Volume 10 - Opinions of Counsel SBRPS No. 20
Assessment roll (designation of owner) (life estate - incompatible conditions) - Real Property Tax Law, § 502:
If a deed purports to reserve a life estate in the grantor, but attaches conditions to the reserved interest which are fundamentally incompatible with a life estate, the reserved interest must be deemed to be something less than a life estate, and the grantees must be deemed to be the owners of the property for purposes of real property tax administration.
The owners of certain real property executed a deed which purported to convey the property to the named grantees, while also retaining an interest in the property for themselves. We have been asked whether the grantors or the grantees should be considered the owners of the property for purposes of assessment (and exemption) administration.
The deed conveys the entire premises to the grantees, subject only to the following reservation:
RESERVING in and to the party of the first part [i.e., the grantors] a life estate in the subject premises; provided, however, that in the event the party of the first part shall for a continuous period of one hundred twenty days fail to occupy the premises as a place of residence, the life estate reserved herein shall thereupon terminate. The affidavit of the party of the second part [i.e., the grantees] to the effect that the party of the first part has for a continuous period of one hundred twenty days failed to occupy the premises as a residence, and that, accordingly, the life estate reserved herein has terminated shall be adequate proof to a purchaser or a mortgagee of the premises that the said life estate has terminated, and any such purchasers or mortgagees shall not be required to inquire of the party of the first part as to the continued existence of said life estate.
As we have often stated, if a person holds a life estate in real property, he or she must be considered the legal owner of the property for purposes of real property tax administration as long as the life estate is in effect (see, 1 Op.Counsel SBEA Nos. 34, 59, 88; 3 id. No. 45; 9 id. Nos. 41, 49). However, if a person holds merely a “right of occupancy” in real property, he or she should not be considered the owner of the property for these purposes (5 Op.Counsel SBEA No. 12).
Whether an interest in real property is a life estate or a right of occupancy depends upon the parties’ intent, as expressed in the instrument creating the interest (Real Property Law (RPL), § 240; 9 Op.Counsel SBEA Nos. 41, 49)). The fact that a deed describes an interest as a “life estate” is certainly relevant, but, if other language in the deed indicates that something other than a life estate was intended, the deed must be construed according to the parties’ apparent intent (id.).
A life estate may be made subject to a residency requirement (9 Op.Counsel SBEA No. 49). Here, however, the deed provides not only that the life estate is subject to a residency requirement, but also that the life estate shall be deemed terminated if the remaindermen execute an affidavit asserting that the residency requirement has been breached. In fact, the remaindermen are effectively empowered to unilaterally declare that they own the property in fee simple, and to suppress any objections which the supposed life tenants might raise. A true life estate cannot be extinguished in such a summary manner, even if the residency requirement has been breached.
Under New York law, in order to terminate an estate in real property that is subject to a condition subsequent, an action must be brought in Supreme Court (Real Property Actions and Proceedings Law, § 1953). The estate remains in effect until a judicial order directing its termination is issued. In this case, since the procedure for terminating the grantors’ so-called “life estate” is so fundamentally incompatible with the procedure for terminating a true life estate, it must be concluded that the parties did not intend to create a true life estate. Something less than a true life estate, such as a right of occupancy, was created.
Thus, we believe that, despite the ostensible reservation of a life estate by the grantors, the grantees must be deemed to be the legal owners of this property, and that the property must be assessed accordingly.
October 20, 1995