Opinion
DOCKET NO. GLO-L-1858-11
03-05-2013
ADVANCED REALTY CORPORATION, LLC and SILEO PROPERTY GROUP, LLC, Plaintiffs, v. TOWNSHIP OF MONROE, a Municipal Corporation of the State of New Jersey, Defendant.
Thomas H. Ward, Esq., for plaintiffs (Ward Shoemaker, LLC, attorneys, Marla D. Gaglione, Esq., on the briefs) Leonard T. Schwartz, Esq., for defendant (Slotnick & Schwartz, attorneys)
NOT FOR PUBLICATION
OPINION
Thomas H. Ward, Esq., for plaintiffs (Ward Shoemaker, LLC, attorneys, Marla D. Gaglione, Esq., on the briefs)
Leonard T. Schwartz, Esq., for defendant (Slotnick & Schwartz, attorneys) DeALMEIDA, P.J.T.C. (t/a),
This is court's opinion with respect to plaintiffs' request for relief in lieu of prerogative writ. Plaintiffs ask the court to interpret a five-year tax exemption and abatement agreement relating to real property owned by plaintiffs in Monroe Township, Gloucester County. The agreement concerns an office building with eight suites for medical professionals to be constructed on vacant land. Pursuant to the agreement, the property owner pays local property taxes only on the value of the vacant land until the development project is completed for its intended purpose. Once the project is completed for its intended purpose, the structure is exempt from taxation for the remainder of the year of completion and the following year. During the next four years, the property owner is required by the agreement to make payments in lieu of taxes to the municipality in graduated amounts, ultimately reaching, in the fifth year of the program, payments equal to 100% of the taxes that would otherwise be due on the entire property.
Although the original development plans for the property at issue here contemplated a single building with eight suites, prior to execution of the exemption and abatement agreement the property was converted to eight condominium units and common areas through the filing of a Master Deed. After completion of the shell of the overall structure in 2007, the eight units were completed in stages between 2007 and 2010. The municipality takes the position that the five-year exemption and abatement period for the entire property began in 2007, the year the shell of the overall structure was completed for its intended purpose. Plaintiffs contend that separate five-year exemption and abatement periods for each condominium unit began as each unit was completed for its intended purpose. The difference is significant because defendant's interpretation of the exemption and abatement agreement will result in payments in lieu of taxes that begin sooner and result in the payment of 100% of the taxes due on the entire property sooner than would be the case under plaintiffs' interpretation of the agreement.
For the reasons explained more fully below, the court concludes that plaintiffs' interpretation of the exemption and abatement agreement is correct. As a result, the court grants plaintiffs' request for relief in lieu of prerogative writ and directs defendant's tax assessor and tax collector to recalculate plaintiffs' financial obligations under the agreement in accordance with the court's conclusions regarding the dates on which plaintiffs' condominium units were completed for their intended purposes. In addition, the court directs the municipal tax collector to refund to plaintiffs any amounts they paid above what is due under the correct interpretation of the exemption and abatement agreement.
I. Findings of Fact and Procedural History
On October 3, 2005, Robert Romalino purchased vacant land in Monroe Township, Gloucester County. The parcel, commonly known as 1035 Black Horse Pike, is designated in the records of the municipality as Block 1301, Lot 6.
On December 31, 2005, Mr. Romalino applied to the Monroe Township Planning Board for preliminary and final major site plan approval to construct on the subject property a 14,750-square-foot, L-shaped, medical "flex" building with eight units, along with various site improvements. Plans accompanying the application detail a single building with eight medical suits. There is no reference in the application or plans to condominium units. Site plan approval was granted by the Planning Board on April 6, 2006.
On January 26, 2007, Mr. Romalino filed with the township an application for a zoning permit to allow for the construction of the project. On March 15, 2007, the township zoning board approved the application.
On May 16, 2007, a township official issued eight separate sewer and water connection approvals for the eight units.
On August 1, 2007, Mr. Romalino submitted an application to the Monroe Township governing body for a tax exemption and abatement for the subject property pursuant to the Five-Year Exemption and Abatement Law, N.J.S.A. 40A:21-1, et seq. The application indicates that construction of an office building on the vacant lot will increase employment opportunities in the township and assist in the municipality's development. Construction of the building was underway while the application was being considered by township officials.
On October 30, 2007, the township's governing body enacted Resolution No. R:216-2007 authorizing the Mayor to execute an agreement with Mr. Romalino for an exemption and abatement for the subject property. The Resolution requires that the agreement provide for payments in lieu of taxes pursuant to N.J.S.A. 54:4-3.101(c). The statutory provision referenced in the Resolution was repealed effective January 18, 1992, more than fifteen year prior to adoption of the Resolution.
On December 14, 2007, the municipality issued Certificates of Occupancy for Units 2 and 3. These units are not before the court.
On December 18, 2007, the municipality issued a Certificate of Occupancy for the overall building structure. The Certificate contained the notation "med-flex building, 8 suites shell only."
On January 9, 2008, the municipality issued a Certificate of Occupancy for Unit 5. This unit is not before the court.
On January 10, 2008, a Master Deed dated December 20, 2007 concerning the subject property was recorded with the Gloucester County Clerk. The Master Deed indicates that Advanced Medical & Professional Condo Association, Inc. ("AM&P") "is the owner of the fee simple title to" the subject property. The accuracy of this statement is questionable. It appears from the record that at the time the Master Deed was filed Mr. Romalino and entities other than AM&P owned the subject property. The Master Deed states that the owner intends to construct eight commercial condominium units, along with site improvements, on the subject property pursuant to the New Jersey Condominium Act, N.J.S.A. 46:8B-1, et seq. The only copy of the Master Deed in the record has attached to it plans for four of the units. It appears the Master Deed was recorded without plans for the remaining units.
On January 24, 2008, the municipality issued a Certificate of Occupancy for Unit 1. This unit is not before the court.
On March 28, 2008, the municipality and Mr. Romalino executed a tax exemption and abatement agreement with respect to the subject property. The agreement enrolls the subject property in a tax exemption and abatement program. According to the agreement, the project is to be exempt from taxation from the "date of completion" until January 1st of the calendar year following completion. In subsequent years, payments in lieu of taxes will be made as follows:
+-----------------------------------------------------------------------------+ ¦ ¦1st calendar ¦ ¦ ¦1.¦year following¦0% of taxes otherwise due; ¦ ¦ ¦completion: ¦ ¦ +--+--------------+-----------------------------------------------------------¦ ¦ ¦2nd calendar ¦ ¦ ¦2.¦year following¦20% of taxes otherwise due; ¦ ¦ ¦completion: ¦ ¦ +--+--------------+-----------------------------------------------------------¦ ¦ ¦3rd calendar ¦ ¦ ¦3.¦year following¦40% of taxes otherwise due; ¦ ¦ ¦completion: ¦ ¦ +--+--------------+-----------------------------------------------------------¦ ¦ ¦4th calendar ¦ ¦ ¦4.¦year following¦60% of taxes otherwise due; ¦ ¦ ¦completion: ¦ ¦ +--+--------------+-----------------------------------------------------------¦ ¦ ¦ ¦80% of taxes otherwise due for that portion of the year ¦ ¦ ¦5th calendar ¦that is prior to the anniversary date of the date of ¦ ¦5.¦year following¦completion of the project and thereafter full taxes for the¦ ¦ ¦completion: ¦project shall be paid for the remainder of that year and ¦ ¦ ¦ ¦thereafter. ¦ +-----------------------------------------------------------------------------+ Taxes on the land and any improvements not subject to the agreement shall be taxed at 100% of assessed value at all times.
It is undisputed that Mr. Romalino did not own Units 1, 2, and 3 at the time that the agreement was executed. Defendant argues that the agreement is invalid with respect to those units. The owners of Units 1, 2 and 3 have not joined this action nor, it appears, challenged in any way the tax assessor's treatment of those units for local property tax purposes. The validity of the agreement with respect to Units 1, 2, and 3 is not before the court.
On May 18, 2008, Mr. Romalino transferred his interest in Units 4, 5, 7 and 8 to plaintiff Advanced Realty Corporation, LLC ("Advanced Realty").
During 2008 the municipality issued a Certificate of Occupancy for Units 5 and 6. Unit 5 is not before the court.
It appears that all eight units remained off the tax rolls of the municipality until December 2009. At that time, a newly appointed municipal tax assessor reviewed the subject property. She examined what she described as a "December 1, 2007 certificate of approval." The record does not contain this document. As a result of her review, the assessor determined that the entire subject property would be 100% exempt for tax year 2009.
The assessor's determination is puzzling. If the assessor concluded that the structure was completed for its intended purpose on December 1, 2007, as appears to be the case given her reliance on a December 1, 2007 certificate, the property would be exempt from December 1, 2007 to December 31, 2007 and for tax year 2008. For tax year 2009, the property owner would be required to make a payment in lieu of taxes equal to 20% of the taxes otherwise due on the property.
During 2010, certificates of occupancy were issued for Units 4, 6, 7 and 8. These are the only Units before the court.
On February 26, 2010, title to Unit 6 was transferred to plaintiff Sileo Property Group, LLC ("Sileo").
Also during 2010, Advanced Realty received a notice from the tax assessor demanding payment in lieu of taxes equal to 20% of the assessed value of Units 4, 7 and 8 for tax year 2010. In addition, during 2010, Sileo received a notice from the tax assessor demanding payment in lieu of taxes equal to 20% of the assessed value of Unit 6 for tax year 2010. These notices are consistent with the assessor's determination to begin the five-year abatement period with tax year 2009.
On September 21, 2011, Advanced Realty received a notice from the tax assessor demanding a payment in lieu of taxes equal to 40% of the assessed value of Units 4, 7 and 8 for tax year 2011. Sileo received a similar notice with respect to Unit 6. These notices are consistent with the assessor's determination to begin the five-year abatement period with tax year 2009. Plaintiffs made the payments demanded by the assessor for tax years 2010 and 2011.
Notably, the tax assessor's notices treated the various units at the subject property as separate line items in her tax records.
On October 27, 2011, plaintiffs filed a Complaint in Lieu of Prerogative Writ in the Superior Court, Law Division, Gloucester County, seeking an Order directing the municipal tax assessor to: (1) bill plaintiffs for a payment in lieu of taxes of 0% of the taxes that would otherwise be due for Units 4, 6, 7 and 8 for tax years 2010 and 2011; (2) comply with the tax exemption and abatement agreement Units 4, 6, 7, and 8 for all tax years; (3) return to plaintiffs the payments in lieu of taxes they made on Units 4, 6, 7 and 8 for tax years 2010 and 2011; and (4) pay plaintiffs' attorneys fees and costs.
Plaintiffs also allege breach of contract, unjust enrichment, and a violations of civil rights under 42 U.S.C. §1983. At oral argument, counsel suggested that resolution of plaintiffs' request for relief in lieu of prerogative writ may obviate the remaining counts of the Complaint. The court, therefore, does not address any claims other than those in lieu of prerogative writ.
The parties thereafter submitted to the Superior Court briefs and exhibits. Plaintiffs' submission contained a brief in support of summary judgment, along with a statement of material facts they contend are not in dispute, and a proposed form of Order. A Notice of Motion was not filed by plaintiffs. It appears that plaintiffs' request for summary judgment is limited to its claim for relief in lieu of prerogative writ, given that plaintiffs' brief concludes with a statement that a trial is needed with respect to its §1983 claims. In response to plaintiffs' submission, defendant submitted a trial brief with exhibits. While defendant agrees that the court may issue an opinion without testimony, it takes the position that the court is not proceeding on summary judgment because plaintiffs did not file a Notice of Motion for summary judgment.
In its submissions, plaintiff argues that a separate five-year exemption and abatement period must be applied to each of the eight condominium units at the subject property. According to plaintiffs, Units 4, 6, 7 and 8 were completed for their intended purposes in 2010. Thus, plaintiffs argue that those units are exempt from taxation from their dates of completion to the end of 2010 and for all of 2011. Plaintiffs argue that they must make a payment in lieu of taxes equal to 20% of the taxes otherwise due on the units for 2012 followed by graduated payments in lieu of taxes until 2015.
In its responding papers, the municipality abandoned the tax assessor's determination with respect to the date on which the five-year exemption and abatement period commenced. The municipality instead takes the position that the operative date for defining the five-year abatement period for the entire property is December 18, 2007, the date on which the overall structure was completed for its intended purpose. Under defendant's interpretation of the exemption and abatement agreement, taxation of the entire property would be treated as follows:
+-----------------------------------------------------------------+ ¦2007¦Exempt in full from 12/18/2007 to 12/31/2007 ¦ +----+------------------------------------------------------------¦ ¦2008¦Exempt in full ¦ +----+------------------------------------------------------------¦ ¦2009¦Payment In Lieu of Taxes Equal to 20% of Taxes Otherwise Due¦ +----+------------------------------------------------------------¦ ¦2010¦Payment In Lieu of Taxes Equal to 40% of Taxes Otherwise Due¦ +----+------------------------------------------------------------¦ ¦2011¦Payment In Lieu of Taxes Equal to 60% of Taxes Otherwise Due¦ +----+------------------------------------------------------------¦ ¦2012¦Payment In Lieu of Taxes Equal to 80% of Taxes Otherwise Due¦ +----+------------------------------------------------------------¦ ¦ ¦Up to 12/18/2012 then 100% taxable ¦ +-----------------------------------------------------------------+
On July 23, 2012, the Hon. Georgia M. Curio, A.J.S.C, transferred this matter to the Tax Court pursuant to N.J.S.A. 2B:13-2b (establishing jurisdiction in the Tax Court for actions "cognizable in the Superior Court which raise issues as to which expertise in matters involving taxation is desirable . . . ."). Although transfer of this matter to the Tax Court pursuant to N.J.S.A. 2B:13-2b was appropriate, the fact that plaintiffs allege a cause of action in lieu of prerogative writ required that the matter be returned to the Superior Court. Pursuant to the Supreme Court's Order in Alid, Inc. v. Town of North Bergen, 89 N.J. 388, 389 (1981):
when relief in lieu of prerogative writ is sought with respect to any matter then pending in the Tax Court involving a state or local tax . . . the action shall be transferred to the Superior Court, Law Division, and, for the purpose of having such claim adjudicated, unless good cause to the contrary is shown, the matter shall be heard by a judge of the Tax Court, who has been temporarily assigned to the Superior Court, Law Division, by the Chief Justice.
On July 31, 2012, the Hon. Stuart Rabner, C.J., issued an Order transferring this matter to the Superior Court, Law Division, Gloucester County, and assigning the undersigned to the Superior Court for the specific, limited purpose of adjudicating the claims raised in this matter.
The court thereafter heard oral argument from counsel. The court treats this matter as a request by plaintiffs for summary judgment with respect to their claim for relief in lieu of prerogative writ.
II. Conclusions of Law
A. Summary Judgment Standard.
Summary judgment should be granted where the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact challenged and that the moving party is entitled to a judgment or order as a matter of law. R. 4:46-2 (c). In Brill v. Guardian Life Ins. Co. of Amer., 142 N.J. 520, 523 (1995), our Supreme Court established the standard for summary judgment as follows:
[W]hen deciding a motion for summary judgment under Rule 4:46-2, the determination whether there exists a genuine issue with respect to a material fact challenged requires the motion judge to consider whether the competent evidential materials presented, when viewed in the light most favorable to the non-moving party in consideration of the applicable evidentiary standard, are"The express import of the Brill decision was to 'encourage trial courts not to refrain from granting summary judgment when the proper circumstances present themselves.'" Township of Howell v. Monmouth County Bd. of Taxation, 18 N.J. Tax 149, 153 (Tax 1999)(quoting Brill, supra, 142 N.J. at 541). The court concludes that no genuine issues of material fact exist relevant to plaintiffs' claim for relief in lieu of prerogative writ. B. Meaning of the Exemption and Abatement Agreement.
sufficient to permit a rational factfinder to resolve the alleged disputed issue in favor of the non-moving party.
The legal authority for the tax exemption and abatement at issue here is rooted in the New Jersey Constitution:
The Legislature may enact general laws under which municipalities may adopt ordinances granting exemptions or abatements from taxation on buildings and structures in areas declared in need of rehabilitation in accordance with statutory criteria, within such municipalities and to the land comprising the premises upon which such buildings or structures are erected and which is necessary for the fair enjoyment thereof. Such exemptions shall be for limited periods of times as specified by law, but not in excess of 5 years.
[N.J. Const. Art. 8, sec. 1, par. 6.]
Pursuant to this constitutional authority, the Legislature adopted the Five-Year Exemption and Abatement Law, N.J.S.A. 40A:21-1, et seq. In order to grant an exemption and abatement under the statute, the governing body of a municipality must enact an ordinance authorizing execution of an agreement with the proposed developer of property in an area in need of rehabilitation. See N.J.S.A. 40A:21-4. The agreement must provide for the developer to make payments in lieu of taxes to the municipality with respect to the developed property. N.J.S.A. 40A:21-10. All such agreements "shall be in effect for no more than the five full years next following the date of completion of the project." N.J.S.A. 40A:21-11.
It is undisputed that defendant's governing body enacted an ordinance authorizing the execution of a five-year exemption and abatement agreement with respect to the subject property. The primary dispute between the parties is the meaning of the subsequently enacted agreement.
The March 28, 2008 agreement provides that the "TOWNSHIP hereby grants approval for the project as described herein to be enrolled in the Tax Abatement Program under the provisions of" N.J.S.A. 40A:21-1, et seq. "The project," however, is not further described in the agreement. The agreement states that Mr. Romalino owns real property, lists the block and lot of the subject property and makes note of the fact that Mr. Romalino applied for a property tax abatement. The property tax abatement application is attached to the agreement and describes the property only by its commonly known street address. In addition, the agreement states that the property owned by Mr. Romalino is "identified on final site plan #397 dated August 1, 2007." The agreement refers to final site plan #397 as being attached to the agreement as Exhibit A. No copy of the agreement in the record has attached to it an Exhibit A or a site plan of any type. Nor does the record contain a final site plan #397 dated August 1, 2007. The final site plan for the subject property was site plan #396, which was approved on April 6, 2006. The agreement provides that "[t]he project is to be considered to be exempt from taxation from the date of completion until January 1st of the calendar year following completion." In addition, "[i]n subsequent years following completion, payments in lieu of full taxes shall be due" according to the five-year payment schedule discussed above.
A contract which contains clear language must be enforced as written. County of Morris v. Fauver, 153 N.J. 80, 103 (1998); East Brunswick Sewerage Auth. v. East Mill Assocs., Inc., 365 N.J. Super. 120, 125 (App. Div. 2004). Unfortunately, the March 28, 2008 agreement is far from a model of clarity with respect to the identification of the project which is intended to benefit from a five-year exemption and abatement. The project is not described in detail in the agreement. The final site plan referenced in the agreement does not comport with the final site plan discussed by both parties in their submissions to the court. No copy of the final site plan, reported to be Exhibit A to the agreement, is contained in the record.
Where an agreement is ambiguous a court may "consider all of the relevant evidence that will assist in determining the intent and meaning of the contract." Conway v. 287 Corporate Ctr. Assocs., 187 N.J. 259, 269 (2006). "'Antecedent and surrounding factors that throw light upon . . . [the meaning of the contract] may be proved by any kind of relevant evidence.'" Ibid. (quoting 3 Corbin on Contracts § 579 (West 1960)). "The polestar of construction is the intention of the parties to the contract . . . and, in the quest for the intention, the situation of the parties, the attendant circumstances, and the objects they were thereby striving to attain are necessarily to be regarded." Atlantic Northern Airlines, Inc. v. Schwimmer, 12 N.J. 293, 301 (1953). "Such evidence may 'include consideration of the particular contractual provision, an overview of all the terms, the circumstances leading up to the formation of the contract, custom, usage, and the interpretation placed on the disputed provision by the parties' conduct.'" Conway, supra, 187 N.J. at 269 (quoting Kearny PBA Local #21 v. Town of Kearny, 81 N.J. 208, 221 (1979)).
It is apparent from the conduct of the parties and their submissions to the court that the parties intended the March 28, 2008 agreement to provide a five-year exemption and abatement to the development of the subject property with one office building containing eight units for medical professionals. Although the agreement is less than precise in its description of the project, there is no genuine dispute with respect to the fact that building subsequently constructed on the subject property was the object of the agreement. What the court must determine is whether the agreement contemplated one completion date when the overall structure was completed for its intended purpose or eight separate completion dates when each of the eight units was completed for its intended purpose.
As a general rule, parties "'in New Jersey are . . . presumed to have contracted with reference to the existing law.'" Camden Bd. of Educ. v. Alexander, 181 N.J. 187, 195 (2004)(quoting Silverstein v. Keane, 19 N.J. 1, 13 (1955)); accord Ravin, Sarasohn, Cook, Baumgarten, Fisch & Rosen, P.C. v. Lowenstein Sandler, P.C., 365 N.J. Super. 241, 248 (App. Div. 2003). It cannot seriously be disputed that at the time that the March 28, 2008 agreement was executed the subject property consisted of eight condominium units and common areas by virtue of the recording of the Master Deed several months earlier.
"It is the recordation of the master deed that establishes the condominium form of ownership." 316 49 St. Assocs. v. Galvez, 269 N.J. Super. 481, 483 (App. Div.)(citing N.J.S.A. 46:8B-8), certif. denied, 137 N.J. 164 (1994). "Condominium ownership of a building and the units it contains is created by a single event - the recording of the master deed pursuant to N.J.S.A. 46:8B-8." Veltri v. Norwood, 195 N.J. Super. 406, 413 (App. Div. 1984)(footnote omitted). The recordation of a deed pertaining to a condominium unit "shall have the same force and effect in regard to such unit as would be given to a like instrument pertaining to other real property which has been similarly made, executed, acknowledged and recorded." N.J.S.A. 46:8B-10. Once the condominium form of ownership is established
[a]ll property taxes, special assessments and other charges imposed by any taxing authority shall be separately assessed against and collected on each unit as a single parcel, and not on the condominium property as a whole. Such taxes, assessments and charges shall constitute a lien only upon the unit and upon no other portion of the condominium property. All laws authorizingThe separate treatment of each condominium unit for local property tax purposes applies even if the units are operated as a single economic enterprise. Cigolini Assocs. v. Borough of Fairview, 208 N.J. Super. 654 (App. Div. 1986)(requiring separate valuation of each condominium unit in building in which all condominium units were owned by a single entity and operated as a rental apartment building).
exemptions from taxation or deductions from tax bills shall be applicable to each individual unit to the same extent they are applicable to other separate property.
[N.J.S.A. 46:8B-19 (emphasis added).]
Through the recordation of the Master Deed defendant was on notice that the subject property had been converted to condominium units and common areas prior to execution of the exemption and abatement agreement. See N.J.S.A. 46:21-1 (providing that the recordation of deeds with the county recording officer shall from the time of recording "be notice to all subsequent judgment creditors, purchasers and mortgagees of the execution of the deed or instrument so recorded and of the contents thereof."). Notice to defendant and its tax officials is also presumed by the orderly statutory process through which municipal tax assessors are notified of the recordation of deeds. N.J.S.A. 54:4-29 provides that a purchaser of real property may provide to the tax assessor a deed or other evidence of title. In such circumstances the assessor is charged with noting and recording the change in ownership in the books and records of the assessor, and certifying on the deed that the assessor has done so. N.J.S.A. 54:4-29. If no assessor's certification appears on the deed, the register of deeds and mortgages or the county clerk with whom the deed is filed shall ascertain from the person filing the deed the post office address of the grantee and shall mark that address on the face of the deed. N.J.S.A. 54:4-30. The official with whom the deed is recorded within one week "shall mail an abstract therefore, together with the address of the grantee, to such assessor . . . who shall properly note the facts therein contained." N.J.S.A. 54:4-31.
Defendant was, as a matter of law, aware of the fact that the subject property had been converted to eight condominium units and common areas at the time that the exemption and abatement agreement was executed. The agreement, therefore, applies to the construction of a single structure containing eight legally separate office units. The actions of defendant's tax officials in the period after execution of the exemption and abatement agreement confirm their awareness of the nature of the subject property. The tax assessor treated the eight units as separate line items in the municipality's tax records. Separate demands for payments in lieu of taxes were sent for the individual unit owners with payments calculated based on the assessed values of the individual units. In addition, building officials of the municipality issued separate certificates of occupancy for the individual units.
Defendant alleges that plaintiffs casually treated the boundaries of the eight units by moving interior walls, suggesting that the overall structure was being used as if it were not in the condominium form of ownership. The truth of this allegation is not relevant to the court's analysis. The fact that the various owners of the condominium units may have elected to share space, move interior walls or permit intrusions on their property by the owners of neighboring units does not change the legal nature of the form of ownership of the subject property. The property is an eight-unit condominium with common areas, whether or not interior walls strictly follow property lines. The owners' casual treatment of the condominium form ownership does not convert the property to a single parcel.
The five-year exemption and abatement period must be separately determined for each of the eight condominium units. Each period will begin when an individual condominium unit is completed within the meaning of the agreement and the Five Year Exemption and Abatement Law. C. When were Units 4, 6, 7, and 8
The court notes that if even defendant's Mayor was under the mistaken impression that the subject property was single parcel at the time that the agreement was executed, the objective of the agreement would not be frustrated by the court's decision. The purpose of providing a five-year exemption and abatement was to encourage the development of property in need of rehabilitation. Here, the municipality agreed to award the exemption and abatement in order to secure the construction of an eight-unit office building for medical professionals. That building has been constructed and houses medical offices. The benefits realized by the municipality from construction of the building - the development of property in an area in need of rehabilitation, the creation of employment opportunities, and the generation of economic activity - were realized regardless of whether the office building sits on a single parcel or is comprised on eight condominium units and common areas.
Completed for their Intended Purposes?
In the Five-Year Exemption and Abatement Law "Completion" is defined as "substantially ready for the intended use for which a building or structure is constructed, improved or converted." N.J.S.A. 40A:21-3e. A structure is completed for five-year exemption and abatement purposes when it is "'ready for use' for its intended purpose." Lowe's Home Centers, Inc. v. City of Millville, 25 N.J. Tax 591 (Tax 2010)(quoting Township of Howell v. Monmouth County Bd. of Taxation, 18 N.J. Tax 149, 163 (Tax 1999)). Varying tests have been applied to make the determination of whether a structure is ready for its intended use. Under the economic viability test, the court will consider whether the construction has reached the point when an economically viable structure is in existence. See Beranto Towers v. City of Passaic, 1 N.J. Tax 344 (Tax 1980). The function test focuses on whether the building could be used for its actual intended purposes. See Litton Business Sys., Inc. v. Borough of Morris Plains, 8 N.J. Tax 520 (Tax 1986), aff'd, 9 N.J. Tax 651 (App. Div. 1988).
Issuance of a certificate of occupancy alone is not a determinative factor. Beranto Towers, supra, 1 N.J. Tax at 349; accord B.P.U.M. Dev. and Urban Renewal Corp. v. City of Camden, 9 N.J. Tax 490, 503 (Tax 1988), aff'd, 11 N.J. Tax 95 (App. Div.), certif. denied, 118 N.J. 201 (1989). A certificate of occupancy is issued when a project "meets the conditions of the construction permit, and all prior approvals and has been done substantially in accordance with the code and with those portions of the plans and specifications controlled by the code," when "all required fees have been paid in full," when "all necessary inspections have been completed," when "all violations have been corrected and . . . any assessed penalties have been paid," and when "all protective devices and equipment" are installed and operational. N.J.A.C. 5:23-2.24. A certificate of occupancy is not an official determination that the structure is substantially ready for its intended use. The certificate of occupancy is, in effect, a declaration that the building is safe for occupancy and is in compliance with the building code and local ordinances.
As of October 30, 2007, Units 4, 6, 7 and 8 were only shells. They were part of an open room that was framed but unfinished. The units had no heating, ventilation or air conditioning. The floors of the units were comprised of a partial slab with gravel in the center of the structure. Finished ceilings were absent. The wooden frame of the roof and walls were exposed. Electrical work was not installed in Units 4, 6, 7 and 8 until 2009 and 2010. These units quite plainly were not in 2007 substantially ready to serve as offices for medical professionals.
Certificates of Occupancy were issued to Units 4, 6, 7 and 8 in 2010. Although issuance of such certificates is not necessary determinative, in this case the certificates are the best evidence in the record of when Units 4, 6, 7 and 8 were substantially ready to serve as offices for medical professionals - their intended purpose under the exemption and abatement agreement. At the point that the certificates of occupancy were issued, and no sooner, the units were ready to be occupied by medical professionals and their staffs for the purpose of providing services. D. Did Transfer of Title to Units 4, 6, 7 and 8 Negate the Exemption
and Abatement Agreement?
Defendant argues that plaintiffs violated a provision of the March 28, 2008 exemption and abatement agreement regarding transfers of the property during the five-year abatement period. The agreement provides as follows:
It is agreed and understood that if at any time prior to the termination of the abatement, the property owner disposes of the property, fails to meet the conditions required for Tax Abatement, or secures a new tenant, the new owner or tenant must make application to the governing body for continuance of Tax Abatement. The applicant shall have the obligation to notify the Township Clerk immediately upon any of the above events so that a determination may be made regarding the continuance of Tax Abatement. The new owner or "lessee" must complete and file an application for continuance of Tax Abatement on an approved form no later than 30 days following the transfer of the lease or sale of the subject premises. Additionally, the new owner or lessee must simultaneously supply the copies of the Contract of Sale or Lease along with any documents deemed relevant to consideration of the application. Failure to comply with the terms of this paragraph shall result in an automatic termination of the Tax Abatement 31 days after such transfer referred to above.As noted above, title to the Units 4, 6, 7 and 8 were transferred after execution of the March 28, 2008 exemption and abatement agreement. Formal notice of the transfers was not provided to the township clerk.
According to Scott E. Sileo, the owner of defendant Sileo, which holds title to Unit 6, he attempted to secure a copy of the "approved form" on which to apply for a continuation of the exemption and abatement referenced in the agreement. His affidavit, which was not contested by defendant, reports that no such "approved form" exists. According to Mr. Sileo, he requested the form from the township clerk, the township tax collector and the Gloucester County Tax Assessor. None of those officials were aware of such a form. Defendant did not submit to the court a copy of the approved form. The court concludes that the township has not approved a form on which an owner may apply for continuation of an exemption and abatement. Defendant, therefore, frustrated plaintiffs' ability to comply with the above-detailed provision of the March 28, 2008 agreement.
In addition, the notice provision of the agreement is contrary to law. As noted above, parties "'in New Jersey are . . . presumed to have contracted with reference to the existing law.'" Camden Bd. of Educ., supra, 181 N.J. at 195; Ravin, Sarasohn, Cook, supra, 365 N.J. Super. at 248. In addition, the parties' agreement expressly states that it shall be governed by the Five Year Exemption and Abatement Law. N.J.S.A. 40A:21-12, a provision of that law, provides as follows:
a. If during any tax year prior to the termination of the tax agreement, the property owner ceases to operate or disposes of the property, or fails to meet the conditions for qualifying, then the tax which would have otherwise been payable for each tax year shall become due and payable from the property owner as if no exemption and abatement had been granted. The governing body of the municipality shall notify the property owner and tax collector forthwith and the tax collector shall within 15 days thereof notify the owner of the property of the amount of tax due.The Legislature expressly provided that a five-year exemption and abatement will continue after title to the property is transferred provided "the new owner of the property will continue to use the property pursuant to the conditions which qualified the property" for exemption and abatement. Defendant makes no argument that use of any of the units changed after title was transferred. In fact, the record establishes that each of the eight units is being used as an office for professionals, the precise purpose of the March 28, 2008 agreement. The court concludes that, in light of N.J.S.A. 40A:21-12, even if plaintiffs violated the notice provision of the agreement, termination of the five-year exemption and abatement solely as a result of the failure to provide notice would not be authorized by law.
However, with respect to the disposal of the property, where it is determined that the new owner of the property will continue to use the property pursuant to the conditions which qualified the property, no tax shall be due, the exemption and the abatement shall continue, and the agreement shall remain in effect.
The court notes that the recording of the deeds memorializing the transfer in title to the units put defendant on notice of the change of ownership. In addition, tax bills in the record from the municipality specify the various owners of the condominium units, establishing that the municipality ultimately became aware that title to the property changed hands and did not attempt to rescind the five-year exemption and abatement.
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Patrick DeAlmeida, P.J.T.C. (t/a)