Landlocked Property Yields Property Tax Reduction

by: Anthony F. Della Pelle
4 Oct 2016

Recently, in Acocella v. Cedar Grove, the Tax Court of New Jersey was asked to examine the value of a vacant landlocked parcel.  The subject property is approximately one-acre and has no frontage or roadway access.  It lies to the rear of plaintiff’s residential parcel, and surrounded on all sides by adjacent properties.  Given the lack of ingress or egress to the subject property, plaintiff’s challenged the assessment of the property contending that the property is of minimal use (assessed at $238,700).  The Township countered that the subject neither lacks frontage nor access because plaintiffs actually own the adjacent residential parcel fronting the street.  Both parties presented an expert witness relying on the sales comparison approach at trial to testify as to the subject’s market value.

The major issues of contention between the parties’ experts were the significant adjustment made by plaintiffs’ expert (50%), said to compensate for the subject property’s “lack of street frontage,” and the experts’ conflicting conclusions of the subject property’s highest and best use.  Plaintiff’s expert concluded that the subject’s highest and best use is as vacant and “extremely limited” in development potential given its location.  On the other hand, the town’s expert based his highest and best use conclusion on an assumption of access provided to the subject property from plaintiffs’ adjacent residential parcel. He further testified that plaintiffs’ ownership of both the subject property and adjacent parcel presents a potential merger or assemblage scenario to create a parcel with greater utility and development potential, a viable and reasonable “alternate” highest and best use.

The Tax Court agreed with the highest and best use analysis concluded by plaintiff’s expert.  By law, the subject property could not be developed without construction of a roadway to provide access or a variance and defendant’s expert simply assumed that ingress or egress would be provided without providing any credible evidence.  Furthermore, the court found that the subject does not benefit from an easement by necessity over the adjoining parcel owned by plaintiff since there was “no evidence presented by defendant to dispute the fact that severance from an adjacent parcel occurred and rendered the subject property landlocked prior to its purchase by the developer, and that it was conveyed to plaintiffs in that condition.” The court thus concluded “that any future conveyance of the subject by plaintiffs would not give rise to a right-of-way over the residential lot via an easement by necessity, rather it would simply constitute a transfer of landlocked land.”

The court also accepted the evidence that any type of construction of a road or corridor providing access to the subject property would be detrimental to the adjoining residential parcel given the limited space between the proposed access and plaintiff’s residence.  For these reasons the court concluded that the subject property should be valued in its present condition as vacant land with impaired development potential.

Despite the difference in the highest and best use of the subject from the comparable sales, given the unique circumstances of the subject property, the court accepted plaintiff’s comparable sales and the 50% adjustment for lack of frontage.  The court stated that “[m]indful that the adjustment is substantial at fifty percent. . . the character of the subject property limits its development potential and warrants the adjustment.”  The court further noted that “considering the limited use of the subject property akin to encumbered land based on its landlocked condition, the court finds a fifty percent adjustment is reasonable.”  In light of all that was before the court, it adopted the common sales utilized by both parties and applied plaintiff’s adjustments thereby rendering reductions in the assessment for all years under appeal.

A copy of the Tax Court’s published opinion can be found here.