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Volume 8 - Opinions of Counsel SBEA No. 26

Opinions of Counsel index

Exemptions generally (transfer to nonexempt owner) (failure to value and to give notice) - N.Y.S. Constitution, Art. I, § 6; Real Property Tax Law, § 520:

A transfer of exempt property to a nonexempt owner requires the assessor to assess the property according to its value as of the date of the transfer. A failure by the assessor to notify the new owner of the assessment and of the right to review of the assessment constitutes a denial of due process of law.

A private individual has purchased property of a school district, exempt from taxation pursuant to section 408 of the Real Property Tax Law (RPTL). At the time of transfer, the property was assessed for $66,600 on the portion of the assessment roll set aside for the entry of properties wholly exempt from taxation (RPTL, § 502(5); 9 NYCRR 190-1.3(a)(2)(vi)). The taxpayer received a tax bill which included a “pro-rated” levy (RPTL, § 520) based upon that assessment. The taxpayer complains that no notice was mailed or received and that he had no opportunity to be heard in regard to the assessment subject to the pro rata tax levy.

Section 520 of the RPTL provides for the imposition of a pro rata tax liability on exempt real property transferred to a nonexempt owner after taxable status date. Implementation requires the use of the forms and procedures of the so-called “Correction of Errors Law” (RPTL, §§ 550-559) for the addition of omitted assessments. Where the assessor learns of a transfer of exempt property to a nonexempt owner after the levy of taxes he must wait until the following tentative roll to make the appropriate entry (§ 520(4)).

Regardless of when he learns of such a transfer, subdivision two of section 520 requires the assessor to assess the property “at its value as of the date of transfer” and to notify the new owner of the assessment and of the right to a review of the assessment as provided in the “Correction of Errors Law”.

In this case, the new owner has objected that the assessment of $66,600 does not correspond to the real value of the parcel. The purchase price was $122,500 and the latest State equalization rate for the assessing unit is 14. Applying the rate to the purchase price suggests that a reasonable assessment would approximate $17,000.

Valuation is a subjective judgment and is left, at least initially, in the discretion of the assessor. While a recent sale of a property may be probative of its fair market value (860 Fifth Avenue Corp. v. Tax Commission, 8 N.Y.2d 29, 167 N.E.2d 455, 200 N.Y.S.2d 817 (1960)), there is also precedent suggesting that a sale of the subject property must be closely scrutinized and is not conclusive of value (People ex rel. Gale v. Tax Commission, 17 A.D.2d 225, 233 N.Y.S.2d 501 (1st Dept, 1962), lv. to app. den. 12 N.Y.2d 646, 238 N.Y.S.2d 1026 (1963)). However, the adoption by the assessor of the assessment carried on the rolls for many years does not appear to be a good faith effort to comply with the direction of the statute, particularly in light of the fact that it is not uncommon for assessors to significantly over- or under-value wholly exempt properties, since no taxes will be levied so long as they remain exempt. As noted in the memorandum in support of the bill which became section 520 (L.1978, c.635) the primary reason for requiring the assessor to value the property as of the date of transfer is to avoid the situation where the assessed value established for a property while exempt bears no relation to its fair market value.

It is a fundamental rule under the Federal (5th and 14th amendments) and State (Article I, § 6) constitutions that taxpayers must be given both notice and the opportunity to challenge the value placed on their taxable property (In Re 801-815 East New York Avenue, Borough of Brooklyn, City of New York, 290 N.Y. 236, 48 N.E.2d 502 (1943); People ex rel. Bridgeport Savings Bank v. Feitner, 191 N.Y. 88, 83 N.E. 592 (1908)). An assessor’s failure to comply with the statutory notice mandate of section 520 results in a denial of due process of law (see, TRC Industrial Park v. Town of lslip, 104 Misc.2d 585, 428 N.Y.S.2d 554 (S.Ct., Suffolk Co., 1980); see also, City of New York v. Village of Valley Stream, 114 Misc.2d 739, 452 N.Y.S.2d 529 (S.Ct., Nassau Co., 1982)).

January 11, 1984