On appeal from Tax Court of New Jersey.
Brody, Landau and Thomas. The opinion of the court was delivered by Brody, J.A.D.
Plaintiff, the owner of a 483-unit high-rise cooperative apartment building in the Borough of Fort Lee (Borough), appeals from a Tax Court judgment setting the property's assessment for the 1987 tax year. The trial Judge equated the property's value with the total value of the cooperative's shares, using as comparables the prices for which shares were sold to outsiders within about a year before and after the assessment date. After allowing discounts for senior citizen tenants and for tenants protected by the anti-eviction statute, the Judge found the true value of the property to be $121,799,169. Based on that value, the $78,000,000 assessment levied by the Borough exceeded the common level range. The Judge therefore applied the 50.50% average ratio (chapter 123 ratio) established by the Director of the Division of Taxation (Director) and arrived at a total assessment of $61,508,600.*fn1 Plaintiff contends that the Director's chapter 123 ratio and the Judge's evaluation of the shares were both too high.
A taxpayer may correct a chapter 123 ratio if it was based on "information that substantially skews the ratio." Murnick v. Asbury Park, 95 N.J. 452, 464, 471 A.2d 1196
(1984). Plaintiff claims that the Borough's 1987 ratio includes fifty-five nonusable sales: two sales to affiliated entities and fifty-three insider sales to the tenants of a building that had been converted to a condominium. Excluding those sales would reduce the chapter 123 ratio from 50.50% to 44.91% thereby further reducing plaintiff's assessment. N.J.A.C. 18:12-1.1 identifies twenty-seven categories of sales that "should generally be excluded [when establishing a chapter 123 ratio]." However, a transaction in one of those categories "may be used if after full investigation it clearly appears that the transaction was a sale between a willing buyer, not compelled to buy, and a willing seller, not compelled to sell, and that it meets all other requisites of a usable sale." N.J.A.C. 18:12-1.1(b).
The first category of allegedly nonusable sales that plaintiff cites is defined in N.J.A.C. 18:12-1.1(a)3:
Sales between a corporation and its stockholder, its subsidiary, its affiliate or another corporation whose stock is in the same ownership;
Plaintiff's expert testified that with respect to two sales used to establish the chapter 123 ratio he was told by people who owned all the stock of one of the seller corporations and half the stock of the other that at the time of the sale they also owned half of the stock of the purchaser corporation. Were these sales excluded, the chapter 123 ratio would have been reduced from 50.50% to 45.11%. The Borough did not refute that hearsay evidence. However, its expert testified that he was told by participants in both sales that nevertheless the selling prices were the result of arms-length negotiations. The trial Judge rejected the challenge to the use of these sales because plaintiff did not "establish that these sales involved consideration that was arbitrarily set or reflected additional items beyond the sale of the real property in question."
The other category of allegedly nonusable sales, a catch-all category, is defined in N.J.A.C. 18:12-1.1(a)26:
Sales which for some reason other than specified in the enumerated categories are not deemed to be a transaction between a willing buyer, not compelled to buy, and a willing seller, not compelled to sell;
In establishing the chapter 123 ratio the Director used fifty-three sales of residential units in a building after the building was converted to a condominium. The selling prices were the same as prices offered tenants in the Public Offering Statement. Plaintiff's expert testified that these sales must have been to insider tenants at prices below market value because there were sales of other units in the building at higher prices. Were these fifty-three sales excluded, the chapter 123 ratio would be further reduced from 45.11% to ...