On certification the Superior Court, Appellate Division, whose opinion is reported at 202 N.J. Super. 474 (1985).
For reversal -- Chief Justice Wilentz, Justices Handler, Garibaldi and Stein, and Judges Fritz, Antell and Pressler (temporarily assigned). Opposed -- None. The opinion of the court was delivered by, Antell, P.J.A.D. (temporarily assigned).
The question presented on this appeal is whether a taxpayer may reduce, for real estate tax assessment purposes, the value of property because of a conservation easement thereon that it granted in perpetuity to a conservation foundation. In an opinion published at 6 N.J. Tax. 391 (1984), the Tax Court held that the reduction was not allowable. With one modification the Appellate Division affirmed, 202 N.J. Super. 474 (1985), and we granted certification, 102 N.J. 343 (1985).
Defendant is a private, nonprofit corporation designated as a private foundation under the Internal Revenue Code, 26 U.S.C.A. § 509. The properties in question, Lot 8, Block 7 in Midland Park and Lot 9, Block 1810 in Ridgewood, have been
held by defendant since 1969 and make up a tract of approximately 2.8 acres straddling the boundary line between the two municipalities. Pursuant to an agreement dated August 15, 1979, defendant conveyed to the New Jersey Conservation Foundation ("NJCF"), a nonprofit corporation organized to foster and preserve open space, a perpetual conservation easement on the property. The easement, which did not extend to other neighboring lands also owned by defendant, was granted for the benefit of the general public and precludes defendant from removing vegetation, excavating soil, erecting structures, dumping trash, and engaging in any activity that might be detrimental to drainage, flood control, potable water, erosion control, or soil conservation. Except as specifically permitted, it prohibits any act or use "detrimental to the preservation of the Property in its natural state." Access thereto is reserved to defendant, with NJCF being permitted limited entry solely for the purpose of inspecting to insure compliance with the terms and conditions of the easement. The terms of the easement, which are binding on defendant and NJCF, their successors and assigns, further provide that in the event NJCF ceases to function with one of its primary purposes being the preservation of natural resources and open space, the easement shall be transferred and assigned to one of a number of specified conservation organizations and public bodies.
The neighborhood in which the tract is located is zoned for one family dwellings on spacious lots. During the tax years in question, 1980 and 1981, defendant's properties were appraised at their "highest and best use" for single family residences. The Ridgewood property was assessed at $21,200 for each year, and the assessment for the larger tract in Midland Park was $25,400. On the taxpayer's appeal from both assessments, the Bergen County Tax Board recognized the existence of the easement, the topography of the property, and other restrictions on the property, and reduced the assessments to a nominal value of $1000 each. The municipalities appealed these determinations to the New Jersey Tax Court. After ruling the
conservation easements nondeductible, the court restored the Ridgewood Park assessment to $21,200 and increased the Midland Park assessment to $37,600 based on its potential for single family development. With the one modification, which we will describe later, the Appellate Division affirmed substantially for the reasons expressed by the Tax Court.
Easements are of two types: easements appurtenant and easements in gross. "The distinction between the two, of course, is that an easement appurtenant requires a dominant tenement to which it is appurtenant, whereas an easement in gross belongs to its owner independently of his ownership or possession of any specific land." Weber v. Dockray, 2 N.J. Super. 492, 495 (Ch.Div.1949). An easement appurtenant is created when an owner of one parcel of property (the servient estate) gives rights regarding that property to the owner of an adjacent property (the dominant estate). It enhances the value of the dominant estate and cannot exist separate from the land itself. American Rieter Co. v. Dinallo, 53 N.J. Super. 388, 392 (App.Div.1959); 25 Am.Jur. 2d, Easements and Licenses, § 11 at 425. An easement in gross, by contrast, benefits no specific parcel owned by another; it is independent of and unconnected to the ownership or possession of any particular tract. Tewksbury Township v. Jersey Cent. Power & Light Co., 159 N.J. Super. 44, 49 (App.Div.1978), aff'd, 79 N.J. 398 (1979); Restatement of Property §§ 454, 455 (1944).
For purposes of real estate tax assessment our courts have held that the fair value of property subject to an easement appurtenant is reduced while the value of the property benefited therefrom is enhanced by the value of the easement. Lipman v. Shriver, 51 N.J. Super. 356, 360 (Law Div.1958); Metropolitan Life Insurance Co. v. McGurk, 15 N.J.Misc. 572 (Cir.Ct.1937), aff'd, 119 N.J.L. 517 (E. & A.1938); Ehren Realty Co. v. Magna Charta Building & Loan Assoc., 120 N.J. Eq. 136 (Ch.1936). Conservation easements of the kind here considered are easements in gross. While there is no identifiable dominant estate that directly enjoys the benefit thereof, obviously such
an easement can enhance the value of other ...