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The Opportunity Zone program enacted as part of the 2017 federal Tax Cuts and Jobs Act is designed to spark long-term capital investment into low-income and urban communities. The 169 Opportunity Zones (or tracts) designated in New Jersey by Governor Murphy are a complete game changer and contain attractive investment incentives for developers and investors.

Via the Opportunity Zone program, developers and investors can tap into and reinvest their unrealized capital gains without paying capital gains for a period of time, if at all. For example, capital gains invested or reinvested in an Opportunity Fund will receive a step up in basis of 10 percent if held for at least five years and by an additional 5 percent if held for at least 7 years, excluding up to 15 percent of the original gain from taxation.

An even greater savings is realized if the investment in the Opportunity Fund is held for at least 10 years. The gain accrued while invested is permanently excluded from taxable income of capital gains upon the sale or exchange of the investment.

With these tax incentives in place, Senator Corey Booker (NJ) believes the barriers between communities and the capital needed to generate economic growth and opportunity will be broken down.

The Opportunity Zones were designated based on key economic indicators in certain neighborhoods and communities such as income, unemployment rate and property values but also consideration was given to accessibility to mass transit and the value of existing investments. The 169 tracts were approved by the US Department of the Treasury on April 9, 2018. You can view the interactive map of designated Opportunity Zones for New Jersey by clicking here.

Home renovations and repairs is big business in Florida, especially in densely populated south Florida where it seems that every available square foot of property is occupied by a residence or commercial building.  That said, it is important to understand the lien rights of contractors, subcontractors and suppliers of materials under Florida law.

First, it is important to understand whether there is a difference between the lien rights of a company that has a contract with the owner of real property as opposed to a company that does not have such a contract.  The prime example of the latter is a subcontractor or supplier of materials for the company that actually does have the contract with the homeowner. One who has a contract with an owner is said to be in privity with the owner, meaning the relationship between the two parties is recognized by law.

The short answer is that both those in privity and those not in privity with owners of real property have lien rights in that Florida Statutes Sec. 713.01 includes in its definition of  lienors, contractors, subcontractors and those who contract with contractors and subcontractors.  The means of perfecting or protecting those lien rights is, however, different.

As an example, let’s say a homeowner contracts with Company A to install a new roof on her property.  The homeowner and Company A sign a clear, definite contract.  Company A, in turn, contracts with Company B to supply it with all of the materials to install the roof.  Company A and Company B have their own separate contracts, but there is no contract between the property owner and Company B.

Once the job is completed the owner refuses to pay the rather substantial balance that is due and owing to Company A.  Company A, in turn, does not pay the balance that it owes to Company B.  How do each of these respective companies perfect its lien rights on the owner’s real property?

For Company A, the process is quite simple.  Under Florida Statutes Sec. 713.08, it must record a document known as a claim of lien in the county where the real property is located within 90 days of the last date that it provided labor, services or materials.  The statute sets forth, in detail, what must be contained in that claim of lien, and the actual form is provided in Florida Statutes Sec. 713.08.   Amongst other things, the claim of lien must include the name and address of Company A; the labor, services and materials that were furnished and the contract price or the value of what was provided; the name of the owner of the real property; a description of that real property; when labor, services and materials were first and last furnished; and the amount unpaid.

Company B’s ability to perfect its lien rights is a bit more involved.   Although it, too, must record a claim of lien and comply with the requirements of Florida Statutes Sec. 713.08, it has an additional step it must take to ensure that its lien rights are protected.  Pursuant to Florida Statutes Sec. 713.06, prior to furnishing materials or within 45 days of first furnishing such materials, it must serve the owner with a document known as a notice to owner.  Again, the statute  sets forth the actual form—which is quite brief and straightforward– that must be provided, and that form will contain Company B’s name and address, the description of the real property and a description of the materials that were supplied or are being supplied.

On June 21, 2018, the U.S. Supreme Court held that internet retailers may be required to collect sales taxes in states where they have no physical presence. The decision, South Dakota v. Wayfair, No. 17-494 (June 21, 2018), overturned a 1992 Supreme Court precedent which held that a retailer must have a physical presence in a state in order to be obligated to collect sales taxes.

Many in the retail industry have argued that the physical presence rule has given out-of-state on-line sellers an unfair advantage over brick-and-mortar competitors. The Court’s decision concurs.  Writing for the majority, Justice Kennedy stated that the rule, “has come to serve as a judicially created tax shelter” for online and out-of-state businesses.  The Court estimated that this “tax shelter” has caused states to lose between $8 and $33 billion in potential tax revenue every year.

The majority grappled with redefining “presence” in light of modern technology.  The opinion states that “a business may be present in a state in a meaningful way without that presence being physical in the traditional sense of the term.” In support, the Supreme Court considered evidence of the necessary presence for taxing purposes to be: a website accessible in the state, a website that leaves cookies saved to the customer’s hard drive, apps available for download, storing data in servers located in the state, and targeted advertisements.

The majority also addressed compliance burdens small businesses may face when selling a small volume to customers in many states. The Court’s majority stated that they expect software developers and congressional legislation to provide assistance and guidance with respect to compliance.

About twenty states are already encouraging uniformity by adopting the Streamlined Sales and Use Tax Agreement. In addition to providing sales tax administration software paid for by the participating states, this agreement requires single, state level tax administration, uniform definitions of products and services, simplified tax rate structures, and other uniform rules.

This high court decision is a major victory for “brick and mortar” retailers as well as State Treasuries.  There will be much to follow as states move to impose and enforce sales tax collection obligations on on-line sellers.  We will also be monitoring any legislation proposed in Congress to address this decision.

The pitfalls of failing to provide statutorily required public notice in the land use context were once again recently addressed by the Appellate Division in Concerned Citizens of Livingston v. Township of Livingston, (A-4171-15T3, decided June 11, 2018).  There, the Appellate Division reversed the trial court decision and found that the underlying zoning amendment, upon which a development applicant relied, was invalid due to notice deficiencies.

In Concerned Citizens, the Township of Livingston sought to amend its zoning ordinance to liberalize the conditions associated with locating an assisted living facility in its R-1 residential district.  Specifically, although an assisted living use was originally permitted as a conditional use in the zone, the amendment permitted such facilities to be of increased density that is, allowing for even more assisted living units on smaller parcels.  In conjunction with this amendment the governing body conducted the necessary hearings and ultimately amended the zoning district.

Acting on the newly adopted zoning amendment, a developer filed an application with the municipal planning board to develop an assisted living facility consistent with the requirements of the newly amended R-1 zone.  As hearings before the board commenced with respect to this assisted living project, a group of concerned citizens filed suit in the trial court seeking to overturn the adoption of the amended zoning district.  Because this action was filed beyond 45-days from the Township’s publication of the newly enacted zoning ordinance, the trial court summarily dismissed the appeal as untimely.  On appeal, the Appellate Division reversed.

Because the increase in permitted density of assisted living facilities in the R-1 district was found to be tantamount to a “change” in the “classification” of a zoning district, the Appellate Division held that the more onerous notice requirements of N.J.S.A. 40:55D-62.1, requiring personal written notice, were triggered.  Under the circumstances, the Appellate Division held that the municipality was required to provide written notice, via personal service or by regular and certified mail, to all property owners entitled to receive notice at least 10 days prior to the hearing at which time the zoning amendment was to be considered.  Specifically, that meant that such personal notice was to have been provided to all property owners located within the affected district in which the classification change was proposed, and also to all property owners located within 200 feet in all directions of the proposed boundaries of the affected district.  Instead, the municipal clerk merely provided notice by publication only, in conflict with the statutory requirements.

Citing to well-established authorities, the appellate court found that “strict compliance with statutory notice requirements is mandatory and jurisdictional, and non-conformity renders the governing body’s resultant action (adoption of the zoning amendment in question) a nullity.”  (See Rockaway Shoprite Assocs., Inc. v. City of Linden, 424 N.J. Super. 337 (App. Div. 2011); Cox & Koenig, New Jersey Land Use Administration, § 10-2.3 at 159 (2018) (citing Robert James Pacilli Homes, LLC v. Township of Woolwich, 394 N.J. Super. 319 at 333 (App. Div. 2007)).  Due to this notice defect, the zoning ordinance amending the R-1 district requirements was deemed invalid.

Consequently, although the complaint of the citizens group was originally dismissed by the trial court as being filed well beyond the typical 45-day prerogative writ action appeal period, as prescribed by Rule 4:69, the Appellate Division held that the failure to file the complaint within this time frame was excusable because of the defective notice.  Moreover, since the greater public good was involved (concerning the interests of property owners located within an entire zoning district and beyond), the relaxation of the 45-day appeal period, as expressly afforded by Rule 4:69, was also held to be appropriate in this instance.

In the end, while Concerned Citizens is unpublished, it remains persuasive as it applies well-established law concerning the requirements of public notice.  It also warrants careful consideration as the court’s holding further signals a championing of due process concerns over the strict construction of the 45-day appeal period where the interests of justice are implicated.

Published cases examining the New Jersey Construction Lien Law (“CLL”) tend to be few and far between, but recently the Appellate Division issued a decision to be published, helping to further illuminate, albeit on a fairly narrow issue, the scope of the CLL.  In NRG REMA LLC v. Creative Environmental Solutions Corp., Docket Nos. A-5432-15T3, A-0567-16T3 (N.J. Super. App. Div. April 25, 2018), the court analyzed the novel issue of whether, under the CLL, the salvage value of scrap recovered by a demolition contractor may be included in the “lien fund” available for distribution among lien-filing subcontractors and suppliers within that contractor’s chain of contracting.

In NRG REMA, the owner entered into a contract directly with a demolition contractor, pursuant to which the contractor actually agreed to pay the owner $250,000 for the right to demolish a power station but also for title to and the right to sell the resulting scrap metals and equipment (which it estimated at the time would net it millions of dollars).  While the CLL explicitly allows liens to be filed for demolition work, it does not specifically contemplate this type of payment arrangement in determining the “lien fund” – which, at the top contracting tier, is typically based on the simple calculation of the amount owed under the written contract from owner to contractor for the work performed through the date of the lien filing.  Thus, subject to certain limited exceptions, the more paid to the contractor prior to the lien filing, the less the lien fund available for distribution.

While the CLL’s lien fund provision and its lien claim form speak only in monetary terms, other relevant CLL provisions, incorporate the term “contract” whose definition refers to “price or other consideration to be paid” the contractor.  In this case, because the contract specifically required the transfer of title to the salvage materials to the contractor and “it was an essential component of the price [the owner] agreed to pay,” the court deemed such transfer non-monetary “consideration to be paid” to the contractor, and, therefore, part of the “contract price” paid by the owner to the contractor.

Following a lengthy analysis and a balancing of the interests between owner and lien claimant, the court ultimately concluded that, in this case, the lien fund calculation should be based on a contract amount that includes the value of the scrap obtained by the contractor pursuant to its contract, but reduced by the contractor’s cash payment to the owner made prior to the lien’s filing (note: where a contractor was paid for the demolition work and also received title to the salvage, the payment to the contractor would be added to the salvage value to calculate the total contract price).  The court further held that because the owner had transferred title to the scrap at the outset of contract performance, rather than incrementally, the value of the transferred scrap did not reduce the lien fund at that top tier at the time of such transfer, as the CLL provides that the lien fund is not reduced where the owner makes payment of unearned amounts to a contractor prior to a subcontractor’s lien filing.

The court, however, remanded the case back to the trial court for the difficult task of determining, for each lien claimant, both of which resided on the third-tier, the amount of the lien fund that was available at the time each such lien was filed based on the percentage of completion of the work at that time.  The court also made clear that it was solely dealing with the facts before it, and it identified a number of issues along the way, which if the facts were different may require a different analysis or outcome, and which the court made clear, it was not determining in its decision.  Thus, while instructive and useful when dealing with a project on which a contractor obtains salvage rights, the decision is fairly narrow and limited to the facts of that case.   

After the court’s extensive analysis on the lien fund issue, and an apparent victory for the lien claimants, the court found that one of those lien claimants, however, committed a critical technical error in the execution of its lien which precluded its enforcement.  The court reiterated and strictly applied the CLL’s express requirement that a signatory of a lien claim must be an authorized corporate officer pursuant to the company’s bylaws or as designated by board resolution.  The court found that one of the subject liens had been executed by an employee who was informally titled the company’s “financial director”, and had not been properly authorized to execute a lien on behalf of the company.  This case, therefore, serves as an additional warning that any company seeking to file a CLL lien must strictly adhere to its express provisions, lest it risk forfeiture of its lien claim and a potential damages claim based on an improper filing.

Update:  The property owner has appealed the Appellate Division’s decision to the New Jersey Supreme Court, so we will monitor whether the Supreme Court decides to hear the case, and if so, what decision it renders.