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THE COUNTY MUST REIMBURSE THE TOWNS FOR UNPAID PROPERTY MAINTENANCE AND DEMOLITION CHARGES (CT APP).

The Court of Appeals, in a full-fledged opinion by Judge DiFiore, reversing the Appellate Division, determined Monroe County was required to credit unpaid property maintenance and demolition charges assessed by the Town of Irondequoit and the Town of Brighton. The county is required to deduct the unpaid town charges from the sales tax owed by the towns to the county:

Requiring that these charges be credited pursuant to section [RPTL] 936 accords with the overall structure for the enforcement of property tax liens, including the legislative grant of exclusive authority to counties in RPTL 1123 to commence in rem proceedings to foreclose on real property to “enforce the payment of delinquent taxes or other lawful charges which have accumulated and become liens against certain property” … , permitting counties—but not towns—to initiate proceedings to enforce the types of liens at issue here. Indeed, Town Law § 64 (5-a) directs that these charges “levied” on “real property” are to “be collected in the same manner and at the same time as other town charges” by virtue of the normal process of levying and collecting town property taxes, in which towns make the first attempt at collection and after which enforcement shifts to the county … . It appears that the Legislature, recognizing that towns have little power to recoup their costs for unpaid real property tax liens, has shifted the risk of loss to counties, which are in the best position to recover the funds through in rem foreclosure proceedings. The same considerations apply to blighted properties, where the Legislature may have presumed that counties are in a better position to recover charges imposed on real property pursuant to the Town Law … . Thus, the County was required to credit the maintenance and demolition charges, and its determination to the contrary should have been annulled. Matter of Town of Irondequoit v County of Monroe, 2020 NY Slip Op 07689, CtApp 12-22-20

 

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THE SOLAR ARRAY IS ATTACHED TO THE COLLEGE’S LAND AND IS THEREFORE TAXABLE REAL PROPERTY; THE ARRAY IS OWNED BY THE INSTALLER, NOT THE COLLEGE, AND IS THEREFORE NOT EXEMPT FROM TAXATION (FOURTH DEPT).

The Fourth Department, reversing Supreme Court, determined that the solar array installed on petitioner-college’s land was owned by the installer, Argos, not the college, and is taxable as real property because it is permanently attached to the land:

Respondents contend that the system constitutes taxable real property under RPTL 102 (12) (b). We agree. Pursuant to that statute, taxable real property is defined as “[b]uildings and other articles and structures, substructures and superstructures erected upon, under or above the land, or affixed thereto” (id.). “The common law relating to fixtures provides guidance in determining whether particular items fall within [that] statutory definition” … . “To meet the common-law definition of fixture, the personalty in question must: (1) be actually annexed to real property or something appurtenant thereto; (2) be applied to the use or purpose to which that part of the realty with which it is connected is appropriated; and, (3) be intended by the parties as a permanent accession to the freehold” … . …

… .RPTL 420-a (1) (a) provides, in relevant part, that “[r]eal property owned by a corporation or association organized or conducted exclusively for . . . educational . . . purposes, and used exclusively for carrying out thereupon . . . such purposes . . . shall be exempt from taxation.” “Land and [structures] are separately defined as taxable forms of real property (see RPTL 102 [12] [a], [b]), and [parties to an agreement] may agree to their separate ownership” … . …

Here, it is undisputed that petitioner is a qualifying corporation, but Argos is not, and that the system is used for a qualifying purpose; therefore, whether the system is tax exempt depends on its ownership. Matter of Cornell Univ. v Board of Assessment Review, 2020 NY Slip Op 04636, Fourth Dept 8-20-20

 

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BECAUSE THE HOLDER OF A FIRST MORTGAGE WAS A DEFENDANT IN THE TAX FORECLOSURE PROCEEDINGS, THE MORTGAGE HOLDER DID NOT NEED TO FILE ITS OWN FORECLOSURE ACTION TO ENFORCE ITS LIEN ON THE SURPLUS TAX-FORECLOSURE-SALE PROCEEDS (SECOND DEPT).

The Second Department, in a full-fledged opinion by Justice Scheinkman, determined that HPD,  the holder of a first mortgage on property which was the subject of a tax foreclosure, was entitled to the surplus funds from the tax foreclosure sale. The issue was whether HPD’s action seeking the surplus was time-barred because it didn’t enforce the lien on the surplus within six years of the tax foreclosure sale. The Second Department held no further action to enforce the lien was necessary because HPD was a defendant in the tax foreclosure proceedings:

… HPD’s appearance in the tax lien foreclosure action put [the property owner] and anyone else interested in a potential surplus on notice of HPD’s claims. To require HPD to commence a separate foreclosure action, when an action to foreclose the tax lien was already pending, would serve no useful purpose. NYCTL 1997-1 Trust v Stell, 2020 NY Slip Op 02802, Second Dept 5-13-20

 

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OWNER OF A SOLAR ENERGY SYSTEM INSTALLED ON SCHOOL DISTRICT PROPERTY WAS ENTITLED TO THE STATUTORY EXEMPTION FROM REAL PROPERTY TAX DESPITE THE SCHOOL DISTRICT’S RESOLUTION OPTING OUT OF THE EXEMPTION; THE RESOLUTION WAS NEVER FILED AS REQUIRED BY THE REAL PROPERTY TAX LAW (THIRD DEPT).

The Third Department determined the petitioner, Laertes Solar, the owner of a solar energy system installed on school district property, was entitled to the statutory exemption from property tax on the system. The school district had adopted a resolution opting out of the exemption. But the resolution had never been filed with the NYS Department of Taxation and Finance (Department) or the NYS Energy and Research Development Authority (NYSEARDA) as required by the Real Property Tax Law (RPTL 487):

The … examination of “the language of the statute and the legislative intent underlying it” … leads us to agree with Supreme Court that the filing requirements of RPTL 487 (8) are mandatory and that the 2014 resolution was inapplicable to the system given the school district’s failure to meet those requirements during the relevant period (see RPTL 487 [8] [a]). Indeed, although we need not defer to the Department’s interpretation of RPTL 487 given that this case presents a question “of pure statutory reading and analysis, dependent only on accurate apprehension of legislative intent”… , it is notable that the Department has also taken the position that an opt-out resolution “must be filed” with both it and NYSERDA … . It follows that — even assuming that the system may be viewed as a distinct parcel of real property that may be taxed — Laertes was entitled to the RPTL 487 exemption for which it applied (see RPTL 487 [6]). Matter of Laertes Solar, LLC v Assessor of the Town of Harford, 2020 NY Slip Op 02302, Third Dept 4-16-20

 

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PLAINTIFF DID NOT SUFFICIENTLY ALLEGE THAT NEW YORK’S PROPERTY TAX SYSTEM DISCRIMINATES AGAINST PROPERTY OWNERS IN “MAJORITY-MINORITY” NEIGHBORHOODS; COMPLAINT SHOULD HAVE BEEN DISMISSED IN ITS ENTIRETY (FIRST DEPT).

The First Department, in a comprehensive opinion by Justice Kern, reversing (modifying) Supreme Court, determined the complaint alleging the New York property tax system is unconstitutional should have been dismissed in its entirety for failure to state a cause of action. The opinion is too detailed to fairly summarize here. With respect to the allegations the property tax system discriminates against property owners in “majority-minority” neighborhoods, the court wrote:

… [P]laintiff does not adequately allege a causal connection between the property tax system and any racial disparities in the availability of housing. Plaintiff has failed to allege sufficient concrete facts or produce statistical evidence showing that the application of the property tax system, as opposed to other factors, causes financial barriers that inhibit the ability of minority residents to own homes. Additionally, plaintiff does not allege sufficient concrete facts or produce statistical evidence showing how the current property tax system contributes to higher rates of foreclosure or discourages the production of rental units in majority-minority communities. …

… [P]laintiff has failed to meet its burden “to allege facts at the pleading stage or produce statistical evidence demonstrating a causal connection” between the property tax system and the continued segregation of New York City neighborhoods sufficient to “make out a prima facie case of disparate impact” … . …

… [P]laintiff argues that the terms and conditions of all home, condominium and cooperative sales and apartment rentals include the transfer of an illegal tax burden that make purchasing or renting a dwelling more expensive in affected communities. The portion of the FHA [Fair Housing Act] upon which plaintiff relies makes it unlawful to “discriminate against any person in the terms, conditions, or privileges of sale or rental of a dwelling . . . because of race, color, religion, sex, familial status, or national origin” … . However, in the context of taxation, defendants are not involved in the terms and conditions of the sale or rental of property … . Tax Equity Now NY LLC v City of New York, 2020 NY Slip Op 01401, First Dept 2-27-20

 

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MAINTENANCE FEES IMPOSED BY THE TOWN FOR TRIMMING AND REMOVING BRUSH ON PRIVATE PROPERTY ARE NOT TAXES, THEREFORE THE TOWN IS NOT ENTITLED TO CREDIT FROM THE COUNTY FOR UNPAID MAINTENANCE FEES, TWO JUSTICE DISSENT (FOURTH DEPT). ​

The Fourth Department, reversing Supreme Court, over a two justice dissent, determined that maintenance fees imposed by the town for trimming and removing brush from private property are not taxes. Therefore the town cannot seek credit from the county for unpaid maintenance fees:

Section 936 (1) of the RPTL [Real Property Tax Law] provides that the county guarantees the town’s “taxes” by crediting the town “with the amount of . . . unpaid delinquent taxes.” The question raised on this appeal is whether the maintenance charges are “taxes” for the purposes of RPTL 936 and thus whether the County respondents must credit the Town petitioners for the amount of any such charge that goes unpaid or is delinquent.

The maintenance charges are assessed against individual properties for their benefit and thus do not fall within the general definition of “tax,” which instead contemplates ” public burdens imposed generally for governmental purposes benefitting the entire community’ ” … . Nor do those charges constitute “special ad valorem levies” as defined by RPTL 102 (14). A ” [s]pecial ad valorem levy’ ” is “a charge imposed upon benefitted real property in the same manner and at the same time as taxes for municipal purposes to defray the cost, including operation and maintenance, of a special district improvement or service” (id.). Although the definition of “tax” does, in certain enumerated circumstances, include “special ad valorem levies” (RPTL 102 [20]), the maintenance charges are not special ad valorem levies because they are not used to defray the cost of a “special district improvement or service” (RPTL 102 [14]). Maintenance charges also are not assessed “ad valorem” because the amount of the charge is not based on property value but is instead based on the actual expense to the town. Moreover, assuming, arguendo, that the charges are “special assessments” as defined by RPTL 102 (15), we note that the definition of “tax” specifically excludes “special assessments” (RPTL 102 [20]). Matter of Town of Irondequoit v County of Monroe, 2019 NY Slip Op 06235, Fourth Dept 8-22-19

 

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FIBER OPTIC CABLES AND ENCLOSURES ARE TAXABLE UNDER REAL PROPERTY TAX LAW (RPTL) 102 (FOURTH DEPT).

The Fourth Department, reversing (modifying) Supreme Court, determined that the fiber optic cables and equipment at issue constitute taxable property under RPTL 102, in that the statutory exception for radio and television signals was not demonstrated to be applicable:

…  [T]ax exclusions are never presumed or preferred and before [a] petitioner may have the benefit of them, the burden rests on it to establish that the item comes within the language of the exclusion.’ Moreover, a statute authorizing a tax exemption will be construed against the taxpayer unless the taxpayer identifies a provision of law plainly creating the exemption . . . Thus, the taxpayer’s interpretation of the statute must not simply be plausible, it must be the only reasonable construction’ ” … . …

… [P]etitioners contend that their fiber optic installations are not taxable property pursuant to RPTL 102 (12) (i) (D) because, inter alia, petitioners use those properties to some unspecified extent to transmit “news or entertainment radio, television or cable television signals for immediate, delayed or ultimate exhibition to the public” … . We reject that contention. In light of petitioners’ failure to establish the percentage of their fiber optic installations that are used for those purposes, we may accept their contention only if we conclude that any such usage of fiber optic installations, no matter how slight, is sufficient to exclude the properties from the tax. That is not ” the only reasonable construction’ ” of the statute … , indeed, it is “simply [not plausible” … . If we accept that interpretation, based on the proliferation of uses of cell phones to stream video, television, and other programming, all fiber optic cables will be excluded from taxation. That, however, conflicts with the Court of Appeals’ determination in T-Mobile Northeast, LLC that such property is taxable (32 NY3d at 608). Moreover, RPTL 102 (12) (i) provides that taxable property includes all “wires, poles, supports and inclosures for electrical conductors upon, above and underground used in connection with the transmission or switching of electromagnetic voice, video and data signals between different entities.” Matter of Level 3 Communications, LLC v Erie County, 2019 NY Slip Op 05913, Fourth Dept 7-31-19

 

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SUPREME COURT SHOULD NOT HAVE GRANTED SUMMARY JUDGMENT FINDING THAT THE VALUE OF COMMON AREAS OF A DEVELOPMENT OWNED AND MAINTAINED BY PETITIONER HOMEOWNERS’ ASSOCIATION WAS ZERO FOR PROPERTY TAX PURPOSES BECAUSE OF ENCUMBRANCES AND RESTRICTIONS, QUESTIONS OF FACT ABOUT THE VALUE OF THE COMMON AREAS HAD BEEN RAISED (THIRD DEPT).

The Third Department, reversing Supreme Court, determined questions of fact precluded summary judgment finding that the value of the common areas of a development owned and maintained by petitioner homeowners’ association was zero because of encumbrances and restrictions on the property. Petitioner sought a reduction of the tax assessments pursuant to Real Property Tax Law (RPTL)  article 7. The town and the village had assessed the value of the common areas in the millions of dollars:

… [T]he declaration of protective covenants purports to impose a servitude upon the common area parcels in the nature of an easement or covenant that runs with the land; however, petitioner’s bylaws specifically state that individual lot owners “shall have a license to use the [c]ommon [a]reas.” To the extent that the corresponding deeds to the individual lot owners recite that each conveyance was made subject to both the declaration of protective covenants and petitioner’s bylaws, we now reiterate that “[s]uch a conflict in terminology does not lend itself to summary relief” … . …

… [P]etitioner failed to demonstrate, as a matter of law, that the assessed property values of the individual lot owners within the development already include an enhanced value or premium sufficient to cover or offset the value of petitioner’s common area parcels. …

Nor did petitioner sufficiently establish that the subject common area parcels have zero or only nominal value. Indeed, “[i]t is possible that a parcel is so interwoven with a dominant estate that it has no extrinsic value that is available for tax purposes. If, however, it is shown that a servient parcel[, i.e., the common area parcels,] has substantial value, the land can be taxed despite its relationship to a dominant estate owned by a member of a community development” … . Matter of The Assn. of Prop. Owners of Sleepy Hollow Lake, Inc. v McBride, 2019 NY Slip Op 05371, Third Dept 7-3-19

 

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BUILDINGS RECEIVING REAL PROPERTY TAX LAW 421-g BENEFITS ARE NOT SUBJECT TO THE LUXURY DEREGULATION PROVISIONS OF THE RENT STABILIZATION LAW (CT APP).

The Court of Appeals, in a full-fledged opinion by Judge Stein, over an extensive dissent, reversing the Appellate Division, determined that “plaintiffs’ apartments, which are located in buildings receiving tax benefits pursuant to Real Property Tax Law (RPTL) § 421-g, are [not] subject to the luxury deregulation provisions of the Rent Stabilization Law (RSL … .”:

The legislature’s intention, as reflected in the language of the statute at issue here, is clear and inescapable. During “the entire period for which the eligible multiple dwelling is receiving” RPTL 421-g benefits, it “shall be fully subject to control” under the RSL, “notwithstanding the provisions of” that regime or any other “local law” that would remove those dwelling units from such control, “unless exempt under such local law from control by reason of the cooperative or condominium status of the dwelling unit” (RPTL 421-g [6] …) … . The statute does not say that eligible units shall be fully subject to “the provisions of” any local law for the stabilization of rents. Put differently, the notwithstanding clause of the statute evinces the legislature’s intent that any “local law for the stabilization of rents” that would exempt the unit from “control under such local law” does not apply to buildings receiving RPTL 421-g benefits, with the sole exception being for cooperatives and condominiums … . Kuzmich v 50 Murray St. Acquisition LLC, 2019 NY Slip Op 05057, CtApp 6-25-19

 

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PETITIONER IS NOT ENTITLED TO SURPLUS PROCEEDS AFTER A TAX FORECLOSURE SALE (FOURTH DEPT).

The Fourth Department determined petitioner was not entitled to the surplus proceeds after a tax foreclosure sale:

We reject petitioners’ contention that they have a right to the surplus proceeds of the foreclosure sale. As respondent correctly contends, petitioners’ application for surplus proceeds was improperly predicated upon provisions of RPAPL article 13 that apply to surplus monies arising from the sale of property in mortgage foreclosure proceedings (see e.g.RPAPL 1361 [1]). RPAPL article 13, entitled “Action to Foreclose a Mortgage,” does not apply to properties acquired by a tax district pursuant to an in rem foreclosure proceeding under RPTL article 11. Thus, petitioners’ reliance on RPAPL article 13 and cases involving mortgage foreclosures is misplaced … . …

Moreover, petitioners are not entitled to surplus proceeds under RPTL article 11. Contrary to petitioners’ assertion that RPTL article 11 is “silent” regarding any remaining interest that former property owners may have, such as entitlement to surplus proceeds upon the sale of the property following a default judgment of foreclosure, the statute provides that, when property owners neither redeem the property nor interpose an answer, the tax district is entitled to a deed conveying an estate in fee simple absolute and the property owners are “barred and forever foreclosed of all . . . right, title, interest, claim, lien or equity of redemption” that they may have had in the property (RPTL 1136 [3] …). Where the tax district obtains a valid default judgment of foreclosure, which is presumed here given that the default judgment is not subject to challenge on this appeal, the formr property owners are not “entitled to any compensation upon the resale of the property” … , and the tax district may “retain . . . the entire proceeds from [the re]sale” … . Matter of Hoge v Chautauqua County, 2019 NY Slip Op 04821, Fourth Dept 6-14-19

 

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