September 10, 2015

New Hampshire Supreme Court Update: JMJ Properties, LLC v. Town of Auburn

This blog has previously addressed considerations for current use taxation in New Hampshire. This is a concept of particular interest to New Hampshire property owners, and the New Hampshire Supreme Court recently addressed a question regarding when a land use change tax (“LUCT”) may be assessed against a property when it no longer qualifies for current use taxation. This post summarizes the facts and holding of JMJ Properties, LLC v. Town of Auburn

The Facts: JMJ Properties, LLC ("JMJ") owned an 18-lot cluster subdivision in Auburn, which was taxed based upon its current use status in 2011 and 2012. In July 2011, JMJ began constructing a road in the subdivision, and thus the entire parcel no longer qualified for current use assessment. The Town learned about the change in use in the summer of 2012 (after issuing its 2012 tax bills) and issued a Land Use Change Tax (“LUCT”) bill in December 2012. Because the original 2012 tax bill reflected a current use assessment, the Town also “abated” the 2012 tax bill for the parcel and issued supplemental tax bills for each lot to reflect the market value for the tax year that commenced on April 1, 2012.

The Arguments: JMJ disputed the timing of the LUCT and supplemental taxes that were owed following the change in use. JMJ argued that the supplemental bills could not be issued until the beginning of the tax year following the issuance of the LUCT bill (this would mean tax year 2013); the Town argued that land changing use shall be taxed at its full value after the LUCT bill is issued. 

The Decision: The New Hampshire Supreme Court acknowledged that the market value assessment of property is triggered at the time of change in use (here, when the new road was constructed), regardless of when the LUCT bill is issued. Accordingly, a market value assessment is authorized at the time of the change in use, regardless of when the municipality learns about the change or when it issues an LUCT bill. This interpretation is consistent with a policy that prohibits landowners from enjoying a reduced assessment when the land is no longer in current use, and the statute clearly states that land shall be assessed at current use rates “until a change in land use occurs.” 

This case presents a new consideration for New Hampshire property owners, for it determines that property can be properly reassessed for taxation as soon as the change in use occurs. Property owners considering a change that might alter their current use status should consult the real estate lawyers at Cleveland, Waters and Bass to determine how this case might affect their specific interests.