When Social, Political And Legal Worlds Collide

In a recent New Jersey Tax Court decision, a State Tax Judge has ruled that a private not-for-profit company does not deserve tax exemptions on homes it owns and leases to mentally ill clients in several towns in Bergen County, New Jersey.
Most of our readers know that our firm has a very strong commitment to civic matters. We represent numerous social service institutions and agencies, and various not-for-profit organizations. Many of our attorneys also volunteer our time to serve as officers and on boards of these agencies and institutions. Very often, the needs of these agencies and institutions cross over into one of our other areas of expertise, zoning and land use law.

Group homes, and other residential types of facilities for the developmentally disabled or others in need, have been the subject of local news and legal study lately. Many of us can remember Greystone “psychiatric hospital” and other institutions for the developmentally disabled. Dark and dreary asylums as seen in movies, in television and, in real life. While these very large facilities served a social purpose, residential neighbors did not want these buildings or inhabitants near their homes. The phrase “not in my backyard” (NIMBY) is well known for such institutional uses.

Group Homes

Through advanced study for the treatment and care of the developmentally disabled, the concept of group homes arose. Better and more effective care and treatment for those who may be able to become part of the mainstream. However, to those who say NIMBY, this causes the spread of this undesirable use in residential neighborhoods. Instead of one large building and its occupants hidden away, the building is now broken down into many smaller units disbursed throughout residential communities. Residential neighbors are not the only opponents. Local municipalities also worry because many of these facilities qualify for tax exemption, and thus do not pay local real estate taxes. The outcry of the voting public and the loss of tax revenues, made group home facilities homeless step children in the land use process.

The New Jersey Legislature, and the New Jersey Courts, have acted swiftly and frequently to provide protection for these uses. In January of this year, a Bill was introduced in the New Jersey Assembly (A3625) which would close five of the State’s seven developmental centers and send most of the residents into the community to group homes or independent living with support services. Proponents of the Bill claim positive cost benefits for the State, with statistics which show that community living costs less then half of the price of the developmental centers per resident. This is an enticing statistic when State budgets are in turmoil.

Inherently Beneficial

With State laws having been changed to recognize these facilities as “inherently beneficial uses”, the stage would seem to be set for implementation of A3625. Inherently beneficial use is a term of art in land use and zoning law. It is a category of use that must be provided for and accommodated by local governments in zoning ordinances and through the grant of use variances. And specifically, inherently beneficial uses may not be excluded from within the municipal borders.

However, there is a new hurdle. In a recent New Jersey Tax Court decision, a State Tax Judge has ruled that a private not-for-profit company does not deserve tax exemptions on homes it owns and leases to mentally ill clients in several towns in Bergen County, New Jersey. Thus, we can see some of the economic impact of this social policy. How many dwellings are for sale in your neighborhood? Perhaps some of them will become owned, converted and used for community shelters. If they no longer produce real property taxes, there is an added burden upon the remaining property owners who do pay real property taxes. In this particular case, more than one million dollars in property taxes were at stake for a period of several years for 35 homes owned by this private not-for-profit company. Under the facts and circumstances of this case, the Court did not find that the services provided in the residential units rose to the level to qualify for tax exemption.

In Saddle River, New Jersey, a local hospital intends to open a 20 bed residential hospice in a large residential building that was for sale. In 1998, the New Jersey Legislature changed the laws of the State to provide that community residences for the terminally ill are included in the category of land use that is inherently beneficial and protected by the State laws that promote and protect such uses.

The complexity of the laws which govern such basic and vital community services are perplexing to our clients, government officials, residential neighbors, and the families of those in need. We find this area of law to be as frustrating, and rewarding, as most other areas. We hope to continue our work in this area and to achieve the balance needed for affected families, agencies and towns.

Stuart D. Liebman is a Partner of Wells, Jaworski & Liebman and practices actively in the Land Use and Real Estate areas.

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