This case deals with the responsibility of a municipal tax search officer to disclose municipal tax liens to a prospective purchaser of property when the officer issues a tax search certificate pursuant to N.J.S.A. 54:5-12. The issue is whether omitted property tax assessments certified in October 1977 for the 1976 and 1977 tax years were municipal liens which defendant taxing district is now precluded from enforcing against plaintiff pursuant to N.J.S.A. 54:5-17 because the assessments were not shown on the official tax search issued to plaintiff on August 17, 1977.
The issue is presented by an uncomplicated set of facts. Plaintiff purchased her home on September 30, 1977 for $53,000. In connection with her purchase, she ordered a search for municipal liens pursuant to Chapter 5 of Title 54 of the Laws of New Jersey. Prior to closing of title, the tax collector and official tax search officer of defendant township advised plaintiff that the subject property was assessed in 1977 for $34,000, that taxes had been paid for the first three quarters of 1977, and that fourth quarter taxes were due on November 1, 1977. At closing, an appropriate tax adjustment was made between the seller and plaintiff with respect to the 1977 taxes reflected on the tax search. See N.J.S.A. 54:4-56. Subsequent to closing, defendant's tax collector wrote to plaintiff's attorney by letter dated October 5, 1977, enclosing a copy of a 1976 omitted assessment tax bill in the amount of $585.20 and a 1977 added assessment tax bill in the amount of $503.69. The letter from the tax collector contained the following statement:
When the tax search was certified in August, 1977 we had no knowledge of an added or omitted assessment. The Change Orders on file in this office are dated September 5, 1977, but these Change Orders from our Assessor are never used to supply information on an Official Tax Search because they are not yet approved by the County Board of Taxation.
When plaintiff's attorney questioned the imposition of taxes not disclosed on the official tax search, defendant's tax assessor wrote to plaintiff's attorney on November 10, 1977 that notification of the assessor's intent to impose an omitted and added assessment on the subject property had been sent to the owner of record in August 1977. The assessor further stated that the taxes had been levied on the added and omitted tax lists as of October 1, 1977.
At trial it was established that the assessor had increased the assessment on the subject property for 1976 and 1977 from $34,000 to $54,900. He did so because he discovered that work had been done on the house and barn for which no additional assessment had ever been imposed. The work had been done in May 1973 to the house and in June 1974 to the barn. In explaining the delay in imposing additional assessments for these improvements, the assessor testified that he had had difficulty obtaining notices of building permits and certificates of occupancy or completion from the local building inspector for the period from 1973 to 1977. For reasons which were not explained, the assessor received "an appreciable number of these notices" in 1977 and "proceeded to follow up" on them. As a result, after an initial effort to gain access to the subject property in early 1977, the assessor visited the property on August 17, 1977 and decided to increase the assessment on the property's buildings. Ironically, this was the date the tax search officer issued the tax search to plaintiff. Subsequently, the omitted assessments were certified. Plaintiff appealed the new assessments to the Hunterdon County Board of Taxation, which affirmed the assessor's action. Plaintiff has filed this action seeking to have this court vacate the new assessments for 1976 and 1977.
It is evident that an assessment should have been placed upon the subject property to reflect the improvements made in 1973 and 1974. This was not done as of those years and therefore the owners of the property at that time paid less in property tax than they should have paid. Such a circumstance is not uncommon. The general problem was discussed by our Supreme Court in Appeal of New York State Realty & Terminal Co., 21 N.J. 90, 121 A.2d 21 (1956). To ameliorate this situation, the Legislature enacted the added assessment statute, N.J.S.A. 54:4-63.1 et seq., and two omitted assessment statutes, N.J.S.A. 54:4-63.12 et seq. and N.J.S.A. 54:4-63.31 et seq. These statutes have been characterized by the Supreme Court in the following language:
The theory of the Added Assessments Law and the Omitted Assessments Law is to provide means whereby new construction and property omitted from the tax rolls through design or inadvertence can be added and included and taxed from the appropriate date when added to the land or for the appropriate year in which it was omitted from the tax rolls. The effect of these acts is to aid in accomplishing a proper and equitable distribution of the tax burden. [ Appeal of New York State Realty & Terminal Co., supra, at 97, 121 A.2d 21].
The Supreme Court distinguished added and omitted assessments in a manner which makes clear that the 1976 "omitted" assessment and the 1977 "added" assessment in the present case both should have been termed omitted assessments. Id. at 98-99, 121 A.2d 21. The challenged assessments were both imposed to incorporate into the ratable base certain property that had been omitted in prior years "through design or inadvertence." Id. at 97, 121 A.2d 21. See Snyder v. South Plainfield Borough, 1 N.J. Tax. 3, 8 (1980). Added assessments relate to improvements made after the assessing date or during the tax year. N.J.S.A. 54:4-63.2 and 4-63.3.
Omitted assessments may be imposed not only for the year in which the County Board of Taxation or the assessor takes action to correct the omission, but also for the preceding year. N.J.S.A. 54:4-63.12 and N.J.S.A. 54:4-63.31. Thus, the Legislature has limited the remedy of the taxing district to two years. Defendant could not have gone all the way back to 1973 and 1974, the actual years of the improvements in this case, to attempt to collect its taxes, nor did it attempt to do so. At best it may collect taxes based upon the added value of these buildings as of 1976 and 1977.
Annual property taxes for many years have been deemed by the Legislature to be a lien as of the first day of the tax year, even though neither the amount of the assessment nor the tax rate is known at that time. N.J.S.A. 54:4-63.20; N.J.S.A. 54:5-6. Prior to a statutory amendment in 1944, property taxes did not become a lien until December 1 of the tax year. L. 1918, c. 237, § 6. According to the sponsor's statement to the bill which became L. 1944, c. 247, the effective date of the lien was advanced to prevent a loss of local tax revenues, the change being prompted by court decisions holding that when the Federal Government condemned land it had to pay only those taxes which had already become due or which were then a lien upon the property. The sponsor stated that the result of this had been that "many municipalities have lost tax revenues on which their current budget was dependent," and that after adoption of the amendment, annual taxes "would have to be paid in full in case of a Federal taking." Statement, Assembly Bill 234 (1944).
It is settled that "municipal liens, and the rights arising therefrom, are solely statutory in origin and are fixed and determined by the statute." Brewer v. Porch, 53 N.J. 167, 173, 249 A.2d 388 (1969). The statutory provision establishing the effective date on which property taxes become a lien is unequivocal. It was made the first day of the tax year in order to benefit municipalities. It is therefore clear that the omitted assessments imposed by defendant in this matter were liens on property purchased by plaintiff as of January 1, 1976 and January 1, 1977. Cf. East Orange v. Palmer, 47 N.J. 307, 318, 220 A.2d 679 (1966).
Plaintiff contends that since the omitted assessments were not shown on the official tax search she obtained prior to acquiring title, defendant is precluded from collecting taxes on the omitted assessments or from otherwise enforcing its lien. Plaintiff relies upon N.J.S.A. 54:5-17, which provides in part as follows:
A bona fide purchaser, lessee or mortgagee who shall acquire for a valuable consideration an interest in lands covered by an official tax search and in reliance on said search shall hold such interest free ...