Do Me a Favor, Open The Door, and Let ‘Em In!

“Someone’s knockin’ at the door
Somebody’s ringin’ the bell
Someone’s knockin’ at the door
Somebody’s ringin’ the bell
Do me a favor
Open the door and let ’em in”

Paul McCartney, 1976

A recent opinion by the Tax Court of New Jersey reminded us of the Wings classic “Let Em In”, written by Paul McCartney in 1976.  In the tax matter, the taxpayers owned a condominium in Atlantic City, and filed an appeal of their 2020 and 2021 property tax assessments.  While the matter was pending, the taxpayers leased the property to a third party, a 93-year-old tenant.  Although there was a written lease in effect between the taxpayers and the tenant for the property which reserved the landlord’s right to access the property for certain purposes, including inspections by “buyers, lenders, contractors, appraisers, and insurers”, the tenant refused to provide access for an appraisal inspection which was requested by the City’s appraiser in connection with the pending tax appeals.  The taxpayers, therefore, responded to the request by stating that the tenant had changed the locks, had refused access, and they were therefore unable to make the property available for inspection at the City’s request.

As a result of the taxpayers’ refusal or inability to permit the property inspection, the City moved to dismiss the pending tax appeal for failure to provide discovery.  The motion was granted.

New Jersey Tax Court Judge Mark Cimino presided over the matter and decided the City’s motion.  In his opinion, the judge noted that N.J.R. 8:6-1(a)(4)  provided that discovery from the taxpayer was limited, but specifically included an inspection of the premises by the taxing authority.  The court also found that, because the taxpayer controlled the right to possession of the premises, the taxpayer had the onus to procure the inspection upon request by the taxing authority.  As the court held:

“An inspection is one of the few types of discovery which a municipality can pursue under the small claims practice of the Tax Court. R. 8:6-1(a)(4).  It must be remembered that as a practical matter, ‘local tax officials often cannot know whether a residence has undergone renovations which have increased its value without entering the residence itself.’  Smith v. Ayotte, 356 F. Supp. 2d 9, 16 (D.N.H. 2005).  In other words, an inspection is an important part of the tax appeal process”.  Slip Op. at 5.

The Tax Court further reasoned that the lease agreement between the taxpayers and the tenant was a private agreement, and the court was unwilling to insert itself into a private contractual dispute.  It noted that it mattered not that the tenant may have opposed the inspection for otherwise valid reasons, such as COVID fears or privacy concerns.  As a result, the court dismissed the appeal for failure to provide necessary discovery, without prejudice.  It gave the taxpayers three options.  First, they could accept the refusal of the tenant to permit access, in which the dismissal would stand.  Second, the taxpayers could seek enforcement of the lease through eviction or some other legal process, in which event the appeal could be reinstated if those efforts were successful and access was obtained.   Third, the taxpayers could undertake further negotiations with the tenant to consensually gain entry into the property.  As to this third option, maybe the court was suggesting that the taxpayers approach the tenant by singing “do me a favor, open the door, and let ’em in”.  And if that did not work, the taxpayers could always ask Sir Paul McCartney for some help on his next trip to New Jersey…

The court concluded that it was appropriate to place the burden on the taxpayer to secure the inspection because that “would prevent mischief of a taxpayer in thwarting an inspection through establishment of a tenancy.”  Slip Op. at 9.

A copy of the Tax Court’s full opinion in Kugler v. Atlantic City is available here.

This case reinforces the need to be mindful that, in New Jersey, real estate tax appeal matters have special court rules that govern their proceedings and the failure to comply with those rules can lead to unfavorable results, such as the dismissal of an otherwise valid appeal.    If you have questions about a current or future tax appeal matter, you should consult with an attorney experienced in this specialized field.  Let us know if we can be of assistance.