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Volume 12 - Opinions of Counsel SBRPS No. 23

Opinions of Counsel index

Assessment, separate (parcel) (homeowners’ association commonly owned property) - Real Property Tax Law § 504:

A common area owned by members of a homeowners’ association and encumbered by easements and restrictions that benefit only the residential lots may be entered on the assessment roll as a separate parcel with a zero value for tax purposes where the value of such parcel is incorporated into the values of those residential lots.

An assessor has requested our advice as to the procedure for entering common property owned by members of a homeowners’ association on the assessment roll. A developer is constructing a subdivision that will include three parcels of real property to be owned as common property and 109 individually owned lots. The owners of the individual lots within the subdivision will be the members of the homeowners’ association and the common areas will be owned by and used for the sole benefit of the homeowners’ association. The developer has requested that a proportionate share of the value of the common areas be ascribed to the respective individually owned lots with the three parcel common areas being assessed at a value of zero dollars. The assessor asks if this is appropriate.

Under the Real Property Tax Law, the assessor must separately assess on the assessment roll each “parcel” of real property (RPTL, § 502). A “parcel” is defined as “a separately assessed lot, parcel, piece or portion” of real property (RPTL, § 102(11)). Previously, we opined that the law did not authorize the assessor to assess common properties in the manner requested here (5 Op. Counsel SBEA No. 66), but the law has since changed. Section 504(5-a) of the RPTL (added L.1996, c.135, § 6) was added; it provides:

5-a. Notwithstanding any other provision of the law, real property owned by a homeowners’ association may be separately assessed to that association or may be incorporated in the assessments of the parcels of the members of that association. Whenever any real property is so incorporated, the inventory maintained for each parcel shall describe how the value of that real property has been incorporated in the assessment of such parcel.

Clearly then, the assessor is now authorized to proceed in the manner requested by the developer.

By proceeding in the manner requested by the developer, the assessor is essentially following the law as to easements which we have discussed in prior opinions (5 Op.Counsel SBEA No. 62; 10 Op.Counsel SBRPS No. 103). In addition, we note that the courts have recognized that it is possible for a parcel to be so interwoven with a dominant estate that it has no extrinsic value for tax purposes (In the Matter of the Property Owners of Sleepy Hollow Lake v. Town of Coxsackie Assessment Board of Review, 121 AD 2d 836, 504 NYS2d 570 (3d Dept 1986) citing Grasser v. Graham, 97 Misc 2d 417, 411 NYS2d 836 (Sup Ct, Erie Co. 1978)). Where such property is encumbered by easements and restrictions in a favor of the residential parcels and there is no indication that the property is available for any purpose other than to benefit the residential lots, the property at issue has no substantial value apart from its purpose as recreational land and facilities held for the exclusive benefit of the lot owners (i.e., homeowners’ association) (Matter of Wolf Lake v. Board of Assessors for the Town of Thompson, 271 AD2d 925, 707 NYS2d 519 (3d Dept 2000)). The appropriate analysis in these situations is whether the deeds establish a dominant-servient estate relationship between the individual lots and the common areas and whether the servient estate (common area) has any value or beneficial interest for its owner (see, Sleepy Hollow). Generally, a servient parcel would have separate value where the property rights can be sold or used by the owner either for profit or for the gratification of some need or desire or where the owner is free to charge admission to strangers for use of the facility (see, Grasser).

March 9, 2009