Ashkenazi v. Borough of Deal

NOT FOR PUBLICATION WITHOUT APPROVAL OF
THE TAX COURT COMMITTEE ON OPINIONS

TAX COURT OF NEW JERSEY

MALA SUNDAR Richard J. Hughes Justice Complex
PRESIDING JUDGE P.O. Box 975
Trenton, New Jersey 08625-0975
609 815-2922, Ext. 54630 Fax 609 376-3018

May 10, 2021
Michael I. Schneck, Esq.
Schneck Law Group, LLC
Attorneys for Plaintiffs

Martin M. Barger, Esq.
Barger & Gaines,
Attorneys for Defendant

Re: Ashkenazi et al. v. Borough of Deal
Block 6.02, Lot 3.01, 12 Whitehall Avenue
Docket No. 000426-2020

Dear Counsel:

This is the court’s decision following trial of the above-captioned matter deciding plaintiffs’

appeal of the tax year 2020 local property tax assessment of $12,437,200, 1 on the above-captioned

property (Subject), a residence located in defendant municipality (Deal). Each party’s real estate

appraiser used the sales comparison approach as a valuation methodology. Plaintiffs’ appraiser opined

the Subject’s value as $10,000,000, while Deal’s real estate appraiser opined it as $15,000,000.

Their difference in value opinion was predominantly due to the choice of each appraiser’s

comparable sales: three of the four plaintiffs’ appraiser’s sales were of homes outside Deal with the

unadjusted sale prices between $3,850,000 and $6,750,000, whereas all four comparables of Deal’s

appraiser were in Deal, but two of which were vacant parcels with unadjusted sale prices between

$11,800,000 and $14,200,000. Thus, and although their adjustments (type and amounts) were not widely

disparate, their respective adjusted sale prices differed (plaintiffs’ appraiser’s adjusted sale prices were

1
The assessment was allocated $10,689,100 to land and $1,748,100 to improvements.

ADA
Americans with
Disabilities Act
ENSURING
AN OPEN DOOR TO

JUSTICE rm
$7,775,000; $10,464,000; $7,525,500; and $9,445,000 while Deal’s appraiser’s adjusted sales prices

were $11,425,000; $14,905,000; $12,698,000; and $15,991,000).

For the reasons stated below, the court rejects plaintiffs’ appraiser’s comparables outside of Deal,

and the one comparable in Deal, as not being credible indicators of the Subject’s value. The court also

rejects Deal’s vacant land sale comparables since they cannot be compared or adjusted to the Subject’s

improved condition, which is its highest and best use. Although the court finds problematic each

appraiser’s valuation technique of what they deemed as surplus land, the fact is that they are not widely

disparate on almost all adjustments. With most weight to the adjusted sale prices of the two improved

Deal sales used by Deal’s appraiser, the court finds the Subject’s assessment is reasonable and therefore

affirms the same.

SUBJECT DESCRIPTION

The Subject is a rectangular lot measuring 1.857 acres located in the R-1 residential zone where

the minimum lot size is 0.43 acres (18,750 square feet or “SF”). One side has frontage on Whitehall

Avenue at 319+ SF, and one side which directly faces the ocean has a frontage of 192+ SF. View of the

ocean is unobstructed.

The site is improved by a two-story single-family colonial style residence built in 1920, with a

gross living area (GLA) of 5,880 SF. There are five bedrooms, five full, and 2 half baths (above grade),

and another half bath in the partial basement, which is partially finished with a kitchen. There is a two-

car built-in garage, a tennis court, gazebo with a wet bar, spa tub, a patio, porch, and a pond. The pictures

attached to plaintiff’s appraiser’s report (reproduced in color) show the exterior of the home with tiled

roofs throughout (including on the gazebo), raised brick borders in the rear, a brick walkway in the front

(leading to the house), and two balconies to rooms fronting the street.

2
Both appraisers agree that the improvements are well maintained and of excellent construction

quality. Plaintiffs’ appraiser opined them as in “average” condition due to lack of any renovations or

upgrades especially to the most “sellable” areas such as kitchens and bathrooms which dates to the sixties

or seventies, with the tennis court needing major repairs/maintenance. Deal’s appraiser opined the

improvements to be in “good” condition since they were well maintained, and though some were dated,

did not render them any less “good” in condition. The pictures attached to plaintiffs’ appraiser’s report

(reproduced in color) endorse the very well-maintained interior and exterior condition of the property.

HIGHEST AND BEST USE

Plaintiffs’ appraiser after setting forth the four elements for analysis of the highest and best use

(HBU) of a property, concluded that as vacant, the HBU of the Subject was for residential development,

and as improved, for “its current single-family residential use.” He noted that he also considered the

potential for the lot’s subdivision because it was “large” however, concluded that demolition of the

existing improvements was not financially feasible. 2

Deal’s appraiser’s report contained his conclusion that the HBU of the Subject as vacant was for

residential development in compliance with zoning. As improved, he opined the Subject’s continued

present use “as a single-family dwelling on an interim basis as the current improvement is nearing the

end of its economic life.” However, he did not analyze the alternative use(s), or when and why the use(s)

was (were) more financially feasible or maximally productive than the current use. See Appraisal

Institute, The Dictionary of Real Estate Appraisal, 187 (3rd ed. 1993) (defining interim use as “the

2
This conclusion was based on his adjustments for lot size differences using a linear regression analysis.
There, he computed the Subject’s 1.857 acres as vacant to have a value of $7,975,000 less estimated
subdivision approval and demolition costs of $500,000. For this conclusion, he deemed the Subject to
be divisible into two lots, one “beach block” at 0.54 acres, and the balance 1.32 acres as oceanfront
(though noted as “beach block” on the report, which appears to be a typographical error). Since his value
conclusion for the Subject as improved was higher, his report noted that “demolition of the existing
improvements . . . [was] not financially feasible.”
3
temporary use to which a site or improved property is put until it is ready to be put to its future” HBU);

Appraisal Institute, The Appraisal of Real Estate, 345-46, 354 (14th ed. 2013) (“Existing improvements

that do not conform with the ideal improvement may be an interim use, i.e., not the [HBU]” and with

zero or even negative contributory value, and “[a]n interim use is not the [HBU] of the property at the

present time”). Here, there was no data or facts to support a conclusion that the Subject’s use as improved

had an alternate use, based on an analysis of the same four elements in the HBU analysis. Speculating

that the improvements were at the end of their economic age does not equate to the lack of their

contributory value, or support a conclusion that the Subject’s use as improved, is interim.

The court therefore finds that the Subject’s use as improved is for the continuation of its present

use because there is nothing to support a conclusion or opinion of a more financially feasible or

maximally productive use.

VALUATION

A complainant carries a dual burden of first overcoming an assessment’s presumptive correctness,

and thereafter, of persuading the court of the correct value of the property. MSGW Real Estate Fund,

LLC v. Borough of Mountain Lakes, 18 N.J. Tax 364, 373, 377 (Tax 1998); Ford Motor Co. v. Township

of Edison, 127 N.J. 290, 314-15 (1992), aff’g, 10 N.J. Tax 153 (Tax 1988). The court can only determine

the true value of the property based upon “the evidence before it and the data that are properly at its

disposal.” F.M.C. Stores Co. v. Borough of Morris Plains, 100 N.J. 418, 430 (1985).

Plaintiffs’ appraiser provided an opinion which was based on an accepted valuation methodology

for single family homes using sales he considered comparable. As such, his opinion raises a debatable

question whether the imposed assessment is accurate, and the court finds that plaintiffs have overcome

the initial presumptive correctness of the assessment. The court will now examine the proffered evidence

and whether it suffices to change the imposed assessment.

4
APPRAISERS’ VALUE CONCLUSIONS

Plaintiffs’ appraiser maintained that he would only use sales which were exposed to the market

through Multiple Listing Services (MLS) or other internet-based services, and not private sales which he

agreed were prevalent in Deal. Such sales, he opined, are not credible comparables since they are not

exposed to the market, and further could rarely be verified to ensure its arms-length nature. While he

deemed Allenhurst as competitive to the Subject’s “market” (allegedly one would not know the difference

between Allenhurst and Deal when driving on Ocean Avenue), he stated that he extended his search due

to a paucity of ocean front homes in Monmouth County. He concluded a value of $10,000,000 based on

four sales, one of which was in Deal, with adjustments (in italics) as follows:

Subject Comparable One Comparable Two Comp. Three Comp. Four
12 Whitehall 7 Ocean Ave 2509 Ocean Ave 112 Ocean Ave 2 Cedar Ave
Address
Deal Monmouth Beach Spring Lake Deal Allenhurst
Sale Price N/A $3,850,000 $6,750,000 $3,898,500 $6,120,000
Sale Date/DOM N/A 10/25/18; 113 days 12/13/18; 28 days 10/23/18; 86 days 09/14/18; 129 days
Year Built 1920 2018 2003 1943 1984
Style Colonial Colonial Colonial Ranch Colonial
GLA (SF) 3 5880 3611 (+340,000) 5420 (+69,000) 3580 (+345,000) 5156 (+108,000)
Bathrooms 4 5.2 4 (+60,000) 3.1 (+45,000) 3.1 (+45,000) 5.1 (+15,000)
Full/Part Finished Crawl Full/Unfinished Full/Unfinished Partial/Unfinished
Basement 5
1 half bath (+90,000) (+40,000) (+40,000) (+40,000)
Fireplaces 6 2 1 (+10,000) 1 (+10,000) None (+20,000) 3 (-10,000)
Garage 2 2 2 None (+50,000) 2
Patio, Deck, Patio, Deck, Porch
Tennis Court, Elevator, Decks, Balcony, Open Porch (+15,000)
Improvements
Gazebo, Patio, Porch Open Porch Porch (+35,000)
(+5,000)
Condition/ Good/Good Good/Good Average/Average Good/Good
Average/Good
Quality 7 (-385,000) (-675,000) (+390,000) (-612,000)
0.2448 Acres 0.34 Acres 0.6428 Acres .4439 acres
Site Size 8 1.857 acres
(+3,168,000) (+2,870,000) (+1,922,000) (+2,545,000)

3
At $150 per SF (PSF).
4
At $30,000 for a full bath; $15,000 for a half bath.
5
$50,000 for finished; $25,000 for unfinished or partial finish; and $15,000 for half-bath in basement.
6
At $10,000 per fireplace.
7
By 10% of the sale price, which he deemed conservative since upgrades to the Subject would cost
$300,000 to $600,000. Age was also included in this adjustment.
8
In the report, the appraiser used $1,734,000 for lot size differences. Thus, the adjustments were
+$2,796,000; +$2,630,000; +$2,105,000; +$2,450,000. At trial, he corrected the same to “$3,129,000
per acre for lot size differences under 1 acre and $939,000 for lot size differences over 1 acre,” which
5
Excellent – Inferior Inferior Inferior
Location Similar (+642,000) 9
Oceanfront (+1,350,000) (+780,000) (+1,224,000)
Good-Ocean 10 Good-Ocean View
View Good-Ocean View Good-Ocean View Good-Ocean View
View
Total Adj. 11 N/A +$3,925,000 +$3,714,000 +$3,627,000 +3,325,000
12
Adj. Sale Price N/A $7,775,000 $10,464,000 $7,525,500 $9,445,000

The largest adjustment (over $1 million) was for differences in lot size. Plaintiffs’ appraiser used

a linear regression analysis wherein he extracted a value for what he deemed to be surplus land (because,

as his report noted, “[a]ll of the [comparables’] lots support existing structures and various amenities,

therefore the difference in lot sizes accounts primarily for some privacy and proximity to the neighboring

houses”) by a formula y = mx+b, where b is the constant, x is the lot size in excess of the constant, and

m is the variable, i.e., the value per-acre in excess of the constant. He used six vacant land sales (one of

which was in Allenhurst, and one on the same street as the Subject) as samples, with the Allenhurst sale

as the “constant” (since it was the smallest lot). He plotted the various sales manually (using the excel

spreadsheet) to determine the value of land in excess of 0.4269 acres as follows:

Size Size over Value
Location Sale Date Sale Price
(acres) 0.4269 acres (y=mx+b)
8 Allen Ave, Allenhurst 6/30/2015 $2,170,000 0.4269 0.0 $2,228,907
28 Whitehall Ave, Deal 2/28/2017 $2,700,000 0.5438 0.1169 $2,533,723
37 Parker Ave, Deal 3/23/2017 $3,300,000 1.0331 0.6062 $3,809,573
80 Neptune Ave, Deal 9/29/2017 $1,750,000 0.5615 0.1346 $2,579,876
62 Phillips Ave, Deal 9/5/2018 $3,000,000 0.6428 0.2159 $2,791,886
72 Brighton Ave, Deal 3/1/2019 $4,160,000 0.7748 0.3479 $3,136,066

then changed the adjustment amounts for each comparable as shown in the above grid. He testified that
these changes did not alter his final value conclusion of $10,000,000.
9
The upward adjustment was only because the effective tax rate in Monmouth Beach was higher ($1.202)
than Deal ($0.71), Spring Lake and Allenhurst. The adjustments to the other comparables were for lack
of ocean front at 20% of the sale price.
10
The appraiser’s notes to the grid state that comparable 3 had an “obstructed ocean view and was
adjusted upwards by 10% of the sale price.” The adjustment grid however does not reflect this addition.
11
The amounts in this row changed due to the appraiser’s changes during trial to the lot size adjustment.
The “total adjustments” originally were +$3,553,000; +$3,469,000; +$3,810,000; and +$3,230,000.
12
The amounts in this row changed due to the appraiser’s changes during trial to the lot size adjustment.
The “adjusted sale price” originally was $7,703,000; $10,219,000; $7,708,500; and $9,350,000.
6
His calculations provided an adjustment of $2,607,199 per acre, which he further adjusted by

+20% because the Subject is oceanfront. This was $3,129,000 (rounded) which he applied to “lot

differences under 1 acre.” He used 30% of this amount or $939,000 (rounded) for a lot size over one

acre. He testified he deemed the six vacant land sales as a sufficient sample size.

He explained his mathematical computation vis-à-vis his comparable 1 which has a lot size of

0.2448 acres thus: He split the Subject’s 1.857 acres into one acre and 0.857 acres. The comparable was

0.7552 acres less than the Subject’s one acre (1 minus 0.2448). He multiplied this difference (0.7552

acres) by $3,129,000 which produced $2,363,021 (rounded). He then multiplied the balance of the

Subject’s lot size (0.857 acres) by $939,000 which was $804,723. This amount plus $2,363,021, or

$3,168,000 (rounded) was the upward adjustment to comparable 1’s lot size.

Deal’s appraiser used four sales he deemed were comparable, all located in Deal. He testified

that given the nature, real-estate sophistication, and wherewithal of the community (wealthy) where

homeowners used the residences as summer homes only, and transacted sales privately, Deal had a real

estate market of its own because only certain players are (and can be) the buyers. He noted that regardless

of the private nature of the sales, one could still obtain sale deeds and verify sale details from the

assessor’s records (including SR-1As) as well as from the attorneys. He also noted that vacant land sales

demonstrated the high per-acre value of land in Deal.

Deal’s appraiser’s comparables included two vacant land sales. The vacant land sales were: (A)

8 Neptune Avenue, which sold 01/10/18 for $11,800,000. The lot size was 0.80 acres; and (B) 2 Beringer

Road, which was oceanfront, and sold 10/03/17 for $14,200,000. The lot size was 1.53 acres. When

sold, there was an improvement on it which was subsequently demolished. He did not increase the price

for demolition costs having no information in this regard.

7
His two improved comparables were: (A) 1 and 5 Clem Conover Road, which sold 02/28/19 for

$10,000,000. The property comprised two lots, totaling 1.40 acres, with 2,296 SF of GLA (four beds)

and 5 full and one, half bath. The basement was partial with partial finish, and there was a 4-car tandem

garage. It was built in 1980. He deemed its condition the same as the Subject’s, i.e., good/good; (B) 9

Monmouth Terrace, which sold 12/21/17 for $9,000,000. This property had a lot size of 0.40 acres, 5,480

SF of GLA (five beds), four full and one half-bath, built in 2000 with a 2-car basement garage and a

partial partially finished basement. He deemed its condition average/good.

To all four sales he adjusted for (1) surplus land (i.e., lot size differences) since each comparable

was on a lot which could “accommodate one single family dwelling,” and the excess could not “be

developed separately and does not have a separate” HBU. Such surplus, his report noted could be used

for “future expansion and amenities such as swimming pools, tennis courts” and the like. His report

noted that vacant land sales 2 and 4 showed that the per-acre value of land was more than $9 million, 13

thus, he used 20% of $9 million or $1,800,000 per acre as the value of surplus land. This, times the lot

size difference, provided the adjustment. For instance, his improved Sale One with 1.40 acres was

adjusted upward by $828,000 which is the size difference of 0.46 acres (the Subject’s 1.86 acres minus

the comparable’s 1.40 acres) times $1,800,000; (2) GLA (at $150 PSF); (3) bath count ($30,000 for full

and $15,000 for half bath); (3) basement/finish at $50,000; (4) garage at $20,000; (5) condition by 10%

of sale price; and (6) amenities at $50,000.

His adjusted sale prices for the four sales were $11,425,000; $14,905,000; $12,698,000; and

$15,991,000, from which he concluded a value of $15,000,000.

13
Sale 2 reflected a price per-acre at $14,750,000 ($11,800,000 sale price ÷ 0.80 acres lot size). Sale 4
reflected a price per-acre at $9,281,046 ($14,200,000 sale price ÷ 1.53 acres lot size).
8
FINDINGS

The court rejects plaintiffs’ appraiser’s comparables 1 and 2 located outside Deal. The court is

unpersuaded by his opinion that municipalities such as Spring Lake or Monmouth Beach are competitive

with, and no different than Deal. These towns, unlike Deal, are beach towns, i.e., summer destinations

for the general public, thus invite traffic, noise, business, and entertainment. Hence, and unlike Deal,

there are interspersed commercial establishments in Spring Lake and Monmouth Beach (the aerial picture

of the property in Monmouth Beach, which appears to be a simulation, shows a filled-up parking lot

across). Deal is purely residential except for the casino club. Therefore, and while some homes in Spring

Lake and Monmouth Beach may also face the ocean (albeit, unlike in Deal, with a busy public access

street and barriers between the homes and the ocean) and may have the same architectural design as the

homes in Deal, the court is unpersuaded that they are fungible with homes in Deal, and thus competitive

to Deal in real estate. That the sales in Deal are conducted privately does not equate to their being suspect

(not at arms-length) or unverifiable especially when there is no evidence that Deal sales are not amongst

knowledgeable sophisticated buyers and sellers. Indeed, the sale deeds of Deal’s appraiser’s comparables

did not evidence any such shortcoming and showed the sellers as entities or trusts as were some of the

buyers (whether during or after the purchase).

The court also rejects plaintiffs’ appraiser’s Sale 3, the ranch-style home in Deal (marked NU-10,

sale by an estate or estate representative, -
see
- N.J.A.C. 18:12-1.1(a)(10)). It is too dissimilar to be

comparable. A ranch is plainly not the mansion-type colonial style structure as the Subject. The pictures

of its interior and exterior also evidence their significant differences. The gross adjustments are about

98% which resulted in doubling the property’s sale price further evidencing non-comparibility.

The court rejects Deal’s appraiser’s two vacant land sales as comparables. Simply because the

lots are in a residential zone, therefore, their use, as of the assessment date here, would have to be for

9
their improvement by a residence, does not mean that these are credible value comparables when the

Subject’s HBU is its present use, thus, as improved. His adjustments for non-existent improvements

were conjectural, and his theory that adjustments should be made to convert vacant land into an improved

one with all of the Subject’s amenities, is not credible. The theory is a fallacy of the initial logic—vacant

land can be used as a comparable for an improved property, the HBU of which is its use as improved.

This leaves plaintiffs’ appraiser’s sale 4 (in Allenhurst which occurred in 2018), and Deal’s

appraiser’s two improved sales (sales 1 and 3), both in Deal one of which took place in 2019 and the

other in 2017. Their adjusted sale prices were $9,445,000; $11,425,000 and $12,698,000. Each

appraiser’s largest adjustment was for lot size. The court finds Deal’s appraiser’s per-acre value at

$9,000,000 more credible since it was based on two vacant lot sales in Deal (his sale comparables 2 and

4), which closer to the assessment date, with sale 4 being ocean front. In contrast, plaintiffs’ appraiser’s

regression analysis required subjective adjustments since his vacant land sales were not oceanfront, and

despite their smaller sizes, the more recent sales in Deal (62 Phillips Avenue and 72 Brighton Avenue)

show that their actual sale prices exceeded his concluded opinion of value of one acre. 14

The court is also not persuaded by both appraisers’ conclusions that (1) the Subject is

subdividable; and (2) lots in excess of the minimum buildable area should be automatically deemed as

surplus less valuable acreage. There was no expert opinion or analysis as to the first point (such as from

a planner or engineer). As to the second point, if the Subject was subdividable, then the excess land may

be more valuable as excess land, and not necessarily less valuable as surplus land.

Nonetheless, the court does not need to analyze and choose one appraiser’s lot size adjustment

over another. Despite their disagreements on what an acre of vacant land would be worth (plaintiffs’

14
Plaintiffs’ appraiser’s use of vacant land sales in Deal does not reconcile with his firm opinion that
sales of improved homes in Deal are not usable for valuation because they are not marketed via MLS.
10
appraiser through his regression analysis of six vacant lot sales, five of which are in Deal, computing an

acre of ocean front property to be worth $3,129,000, and Deal’s appraiser opining the same one-acre

ocean front lot to be at least $9,000,000 based on two vacant lot sales in Deal), and their method of

computing lot size differences (plaintiffs’ appraiser using a manually computed regression analysis and

Deal’s appraiser using 20% of $9,000,000), their ultimate site size adjustments were not that disparate.

For instance, plaintiffs’ appraiser’s Allenhurst comparable has a lot size of 0.4439 acres which he

adjusted by +$2,545,000. Deal’s appraiser’s improved Sale 3 (in Deal) has a lot size of 0.40 acres which

he adjusted by +$2,628,000. 15 Similarly, the appraisers’ other adjustments are almost identical (except

for garage and location, the latter being only provided by plaintiffs’ appraiser).

Giving most weight to the Deal sales and much lesser consideration to the Allenhurst sale, the

court finds that the Subject’s assessment is amply reasonable.

CONCLUSION

For the reasons stated above, the court affirms the assessment.

Very Truly Yours,

/s/ Mala Sundar
Hon. Mala Sundar, P.J.T.C.

15
Even if one computed the lot size differences under each respective appraiser’s methodology, the
difference is not widely disparate. For instance, if 1.413 acres, the lot size difference in plaintiffs’
appraiser’s Allenhurst sale and the Subject (1.857 acres Subject minus 0.4439 acres comparable), was
multiplied by $1,800,000, (Deal’s appraiser’s adjustment for lot size difference), the resultant adjustment
would be +$2,548,980. Plaintiffs’ appraiser’s adjustment was $2,545,000 under his regression analysis
computation.
Similarly, if 1.457 acres, the lot size difference in Deal’s appraiser’s Sale 3 and the Subject (1.857
acres Subject minus 0.40 acres comparable) was computed under plaintiffs’ appraiser’s regression
analysis as explained to the court, the resultant adjustment would be $2,682,123 (.60 acres x $3,129,000
or $1,877,400 plus 0.857 acres times $939,000 or $804,723). Deal’s appraiser’s adjustment was
$2,628,000 (1.46 acres lot size difference x $1,800,000).
11