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Volume 10 - Opinions of Counsel SBRPS No. 19

Opinions of Counsel index

Veterans exemption (ownership) (assignment of rents) - Real Property Tax Law, § 458:

The assignment of rents to property receiving an eligible funds veterans exemption does not constitute a conveyance of such property justifying the removal of such exemption.

Our opinion has been requested concerning the eligible funds veterans exemption (Real Property Tax Law, §458). A veteran, currently receiving a $4,100 exemption on his rental property, has assigned the rents to such property to another party, and the question is whether the exemption should be removed. We think not.

Unlike the alternative veterans exemption (RPTL, §458-a), the eligible funds exemption includes no residency requirement nor is it limited to residential property. Leased property may receive the exemption (see, 5 Op.State Compt. 383). To qualify for the exemption, all that is required is that the property be owned by someone eligible to receive the exemption (e.g., the veteran himself or herself) and that the property be purchased with pension, bonus or insurance moneys (“eligible funds”) paid on account of the veteran’s service. We assume that the only issue in this case is whether the veteran’s assignment of the rents to his property divests him of ownership, making the property ineligible for the exemption.

The court in Conley v. Fine, 181 App.Div. 675, 169 N.Y.S. 162 (1st Dept., 1918), held that “an assignment of rents was not a conveyance of, nor an incumbrance upon, real property, and was therefore not within the recording act” (169 N.Y.S. at 164). In 1944, at the recommendation of the Law Revision Commission, chapter 262 was enacted so as to “bring assignments of rent ... within the recording statutes applicable to conveyances of real property” (footnote to Session Laws, L.1944, c.262; see also, Warren’s Weed New York Real Property, “Recording,” §2.20). Those recording provisions remain in the law (e.g., Real Property Law, §§294-a, 321-a).

That these recording statutes did not overrule the holding in Conley is evidenced by a more recent decision. In Albee Fuel Corporation v. Gallman, 42 A.D.2d 323, 346 N.Y.S.2d 678 (3d Dept., 1973), aff’d, 34 N.Y.2d 773, 314 N.E.2d 879, 358 N.Y.S.2d 140 (1974), the court held that an assignment of rents given as security did not constitute a mortgage. The court stated:

[I]t was early stated that an assignment of rents “in no wise [affects] the title to the land, nor [is] it a lien or incumbrance thereon” (Harris v. Taylor, 35 App.Div. 462, 467, 54 N.Y.S. 864, 867, app. dsmd. 159 N.Y. 533, 53 N.E. 1126). This statement was approved in Conley v. Fine ....

It is obvious that in the eyes of the Legislature, an assignment of rents was not an “interest in real property *** assigned” or an instrument “by which the title to any real property may be affected”, so as to be a “conveyance” under section 291 [of the Real Property Law], otherwise there would have been no need for section 294-a ... (346 N.Y.S.2d at 680).

Accordingly, in our opinion, the assignment of rents to property receiving an eligible funds veterans exemption does not constitute a conveyance of such property justifying the removal of such exemption.

May 22, 1996

Updated: