Posted: Sunday, September 25, 2011
By KEVIN POST Press of Atlantic City Business Editor
The real estate industry was gleeful this past week, especially in oceanfront towns, after Realtors succeeded in getting the state to ease a regulation that was interfering with home sales.
“This was huge. I can’t even begin to tell you how many deals it killed,” said Nicholas Marotta, president of the Ocean City Board of Realtors.
The rule, which will no longer apply to sales of single-family and duplex homes, requires businesses to give the state advance notice of unusual asset sales. That allows the state to seek any taxes owed by the business and to require an escrow account for possible payment of taxes before the sale is closed.
An inconvenience for real estate agents everywhere, the 2007 so-called bulk sales law was a serious problem along the Jersey Shore, where most properties are rented at some point during the year and therefore were business assets under the law.
Marotta said home sellers would have a deal lined up and notify the state, and then the state would tell purchasers they must set aside money in case it turned out past taxes hadn’t been paid.
“I had sellers on the bayfront with a buyer for $1 million, and it was their primary home, not a rental. They filed the form and the buyer got back a notice to escrow $100,000,” Marotta said.
That killed the deal, since the bulk-sales law makes the buyer responsible for any back taxes the state can’t collect from the seller.
“It didn’t matter that it was baseless because we knew it was a primary residence and not a business in any way,” he said. “Everything had to be filed, and we were supposed to wait until they sorted through everything.”
Buyers were often told they’d have to hold off until the back-tax issues were resolved at some point in the future, but many chose to walk away instead, he said.
As such horror stories spread, the Ocean City Realtors started working through the state Realtor organization and county government to get relief.
“God bless Ocean City because we were out in front on this thing. We were the first board to raise some flags and got the N.J. Association of Realtors involved,” Marotta said.
NJAR championed a bill through the state Legislature to exempt single- and two-family homes, including seasonal rentals, from the bulk sales notification process.
Jarrod Grasso, CEO of the state Realtors, said the exemption simply brought the 2007 law back to its original intent, clarifying an issue that had been left too broad.
Among 16 sponsors of the relief measure, which drew broad bipartisan support, were Sens. Jeff Van Drew, D-Cape May, Cumberland, Atlantic, and Jim Whelan, D-Atlantic; and Assemblymen Nelson Albano and Matthew Milam, both D-Cape May, Cumberland, Atlantic, and Vincent Polistina, R-Atlantic.
Marotta also credited Cape May County Freeholder Susan Sheppard for discussing the need for relief with the Governor’s Office.
On Sept. 14, Gov. Christie signed the bill into law “to boost New Jersey’s real estate market and cut red tape in order to ease the individual sale of homes and seasonal rentals,” said a signing statement released by his office.
“Thank God. That’s one major thing that we don’t need to consider doing in a property transaction,” said Midge Grunstra, director of sales at Goldcoast Sotheby’s International Realty in Ocean City.
She said she never lost a sale to the bulk sales process. “Everybody I dealt with had paid their taxes.”
Marotta, however, said there was a point to the original law, and the state has found that some limited liability corporations selling properties have had back taxes due.
“We weren’t able to get LLCs exempt, and that’s OK, because the state was finding some LLCs were not paying their taxes,” he said. “The state was collecting — legitimately — a good amount of money.”
The work on the issue by the Realtors in Ocean City — which he called “the rental capital of New Jersey” — isn’t quite done.
Marotta said in early October the board’s contracts committee will meet to revise the basic property sales contract used by members to reflect the bulk-sales exemption of one- and two-unit dwellings.