L. Bogusevich et al. v. Township of Ocean

NOT FOR PUBLICATION WITHOUT APPROVAL OF

THE TAX COURT COMMITTEE ON OPINIONS

 

TAX COURT OF NEW JERSEY

 

Mala Sundar R.J. Hughes Justice Complex

JUDGE P.O. Box 975

25 Market Street

Trenton, New Jersey 08625

Telephone (609) 943-4761

TeleFax: (609) 984-0805

taxcourttrenton2@judiciary.state.nj.us

December 2, 2013

BY ELECTRONIC MAIL

William S. Winters, Esq.

199 Route 18 South

East Brunswick, New Jersey 08816

Kerry Higgins, Esq.

McKenna Dupont Higgins & Stone, P.C.

229 Broad Street

P.O. Box 610

Red Bank, New Jersey 07701

 

Re: L. Bogusevich et al. v. Township of Ocean

Block 138, Lot 47

Docket No. 016127-2011

 

Dear Counsel:

 

This letter constitutes the court s decision following trial in the above-captioned matter. Plaintiffs contests the judgment of the Monmouth County Board of Taxation ( County Board ) which affirmed the local property tax assessment for tax year 2011 on the above captioned property ( Subject ) located in defendant, Township of Ocean ( Township ). The affirmed, and thus, contested assessment, is as follows:

Land: $195,700

Improvements: $287,700

Total: $483,700

 

*

The Chapter 123 ratio applicable to tax year 2011 was 84.38%, with an upper limit of 97.04% and a lower limit of 71.72%.

Plaintiffs presented factual and expert testimony. The Township did not object, and the court accepted the expert s report into evidence. Based on the sales comparison approach, and the adjusted sale prices of three comparable houses, all located in the Township, the expert concluded the value of the Subject as $480,000.

For the reasons explained below, the court finds the adjustments are subjective without adequate market based data supporting the same. Therefore, the court finds that the plaintiffs have not proven by a preponderance of evidence that the County Board s judgment is incorrect. Consequently, the court affirms that judgment.

FACTS

Subject Description

The Subject is a lot comprising about .29 acres improved with a single family dwelling. It is located in R-4, single residential zone, thus, is legally conforming. It has all available public utilities. It is set back from the fronting street by 108 feet.

Plaintiffs purchased the Subject June 4, 2010 for $465,000. The purchase was accomplished through a real estate broker. Plaintiffs were unaware of any circumstances leading them to believe that the seller was under any pressure to sell, nor were they related to the seller. However, they did not know this for a fact.

The residence was built in 2003 and occupies 3,038 square feet ( SF ) of gross living area ( GLA ). It has a cathedral ceiling, with ten rooms of which five are bedrooms. There are three baths, one with a jacuzzi. It also has an unfinished basement with a block foundation, a fireplace, a deck (448 SF) and a two-car garage. The photographs of the dwelling, front and rear, shows the exterior to be in a good condition and built to modern style.

Comparable Sales

Plaintiffs expert relied upon the following three comparable sales, all located in the Township:

Location

Sale Date

Sale Price

Description

1.

908 Berkeley Avenue

7/29/2010

$488,000

11 years old; 0.23 acres site; 2,749 SF GLA; cathedral ceiling; 9 rooms; 4 bedrooms; 2 bathrooms; fireplace; full partially finished basement; two-car garage; deck (492 SF); porch.

2.

31 Meadows Lane

5/24/2010

$507,500

23 years old; 0.46 acres site; 2, 938 SF GLA; 9 rooms; 5 bedrooms; 3 bathrooms; fireplace; full finished basement; two-car garage; deck; in-ground pool.

3.

37 Meadows Lane

9/28/2010

$495,000

23 years old; colonial style; 0.49 acres site; 2, 940 SF GLA; 8 rooms; 4 bedrooms; 2 bathrooms; fireplace; full partially finished basement; two-car garage; deck; in-ground pool; patio.

 

The expert did not inspect any of the interiors of the comparables. He obtained all information of their physical description from the Multiple Listing Services ( MLS ) and the site size from their property record cards. Their photographs (front exterior only) were also from the MLS. He made adjustments at $30,000 per acre for site size; at $40 per SF ( PSF ) for GLA; at $10,000 for pool; and at $10,000 for basement. Although the comparables had differences in the bathrooms, he made no adjustments because they were accounted for in his GLA adjustment.

FINDINGS

(A) Standard of Review

Original assessments and judgments of county boards of taxation are entitled to a presumption of validity. MSGW Real Estate Fund, L.L.C. v. Borough of Mountain Lakes, 18 N.J. Tax 364, 373 (Tax 1998). Due to the strength of the presumption, a taxpayer must prove that the assessment is erroneous with evidence that must be definite, positive and certain in quality and quantity to overcome the presumption. Ibid. (citations and quotations omitted).

If the presumption of correctness is overcome, the court must determine the value based on a fair preponderance of the evidence provided by both parties. Ford Motor Co. v. Township of Edison, 127 N.J. 290, 312-13 (1992). The court should proceed to weigh and evaluate the evidence and decide the appeal on the merits, whether or not the defendant seeks relief against the assessment. MSGW, supra, 18 N.J. Tax at 378.

The court s independent assessment depends on the evidence before it and the data that are properly at its disposal. F.M.C. Stores Co. v. Borough of Morris Plains, 100 N.J. 418, 430 (1985). The complainant continues to bear the burden of persuading the court that the judgment under review is erroneous. Ford Motor Co., supra, 127 N.J. at 314-15.

(B) Valuation

The sales comparison approach is generally accepted as an appropriate method of estimating value for a residence. Brown v. Borough of Glen Rock, 19 N.J Tax 366, 377 (App. Div.), certif. denied, 168 N.J. 291 (2001). The market value for the subject is derived by comparing similar properties that have recently sold, identifying appropriate units of comparison, and making adjustments to the sale prices of the comparable properties based on relevant, market-derived elements of comparison. Appraisal Institute, The Appraisal of Real Estate 301-02 (13th ed. 2008). There must be substantial similarity between the subject property and the comparable property. Venino v. Borough of Carlstadt, 1 N.J. Tax 172, 175 (Tax 1980), aff d, 4 N.J. Tax 528 (App. Div. 1981). See also The Appraisal of Real Estate, supra, at 301 (comparable properties should be sought in a competitive market by considering characteristics such as property type, date of sale, size, physical condition, location, and land use constraints since the goal is to find a set of comparable sales as similar as possible to the subject property to ensure they reflect the actions of similar buyers ).

Here, the comparables are all located in the Township. Although two are not in the same neighborhood as the Subject, Comparable One is on the same street as the Subject. Their exterior photographs show that they are comparable stylistically to the Subject. Their sales are all well within proximity of the assessment date. There was no evidence to show that they were non-arms-length sales. Therefore, they are credible comparables.

However, other than the pool adjustments of -$10,000, which the court finds reasonable, the expert s adjustments for site, GLA, and basement, are not as credible. The expert s report did not contain the data underlying his adjustment for size or GLA adjustment. Upon the court s questioning, he stated that he had examined vacant land sales in the Township to come up with the $30,000 per acre site adjustment, but did not provide any of the details of these alleged sales. The court (and the Township) were thus unable to examine the credibility of these alleged sales, and the expert s inference or conclusion of the per-acre value from the same. See generally Greenblatt v. City of Englewood, 26 N.J. Tax 41, 54-55 (Tax 2010) (expert s opinion must be based upon facts or data, thus expert must explain the whys and wherefores of his opinion) (citations and quotations omitted).

His GLA adjustment suffered the same problems. He claimed that $40 PSF was based on the market but there was no data of this market. He maintained that it was realistically impossible to justify the adjustment because one property is never identical to another. While this may be true, here, his claim that he arrived at a land value based on his alleged vacant land sale analysis could have been a factual basis for the GLA adjustment.1 However, this was not done or if so, not explained. He stated that his 30-plus years of experience as an appraiser provided him the knowledge, experience and basis for his adjustments. This is insufficient in and of itself. Although [i]n the market data approach adjustments made to comparable sales are mainly subjective in nature, Owens-Illinois Glass Co. v. Township of Bridgeton, 8 N.J. Tax 495, 512 (Tax 1986), there must nonetheless be some factual data and his opinion lies in his inferences or conclusions from that data.

Last, his uniform treatment for adjustment of the basement regardless of the area finished is unpersuasive. His treatment of Comparable Three s basement as fully finished simply because it had a half-bathroom and recreation room, is subjective. Although the basement finish area in Comparable One was half the size of the basement, he treated it as a fully finished basement. He did not provide any data to show that buyers of single family homes would pay the same for a house with a fully finished basement as they would for a house with a partially finished basement. Nor did he indicate that this factor was irrelevant in the market place because there is no price differential in finishing a fully unfinished basement and a partially finished basement.

Plaintiffs argue that even if the court were to find that the comparables are not usable because of the issue of the expert s adjustments, the Subject s sale should be considered as its fair market value. They acknowledge that one sale a market does not make but contend that this is not a hard-and-fast rule. The Township argues that one sale cannot be considered, especially when plaintiffs have failed to establish that the Subject was sold as an arms-length market sale.

Plaintiffs are generally correct that courts do not automatically or arbitrarily discard consideration of the Subject s sale as an indicator of its fair market value even if it is the only evidence. See Passarella v. Township of Wall, 22 N.J. Tax 600, 603 (App. Div. 2004) (the sales price of a property may be the best indicator of its true value in some circumstances ). However, the Subject s sale price is only a guiding indicium of fair value and ordinarily is merely evidential . . . Romulus Dev. Corp. v. Town of West New York, 7 N.J. Tax 305, 316 (Tax 1985), aff d o.b., 9 N.J. Tax 90 (App. Div. 1987) (internal quotations and citation omitted). Nonetheless, it might under peculiar circumstances become controlling, subject to the limitation that the determination properly involve[s] the weighing and appraising of all component factors and adventitious circumstances. Ibid.

Plaintiffs provided credible testimonial evidence that they purchased the Subject through an independent third-party real estate broker, and were unrelated to the seller. However, they also admitted that they did not know for a fact whether the seller/s was/were under pressure to sell.2 Further, plaintiffs expert did not include the Subject s sale in his analysis. Although he testified that it should be considered as the best indicator of its value, he did not include any factual data in support of this assertion. Thus, the court does not have enough on the record to determine whether the Subject s sale price is a truly credible indicator of its value.

Here, the court does have three comparable sales, which it has found to be usable but for the adjustments. That the court does not find the plaintiffs expert s adjustments to the comparables to be credible, does not, however, establish the peculiar circumstances so that the Subject s purchase price becomes controlling. Indeed, even if this court were to consider the expert s unadjusted sale prices ($488,000; $507,500; $495,000), or the sales prices less the pool adjustments ($488,000; $497,500; $485,000) with the Subject s purchase price, it would still conclude that the assessment of $483,700 is proper.

Based on the above analysis, the court finds that plaintiffs have failed to provide sufficient competent evidence to overcome the presumptive correctness of the County Board s judgment. Borough of Rumson v. Haran, 3 N.J. Tax 590, 592 (Tax 1981) (county board of taxation s judgment is entitled to a presumption of correctness unless the taxpayer provides sufficient competent evidence of true value of the property ).

CONCLUSION

For the foregoing reasons, the County Board s judgment is affirmed. An Order reflecting the affirmance will be entered by the Clerk of the Tax Court.

Very truly yours,

 

Mala Sundar, J.T.C.

1 If the $30,000 per acre was a valid conclusion (i.e., based on credible data), and used as a measure to extract the land value portion of the comparable sales price, the remaining price (allocable to the improvement) when divided by the GLA would produce more than $40 PSF. Thus, Comparable One s 0.23 acres at $30,000 per acre equals $6,900, which when subtracted from its sale price of $488,000 provides $481,100 (allocation to improvement), which when divided by the GLA of 2,749 SF provides $175 PSF. Comparable Two s 0.46 acres at $30,000 per acre equals $13,800, which when subtracted from its sales price of $507,500 equals $493,700 (improvement allocation), which when divided by 2,938 SF of GLA provides $168 PSF. Comparable Three s 0.49 acres at $30,000 per acre equals $14,700, which minus its sales price provides $480,300 (improvement allocation), which when divided by 2,940 SF of GLA provides $163 PSF. Each of the PSF amounts ($175; $168; $163) far exceeds $40 PSF used by the expert. Since the Subject s GLA is larger than all three comparables ( 289 SF; 100SF; 98SF), the upward adjustments would have been greater than those provided by the expert, which would have provided significantly higher adjusted sale prices for each comparable.

2 The court allowed the Township s objection to plaintiffs testimony as to the listing period for the Subject s sale because plaintiffs had not provided the Township with any documents in this regard prior to the trial.