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Clay v. City of East Orange

Decided: August 28, 1980.

ARTHUR L. CLAY, DAVID SCHULMAN (DAVAL ASSOCIATES), AND ALAN SCHULMAN (PROGRESSIVE REALTY MANAGEMENT CO.), APPELLANTS,
v.
CITY OF EAST ORANGE, PHILLIP T. MORRIS, VIRGINIA WHITE, AND GUS ELMORE, RESPONDENTS



Hopkins, J.t.c. (temporarily assigned).

Hopkins

This is a consolidated appeal from municipal court judgments entered as a result of the finding that appellants, insofar as the City of East Orange was concerned, were liable for penalties of $100 each, pursuant to N.J.S.A. 54:4-6.12, for failure to provide property tax rebates to three tenants. Judgments were also entered in favor of three individual tenants in the amount of $100 each, pursuant to N.J.S.A. 54:4-6.11, for failure of appellants to provide property tax rebates to those tenants.

The matters were consolidated for appeal, as the facts and principles of law are equally applicable to each individual action.

Appellants allege that the municipal judge failed to take into consideration that the reduction in property taxes for 1979, which gave rise to the disputed rebates, was, in major part, applicable to a separate billing during that year for sewerage services. Their position is that since East Orange had included the sewer services charge in their tax bill for the base year 1976, the computation of a property tax rebate should reflect an adjustment for such divergent treatment by East Orange during 1979.

N.J.S.A. 54:4-6.2 et seq. , known as the Tenants' Property Tax Rebate Act, provides that a landlord owning qualified real rental property must share with the tenants any saving which results from a reduction in local property taxes. Under normal circumstances the base year, for the purpose of determining whether there was a local property tax reduction, was 1976.

East Orange is a member of two federally-aided sewer facilities known as the Passaic Valley Sewerage Commission and the Edward T. Decker Waste Water Treatment Facility. These organizations supply sewerage service to East Orange. During 1976 East Orange included the cost of these services as part of its municipal budget and, as such, the cost was included in determining the 1976 local property taxes. In 1979, pursuant to a claimed mandate from the Federal Government, East Orange did not include the sewerage service cost in its municipal budget. Rather, it billed each property owner separately on the basis of the number of units involved. A single-family dwelling would be one unit while an apartment building would be treated as having one unit for each apartment. As a consequence of the separate billings for sewerage services, the local property taxes for 1979 were less than the taxes paid in 1976, the base year with respect to the Rebate Act.

As a result of the difference in the taxes billed for 1976 and 1979, appellants were notified by the tax collector for East Orange that there was a rebate payable to the tenants. The landlords, in turn, notified the tax collector that no rebate was

to be paid, because the combination of the tax billing for 1979 and the separately billed sewerage services charges during 1979, when subtracted from the 1976 base year tax, did not result in a tax reduction which required a rebate to the tenants.

East Orange then commenced an action in the Municipal Court of East Orange, pursuant to N.J.S.A. 54:4-6.12, which provided that a landlord who fails to provide property tax rebates in accordance with the provisions of the act shall be liable for a penalty of no more than $100 for each offense. At the same time, the individual defendants herein commenced an action pursuant to N.J.S.A. 54:4-6.11 which provides that a property owner who fails to provide a tenant with the property tax rebate in accordance with the provisions of the act shall be liable to the tenant for twice the amount of the property tax rebate to which the tenant was entitled, or $100, whichever is greater. Judgments were entered against appellants in favor of East Orange for $100 each and in favor of each of the individual tenants for $100 each.

On appeal appellants have taken the position, as they did in the municipal court proceeding, that the segregation of sewerage charges from the normal property tax billing cannot be utilized to produce an artificial reduction in the property tax for the purpose of the Rebate Act. Respondents, on the other hand, have taken the position that the Rebate Act, which became effective in 1976 and was amended in 1977, was enacted and amended by the Legislature with full knowledge by that body that a municipality could separately bill for sewerage charges. This being so, it opts for a literal reading which would require a rebate under the circumstances under review.

The parties have supplemented the record by stipulations of facts enabling the court to find as follows:

1. If the separately billed sewerage service charges are to be ignored for the purpose of determining a tenant rebate, then the total amount properly payable to the ...


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