WARREN LUMBER, INC. C/O WARREN MILLWORK & EMPIRE TFI JERSEY HOLDING LLC VS. WASHINGTON BOROUGH (TAX COURT OF NEW JERSEY)

NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
This opinion shall not "constitute precedent or be binding upon any court ." Although it is posted on the
internet, this opinion is binding only on the parties in the case and its use in other cases is limited . R. 1:36-3.

SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-3389-18T3

WARREN LUMBER, INC. c/o
WARREN MILLWORK &
EMPIRE TFI JERSEY
HOLDING, LLC,

Plaintiffs-Respondents,

v.

WASHINGTON BOROUGH,

Defendant-Appellant.
__________________________

Submitted March 2, 2020 – Decided June 4, 2020

Before Judges Sumners and Geiger.

On appeal from the Tax Court of New Jersey, Docket
Nos. 004276-2013 and 002647-2014.

Richard M. Conley, LLC, attorneys for appellant
(Richard M. Conley, of counsel and on the briefs).

Schneck Law Group, LLC, attorneys for respondents
(Michael I. Schneck, of counsel and on the brief).

PER CURIAM
 Following a trial before the Tax Court, Washington Borough (the

Borough) appeals two orders reducing its tax assessments for the years 2013 and

2014 on property previously owned by plaintiff Warren Lumber, Inc. and

thereafter owned by plaintiff Empire TFI Jersey Holding LLC (Empire). We

affirm for the reasons expressed by Tax Court Judge Joshua D. Novin in his

comprehensive written opinion that properly applied the law and the credible

facts in the record.

The property in question is a 6.53-acre lot, upon which five buildings – a

multi-family residence with an attached garage, three warehouses, and a two-

story office building – are situated. In accordance with N.J.S.A. 54:4-23, the

Borough's tax assessor made valuations of the property determining the

property's value as $1,658,000 (land - $296,200 and improvements -

$1,361,800) for the tax years 2013 and 2014. Warren Lumber owned the

property until December 18, 2013, when its right of redemption was foreclosed

on by Empire, which three years prior had purchased a Borough tax lien on the

property. In 2015, the property was sold for $800,000 in an arms-length

transaction. Warren Lumber and Empire challenged the Borough's 2013 and

2014 tax assessments prior to Empire's sale of the property. A Tax Court trial

ensued.

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 Following trial, Judge Novin determined the Borough's assessments were

excessive and reduced them in 2013 to $837,100 (land - $296,200 and

improvements - $540,900) and in 2014 to $862,800 (land - $296,200 and

improvements - $566,600).

Before us, the Borough contends the presumption that its tax assessments

are correct, Pantasote Co. v. City of Passaic, 100 N.J. 408, 413 (1985), was not

overcome by Empire as required by Ford Motor Co. v. Twp. of Edison, 127 N.J.

290, 312 (1992). Specifically, the Borough asserts the judge's reliance on

Empire's expert's property valuation was misplaced because: (1) property photos

relied upon by expert were taken in 2017, not 2013 and 2014, the tax years in

question; (2) the expert never contacted the Borough's officials to inquire about

the residential building and did not determine any value for the building; (3) the

judge rejected the expert's contention the highest and best use for the residential

building was that it be demolished and Empire offered no evidence regarding

the costs to modify, renovate, convert or demolish the building; (4) the judge

rejected the expert's downward adjustment for the property's environmental

concerns; (5) the expert only reviewed one lease for comparable properties; and

(6) the expert did not inspect the buildings' interiors. We disagree.

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 Our review of the record leads us to conclude the judge thoroughly

explained why he found telling aspects of Empire's expert's valuation credible

to refute the Borough's assessments. Noting Empire had overcome the

presumption of validity of the Borough's valuation, which did not mean the

property tax assessment was erroneous, the judge, relying on Ford, used

evidence adduced at trial to determine valuation of the property based upon the

"highest and best use analysis," as Empire's expert opined.

The analysis is a market-driven concept which considers a property's

"most profitable, competitive use to which [it] can be put." Id. at 302 (citations

omitted). Thus, "all the capabilities of the property and all the uses to which it

may be applied, or for which it is adapted, are to be considered and examined

and that use which yields the highest value should be selected." Ford Motor Co.

v. Edison Twp., 10 N.J. Tax 153, 165 (Tax 1988) (citation omitted).

The judge rejected Empire's expert's analysis of the residential building's

value as "imperfect" because he failed to consider the financial feasibility of

renovating the building into office space to maximize its productivity. The

judge found no merit to the expert's opinion that there was no legally conforming

use for the building or that it did not contribute to the value of the property, and

instead found it would be reasonable for a hypothetical buyer to purchase the

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property and use the building as a supportive office to one of the warehouses.

However, the judge credited the expert's methodology for determining rental

rates of all the buildings on the property, finding his proposed rate of $2.50 per

square foot in "fair" condition and $1.50 per square foot in "poor" condition to

be reasonable. According to the judge, the residential building was in "poor"

condition because it was not being used as supportive office space.

Regarding the expert's adjustments, the judge reduced his vacancy and

collection loss factor from twenty percent to fifteen percent because his analysis

on the presumption that the "property was completely vacant for number of years

prior to the effective valuation dates," was not as credible as relying on statistical

data from investor surveys. The judge found the expert's stabilizing expenses

for management fees, leasing commissions, and reserves to be reasonable as well

as his proffered loan-to-value ratio. Last, the judge rejected the expert's $88,800

downward adjustment for purported environmental concerns, noting no credible

evidence was offered to show any concerns impacted the value of the land in

accordance with Inmar Assocs., Inc. v. Borough of Carlstadt, 112 N.J. 593, 605-

08 (1988).

Considering his findings and adjustments, the judge computed the "true

market value" of the property for the tax years of 2013 and 2014 and concluded

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it was $1,067,150 for each year. Next, applying N.J.S.A. 54:51A-6(a) (Chapter

123), the judge reasoned

when the court is satisfied in a non-revaluation year by
the evidence presented "that the ratio of the assessed
valuation of the subject property to its true value
exceeds the upper limit or falls below the lower limit of
the common level range, it shall enter judgment
revising the taxable value of the property by applying
the average ratio to the true value of the property . . . ."
[Ibid.] This process involves application of the Chapter
123 common level range. N.J.S.A. 54:1-35(a)-(b).
When the ratio of assessed value exceeds the upper
limit or falls below the lower limit, the formula for
determining the revised taxable value of property,
under N.J.S.A. 54:51A-6(a), is as follows:

True market value x Average ratio = Revised taxable
value

For the 2013 tax year, application of the Chapter 123
ratio results in an applied upper limit of 0.9021 and
lower limit of 0.6667. The ratio of total assessed value,
$1,658,000, to true market value, $1,067,150, yields a
ratio of 1.5537%, which exceeds the applied upper
limit. Consequently, the calculation for the 2013 tax
year is:

$1,067,150 x 0.7844 = $837,100 [ROUNDED]

Accordingly, a judgment establishing the subject
property's tax assessment for the 2013 tax year will
entered as follows:

Land: $296,200
Improvement: $540,900
Total: $837,100

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 For the 2014 tax year, application of the Chapter 123
ratio results in the applied upper limit of 0.9298 and
lower limit of 0.6872. The ratio of total assessed value,
$1,658,000, to true market value, $1,067,150, yields a
ratio of 1.5537%, which exceeds the applied upper
limit. Consequently, the calculation for the 2014 tax
year is:

$1,067,150 x 0.8085 = $862,800 [ROUNDED]

Accordingly, a judgment establishing the subject
property's tax assessment for the 2014 tax year will be
entered as follows:

Land: $296,200
Improvement: $566,600
Total: $862,800
(Da93-Da94).

Judgments reflecting these totals were entered.

Considering Judge Novin's decision was based upon his expertise as a Tax

Court judge, his evaluation of witness credibility, and is supported by substantial

credible evidence, we find no reason to second-guess his decision. See Dover-

Chester Assocs. v. Randolph Twp., 419 N.J. Super. 184, 195 (App. Div. 2011)

(recognizing appellate review "take[s] into account the special expertise of Tax

Court judges in matters of taxation"); Rova Farms Resort, Inc. v. Inv'rs. Ins. Co.

of Am., 65 N.J. 474, 483-84 (1974) (holding appellate courts owe deference to

the judge's evaluation of witness credibility and fact findings supported by

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"adequate, substantial and credible evidence" in the record). The Borough's

arguments are without sufficient merit to warrant further discussion. R. 2:11-

3(e)(1)(E).

Affirmed.

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