Taxpayer Obtains Freeze Act Relief Amid City’s Outcry

by: Anthony F. Della Pelle
20 Oct 2016

As many are aware, the Freeze Act is a safeguard for taxpayers who have obtained a judgment either by trial or by stipulation of settlement.  It protects the taxpayer by “freezing” an assessment for two years subsequent to the base year of a final judgment of the Tax Court.  Generally, unless a taxpayer explicitly waives this right or there is a revaluation, this relief is available whether or not an appeal was filed for the subsequent tax years.

Recently, in Ritchie & Page Distrib. Co., Inc. v. City of Trenton, the prior owner had filed appeals for tax year 2011-2014 and obtained a favorable reduction.  A stipulation of settlement was filed with the Tax Court and judgment setting the 2014 assessment followed thereafter.  The 2014 assessment was reduced from $1,250,000 down to $940,900.  Prior to the settlement and judgment, however, there was a sale of the subject property by the plaintiff to another entity in 2014.  Some time during 2014, the property sold once for $1,665,000 and then again for $1,360,000.  Notwithstanding these transactions, after the issuance of the Tax Court judgment, the new owner filed a Freeze Act application for tax years 2015 and 2016.

The City first argued that the caption of the Freeze Act application cites to plaintiff’s name, not the successor owner, and thus, this is plaintiff’s application for Freeze Act who no longer own the property.  The City also argued that the successor owner never filed tax appeals for 2015 and 2016 and thus did not preserve its right to further litigation nor preserve its right to claim a Freeze Act.  Lastly, the City contended that the Freeze Act was inapplicable since there was an “implied change in value due to change in occupancy of the Subject from owner-occupied during plaintiff’s ownership, to being tenanted post-sale.”  Furthermore, the City was prevented from offering proof of the value change because the successor owner failed to respond to the Ch. 91 requests.  The City urged the court to permit discovery as to the ownership details so that it can prove a prima facie change in value.

The Tax Court did not find the City’s arguments persuasive.  First, the stipulation of settlement entered by the parties was silent as to the applicability of the Freeze Act.  Second, the Freeze Act is not contingent or conditions upon the filing of a tax appeal for subsequent freeze year(s) as per the clear language of the statute.  The Freeze Act application is “mandatory and self-executing.”  Furthermore, citing to precedence, the court concluded that a change in occupancy does not establish a prima facie showing of a substantial value change.  The City’s argument as to the need for discovery in order to make a claim of value change was also rejected.  The court stated that a taxing district must perform its research prior to opposing a Freeze Act application since “discovery is warranted only if a plenary hearing is necessary, and a plenary hearing is warranted only if the municipality provides a preliminary basis that a substantial and meaningful change in value has occurred.”  The property owner’s Ch. 91 non-compliance does not foreclose the City from making a prima facie showing of a change in value nor does it foreclose a taxpayer’s right to relief under the Freeze Act.

Based on the facts of the case, one must wonder why the City offered to settle tax year 2014 when there were two sales in the very same year which may have supported the assessment.  Given that the stipulation of settlement was filed in 2016, the City should have been aware of the sales prior to the settlement.

A copy of the Tax Court opinion can be read here.