O'Malley v. Borough of Spring Lake

NOT FOR PUBLICATION WITHOUT APPROVAL OF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) 815-2922
TeleFax: (609) 376-3018
taxcourttrenton2@judiciary.state.nj.us
April 13, 2018
David and Katherine O’Malley
Self-Represented
Thomas J. Sateary, Esq.
Lindabury McCormick Estabook & Cooper, P.C.
423 Warren Avenue
Spring Lake, New Jersey 07762
Re: O’Malley et al. v. Borough of Spring Lake
Block 6, Lot 2
Docket No. 008098-2017
Dear Plaintiffs and Counsel:
This is the court’s decision following trial of the above-captioned matter. Plaintiffs own
the above captioned property (“Subject”), in defendant taxing district (“Borough”). For tax year
2017, a revaluation year, they petitioned the Monmouth County Board of Taxation (“County
Board”) to reduce the Subject’s local property tax assessment of $2,028,600 (allocated $1,263,800
to land, and $764,800 to improvements). The County Board reduced the assessment to $1,991,000
under code 1A (“assessed value exceeds 100%”), allocating the reduction to the improvements.
Plaintiffs timely appealed the County Board’s judgment to this court.
The Subject is a lot measuring 0.3 acres improved by a two-story single-family residence,
built in 1991, with gross living area (“GLA”) of 4,055 square feet (“SF”). It is located across from
a watershed, Wreck Pond, and is in a FEMA designated flood-risk hazard zone. Due to flood
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issues, the Subject was raised so that there are no improvements on the first floor, and stairs from
the ground level on both sides of the front of the house provide access to its raised first floor level
(making the building’s height as effectively 2½ stories). The half-basement is unfinished. Other
improvements include a built-in garage, open porch, and a deck.
Plaintiffs selected four comparable sales as evidence of value of the Subject, all located in
the Borough, and in close proximity to the Subject as follows:
Address Built Lot Size GLA Sale Date Sale Price Style Other
1 419 Salem Ave 1990 0.19 ac 2699 SF 08/29/16 $1,155,000 2-story Porch, deck, patio,
Colonial Wreck Pond behind
house
2 301 Shore Rd 1974 0.22 ac 2820 SF 06/02/16 $1,385,000 2-story Porch, deck, patio,
Colonial across from Wreck Pond
3 408 Sussex Ave 1915 0.25 ac 2315 SF 04/08/16 $1,550,000 2½ story Porch, partial basement
Colonial
4 420 Salem Ave 1952 0.17 ac 1632 SF 07/15/16 $850,000 1½ story Porch, deck, basement
Cape Cod
They noted that none of the comparables had flooding issues as did the Subject, and further
that, their 2017 assessments were all much lower than the Subject.
The Borough provided exterior pictures of the Subject and the four comparables (powered
by Google). They clearly showed the Subject’s superiority in terms of size, style, and quality of
materials/construction. It is also readily apparent that all of the comparables’ GLA is significantly
smaller than the Subject, comparables 3 and 4 are much older, and comparable 4, which is of a
different style, has a lot size that is almost 50% smaller than the Subject. None of the comparables
are raised, nor are they set back as far from the street as is the Subject. Moreover, comparable 1
was marked with non-usable code 10, which applies to “[s]ales by guardians, testamentary trustees,
executors and administrators.” See N.J.A.C. 18:12-1.1(a)(10). Although this does not per se
indicate that the sale could not be used as a credible indicator of the Subject’s value, plaintiffs
proffered no proof in this regard. Thus, the court is simply not persuaded that the sales are
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comparable, let alone their unadjusted sale prices as being credible indication of the Subject’s
value.
Plaintiffs maintain that they are not challenging the allocated assessment to the Subject’s
improvement, rather, desire a reduction of the value allocated to land. They claim that the
revaluation company grossly exaggerated the value allocated to land, and failed to consider the
severely negative factor of the Subject, viz., its location in a FEMA categorized flood zone, and
proximity to Wreck Pond, which collects excess drainage from other surrounding over-developed
towns, and causes flooding/soil pollution on the Subject. Plaintiffs provided a letter from the
revaluation company, which was a response to their inquiry on how “land calculations” were made,
and why no “depreciation” was recognized. The revaluation company explained that it had used
the extraction method whereby the contributory value of the dwelling was extracted from the total
sale price, the balance being “an indication of the underlying land value.” Thus, if property sold
for $600,000 and the dwelling is estimated to be currently worth $200,000 (using the “State
manual,” a requirement), the underlying land value would be $400,000. Plaintiffs claimed that the
revaluation company made no investigation of land values in flood zones, and was not cognizant
of problems with such types of land.
Plaintiffs also argued that because of the FEMA restrictions, the Subject cannot be further
improved with additions such as an in-ground pool, expansion of the driveway or of the residence,
and that future buyers must be notified of these strictures. Additionally, the Subject is not close to
the ocean. All these factors, per plaintiffs, diminish the Subject’s value, which were properly
recognized by periodic reduction in prior years’ assessments, and justifies restoration of the
Subject’s 2016 assessment of $1,321,000 (allocated $775,500 to land; $545,500 to improvements),
for tax year 2017.
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The arguments, while sympathetic, are unpersuasive. The allocation of an assessment
between land and improvement is a purely administrative function because the assessment is for
the property as a whole, i.e., land and building, which is why when an appeal is filed, the challenge
can only be to the entire assessment, not to the allocated portions of the same. See Brown v.
Borough of Glen Rock, 19 N.J. Tax 366, 375-377 (App. Div. 2001) (rejecting the taxpayers’
argument that the trial court erred “in concluding that they could not prove the ‘true value’ of their
property by challenging only the land portion of the assessment”). Consequently, plaintiffs’
characterization of their challenge as isolated to land value is unsustainable.
Additionally, from the property record cards of the Subject and the comparables (provided
by the Borough), it appears that the revaluation company assigned the same lot value, and front
foot value to the Subject and Comparable 2, which are both on the same street, at $700,000 and
$6,000, respectively. It therefore does not appear that differing lot values were applied, rather, the
difference was due to lot size and the depth factors. Plaintiffs did not provide any evidence to
establish that these values were wrong.
Further, the record cards also show that the Subject and certain comparables’ proximity to
Wreck Pond was noted and acknowledged by the revaluation company. They do not show any
adjustments for this factor. No doubt features such as flooding hazards, or location in a designated
high flood risk zone with restrictions on building or expanding improvements, can negatively
impact a property’s value. Buyers could view flood hazard locations more expensive to maintain
due to mandatory flood insurance, with higher risk of property damage, thus, likely higher costs
to owners, which in turn could impact value. On the other hand, depending on the area or
neighborhood, such as river or ocean front/proximate properties, potential flooding considerations
may be offset by the appeal of scenic views, exclusivity of neighborhoods, affluent population,
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which in turn, could influence the increase in values of such properties. 1 Either way, any negative
adjustment to sale prices (in a comparable sales analysis), for flooding hazards must be supported
with credible market-based data.
Here, plaintiffs did not provide any evidence that could support a quantified negative
adjustment for the flooding factor, which they allege are significantly deleterious to the Subject’s
value. This was their burden to begin with, and continues to the end of the case. See MSGW Real
Estate Fund, L.L.C. v. Borough of Mountain Lakes, 18 N.J. Tax 364, 373 (Tax 1998); Ford Motor
Co. v. Township of Edison, 127 N.J. 290, 314-15 (1992). Without any evidence, the court cannot
speculate what a reasonable adjustment should be, and what the consequent value should be. The
court can determine value “from the evidence,” and cannot “arbitrarily assign a value to the
property not supported in the record.” U.S. Life Realty Corp. v. Township of Jackson, 9 N.J. Tax
66, 79 (Tax 1987).
CONCLUSION
The court finds that none of the four comparable sales are persuasive indicators of the
Subject’s value. Further, the court cannot provide an arbitrary reduction for the Subject’s flood
hazard zone location without any market-based evidence in the record. Therefore, plaintiffs have
failed to produce sufficient evidence to overcome the presumptive validity of the judgment of the
County Board, which is affirmed.
Very truly yours,
Mala Sundar, J.T.C.
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Despite the plaintiffs’ testimony, the Borough’s assessor stated that people still pay a premium for land in a flood
zone due to ocean proximity. He also claimed that there were no restrictions on the property’s further improvement
or development other than normal zoning requirements, such as seeking a variance. Lastly, he claimed that land values
are typically $12-$14 million an acre in the Borough including the Subject’s neighborhood.
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