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Tamburelli Properties Association v. Borough of Cresskill

308 N.J. Super. 326, 705 A.2d 1270 (App. Div. 1998)

TAX APPEALS; ASSESSMENTS—Under the “highest and best use” doctrine, a country club may be assessed as if it were a residential development and if the existing club house would likely be demolished if the property were subdivided, its value should be ignored for assessment purposes. It is appropriate to apply an absorption discount on a discounted cash flow basis to account for the likelihood that it would take years to sell all of a new residential subdivision.

The Tax Court reduced the property tax assessment on contiguous country club property consisting of a golf course, tennis courts, a swimming pool and a clubhouse/banquet hall. The municipality claimed the highest and best use of the entire lot would be to develop 30 acres into 24 separate, one acre residential lots and maintain the clubhouse on the remaining 5 acres. In determining which plan was the highest and best use of the property, the trial judge held that the municipality failed to prove that the clubhouse use would be permitted after the property was subdivided for residential use. The judge refused to speculate whether a use variance would actually be granted, despite testimony from the municipality favoring such a variance. In fact, the trial judge concluded that the reduction in lot size from 35 acres to just over 5 acres constituted an expansion of a nonconforming use by spreading out the nonconforming use over a smaller area. Finding that sales of residential lots on an adjacent property (also a former golf course) were conditioned on demolition of a nearby clubhouse, the judge thought this demonstrated that buyers of high-end residences in the area did not want to live immediately adjacent to a banquet hall. Therefore, since the clubhouse would have to be removed, the municipality’s appraiser arrived at an insufficient value. The judge determined that the highest and best use of the property was for 28 separate lots without a clubhouse and concluded that this determination was properly in accordance with New Jersey law since it was legally permitted, physically possible, economically feasible, and the most profitable. Ford Motor Co. v. Edison Township, 10 N.J. Tax 153 (Tax 1988). After arriving at a value for the lots, the total amount was discounted to account for the four or five years it would take to sell all the lots. On appeal, the municipality argued for the first time that the New Jersey Constitution requires assessment of each lot separately and without a discount factor to account for the time it would take to sell all the lots, thus achieving uniformity of assessment.

The Appellate Division agreed with the trial judge’s exclusion of the clubhouse as a banquet hall since such a use would be in violation of applicable zoning laws. The Appellate Division found that the cases relied on by the municipality in support of its constitutional argument were factually distinguishable since the properties in those cases were already divided into lots that could be valued separately. Since the property in this case was undeveloped land with no comparable sales, the Court held that the country club fell within a judicially recognized exception to the constitutional requirement of separate assessments, and should be valued as a single entity with a discount factor to account for the time needed to sell all 28 lots. The Court went on to hold that the municipality’s constitutional claim was barred by judicial estoppel, which precludes a party from asserting a position contradictory to a position it had previously asserted in the same case or a related legal proceeding. Since the municipality’s initial assessment factored in a discount, it could not contest the validity of that method of valuation simply because the lower court used a higher discount.


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