Tell the Truth and Nothing But the Truth, or Get Dismissed!
We have emphasized many times on our blog about the importance of responding to the assessor’s annual request for income and expense information for income-producing properties, commonly referred to as a Chapter 91 request. A property owner’s failure to respond is frequently cited as the basis for dismissal for many appeals involving income-producing properties. However, usually any effort made to respond to the assessor’s request is seen as a form of compliance and although responses may at times be vague or inadequate, the court will often not dismiss an appeal on these grounds alone.
Recently, in 279 Homestead Road, LLC v. Twp. of Hillsborough, plaintiff received a written request for income and expense information from the Township’s assessor in 2013. This information was to be utilized by the assessor in setting forth the assessment on the property for tax year 2014. The plaintiff indicated on the forms that the property was 100% owner-occupied and thus the property derived no profit or loss. A complaint was filed with the Tax Court the following year by the plaintiff challenging the property’s 2014 assessment.
During the course of discovery in plaintiff’s 2014 tax appeal, it was discovered that a lease was executed by the property owner and a tenant. The lease provided that the tenant make annual rent payments equal to 120% of the annual mortgage payments on the mortgage of the property. The lease arranged the payments to be made in monthly installments. The lease further required the tenant to pay additional taxes on the property and utilities. The lease was signed by a member of 279 Homestead Road, LLC, the entity owning the property, and the same person also executed the lease on behalf of Stracq, Inc., the entity leasing the property as a tenant. Financial records released during discovery also revealed profit and loss statements during 2012 and 2013.
The Tax Court recognized that common ownership of the entity operating as the tenant and the property owner may have existed. Nonetheless, it was not material to the court’s analysis based on prior precedent. What controls is the existence of a lease and the fact that rental income was being collected by the property owner. It was clear to the court that plaintiff’s statement in its response to the assessor’s Chapter 91 request stating that the property was 100% owner occupied and rent was not collected was in fact false. Plaintiff also falsely stated that there was no profit or loss associated with the property. Regardless of the relationship that exists between the tenant and property owner, the payment arrangements rendered the subject property income producing for purposes of Chapter 91. In light of all the facts, the court ultimately dismissed plaintiff’s complaint for its failure to comply with the assessor’s request truthfully.
A copy of the opinion can be read here.
If you have any questions about a property tax issue, please feel free to contact us at 973-539-8900 or info@mrod.law
