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Board of Education of the Township of South Brunswick, Middlesex County v. Eckert

361 N.J. Super. 238, 824 A.2d 1132 (App. Div. 2003)

EMINENT DOMAIN; TAXATION; ROLLBACK TAXES—When condemnation proceeding cause a change in use away from farming, rollback taxes may be triggered and because the government is not immune from such taxes, a condemning authority must include them in its award to the farm owner.

A property owner owned farmland that was leased to a farmer who grew crops on the land. As a result, it was granted farmland tax assessment status. A board of education decided to purchase the property for a new elementary school. Referendums were adopted, funds were authorized, and a zoning ordinance change was passed to permit school use. The board of education entered the land after crops had been harvested and took soil samples. Although there was disagreement about the extent of the board’s soil excavation, clearly there were craters. The farmer was “confronted with [a] dilemma. He had ‘prepared the lands to plant crops,’ expecting to farm the property, but [the property owner] informed him that the Board planned to begin construction in early September 2000.” Feeling that the start of the construction in September would preclude him from harvesting his soy bean crop, he decided not to plant. Negotiations for the property ultimately failed, and the board of education took the property by eminent domain. In the meantime, based on the cessation of farming, the county tax assessor filed a complaint seeking roll-back taxes for the property. The complaint was not solely based on the conversion of the property for school use. It also alleged cessation of farming. This left the question as to who would be responsible for payment of the roll-back taxes. The board of education argued “that it should not bear the burden of the roll-back taxes because (1) most negotiated contracts allocate taxes as of the date of the sale, and allocating taxes here would be consistent with the legislative intent of imposing roll-back taxes; ... and (4) the change of use here preceded any filed condemnation action.”

The purpose of rolling back taxes “is to provide a means of deterring the landowners who enjoy farmland tax assessment from changing the use of their land.” A change of use triggers the imposition of roll-back taxes. Under an earlier case, a court held that the State “was responsible for roll-back taxes on farmland condemned as part of a highway project,” reasoning that the farmers in that case “were not land speculators” because they did not voluntarily change their use. In that case, the farmland was forcibly taken from them, “albeit lawfully, by the process of condemnation permitted under the powers of eminent domain but nevertheless against their will.” In this case, the property owner demonstrated no intent to change the use. Only the condemnation proceeding intervened to cause such a change. Consequently, the Court perceived “no unfairness in imposing the burden of such change on the condemning authority rather than the reluctant [farm owner].” It rejected the Board’s argument that it would be “doubly unfair” to taxpayers who subsidized the farmers “while they benefit from farmland assessment.”

The government is not immune from roll-back taxes. “The roll-back taxes are a consideration that any condemning authority must factor into its cost analysis for its public purpose use. The condemning authority chose to condemn a farm for its use. It must bear the cost of such condemnation including tax obligations that are imposed as a matter of law.” The Court also rejected the Board’s argument “that by failing to continue the farming into the 2000 planting season [the property owner] had changed the use of the property.” According to the Court, “[s]uch view is unrealistic.” It made no sense to require a tenant-farmer to expend capital “knowing he would not reap the benefits of his efforts.” To do so “would require a futile (and expensive) act that any concept of equity and fair play will not countenance.”

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