jersey statute “permits the costs associated with a special improvement district ‘to be assessed and taxed to benefitted properties or businesses.’” It requires a municipal assessor to prepare assessment tax rolls. On advice from the municipal tax assessor, “who consulted county tax authorities, [the] apartment building” was included for assessment under the ordinance. This was done because the tax assessor’s manual stated that the property was not subject to residential exemption because assessments for apartment buildings used “the same capitalization-of-income approach set forth for commercial properties.” The assessor’s manual did “not include such buildings in the residential class, for which other approaches to value are provided.” Essentially, the tax assessor treated the apartment building as a commercial property because its owner rented property for income. A similar residential apartment building that was organized as a condominium was not included within the S.I.D. assessment scheme because the individual condominium units were separately assessed as residences.

The lower court concluded that “the ordinance was unconstitutionally vague and ambiguous because of the standardless discretion exercised on the issue of what should be deemed residential under the ordinance’s exemption provision.” The S.I.D. appealed. Subsequent to entry of the lower court’s order, the municipality adopted an amending resolution clarifying that the apartment building was subject to a special assessment because it was not considered “residential.” Based on this amendment, the Appellate Division reached the conclusion that “the issue of vagueness and ambiguity of the S.I.D. ordinance [had] been rendered moot.” This left “the question of whether two similarly situated residential apartment complexes, each regularly regarded as a residential use for zoning purposes, may be distinguished for purposes of a special assessment under an S.I.D. Ordinance solely because tax assessors must assess all income-producing properties in the same manner as commercial or business properties.” The S.I.D. argued that the Appellate Division was required to give “very broad latitude to legislative classifications so long as there is a rational basis for a distinction.” The Appellate Division found no reason to reach or address constitutional issues. It looked to the legislative history and noted that it had been amended to delete the word “all” before the word “property” in describing property that may be made subject to special S.I.D. assessments. The Legislature then added these words: “The municipal ordinance may exempt residential properties, residential portions of mixed use properties, parcels with any number of residential units, or vacant properties located within the district from special assessment.” This caused the Court to inquire “whether the legislature intended to use the word ‘residential’ other than in its generally accepted connotation in terms of dwelling use.” The Court found no inherent ambiguity in the word “residential.” It believed that its meaning was clear and included “places of dwelling, including apartment houses.” According to the Court, that was “certainly the meaning imparted to the term in municipal zoning regulations.” The Court also pointed out that it did not ignore the S.I.D.‘s “invitation that we analogize the holdings in sidewalk tort liability cases.” Instead, it pointed out that “[c]ourts may evolve or adopt common law distinctions respecting sidewalk liability and other subjects not legislatively addressed.” It did not feel free, however, “to engraft those distinctions upon subjects that ... are specifically addressed and resolved by statute.”

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