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Volume 5 - Opinions of Counsel SBEA No. 85

Opinions of Counsel index

Assessments, generally (land use restrictions) (generally); Open space lands (assessment) (limitation) - General Municipal Law, § 247; Real Property Tax Law, § 306:

Land use restrictions imposed both by governments and by property owners may affect the assessed value of real property. The assessor should reflect zoning restrictions in his assessments of zoned property, but a municipality may not enact an ordinance requiring the assessor to reduce assessments as a matter of law because of zoning restrictions. Similarly, where a planning board requires a developer to set aside a portion of a development for park or recreational purposes, an easement by estoppel results, and the assessor must assess the parcel as encumbered by the restrictions on use. Likewise, where a municipality acquires open space easements in property pursuant to section 247 of the General Municipal Law, the assessment on such property is limited by the limitations placed on the future use of the land.

We have received an inquiry relating to the power of local governments to change assessments because of the imposition of use restrictions. In particular, our comments are requested concerning a development easement acquisition commission (DEACOM) program undertaken recently in a town.

Before discussing specific questions, a general understanding of the legal relationship of local governments vis-á-vis the State on real property taxation is necessary.

Real property taxation is a matter of exclusive State concern and local governments possess only those powers in regard thereto as have been expressly delegated to them. Thus local governments have no residual power to grant exemptions or to establish assessment standards.

However, the assessing function is protected by the State constitutional home rule provision - the assessing of real property cannot be transferred from cities, towns and villages (and two counties which have adopted county assessing) to the State.

The standard of assessment of real property established by State law (Real Property Tax Law, § 306) is that “[a]ll real property shall be assessed at the full value thereof.” Case law has construed the term “full value” to mean fair market value and the concept of economic highest and best use is a part of “fair market value.” Neither case law nor statute authorizes any local government to pass any local laws which would change this concept of full value. An exemption statute permits the preferential assessment of agricultural lands which satisfy the requirements of Article 25AA of the Agriculture and Markets Law. Property exempt under this statute is assessed on the basis of per acre factors ascertained and established by the State Board of Equalization and Assessment reflecting only the farm value.

However, land use restrictions do affect the assessed value of real property in the State of New York in several ways. For the purposes of this discussion, restrictions will be divided into (1) those imposed by government without the consent of the landowner and (2) restrictions placed upon property by the owner thereof.

Zoning restrictions enacted by ordinances of local governments pursuant to the police power constitute most of the first category under discussion. Naturally, the local assessor reflects zoning restrictions to the extent they affect the market value of the property. But there is no law which requires or permits a municipality to enact ordinances directing the assessor to reduce assessments as a matter of law because of zoning restrictions. The comprehensive zoning ordinance promulgated by the town in question setting forth its 15 point program for development is reflected in local assessments only to the extent that any zoning ordinance in any locality should be reflected in assessments. The DEACOM program cannot legally require the town’s assessor to reduce assessments a stated amount on property which cannot be developed under the 15 point program.

Another type of “mandatory” restriction is contained in laws which empower town and village planning boards to require a developer to set aside a portion of the development for park or recreational purposes as a condition to the approval of the development (Town Law, § 277; Village Law, § 7-730). The courts have held that a requirement of this sort is an easement by estoppel and as a matter of law the assessor must value the land so set aside as if encumbered in perpetuity by the restrictions on use (Crane-Berkley Corp. v. Lavis, 238 App. Div. 124, 263 N.Y.S. 556). In the case just cited the land was found to have a value of $1.00.

The second type of restrictions on use are those placed upon property by the owners thereof.

Under the in rem “whole property” concept of real property taxation which exists in New York State, all property is assessed without regard to restrictions or encumbrances which are personal to the owner (People ex rel. Galev. Tax Commission, 17 App. Div. 2d 225, 233 N.Y.S. 2d 50l; Knickerbocker Village Inc. v. Boyland, 16 App. Div.2d 223, 226 N.Y.S.2d 982, aff’d, 12 N.Y.2d 1044, 190 N.E.2d 239, 239 N.Y.S.2d 878).

Even though an easement interest is personal to the owner where given not under compulsion of law, these interests nonetheless must be taken into consideration in the assessment of property for tax purposes. In one case, People ex rel. Poor v. O’Donnel, 139 App. Div. 83, 124 N.Y.S. 36 affirming on opinion of Special Term, aff’d, 200 N.Y. 518.93N.E. 1129, property encumbered by easements in favor of adjacent lot owners to use and enjoy the property for park purposes was held to have only a nominal value for taxation purposes. The theory was that the property had no market value since a purchaser would acquire no beneficial interest - his title would simply be a naked one with none of the usual advantages attendant upon the ownership of real property. This same theory was applied in People ex rel. Larchmont Manor Park Society v. Smith, 294 N.Y. 920, 63 N.E.2d 116, where the title to a beach was in a property owners association and the lot owners in the development had easements to use and enjoy the beach (see also, 5 Op.Counsel SBEA No. 62).

The “easement” method of restricting the use of property by agreement can now also be used by local government. Section 247 of the General Municipal Law empowers a county, city, town or village to acquire open space easements. This law also provides that the valuation placed on any such open space or area for purposes of real estate taxation shall take into account and be limited by the limitation on future use of the land.

The aforementioned DEACOM program was undertaken pursuant to the authority given by this section. Under the program, open space easements are obtained from property owners for periods of from five to ten years. The assessor is required to reduce his estimate of the full value of property encumbered by these easements in an amount he feels the market value has been affected.

July 18, 1974