Farrell v. Borough of Monmouth Beach

• Court: New Jersey Tax Court
• Decided: April 30, 2020
• Docket: 008396-2019
• Status: Unpublished

Opinion

NOT FOR PUBLICATION WITHOUT APPROVAL OF THE TAX COURT COMMITTEE ON OPINIONS

TAX COURT OF NEW JERSEY

MALA SUNDAR Richard J. Hughes Justice Complex JUDGE P.O. Box 975 Trenton, New Jersey 08625-0975 609 815-2922, Ext. 54630 Fax 609 376-3018

April 29, 2020 (Opinion amended to correct typo on page 9) Karyn Farrell, Plaintiff Self-Represented

Dennis Collins, Esq. Collins, Vella, and Casello, LLC Attorney for Defendant

Re: Farrell v. Borough of Monmouth Beach Docket No. 008396-2019

Dear Plaintiff and Counsel:

This is the court’s decision following trial of the above-captioned matter. Plaintiff owns a

single-family residence, located at Block 61, Lot 11 (Subject), in defendant taxing district

(Borough). For tax year 2019, the Borough imposed a local property tax assessment of $737,100

(allocated $439,800 to land; $297,300 to improvements) on the Subject. Plaintiff petitioned the

Monmouth County Board of Taxation (County Board), which reduced the assessment to $710,500

(allocated $439,800 to land; $270,700 to improvements).

Plaintiff appealed the County Board’s judgment to this court. She provided the sale prices

of five single-family residences in the Borough, which ranged from $590,000 to $687,500, and

contended that their average proved that the Subject’s value should be $600,000 but in no event

higher than $650,000.

The Borough’s real estate appraiser, accepted by the court as an expert in residential real

estate appraisal, maintained that the adjusted prices of three sales in the Borough (one of which

was a sale also used by Plaintiff) supported the Subject’s value as being $735,000. The court finds that Plaintiff’s use of comparable sales, all in the Borough, and with sale

dates proximate to the assessment dates, allow for the overcoming of the presumptive correctness

of the Subject’s assessment. However, the average of the unadjusted sale prices of these sales is

not credible evidence of the Subject’s value. The comparables differ from the Subject as to lot

size, gross living area (GLA), age and style, as to which no adjustments were made, nor were the

bona fides of two sales, one marked as subject to a lis pendens, and the other as being an estate

sale, verified.

The court rejects the Borough’s appraiser’s adjustments to the sale prices of his three

comparables to account for the Subject’s elevation, the same being unsubstantiated, and further

rejects the adjustment to Sale 2 for Amenities/Modernization as duplicative. The re-adjusted sale

prices of $708,700; $688,000; and $731,300 allow the court to find the Subject’s value of $710,500

as concluded by the County Board to be reasonable. Therefore, the judgment of the County Board

is affirmed.

FACTS AND ANALYSIS

The Subject is a lot measuring 60 x 121 square feet (SF), or about 0.17 acres. It is improved

by a single-family home built in 1907. It is in a flood zone but in a residential neighborhood.

Plaintiff bought the Subject in 1993. In 2011, the home was substantially renovated and

improved with a new kitchen, extra bedroom, marble-tiled bathroom, and a laundry room. In 2012,

it was damaged due to Hurricane Sandy, which required replacing the flooring on the entire first

floor including the kitchen; replacing kitchen appliances and cabinetry up to the stovetop level;

reconfiguring the living room, utilities, and bathroom on the first floor; raising the Subject on

concrete pylons; and adding an elevator. All these repairs and renovations were completed in

2016. The framework, however, is the same, thus it is over 100 years old. The photographs

2 attached to the Borough’s appraiser’s report show the interior and exterior to be in good condition,

with wooden floors in the interior, and marble kitchen island and counters, wooden cabinets and

cool backsplash. The bathroom has tiled floors, a standup shower and a bathtub.

As of the valuation date herein, the house was elevated, had two stories, and was colonial-

style. The GLA measured 2,125 SF with three bedrooms and two full baths, a fireplace, two decks,

two open porches and a detached two-car garage. There is no basement. The base of the house is

on a concrete slab with spaced concrete bricked pylons (to raise the house) and is open-spaced.

The Subject is proximate to the border of the City of Long Branch. Its rear borders wetlands, and

a tributary of the Shrewsbury River flows beyond the Subject’s rear. Per Plaintiff, this causes

flooding of the Subject.

Plaintiff provided the following five sales of single-family houses, all located in the

Borough, as evidence of the Subject’s value:

Sale Sale Price Sale Date Lot GLA Age Other 25 Tocci Ave $600,000 10/16/18 50x150 SF 2088 SF 1937 Colonial style 18 Cook St $590,000 07/23/18 90x155 SF 1404 SF 1905 Neighbor 55 Riverdale Ave $565,000 06/28/18 50x104 SF 1419 SF 1921 2-3 baths 4 Shrewsbury Dr $660,000 09/28/18 87x142 SF 1771 SF 1962 Ranch style; 2-3 baths; detached garage; pool 8 Club Cir. $687,500 10/05/18 unknown 3563 SF 1905 attached garage; waterfront property

Her data source was the information posted on the County Board’s website, njactb.org.

She drove by these houses for an exterior inspection, and other than Sale 2, which neighbored the

Subject, she did not inspect the interiors of any other comparables. She contended that Sale 2 is

the most reliable indicator of the Subject’s value because the house was a similar colonial style

with similar room count and a detached garage, and the rear faced the same marshy area and the

tributary of the Shrewsbury River.

The Borough’s appraiser relied upon four sales, all in the Borough, as follows:

3 Sale Price Sale Date Lot GLA Age Other 38 Riverdale $697,500 08/06/18 0.18 acres 2,052 SF 1905 3 beds; 2 baths; crawl space; 1-car Ave detached garage; condition similar to Subject since renovated 2017 18 Cook St $590,000 06/11/18 0.39 acres 1,404 SF 1905 2 beds; 2 baths; crawl space; 2-car detached garage; “fair” condition 77 Riverdale $760,000 05/01/18 0.11 acres 2,120 SF 1907 3 beds; 2 baths; partial/unfinished Ave basement; driveway; “superior” condition since renovated 2018 9 Johnson St $830,000 02/21/18 0.31 acres 2,354 SF 1926 4 beds; 3 baths; crawl space; 2-car built-in garage; condition similar to Subject

He adjusted the sale prices for differences in lot size, GLA, basement/finish, garage count,

age/condition, and amenities/modernization (an addition to the sale price indicating the Subject is

superior as to a particular feature, while a reduction indicating the Subject is inferior to the

comparative feature). The basement/finish adjustment was for the fact that the Subject was

elevated, while the comparables were not. The elevation, per the appraiser, rendered the Subject

superior in terms of flood safety and lower flood insurance cost to a homeowner. He noted that

Sale 2 (Plaintiff’s neighbor) was inferior in that aspect since it was elevated only post-sale. His

adjustments for lot size, he stated, were about $10 per SF, while the condition adjustment was

about 15% of the sale price for Sale 2, and 10% of the sale price for Sale 3. He also noted that

Sales 1 and 3 were renovated in 2017 and 2018, respectively, similar to the Subject; however, Sale

3’s renovations rendered that comparable superior to the Subject, meriting a negative adjustment.

He stated that he had inspected the Subject’s interior and exterior in September 2017, and for

purposes of the tax year at issue here (2019), did not revisit the Subject’s interior but did an exterior

inspection only, and did not observe any difference. In 2017, the Subject’s improvements were in

good condition. The GLA adjustments, per the math, were $100 per SF. The gross adjustments

4 for each comparable were $43,400; $268,200; $133,300; and $124,100, while the net adjustments

were $31,200; $143,000; ($18,700); and ($84,100). 1

The net adjustments provided adjusted sale prices of $728,700; $733,000; $741,300; and

$745,900, respectively, which the appraiser reconciled for a value conclusion of $735,000. He

placed the most weight on Sales 1 and 3 due to their overall similarity to the Subject as to lot size

and GLA, and also because they required the least adjustments. Although he used Sale 2 (also

used by Plaintiff), he stated that it was used more as a test. He placed no reliance on Sale 4 (and

did not testify as to it) although he included it in his report, and contended that regardless, his value

conclusion of $735,000 was reasonable.

Plaintiff’s use of comparable sales as a valuation methodology is reasonable. Greenblatt

v. City of Englewood, 26 N.J. Tax 41, 53 (Tax 2010) (citation omitted). The sales being single-

family homes, all located in the Borough, with sale dates proximate to the assessment date, allow

the court to find that she overcame the presumptive correctness of the Subject’s assessment. See

MSGW Real Estate Fund, LLC v. Borough of Mountain Lakes, 18 N.J. Tax 364, 373 (Tax 1998)

(the burden to overcome the presumptive correctness of a local property tax assessment is on its

challenger). However, it does not follow that the assessment should therefore be reduced. Rather,

Plaintiff must still persuade the court, with credible, objective evidence why the Subject is over-

assessed and what is, or should be, the Subject’s value. Ibid. This was not done here.

1 Lot Size ($6,100) ($62,600) $27,300 ($61,200) GLA $7,300 $72,100 $0 ($42,900) Basement/Finish $20,000 $20,000 $10,000 $20,000 Garages $10,000 $0 $20,000 $0 Age/Condition $0 $88,500 ($76,000) $0 Amenities/Modernization $0 $25,000 $0 $0 GROSS ADJUSTMENT $43,400 $268,200 $133,300 $124,100 NET ADJUSTMENT $31,200 $143,000 ($18,700) ($84,100)

5 A comparative analysis requires a “focus on the similarities and differences that affect

value . . . which may include variations in property rights, financing, terms, market conditions and

physical characteristics.” VBV Realty, LLC v. Township of Scotch Plains, 29 N.J. Tax 548, 560

(Tax 2017) (citation and internal quotation marks omitted). Unless a comparable is almost

identical or the difference in a feature is negligible (i.e., will not impact the sale price in the

market), the differences are accounted for by making adjustments (upward or downward) to the

comparables’ sales prices. See U.S. Life Realty Corp. v. Township of Jackson, 9 N.J. Tax 66, 72

(Tax 1987) (“differences between a comparable . . . and the subject property are anticipated. They

are dealt with by adjustments recognizing and explaining these differences, and then relating the

two properties to each other in a meaningful way so that an estimate of the value of one can be

determined from the value of the other.”).

Plaintiff did not engage in this exercise but rather simply relied upon the sale prices of her

five comparables. This does not assist the court. For instance, Sale 4 was ranch-style, unlike the

Subject’s style. Style variations can command different prices. Sales 2, 3, and 4 had significantly

smaller GLAs as compared to the Subject, but for which the sale price was not adjusted upward.

Plaintiff’s argument that the smaller GLA is offset by a comparable’s larger lot size asks the court

to assume that the lot size dollar adjustment is the same as an adjustment for the GLA difference.

Without market-supported evidence to show that the market (buyers) will pay the same price for

smaller houses with larger lots and bigger houses with smaller lots, the court cannot accept this

inference. The Subject was renovated in 2016; however, there was no information whether the

other comparables were in a similar renovated condition.

In sum, the unadjusted sale prices of these sales are not credible evidence of the Subject’s

value. See Am. Cyanamid Co. v. Township of Wayne, 17 N.J. Tax 542, 581 (Tax 1998), aff’d, 19

6 N.J. Tax 46 (App. Div. 2000) (“without . . . adjustments [to the comparables’ sale prices], the sales

provide no meaningful indication of the value of the subject property”). Nor does averaging

unadjusted sale prices. Wedgewood Knolls v. Borough of West Paterson, 11 N.J. Tax 514, 523

(Tax 1991). Nor does comparing the comparables’ assessments assist the court in determining the

Subject’s value. See AHS Hosp. Corp. v. Town of Morristown, 28 N.J. Tax 456, 520 (Tax 2015)

(“comparing assessments of different properties in a property tax appeal is disallowed - the other

assessment may be incorrect”).

Further, Sales 4 and 5 were marked as non-usable (NU), one sale because of a lis pendens

and the other sale because it was by an executor. 2 Without any examination into their bona fides,

using them as credible comparables raises a doubt. See VBV Realty 29 N.J. Tax at 564 (“[v]ital

to the accuracy and integrity of the sales comparison approach is the premise that information and

data must be properly sourced, verified and analyzed to ensure accuracy and to better understand

the attitudes and motivations of the buyer and seller”) (citation and internal quotation marks

omitted). Note that a sale by an executor may be used as a comparable “if after full investigation”

the sale was between parties neither under a compulsion to sell or buy and was a fair market sale.

N.J.A.C. 18:12-1.1(b). But Plaintiff must first satisfy this court of the sale’s reliability. However,

she conceded that she did not verify the details of either sale (indeed of any sale). Without

verification of its bona fides, the court cannot simply accept a sale price as a credible indicator of

the Subject’s value.

2 In developing a credible sales-to-assessment ratio for use in the table of equalized valuations for each taxing district, the Division of Taxation reviews “the sales prices and assessed values of all real property sold during the sampling period” and “discards those sales which fall into one or more of 27 categories of transactions [set forth in N.J.A.C. 18:12-1.1] deemed to yield unreliable results[.] . . . These are called nonusable sales.” Borough of Englewood Cliffs v. Dir., Div. of Taxation, 18 N.J. Tax 662, 665 (App. Div. 2000) (citation and internal quotation marks omitted).

7 The Borough’s appraiser’s Sales 1 and 3 are closest in lot size and GLA to the Subject.

Although they do not have a creek in the rear of their lots, they are in a flood zone requiring an 8-

foot elevation, as is the Subject. The Borough’s appraiser also opined that since they were

renovated in 2017 and 2018 respectively, 3 they were similar to the Subject, which was renovated

in 2016. Plaintiff disagreed on the grounds that Sales 1 and 3 were “completely renovated” in

2017/2018 (as described in the Multiple Listing Services (MLS)), whereas the Subject was only

repaired in 2016 to mitigate Sandy damage, its “complete” renovation having occurred in 2011,

thus, at least six to seven years before the comparables’ complete renovations. She added that the

2016 changes were not “renovations” but simply repairs to the Subject, in that what was replaced

(floors, kitchen cabinets) were of the same type and/or make/model used in 2011.

The court is unpersuaded that the reason for the renovation renders Sales 1 or 3 as non-

comparable. Nor does it matter that the brand-new replacements in the Subject were of the same

type, make, or model which were used in 2011. The focus is on the condition, and if the appraiser

found the condition similar, inferior, or superior, as compared to the Subject (based on his 2017

inspection), he adjusted for that factor. The issue is, rather, the credibility of the Borough’s

appraiser’s adjustments for condition. And as to this, the court finds the same to be reasonable.

The court is unpersuaded by the Borough’s appraiser’s adjustments for the Subject’s

elevation (which his report labeled “Basement/Finish”). He claimed that the elevation was a

superior feature as it protected the property from floods and provided significant monetary savings

to a homeowner in connection with flood insurance premiums. However, this opinion is bereft of

3 It is unclear why comparable 3 was marked by the Borough’s assessor as NU 7 (“Sales of property substantially improved subsequent to assessment and prior to the sale thereof,” see N.J.A.C. 18:12-1.1(a)(7)). The sale date was May 1, 2018, while the assessment date for tax year 2019 was October 1, 2018.

8 any supporting objective data. The appraiser could have provided information as to sales of homes

in the neighborhood or competing neighborhoods, to show the difference in sale prices between

elevated homes (post Sandy-damage) and those which were not, from which the court could

surmise that the market would pay more or less for this physical characteristic. Nor was there any

evidence as to the alleged savings in flood insurance costs, whether the Subject was subject to this

cost, or whether flood insurance was mandatory or optional. 4

The court also finds the appraiser’s $25,000 adjustment to Sale 2 for lack of

“Amenities/Modernization” to be duplicative of his $88,500 adjustment for “Age/Condition.” The

former would logically, and should, be included in a condition adjustment. Therefore, it is rejected.

The remaining adjustments are reasonable.

Removing these adjustments provides the court with the adjusted sale prices of Sales 1, 2,

and 3 as $708,700; $688,000; and $731,300. Giving most weight to Sale 1 (closest to the

assessment date), and equal weight to Sales 2 and 3, the court finds the Subject’s value of $710,500

as concluded by the County Board to be reasonable. 5 Therefore, the judgment of the County Board

Very truly yours,

Mala Sundar, J.T.C.

4 Casting further doubt on the credibility of this adjustment is his assignment of $10,000 to Sale 3, but $20,000 to Sales 1 and 2. If, in his opinion, elevation increases value, then the same adjustment should be applied to all non-elevated comparables regardless of whether they had a basement, partial basement, or a crawl space. Yet he deemed Sale 3 as less inferior because it had a partial unfinished basement and Sales 1 and 2 more inferior because they had a crawl space. 5 The County Board’s judgment is the assessment for the Subject for tax year 2019, since it is entered as such on the May 5 final tax list in accordance with N.J.S.A. 54:4-35(b).