A Taxpayer’s Burden
In Hertrich v. Township of Middletown, a copy of which may be found here, the plaintiff challenged the assessments for tax years 2009 through 2013 on Chevrolet car dealership located on Route 35 in Middletown. While the appraisal experts for the plaintiff and the defendant agreed that the optimal size of an automobile dealership is 5 acres, they disagreed on the meaning and calculation of lot coverage under the local zoning and on the valuation of the undeveloped portion of the subject property. The Tax Court found there was enough evidence presented by plaintiff to overcome the presumption of validity, also known as the presumption of correctness that attaches to municipal assessments; however, the court held that neither appraiser was very persuasive in dealing with the undeveloped portion of the property.
The property is 9.9 acres and improved with a nearly 16,000 sf improvement that was expanded in 2011 to nearly 19,000 sf. With the addition to the building and other improvements, the total lot coverage increased from 3.94 to 5.75 acres. The property was also impacted by wetlands and associated buffer areas although neither expert was certain as to the exact acreage of these areas.
Both appraisers used the sales comparison approach. Plaintiff’s expert valued the property as if it had only 5 acres, which the court questioned finding that the subject’s improvement coverage was possible under local zoning only because of the site size. The court concluded that the “plaintiff obtained the benefit of the large size of the lot for its business purpose.” The court also rejected the Township’s position that the zoning regulations do not permit exclusion of environmentally sensitive areas from the computation of lot coverage. Because neither expert was persuasive as to how the undeveloped portion of the property should be treated, the court concluded that a detailed analysis of their respective comparable sales was not necessary.
The court rejected also the cost approach analysis of each expert, here again, based primarily on their approach to the land value. In calculating the land value the plaintiff’s expert claimed that 4.9 acres was wetlands, which the court found to be in error based on the record. Also, the court noted that none of the sales relied upon the plaintiff’s expert were zoned as the subject. Defendant’s land value conclusion was deemed by the court to be “problematic” because its appraiser did not account at all for the environmental encumbrances.
As neither appraiser provided credible evidence of value, the assessments were affirmed.
This case provides another example of the importance of ensuring that the expert witnesses in a valuation case are fully familiar with all of the features of the subject property and ensure that any conditions that may affect valuation are adequately addressed in the respective expert reports. This is particularly true for the plaintiff in a tax appeal. As held by the State Supreme Court in Ford Motor Company v. Township of Edison, 127 N.J. 290 (1992), the plaintiff not only bears the burden of overcoming the presumption of validity that attaches to a tax assessment, but even after overcoming that burden, the plaintiff must then demonstrate that the assessment is incorrect.
Related blog posts:
Taxpayer Fails to Overcome Presumption of Correctness
Appraiser’s Subjective Adjustments Rejected; Owner Loses Appeal
