Financial Incentives for Solar Energy - Section 1603 In a Nutshell

By now, much has been written about the American Reinvestment and Recovery Act of 2009.  In fact, this legislation has spawned such abbreviations and acronyms such as:  ARRA, the Recovery Act, or quite simply, the "Stimulus".  Whichever your preference, the purposes of this legislation included the preservation and creation of jobs, the promotion of economic recovery in the near term, and the investment in infrastructure that will provide long-term benefits. 

Of the Recovery Act's initiatives, most people are familiar with the $8,000 homebuyer credit that just expired on April 30, 2010 or a deduction for sales taxes on qualifying new car purchases.  For the real estate development community or proponents of renewable energy, one of the Recovery Act's mandates has generated (no pun intended) little press but packs a big punch. 

Section 1603 of the Recovery Act appropriated grant monies to reimburse qualified applicants for up to 30% of the construction costs for specified renewable energy property.  Provided that the property is placed into service by the termination date provided in the Recovery Act, the Treasury Department will pay the credit amount to applicant within 60 days of the date the application is deemed complete.  Applicants can also assign their rights to the payment to a bank or financial institution. 

But, the window is rapidly closing on this extraordinary financial opportunity.  The application filing deadline expires on October 1, 2011.  However, construction on a project must commence in 2010 in order to qualify for the Section 1603 payment, even though the application may not be submitted. 

My tenant moved out and left its junk behind. Now what?

     Imagine a situation where a burglar breaks into your home and “borrows” some of your possessions without paying for them. On the way out, the burglar drops its wallet on your kitchen floor. Instead of returning the wallet to the burglar, you immediately throw it in the trash. Do you think that you should have to compensate the burglar for failing to notify before throwing the wallet away? 

 

     Of course you shouldn’t. But, if you were a landlord and the burglar was your tenant, and you had a lease to allow the tenant to “borrow” your space in exchange for paying rent, the analogy might have a different conclusion.   That’s because New Jersey has a Tenant Abandoned Property Act (N.J.S.A 2A:18-72 et al.) (the “Act”), which permits a landlord of commercial or residential property to dispose of any tangible goods, chattels or other personal property left upon a premises by a tenant, but the landlord must reasonably believe under the circumstances that the tenant has left the property upon the premises with no intention of asserting any further claim to the premises or the property and the landlord must put the tenant on notice that the property will be disposed if not timely claimed.  An exception is made for perishable items, which the landlord may freely dispose in order to maintain the premises in a sanitary condition.  

 

 

     In this tough economic climate, landlords are facing an increasing number of defaults both from residential and commercial tenants alike. While the causes of default can range from the non-payment of rent to the breach of a covenant of the lease, the ultimate goal of the landlord is usually to recoup most (if not all) of the back rent due and fees accrued, recapture the premises from the tenant, and (hopefully) relet the space to a new tenant. Problems arise when a tenant abandons the premises surreptitiously and without providing a forwarding address.  Aside from the monetary implications, the landlord is saddled with the responsibility of disposing of the tenant’s property. 

     Understandably, the primary concern of any landlord is getting paid. But the handling, care, and disposal of a tenant’s possessions is governed by statute and a landlord faces consequences if it does not follow the procedures prescribed by the Act. In this situation, a landlord is entitled to enter the premises and collect the property and possessions and left behind by the tenant. However, before the landlord can sell them or otherwise dispose, the landlord must provide written notice to the tenant as required by the Act. The Act has very stringent notice requirements which can subject the landlord to monetary liability if not followed.   Under the Act, a landlord is also required to store the possessions for a period of time at the tenant’s expense. The landlord must exercise reasonable care for the property and depending upon the circumstances may be best served by procuring a commercial storage unit to store the possessions. As you can imagine, this is a source of added aggravation for the landlord especially if it is required to front the costs of the storage in hope of recouping it from the tenant. 

     Under the Act, before a landlord of a residential or commercial property can consider disposing of property abandoned by the tenant, the Act requires that one of the following has occurred: (1) a warrant for removal has been executed and possession of the premises has been restored to the landlord or (2) the tenant has given written notice that he or she is voluntarily relinquishing possession of the premises. Either option poses difficulties for the landlord. In most instances, a tenant abandons a property and thus does not provide the written notice contemplated by the Act; therefore, a landlord is required to file an action in court to recapture the premises and will undoubtedly incur additional expenses that may or may not ultimately be recovered from the defaulting tenant.

     Commercial landlords, however, have a silver lining. The provisions of the Act will not apply to the disposal of tenant property left on non-residential rental property if there is a lease in effect which has been duly executed by all parties and said lease contains specific terms and conditions for the disposal of tenant property. In other words, a landlord of non-residential property can essentially bypass the grasp of the Act by tackling the disposal of tenant property in an abandonment head-on in the underlying lease agreement. 

     Landlords of all non-residential property should re-visit their lease agreements to insure that not only do they provide for the landlord’s ability to reclaim the premises in the event of an abandonment, but also contain detailed provisions specifying how the tenant’s property will be disposed if the premises are abandoned. 

    

Camden County Property Taxes Highest in the State, 11th in the Nation

     One New Jersey county is on the cusp of cracking a Top 10 List that probably leaves little to be desired. 

     As reported in an article by Jim Walsh published in today's edition of the Courier-Post, (follow link here for online article) a new study published by the Washington D.C. based Tax Foundation has concluded that property taxes in Camden County are the highest in New Jersey and 11th highest in the nation (out of 790 "high population" counties) when measured as a percentage of a home's value.  The national median is nearly 1 percent (0.96%) - Camden County's was estimated at 2.33%. Following close behind were Gloucester County (31st), Salem County (32nd) and Burlington County (46th). 

     Not to be outdone, the North Jersey counties fared even better (or worse...) according to the Foundation's ranking of median property tax paid per owner-occupied home in 2008.  New Jersey had six of the top 10 counties (from 1 to 10, Westchester County, NY ($8,890); Nassau County, NY ($8,628); Hunterdon County, NJ ($8,492); Bergen County, NJ ($8,446); Rockland County, NY ($8,430); Essex County, NJ ($7,924); Somerset County, NJ ($7,743); Morris County, NJ ($7,557); Passaic County, NJ ($7,370); and Putnam County, NY ($7,324). The national median is $1,897.

     According to its website,  Tax Foundation "is a nonpartisan, nonprofit organization that has monitored fiscal policy at the federal, state and local levels since 1937."  Click here to review a copy of the Foundation's press release on the property tax census survey. 

     The question remains - what can be done to fix the problem?  That remains to be seen, but suffice it to say that property taxes are sure to be a hot button issue in the upcoming Gubernatorial elections in New Jersey.  From a practical perspective, the deadline to file an appeal challenging a property's assessment for tax purposes is April 1st annually (unless extended in which case the taxpayer would receive written notice).  It is important to note, however, that pursuant to state statute the property taxes for the 2010 tax year are determined, in part, based upon the fair market value of your property as of October 1, 2009

     October 1, 2009 is a week away.  One can only hope that next week will not mark the start of a top 10 ranking for Camden County, or a blue ribbon for the six North Jersey contenders. 

Purchaser of Commercial Property Found to be Liable for Payment of a Broker's Commissions Where the Purchaser Obtained the Seller's Interests Under a General Assignment of Leases and Rents

In a recent decision, the New Jersey Supreme Court held that the purchaser of a commercial property may be liable for the payment of a broker’s commission which was due under leases assumed by the purchaser pursuant to a general assignment executed at closing. 

In Pagano Company v. 48 South Franklin Turnpike  (decided March 9, 2009), the Court applied its prior holding in VRG Corp. v. GKN Realty Corp., 135 N.J. 539 (1994) which held that to incur liability by virtue of an assignment the purchaser must have “affirmatively assumed” the seller’s obligations to pay the commissions, to require that a purchaser honor a commission agreement even without a separate, express agreement to pay such commissions. 

The leases at issue were executed with the Seller due to the Plaintiff's brokerage efforts.  Because each of the leases included a provision that in the event of the sale of the building the purchaser would assume and carry out all of the covenants and obligations of the landlord, the Court agreed with the trial court's reasoning the purchaser had affirmatively assumed the obligation to pay the Plaintiff's commissions.

 

The decision can be viewed by clicking on the following link:

lawlibrary.rutgers.edu/decisions/supreme/a-9-08.opn.html