Paul Meiring and Sarah Meiring v. City ofSummit

NOT FOR PUBLICATION WITHOUT APPROVAL OF

THE TAX COURT COMMITTEE ON OPINIONS

TAX COURT OF NEW JERSEY

Patrick DeAlmeida R.J. Hughes Justice Complex

Presiding Judge P.O. Box 975

Trenton, New Jersey 08625-0975

(609) 292-8108 Fax: (609) 984-0805

December 23, 2014

Michael A. Paff, Esq.

Wilentz, Goldman & Spitzer, P.A.

90 Woodbridge Center Drive, Suite 900 Box 10

Woodbridge, New Jersey 07095-0958

William T. Rogers, III, Esq.

Skoloff & Wolfe, PC

293 Eisenhower Parkway

Livingston, New Jersey 07039

Re: Paul Meiring and Sarah Meiring v. City of Summit

Docket No. 009639-2010

Docket No. 008699-2011

Dear Counsel

This letter constitutes the court s opinion after trial in the above-referenced matters. Plaintiffs challenge the assessments on their single-family residence in the City of Summit for tax years 2010 and 2011. For the reasons explained more fully below, the assessments are reduced.

*

I. Findings of Fact and Procedural History

This letter opinion sets forth the court s findings of fact and conclusions of law after trial. R. 1:7-4.

Plaintiffs Paul Meiring and Sarah Meiring are the owners of a single-family home in Summit. The property is designated in the records of the municipality as Block 4801, Lot 8 and is known as 189 Oak Ridge Avenue. For tax year 2010, the property was assessed as follows

Land $ 381,000

Improvements $ 729,400

Total $1,110,400

The Chapter 123 average ratio for the municipality for tax year 2010 is 43.20. When the ratio is applied to the assessment, the implied equalized value of the subject property for tax year 2010 is $2,570,370.

On March 31, 2010, plaintiffs filed a Complaint with this court challenging the tax year 2010 assessment.

For tax year 2011, the assessment remained at $1,110,400. The Chapter 123 average ratio for the municipality for tax year 2011 is 45.94. When the ratio is applied to the assessment, the implied equalized value of the subject property for tax year 2011 is $2,417,066.

On March 31, 2011, plaintiffs filed a Complaint with this court challenging the tax year 2011 assessment.

The two appeals were consolidated for purposes of trial and this opinion.

The subject property is a colonial-style, single-family home constructed in approximately 1992. The home, which is situated on .38 acres, has five bedrooms and four and one half bathrooms and is in good condition. The residence has a total of eleven rooms, as well as a partially finished basement with a recreation room, lavatory and office. The home has two fireplaces, a three-car garage, a deck and a patio. Plaintiffs residence is in a desirable residential neighborhood in an upscale community.

The record contains conflicting evidence with respect to the size of the living space at the subject property. Both parties relied on the testimony of expert appraisal witnesses. Plaintiffs expert offered the opinion that the home has 4,173 square feet of living space. He did not explain the basis for this opinion. Defendant s expert, who serves as an assistant to the Summit municipal tax assessor, offered the opinion that the home has 4,359 square feet of living space. He also did not explain the basis for this opinion. Both experts inspected the subject property. Although neither expert testified that he measured the amount of living space during the inspections, defendant s expert states in his report that the size of the improvements is based on measurements taken at the time of inspection. Plaintiffs expert s report contains a sketch of the subject, which he appears to have created. The origin of the sketch in the report of plaintiffs expert is not explained in detail. The court will accept the opinion of defendant s expert, given that his report contains an express declaration that he measured the subject property during his inspection.

Each expert used the comparable sales approach to reach an opinion with respect to the true market value of the subject property on the relevant valuation dates. Plaintiffs expert offered the opinion that the true market value of the subject property on October 1, 2009, the valuation date for tax year 2010, was $1,800,000. He also offered the opinion that the true market value of the subject property on October 1, 2010, the valuation date for tax year 2011, was $1,775,000. The municipality s expert offered the opinion that the true market value of the subject property on October 1, 2009 was $2,300,000 and on October 1, 2010 was $2,200,000.

II. Conclusions of Law

The court s analysis begins with the well-established principle that [o]riginal assessments and judgments of county boards of taxation are entitled to a presumption of validity. MSGW Real Estate Fund, LLC v. Borough of Mountain Lakes, 18 N.J. Tax 364, 373 (Tax 1998). As Judge Kuskin explained, our Supreme Court has defined the parameters of the presumption as follows

The presumption attaches to the quantum of the tax assessment. Based on this presumption the appealing taxpayer has the burden of proving that the assessment is erroneous. The presumption in favor of the taxing authority can be rebutted only by cogent evidence, a proposition that has long been settled. The strength of the presumption is exemplified by the nature of the evidence that is required to overcome it. That evidence must be definite, positive and certain in quality and quantity to overcome the presumption.

Ibid. (quoting Pantasote Co. v. City of Passaic, 100 N.J. 408, 413 (1985)(citations omitted)).

The presumption of correctness arises from the view that in tax matters it is to be presumed that governmental authority has been exercised correctly and in accordance with law. Pantasote, supra, 100 N.J. at 413 (citing Powder Mill, I Assocs. v. Township of Hamilton, 3 N.J. Tax 439 (Tax 1981)); see also Byram Twp. v. Western World, Inc., 111 N.J. 222 (1988). The presumption remains in place even if the municipality utilized a flawed valuation methodology, so long as the quantum of the assessment is not so far removed from the true value of the property or the method of assessment itself is so patently defective as to justify removal of the presumption of validity. Transcontinental Gas Pipe Line Corp. v. Township of Bernards, 111 N.J. 507, 517 (1988)(citation omitted).

In the absence of a R. 4:37-2(b) motion . . . the presumption of validity remains in the case through the close of all proofs. MSGW Real Estate Fund, LLC, supra, 18 N.J. Tax at 377. In making the determination of whether the presumption has been overcome, the court should weigh and analyze the evidence as if a motion for judgment at the close of all the evidence had been made pursuant to R. 4:40-1 (whether or not the defendant or plaintiff actually so moves), employing the evidentiary standard applicable to such a motion. Ibid. The court must accept as true the proofs of the party challenging the assessment and accord that party all legitimate favorable inferences from that evidence. Id. at 376 (citing Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 535 (1995)). In order to overcome the presumption, the evidence must be sufficient to determine the value of the property under appeal, thereby establishing the existence of a debatable question as to the correctness of the assessment. West Colonial Enters, LLC v. City of East Orange, 20 N.J. Tax 576, 579 (Tax 2003)(quoting Lenal Props., Inc. v. City of Jersey City, 18 N.J. Tax 405, 408 (Tax 1999), aff d, 18 N.J. Tax 658 (App. Div.), certif. denied, 165 N.J. 488 (2000)).

Only after the presumption is overcome with sufficient evidence at the close of trial must the court appraise the testimony, make a determination of true value and fix the assessment. Rodwood Gardens, Inc. v. City of Summit, 188 N.J. Super. 34, 38-39 (App. Div. 1982)(citations omitted). If the court determines that sufficient evidence to overcome the presumption has not been produced, the assessment shall be affirmed and the court need not proceed to making an independent determination of value. Ford Motor Co. v. Township of Edison, 127 N.J. 290, 312 (1992); Global Terminal & Container Serv. v. City of Jersey City, 15 N.J. Tax 698, 703-704 (App. Div. 1996).

According all favorable inferences to plaintiffs evidence, as is required by law, the court concludes that plaintiffs raised a debatable question regarding the correctness of the assessments on the subject property. Plaintiffs expert relied on five comparable sales for each tax year, to which the expert applied various adjustments, to offer an opinion that the subject property had a true market value on each of the valuation dates more well below the implied equalized value of the assessments on the subject property. The expert s opinion was based on an analysis typical of that used by appraisers and courts to determine the true market value of residential real property. When the assessment for each tax year is divided by the value opinion offered by plaintiffs expert for that tax year, the resulting ratio exceeds the upper limit of the common level range for that year. Thus, if the opinions of plaintiffs expert were accepted by this court, plaintiffs would be entitled to relief. The court concludes, therefore, that the record contains evidence that is sufficiently definite, positive and certain that the assessments on the subject property exceeds its true market value as of October 1, 2009 and October 1, 2010.

This determination alone does not end the court s inquiry. Having found that the presumption of correctness was overcome, it is the court s obligation to determine the true market value of the subject property on the relevant valuation dates.

The comparable sales 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. 2001); Appraisal Institute, The Appraisal of Real Estate, 419 (12th ed 2001)(the comparable sales approach usually provides the primary indication of market value in appraisals of properties that are not usually purchased for their income-producing characteristics. ). This method of valuation has been defined as [a] set of procedures in which a value indication is derived by comparing the property being appraised to similar properties that have been sold recently, applying appropriate units of comparison, and making adjustments to the sales prices of the comparables based on the elements of comparison. Id. at 417. Both experts took this approach to determine the value of the subject property. The court finds that this approach is the best method for determining the true market value of plaintiffs residence. A purchaser in the marketplace on October 1, 2009 and October 1, 2010 would determine the value of the subject property through the use of comparable sales.

For tax year 2010, the experts together relied on ten comparable sales of single-family homes in Summit. Nine of the comparable sales are less than a mile from the subject property. The tenth is 1.6 miles from the subject. All are homes in good condition in desirable residential neighborhoods. (One expert testified that there are no undesirable residential neighborhoods in Summit, a municipality with a sterling reputation.) Of the ten, the court declines to rely on five sales and finds the remaining five to be the most credible evidence in the record of the true market value of the subject property.

The court finds the following comparable sales to lack credibility as evidence of the true market value of the subject property

1. 39 Portland Road. This sale required a substantial adjustment for the size of the land on which the home is located. The record contained no credible market data to support the expert s adjustment for this category. In addition, the home has fewer bedrooms and bathrooms than the subject, while the record contains several homes with room counts in these categories that are identical or nearly identical to the subject.1

2. 244 Oak Ridge Avenue. Although this home is on the same street as the subject property, the expert offered significant adjustments to the sales price. The large lot size adjustment offered by plaintiffs expert was not supported by market data. In addition, this home is considerably larger than the subject, requiring a large living space adjustment. In addition, the home has more bedrooms than the subject and a 4-car garage, which requires another adjustment not supported by market data.

3. 175 Beechwood Road. This home is the only comparable not within one mile of the subject property. The expert offering the comparable acknowledged that it is in a different neighborhood than the subject s neighborhood, a factor which could have an impact on value. While this fact alone might ordinarily be accounted for through an adjustment, where the record contains numerous comparable sales in the subject property s immediate neighborhood, the credibility of this sale as evidence of value is diminished.

4. 257 Oak Ridge Ave. This sale required a very large living space adjustment because the comparable sale house is much larger than the subject property. This sale also required a large lot size adjustment, reducing its evidentiary value.

5. 40 Druid Hill Road. The sale also required a very large living space adjustment. In this instance, however, the comparable sale home is much smaller than the subject property. The court concludes that this sale has less credibility as evidence of true market value than does other comparable sales in the record.

Having eliminated the above-listed sales as credible evidence of the subject property s value, the court will rely on the following sales of homes similar in quality, size, amenities, and location to the subject property

1. 31 Gloucester Road. This home sold on June 19, 2009 for $1,632,500. Plaintiffs expert applied a negative $38,500 adjustment for living space and a negative $10,000 adjustment for a fence at the comparable sale. This negative $48,500 adjustment resulted in an adjusted sales price of $1,584,000.

It is necessary, however, to modify the adjustments of plaintiffs expert. The expert s size adjustment was based his opinion that the subject property has 4,173 square feet of living space. The court, however, found that the subject property has 4,359 square feet of living space. In addition, plaintiffs expert made the living space adjustment at $150 per square foot. He did not identify market data on which he relied to determine that this adjustment rate was appropriate. The municipality s expert made living space adjustments at a rate of $175 per square foot, which is based on his market extraction study of sales in Summit, as well as his experience as the person in the Summit tax assessor s office responsible for reviewing construction permits and setting a value for additions to homes in the municipality. The court accepts the municipality s expert s adjustment rate of $175 per square foot of living space.

The revised adjustment for living space at 31 Gloucester Road is negative $12,425 (4,430 - 4,359 = 71; 71 x $175 = $12,425). The court accepts as reasonable the expert s negative $10,000 adjustment for the fence at the comparable sale. These findings result in a negative adjustment of $22,425 (-$12,425 - $10,000 = -$22,425) and an adjusted sales price of $1,610,075 ($1,632,500 - $22,425 = $1,610,075).

2. 193 Blackburn Road. This home sold for $1,790,000 on January 27, 2009. The appropriate gross living space adjustment is a positive $92,925 (4,359 - 3,828 = 531; 531 x $175 = $92,925). The court accepts as reasonable plaintiffs expert s positive $10,000 adjustment for the two car garage at the comparable sale. This results in total adjustments of positive $102,925 ($92,925 + $10,000 = $102,925) and an adjusted sales price of $1,892,925 ($1,790,000 + $102,925 = $1,892,925).

3. 27 Silver Lake Drive. This home sold for $2,000,000 on August 27, 2009. The court will apply a living space adjustment of positive $19,775 (4,359 - 4,246 = 113; 113 x $175 = $19,775). In addition, the court accepts the expert s negative $5,000 adjustment to account for the difference in the number of fireplaces. These adjustments result in a net adjustment of positive $14,775 ($19,775 - $5,000 = $14,775). The resulting adjustment sales price is $2,014,775 ($2,000,000 + $14,775 = $2,014,755).

4. 104 Oak Ridge Avenue. This home sold for $2,250,000 on April 16, 2009. The court accepts the net positive $56,200 adjustment of defendant s expert for the difference in living space and bathroom count. This adjustment results in an adjusted sales price of $2,306,200 ($2,250,000 + $56,200 = $2,306,200).

5. 24 Greenbriar Drive. This home sold for $2,450,000 on July 6, 2009. The court accepts the net negative $64,600 adjustment of defendant s expert for differences in land size, living space, bathroom count, garage and fireplace. This net adjustment results in an adjusted sales price of $2,385,400 ($2,450,000 - $64,600 = $2,385,400).

Of these sales, the two closest in size to the subject are 31 Gloucester Road and 27 Silver Lake Drive. Both required minimal adjustments. These homes had adjusted sales prices of $1,610,075 and $2,014,755. The court will give these two comparable sales the most weight. The next closest in size is 104 Oak Ridge Ave, which has an adjusted sales price of $2,306,200. The court considers this comparable sale to represent the upper end of the value range for the subject. The remaining two comparable sales required a greater degree of adjustments and will be given less weight. A careful consideration of these comparable sales leads the court to the conclusion that the true market value of the subject property on October 1, 2009 was $2,000,000.

Pursuant to N.J.S.A. 54:51A-6a, commonly known as Chapter 123, in a non-revaluation year an assessment must be reduced when the ratio of the assessed value of the property to its true value exceeds the upper limit of the common level range. The common level range is defined by N.J.S.A. 54:1-35a(b) as that range which is plus or minus 15% of the average ratio for the municipality in which the subject property is located.

The true value determined above must, therefore, be compared to the average ratio for Summit City for tax year 2010. The formula for determining the subject property s ratio is

Assessment True Value = Ratio

Here, that equation is represented as follows

$1,110,400 $2,000,000 = .5552

The Chapter 123 average ratio for Summit City for tax year 2010 is 43.20%, with an upper limit of 49.68% and a lower limit of 36.72%. Here, the ratio of the subject property s assessment to its true market value is 55.52%, which exceeds the upper limit of the common level range.

According to N.J.S.A. 54:51A-6 [w]henever the tax court is satisfied by the proofs that the ratio of the assessed valuation of the subject property to its true market value exceeds the upper limit or falls below the lower limit of the common level range, it shall enter judgment revising the taxable value of the property by applying the average ratio to the true market value of the property . . . . Thus, the correct formula for determining the taxable value of the subject property for tax year 2010 is

$2,000,000 x .4320 = $864,000

The court will enter Judgment setting the tax year 2010 assessment on the subject property as follows

Land $ 381,000

Improvements $ 483,000

Total $ 864,000

For tax year 2011, the experts together relied on eight comparable sales of single-family homes in Summit, all less than one mile from the subject. Two of the sales were relied on by both experts. All of the comparable sales are homes in good condition in desirable residential neighborhoods. Of the eight, the court declines to rely on three sales and finds the remaining five to be the most credible evidence in the record of the true market value of the subject property.

The court finds the following comparable sales to lack credibility as evidence of the true market value of the subject property

1. 132 Rotary Drive. Although this sale did not require significant adjustments, the home is more than sixty years older than the subject property. Plaintiffs expert testified that most homes in Summit have updated amenities. He did not, however, provide specific testimony with respect to when the amenities in this sale were most recently updated.

2. 10 Pembroke Road (relied on by both experts). This home also is significantly older than the subject property. In addition, the sale required several large adjustments to account for lot size, living space, number of bedrooms, fireplaces, a fence and a two-car garage. The record contains evidence of comparable sales more similar to the subject property, and, therefore, more credible as evidence of the true market value of plaintiffs home.

3. 40 Druid Hill Road. This home is significantly older than the subject property and required large adjustments for bedroom count, living space, garage and patio. The record contains evidence of comparable sales more similar to the subject property, and, therefore, more credible as evidence of the true market value of plaintiffs home.

Having eliminated the above-listed sales as credible evidence of the subject property s value, the court will rely on the following sales of homes similar in quality, size, amenities, and location to the subject property

1. 22 Winchester Road. This home sold for $1,670,000 on December 15, 2010. The appropriate gross living space adjustment is a positive $63,875 (4,359 - 3,994 = 365; 365 x $175 = $63,875). The court accepts as plaintiffs expert s positive $10,000 adjustment for the two-car garage and a negative $5,000 for a fireplace at the comparable sale. This results in total adjustments of positive $68,875 ($63,875 - $5,000 + $10,000 = $68,875) and an adjusted sales price of $1,738,875 ($1,670,000 + $68,875 = $1,738,875).

2. 197 Blackburn Road. This home sold for $1,700,000 on April 5, 2010. The court will apply a living space adjustment of negative $35,875 (4,564 - 4,359 = 205; 205 x $175 = $35,875). In addition, the court accepts the expert s positive $5,000 adjustment to account for the difference in the number of fireplaces. These adjustments result in a net adjustment of negative $30,875 (-$35,875 + $5,000 = -$30,875). The resulting adjustment sales price is $1,669,125 ($1,700,000 - $30,875 = $1,669,125).

3. 11 Cantebury Lane (relied on by both experts). Both experts relied on this sale, which took place on July 26, 2010 at a price of $2,000,000. The court will apply a living space adjustment of negative $22,925 (4,490 - 4,359 = 131; 131 x $175 = $22,925). The court accepts the additional adjustments of defendant s expert of positive $10,000 for room count and negative $5,000 for the number of fireplaces. These figures result in a net adjustment of negative $17,925. The adjusted sales price of the comparable sale is $1,982,075.

4. 149 Oak Ridge Road. This home sold for $2,895,000 on June 23, 2010. The court accepts the net positive adjustment of $89,800 offered by defendant s expert to account for living space, room bathroom count and fireplaces. This net adjustment results in an adjusted sales price of $2,984,800.

5. 24 Greenbriar Drive. This home sold for $2,450,000 on July 6, 2009. The court accepts the net negative $64,600 adjustment of defendant s expert for differences in land size, living space, bathroom count, garage and fireplace. This net adjustment results in an adjusted sales price of $2,385,400 ($2,450,000 - $64,600 = $2,385,400).

Of these sales, the two closest in size to the subject are 197 Blackburn Road and 11 Cantebury Lane. Both required minimal adjustments. These homes had adjusted sales prices of $1,669,125 and $1,982,075. The court will give these two comparable sales the most weight. The remaining three comparable sales required a greater degree of adjustments and will be given less weight. A careful consideration of these comparable sales leads the court to the conclusion that the subject property had a true market value of $1,900,000 as of October 1, 2010.

Pursuant to N.J.S.A. 54:51A-6a, commonly known as Chapter 123, in a non-revaluation year an assessment must be reduced when the ratio of the assessed value of the property to its true value exceeds the upper limit of the common level range. The common level range is defined by N.J.S.A. 54:1-35a(b) as that range which is plus or minus 15% of the average ratio for the municipality in which the subject property is located.

The true value determined above must, therefore, be compared to the average ratio for Summit City for tax year 2011. The formula for determining the subject property s ratio is

Assessment True Value = Ratio

Here, that equation is represented as follows

$1,110,400 $1,900,000 = .5844

The Chapter 123 average ratio for Summit City for tax year 2011 is 45.94%, with an upper limit of 52.83% and a lower limit of 39.05%. Here, the ratio of the subject property s assessment to its true market value is 58.44%, which exceeds the upper limit of the common level range.

According to N.J.S.A. 54:51A-6 [w]henever the tax court is satisfied by the proofs that the ratio of the assessed valuation of the subject property to its true market value exceeds the upper limit or falls below the lower limit of the common level range, it shall enter judgment revising the taxable value of the property by applying the average ratio to the true market value of the property . . . . Thus, the correct formula for determining the taxable value of the subject property for tax year 2010 is

$1,900,000 x .4594 = $872,900

The court will enter Judgment setting the tax year 2011 assessment on the subject property as follows

Land $ 381,000

Improvements $ 491,900

Total $ 872,900

Judgments will be entered accordingly.

Very truly yours,

Patrick DeAlmeida, P.J.T.C.

1 The court notes that this sale was marked by the assessor as non-usable for purposes of the Director s annual assessment-sales ratio study. The non-usable designation selected by the assessor was 29, which applies to [s]ales of property subsequent to the year of appeal where the assessed value is set by court order, consent judgment, or application of the Freeze Act. N.J.A.C. 18:12-1.1(a)(29). This code, while relevant to the assessment-sales ratio study, does not have an effect on the credibility of the sale as evidence of true market value.