Double taxation is a term often referred to by residents of private communities to describe having to pay property taxes to their town in addition to the monthly maintenance fees they pay to their community association for services like snowplowing and recycling. When a condominium community provides services to its residents that the local municipality would normally pay for, it raises the question of reimbursement to the association for what can potentially seem like an unfair arrangement.

Potential for Inequality

To many both inside and outside homeowners associations and planned communities, it makes sense that association members should be exempt from paying—or get reimbursed for—the services they don't require from the municipality. Ironically, as a selling point to townships, developers sometimes tell local government officials that one benefit to letting them build a private community within a township or municipality is that the town can collect additional tax dollars from new residents without having to provide services to them as the services would be association-provided, according to Michael Karpoff, an attorney with Hill Wallack in Princeton.

But "as more and more communities were built," Karpoff says, "the residents got upset about that because they realized they were paying property taxes to the municipality for the services, but they weren't actually getting the services."

Various lawsuits and debates throughout the state eventually led to legislation that requires municipalities to provide qualified private communities in New Jersey with some of the services that "regular" homeowners receive.

But a private community may have desires and expectations that go beyond what a town currently provides, so they still collect maintenance fees and hire contractors to handle those extra or enhanced services. The Municipal Services Act, enacted in 1993, requires municipalities to reimburse private communities within or adjacent to the townships that pay for certain services. These services include snow and ice removal, electricity costs for street lighting and street collection of recyclables and leaves. Before 1993, there was no reimbursement to communities for these services.