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Volume 10 - Opinions of Counsel SBRPS No. 7

Opinions of Counsel index

Assessment roll (designation of owner) (correction deed); Taxable status date (exemptions generally) (correction deed) - RPTL, §§ 302, 502:

When a deed has been executed, delivered and accepted before taxable status date, and a correction deed has been executed, delivered and accepted after taxable status date, the taxable status of the property for purposes of that taxable status date must be based upon the ownership established by the initial deed, not by the correction deed.

We have received an inquiry concerning the effect of a “correction deed” upon the senior citizens exemption (Real Property Tax Law (RPTL), § 467). The property in question was transferred in fee simple by the exempt owner to her daughter (a non-exempt owner) prior to the applicable taxable status date. After learning that the conveyance rendered the property ineligible for exemption, a correction deed was issued providing that the grantor retained a life estate in the property. This correction deed was executed and delivered by the grantor and accepted by the grantee before the applicable taxable status date. The question is what effect this deed has upon the exempt status of the property.

The purpose of a correction deed is to supersede an original deed which the grantor and grantee agree was erroneous in some respect. Upon acceptance by the grantee, “the terms of a corrective or confirmative deed are dominant and conclusive, and the title of the grantee is determined solely by the new grant” (People v. Tompkins-Kiel Marble Co., 269 N.Y. 77, 83, 199 N.E. 10 (1935); see also, Matter of City of New York v. Title Guarantee and Trust Co., 2 N.Y.2d 859, 141 N.E.2d 615, 161 N.Y.S.2d 124 (1957); Matter of Estate of Ford, 135 Misc.2d 897, 516 N.Y.S.2d 1010 (Surr. Ct., Dutchess Co., 1987); see generally, Warren’s Weed New York Real Property, “Deeds”, § 21.01; 43 New York Jur.2d “Deeds”, § 11). In other words, once a correction deed has been executed and accepted, the initial deed is of no legal effect to the extent that it is inconsistent with the correction deed.

It does not follow, however, that an initial deed is of no legal effect with regard to third parties who acquired an interest in the property before the execution and acceptance of the correction deed. Indeed, if a correction deed could nullify an initial deed under such circumstances, it would defeat the purpose of the recording statutes (Real Property Law, Article 9) and create opportunities for collusion and fraud. In our view, therefore, the rights of third parties, including taxing authorities and the taxpayers they represent, may not be diminished by a correction deed executed and accepted after the third party’s interest came into being.

When a third party acquires an interest after the recording of the correction deed, a different conclusion would apply. In such a case, the third party would be charged with notice that the terms of the initial deed had been superseded by the correction deed. There would thus be no need for concern that a correction deed could be used to defraud such third parties, and so there would be no reason not to give a correction deed effect vis-à-vis such third parties.

Taxable status and correction deeds

It then becomes necessary to apply these principles in the specific context of real property tax administration. As noted earlier, the taxable status of real property is generally determined according to its condition and ownership as of the applicable taxable status date (RPTL, § 302(1)). Thus, if a deed conveying exempt property to a non-exempt owner is in effect on taxable status date, and no correction deed is then in effect, the property would be taxable for purposes of the assessment roll based upon that taxable status date. This is so because the taxing authorities, and the taxpayers they represent, would be effectively in the position of a third party who is entitled to rely upon the facts as they appear on taxable status date. If a correction deed reserving a life estate is subsequently executed and accepted, it would be applicable only for purposes of subsequent taxable status dates.

In the situation under present consideration, however, both the original deed and the correction deed were effective before taxable status date. Under those circumstances, the taxable status of the property for purposes of that taxable status date would be governed by the correction deed; the original deed would not be given effect.

November 10, 1992