On certification to Superior Court, Appellate Division, whose opinion is reported at 263 N.J. Super. 382 (1993).
Handler, Clifford, Pollock, O'Hern, Garibaldi, Stein
The opinion of the court was delivered by
In this local property tax matter, the owner of a multi-unit high-rise cooperative building challenges the 1987 tax assessment on its property as discriminatory. Under current standards governing real-property taxation, if the ratio of assessed value to market value of an individual property exceeds the "average ratio" for the taxing district by more than fifteen percent, the tax on the property must be adjusted by reducing the assessed value through the application of the average ratio.
The Director of the Division of Taxation promulgates the average ratio, pursuant to N.J.S.A. 54:1-35a, also generally referred to as the "chapter 123" ratio, using the sales of real property in the respective taxing district as an indicator of the market value of property. The property owner in this case contends that the chapter 123 ratio applicable to the taxing district was invalid because it included sales that were "nonusable" under the Director's regulation, and hence the taxing district could not use the ratio to fix the assessment of its property.
The Tax Court rejected taxpayer's argument that the challenged sales relied upon in promulgating the chapter 123 ratio were "nonusable." The Appellate Division affirmed that judgment, 263 N.J. Super. 382 (1993). We granted certification, 134 N.J. 478 (1993).
The issue on appeal is narrow. It is whether, when challenging the inclusion of sales in the chapter 123 ratio, a taxpayer may succeed by making a prima facie showing that the challenged transactions fall within a "nonusable" category without the Director having "fully investigated" those sales to determine their includability.
Plaintiff, 1530 Owners Corporation ("plaintiff" or "taxpayer"), is the owner of a 483-unit high-rise cooperative apartment building in the Borough of Fort Lee (the "Borough"). In 1985, the property was converted from an income-producing apartment building to a cooperative-apartment building causing the Borough to increase its assessment of the property. Plaintiff brought an action before the Tax Court claiming that the assessment of the subject property for the tax year 1987 was discriminatory.
The Tax Court equated the property's value with the total value of the cooperative's shares, using as comparable sales 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 court found the 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, which is defined by a limit of fifteen percent above the average ratio. The court therefore applied the chapter 123 ratio established by the Director and arrived at a total assessment of $61,508,600.
The Tax Court rejected taxpayer's argument that certain challenged sales should have been excluded because the Director had failed to make a full investigation regarding whether the sales reflected market value. That court also determined that taxpayer's evidence was insufficient to show that the challenged sales did not reflect market value.
On appeal, the Appellate Division ruled that taxpayer had failed to fulfill its burden of proof to invalidate the chapter 123 ratio applicable to the taxing district, and the court sustained the determination of the Tax Court. 263 N.J. Super. at 386-88.
Claims of property-tax discrimination are resolved through application of the chapter 123 ratio, which establishes the average ratio of assessed value to true value for all taxable properties within a taxing district. In order to address the claim of the taxpayer in this case, a basic ...