No Landlord-Tenant Relationship Means No Dismissal Under Chapter 91

A recent opinion by a Tax Court judge denied a municipality’s request to dismiss a property owner’s tax appeal because he found the property was not income producing under N.J.S.A. 54:4-34, also known as “Chapter 91”.  In Greenwood ACRA, Inc. v. Twp. of Hamilton, the property owner failed to respond to a Chapter 91 request in 2011, and the Tax Assessor set the assessment at $20 million which the property owner appealed.  Following discovery, the Township sought to dismiss by arguing that the owner’s financial records identified “event rental income”.  The owner countered that the “rental” income came from several short-term licenses which permitted third parties to use the owner’s parking lot, and that the limited use did not create a tenancy which qualified the income as “rental income” as the term is recognized by New Jersey’s courts.

The Tax Court agreed with the property owner and denied the Township’s request following a discussion of Great Adventure, Inc. v. Twp. of Jackson, 10 N.J. Tax 230 (App. Div. 1988).  In the Great Adventure case, Jackson sought to dismiss Great Adventure’s appeal because the tickets sold to patrons were rental income that must be provided under Chapter 91.  The Appellate Division disagreed by finding that income producing properties were those defined by a landlord-tenant agreement, and that the tickets merely permitted a limited use of the property which did not create a tenancy between Great Adventure and its patrons.  Here, the Tax Court agreed with ACRA that the short-term use of its parking lots several times a year by different entities did not create a tenancy between the parties.  Additionally, the judge found the agreements prohibited the licensees from making any changes or improvements to the property.

This case helps to clarify how a property may be used without being found income producing for purposes of a Chapter 91 analysis.  For more examples of Chapter 91 litigation, please see the following blog posts:

ANOTHER ONE BITES THE DUST! Taxpayer’s appeal stuck down by Township’s Chapter 91 Attack

To Wield Chapter 91 Sword to Dismiss Tax Appeals Towns Must Play by the Rules

Property owner survives Verona’s “Chapter 91″ attack

Chapter 91 Strikes Another Taxpayer

Tax Court Denies Phillipsburg’s Chapter 91 Motion to Dismiss

Paramus Appeal Dismissed: Obligation to Submit Income and Expense Info Runs with the Land

Property Owner’s “False” Responses Lead to Dismissal of Tax Appeal