Assessment on Condo Common Elements Nullified by Tax Court, Affirmed on Appeal

by: Anthony F. Della Pelle
15 Aug 2016

The Appellate Division recently considered the New Jersey Tax Court’s invalidation of assessment placed by South Orange on the common elements of a condominium property.  Plaintiff, The Top Condominium, was established as a condominum association under New Jersey’s Condominium Act.  The master deed establishing the condominium consists of 93 units located in the Township of Maplewood.  The subject of this appeal is vacant land that provides access to the condo. units and included in the master deed as part of the common elements.  Maplewood imposed property taxes on each individual condo. unit.  Meanwhile, South Orange had placed a separate assessment on the subject and billed it to plaintiff.  Plaintiff filed tax appeals challenging South Orange’s imposition of an assessment on the subject property contending that the property is tax exempt.Top Condo

The Tax Court had narrowed the issue as to “how to reconcile South Orange’s constitutional and statutory right and obligation to assess and tax property located within its taxing jurisdiction with the prohibition of N.J.S.A. 46:8B-19 against the separate assessment of common elements.” The Tax Court held that N.J.S.A. 46:8B-19 “does not bar South Orange’s right to assess on property located within its taxing district which constitute common elements of a condominium, but that it does prohibit the assessment of the common elements against the “condominium property as a whole.”  Therefore, the assessments placed by South Orange were nullified but not because the property itself was exempt from taxation.

The outcome is not all that practical, as indicated by the Tax Court judge.  Given that it is unclear whether Maplewood has assessed the subject property as part of the assessment for each individual unit, it is unclear why neither party sought to join Maplewood in the action.  Furthermore, even if Maplewood included the value of the subject in the assessments of each unit, it would not matter because neither town passed a resolution to permit such act.  As cited by the Tax Court, “absent compliance with N.J.S.A. 54:4- 25,” “[o]ne municipality has no legal authority to assess taxes against property located in another municipality.”

In the end, the App. Div. affirmed the ruling substantially for the reasons set forth by the Tax Court.  Although the Tax Court rejected the argument that the subject property was tax exempt, plaintiff obtained the relief sought by having the assessment completely removed.  Meanwhile, South Orange must now figure out a way the subject does not escape taxation going forward and it won’t be able to do so without cooperation from Maplewood.

A copy of the opinion can be found here.