The New Jersey Supreme Court kicked off its week with Klummp v. Borough of Avalon, a property “takings” case. In the case, the Klummps owned property on the shore in Avalon. In 1962, the borough seized their property and began to clear it following a borough council meeting and resolution. They proceeded to build sand dunes and vacate access roads to the Klummp’s property; that was completed in 1965. The borough never filed to condemn the property or issue a notice of a taking and the Klummps never complained, though they had a six year window to do so. Until 1997, that is. That was the year that the Klummps filed for permits to build on the land. The borough advised them that they no longer owned the property. The lower courts agreed.
So what does any of this have to do with taxes? Plenty. The lion’s share of the borough’s case revolves around the idea that the Klummps should have been aware that the borough had acquired the property. The Klummps claim no direct notice (a fact that is difficult to prove or contest more than 40 years later). However, the borough claims that the Klummps’ tax bill should have been an alarm bill. While the Klummps argued that the fact that they paid their taxes each year is indication that they owned the property, Avalon believes that the total property tax due should have been a clue: it dropped to a mere 46 cents. The property owned by the Klummps was assessed at $100, a fact they never challenged. For those of you who don’t know the Jersey Shore, Avalon is one of the swankier spots – in 2007, Forbes listed Avalon to be the 65th most expensive zip code in the US. The median home prices range from over $2 million in 2008 to just under $1 million in 2009.
I don’t profess to be a property lawyer – and not a fan of eminent domain, generally – but the Klummps wouldn’t want me on that bench. In my opinion, you can’t have it both ways. You can’t hold onto land for 40 years, paying real estate taxes that clearly do not reflect what is a fair assessment for the property, and then claim that you want to be compensated for the taking of your property. I suspect the statute of limitations has largely run on the borough’s side but if I were Avalon – and I lost the case – I would actively seek to recover what is sure to be a fair bit of unpaid real estate taxes on the property.
If something is too good to be true, it likely is. The Klummps, for all of their “I had no idea” commentary, had to know that something had changed. I suspect they kind of liked the idea of paying less than a dollar for their property taxes – how great is that? Until they wanted to use it, of course.
We’ll see what the NJ courts have to say.
