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Parcels of Land Entitled to Tax Exempt Status Despite Alleged Violations of Building and Fire Code

The Third Department determined three parcels of land were entitled to tax exempt status, based upon the use of the land for religious and charitable purposes, despite alleged building and fire code violations:

RPTL 420-a (1) (a) provides, in relevant part, that “[r]eal property owned by a corporation or association organized or conducted exclusively for religious [or] charitable . . . purposes . . . and used exclusively for carrying out thereupon\. . . such purposes . . . shall be exempt from taxation as [therein] provided.” To demonstrate entitlement to this exemption, “(1) the [petitioning] entity must be organized exclusively for purposes enumerated in the statute, (2) the property in question must be used primarily for the furtherance of such purposes, . . . (3) no pecuniary profit, apart from reasonable compensation, may inure to the benefit of any officers, members, or employees, and (4) the [petitioning] entity may not be simply used as a guise for profit-making” … . Notably, “a property owner seeking a real property tax exemption which demonstrates that it is a not-for-profit entity whose tax-exempt status has been recognized by the Internal Revenue Service and whose property is used solely for [charitable] purposes has made a presumptive showing of entitlement to [the] exemption” … . * * *

…[B]ecause the alleged violations do not divest petitioner of its ability to use the affected parcels for religious or charitable purposes, such violations cannot operate to deprive petitioner of a tax exemption to which it otherwise has demonstrated entitlement. To the extent that respondents believe that petitioner is not in compliance with all relevant provisions of the Town’s building and fire code, their remedy is to issue a stop work order or pursue whatever enforcement proceedings may be available. Oorah Inc v Town of Jefferson, 2014 NY Slip Op 05387, 3rd Dept 7-17-14

 

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Writing Which Omitted Certain Crucial Terms Was an “Agreement to Agree,” Not an Enforceable Real Estate Sales Contract

The First Department determined that a writing [the September 14 letter] which included some terms of the sale of church property for $15 million constituted an “agreement to agree” and not an enforceable real estate sales contract.  The writing identified the parties, the property, the amount of the downpayment and the price of the property.  At some point after the writing was signed, the defendant property owner told the plaintiff it was negotiating the sale of the property to another and, if the plaintiff wanted to buy, the price would be $17.5 million.  The plaintiff then sued for breach of contract and specific performance.  In finding the writing was not an enforceable real estate sales contract, the court noted that several crucial terms were missing, including the failure to mention the required court-approval of the sale of church property pursuant to the not-for-profit corporation law, and the failure to include details of the escrow agreement:

…[W]e agree with defendant that the September 14 letter did not contain all of the material terms which one would reasonably have expected to be included under the circumstances, rendering the September 14 letter unenforceable. For example, while the September 14 letter contemplated that the down payment would be held in escrow, it failed to identify who the escrow agent would be and left to future negotiations “a reasonably acceptable escrow agreement.” Since “[n];o contract for the sale of real property can be created when a material element of the contemplated bargain has been left for further negotiations,” …, and the details of an escrow arrangement are certainly material, this alone warranted the motion court’s conclusion that the letter was not a contract.

Further, the contemplated transaction was unique, insofar as it was contingent on approval by the court and the Attorney General. While we do not question that defendant was entitled to agree to a sale of the property prior to seeking such approval …, one would expect that an agreement would have contained such material terms as defendant’s duty to seek approval in a diligent manner, and the consequences of a failure to secure such approval. Indeed, it has been held that the contingency created by a condominium association’s right of first refusal is material to an agreement to sell an individual condominium apartment … .  Argent Acquisitions LLC v First Church of Religious Science, 2014 NY Slip Op 04048, 1st Dept 6-5-14

 

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Use of Church Property Sufficient to Maintain Tax-Exempt Status

The Third Department determined the City (respondents) did not demonstrate church-owned property was no longer used for religious purposes.  Therefore the City could not revoke the tax-exempt status of the property:

Although the burden of proof in tax exemption matters ordinarily lies with the party seeking an exemption, a municipality seeking to withdraw an existing exemption bears the burden of proving that the real property in question has become subject to taxation … . Here, although it is undisputed that petitioners continue to be organized exclusively for tax-exempt religious purposes, respondents contend that their properties are not entitled to tax exemptions because they are no longer “used primarily for the furtherance of [religious] purposes” … . To meet their burden in this regard, respondents contend that statements made by the Diocese establish that the properties no longer function as churches, that regular worship services and religious activities that were formerly conducted on the properties now take place elsewhere, and that the parcels are now investment properties being marketed for sale for the non-exempt purpose of generating income.

… Petitioners … submitted affidavits from church officials stating that both properties continue to be used for religious services conducted to serve the spiritual needs of the parish faithful, in the form of monthly morning prayers on one of the properties and periodic prayer services that include scripture readings and communion services on the other.  Contrary to respondents’ contention that such occasional or periodic use cannot be deemed to be primary,”[i]t is the actual or physical use of the property” that determines whether it is exempt from real property taxation … . Here, the record reveals that petitioners’ only actual or physical use of their properties is for religious purposes. Absent any showing by respondents that the properties are used for anything other than the religious purposes for which petitioners were organized, the mere fact that this use is now less frequent does not alter the properties’ tax-exempt status … . The record also includes a letter from a Diocese official to the Assessor averring that the properties are used to store religious artifacts and fixtures. Matter of St Williams Church of Troy…, v Dimitriadis…, 516532, 3rd Dept 3-6-14

 

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Application to Vacate Default Judgment in Tax Foreclosure Proceeding Governed by Two-Year Statute of Limitations (Under the Facts, the One-Month Statute Did Not Apply)/Deed Purporting to Transfer Property from Religious Organization Invalid for Failure to Comply with the Religious Corporation Law/Notice of Tax Foreclosure Sufficient Even Though Actual Owner Not Notified

The Third Department determined petitioner’s application to set aside a tax foreclosure judgment was timely, but determined the application was properly denied because the notice of the foreclosure proceeding was adequate, even though petitioner, the actual owner of the property, was not notified. Petitioner, a religious organization, had transferred the property by deed to Forbes, a minister, in 1985. Forbes paid property taxes for several years, but when the payments ceased the county moved to foreclose, naming Forbes as the owner. It turned out that the deed to Forbes was invalid because the transfer did not comply with the Religious Corporation Law. The actual owner, petitioner, was not notified of the foreclosure proceedings. In affirming the judgment of foreclosure, the court discussed the appropriate statute of limitations under the facts, the property-transfer requirements of the Religious Corporation Law, and the tax-foreclosure notice requirements:

Initially, Supreme Court erred in determining that petitioner’s application was untimely. Unlike a motion to vacate a default judgment in a tax foreclosure proceeding, which “may not be brought later than one month after entry of the judgment” (RPTL 1131…), a person or entity challenging the validity of a deed transferred in connection with a tax foreclosure proceeding faces a two-year statute of limitations (see RPTL 1137…). As petitioner was not a party to the foreclosure proceeding and now seeks to set aside the judgment on the basis that respondent failed to provide notice to the rightful owner, the application was timely (see RPTL 1137).The 1985 deed to Forbes was invalid. A religious corporation shall not sell “any of its real property without applying for and obtaining leave of the court” pursuant to N-PCL 511 (Religious Corporations Law § 12 [1]…). Under N-PCL 511 (b), the Attorney General must be notified before any sale may be finalized. Petitioner did not seek court approval in 1985 or thereafter (see Religious Corporations Law § 12 [1], [9]), nor was the Attorney General notified of the transfer of the property. Where court approval is not obtained for the transfer of real property from a religious corporation, the conveyance is invalid … . Accordingly, the 1985 deed was invalid and Forbes should not have had any legal right to the property. * * *When determining the reasonableness of the taxing authority’s attempts to provide notice to interested parties, the court may take into account the conduct of such parties … Here, petitioner indicated that it intended to convey the property to Forbes – its then-minister – in 1985 and was only unsuccessful due to their lack of legal knowledge. Additionally, petitioner did not take any action against Forbes to regain title, despite the deed having been filed for nearly 27 years at the time the foreclosure proceeding was commenced. Under the circumstances, including respondent’s provision of proper statutory notice to the owner of record, respondent complied with due process and satisfied its obligation of searching for interested parties, and petitioner has not demonstrated that any additional steps or more exhaustive search was required here… . Matter of City of Hudson…, 516690, 3rd Dept 2-27-14

 

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Property Owned by Religious Group Entitled to Real Property Tax Exemption

The Third Department reversed Supreme Court and determined a religious group (Cybeline Revival) had demonstrated its property was used primarily for religious and charitable purposes, and, therefore, the group was entitled to a real property tax exemption:

…[P]etitioner met its burden to demonstrate that it uses the property primarily for its religious and charitable purposes … .  In accord with Supreme Court’s determination, respondents contend that the property was used primarily to provide cooperative housing because, in essence, the few adherents of the Cybeline Revival have in effect just continued the property’s former residential use… .  However, these arguments contend that there is some threshold amount of activity and public benefit that must be demonstrated, which confuses the standard that is simply whether the property was used primarily for religious and charitable purposes … .  The testimony established that the Cybeline Revival stresses communal living among its adherents, as well as providing hospitality and charity to those in need, and the members consider this property the home of their faith … .  They also conduct religious and charitable activities throughout the property on a regular basis.  Accordingly, petitioner has satisfied the legal requirements in order to receive a real property tax exemption for 2009, 2010 and 2011 … .  Matter of Maetreum of Cybele, Magna Mater Inc v McCoy…, 515598, 3rd Dept 11-21-13

 

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Inmate Should Not Have Been Required to Document His Native American Ancestry In Order to Practice His Religion

In annulling a determination by the Central Office Review Committee (CORC) that the petitioner (an inmate) must document his Native American ancestry before he will be allowed to practice his religion, the Third Department wrote:

It has been recognized that correction officials may impose restrictions on the religious practices of inmates provided that such restrictions are reasonably related to legitimate penological interests … .Respondents candidly concede, and we agree, that CORC failed to articulate or otherwise identify any legitimate penological interest reasonably served by the documentation requirement. Consequently, we conclude that the determinations at issue are arbitrary, capricious and  without a rational basis… .  Matter of Santiago, 514317, 3rd Dept, 4-18-13

 

 

 

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Religious Holidays in Teachers’ Collective Bargaining Agreement Violate the Establishment Clause 

A provision in a collective bargaining agreement that allowed teachers to take up to five religious holidays as paid days off was deemed unconstitutional by the Second Department:

“There is no firmer or more settled principle of Establishment Clause jurisprudence than that prohibiting the use of the State’s power to force one to profess a religious belief” … . Here, the clear wording of the religious holidays provision rewarded members of the Association who claimed to be religiously observant with more paid days off than those afforded to agnostics, atheists, and members who were less observant. As a result, the religious holidays provision violated the Establishment Clause of the First Amendment of the United States Constitution … .   Matter of Board of Educ … v Mineola Teachers Assn, 2013 NY Slip Op 02070, 2011-11373, Index No 7359/11, 2nd Dept 3-27-13

 

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