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Commercial Property Overvalued—Evidentiary Criteria Explained In Some Depth

The Fourth Department determined three commercial properties had been overvalued for real property tax purposes.  The court discussed the relevant evidentiary criteria in considerable depth:

…[P]etitioners met their initial burden of presenting “substantial evidence that the propert[ies were] overvalued” …, thereby rebutting the “presumption of validity [that] attaches to the valuation of property made by the taxing authority” … . “In the context of tax assessment cases, the substantial evidence' standard merely requires that petitioner demonstrate the existence of a valid and credible dispute regarding valuation” … . “The ultimate strength, credibility or persuasiveness of petitioner's arguments are not germane during this threshold inquiry” … . Here, petitioners submitted appraisals by a qualified expert who valued the subject properties utilizing the income capitalization approach to valuation, which is “generally regarded as the preferred method for determining the value of income-producing propert[ies]” such as those at issue in this case …. Further, the appraisals “contained documentation and calculations to support the underlying methodolog[y] and the ultimate valuation” … . “The fact that some aspects of [the expert]'s valuation methodology may be subject to question goes to the weight to be accorded the appraisal[s] and not to the threshold issue of whether petitioner[s] produced substantial evidence to rebut the presumption of validity' … .

… It is well established that “valuation [is] largely a question of fact, and the [trial] courts have considerable discretion in reviewing the relevant evidence as to the specific propert[ies] before them” … . “As a general rule, actual rental income is often the best indicator of value” … , although actual income ” may be disregarded where it does not reflect full value' ” … . Here, there is no evidence that the rents petitioners charged were arbitrary or the result of collusion or self-dealing …, and respondents “failed to establish that the actual income was not reflective of the market for the years under review” … . * * *

“The ultimate purpose of valuation . . . is to arrive at a fair and realistic value of the property involved” … . The income capitalization approach to valuation “rests on the proposition that the value of income-producing property is the amount a willing buyer, desiring but not compelled to purchase it as an investment, would be prepared to pay for it under ordinary conditions to a seller who desires, but is not compelled, to sell . . . That amount will depend on the net income the property will likely produce inasmuch as the purchase price represents the present worth of anticipated future benefits” … . Here, the ” net income the property will likely produce' ” …, at least for the next 30 years, is the amount of the ground lease. Matter of Techniplex III v Town & Vil of E Rochester, 2015 NY Slip Op 01101, 4th Dept 2-6-15


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