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Volume 11 - Opinions of Counsel SBRPS No. 29

Opinions of Counsel index

Assessments, generally (easements) (privately-held conservation easements) - Environmental Conservation Law, § 49-0305; Real Property Tax Law, § 305; 9 NYCRR 190-1.3:

If an assessor determines that a privately-held conservation easement diminishes the value of a parcel burdened by such an easement, the assessor may reduce the assessment of the parcel accordingly.

Our opinion has been requested concerning the assessment of property subject to conservation easements. An assessor has submitted copies of two instruments creating conservation easements over lots in a residential subdivision.

Chapter 1020 of the Laws of 1983 authorized the creation of conservation easements pursuant to title 3 of Article 49 of the Environmental Conservation Law. A conservation easement is defined as any restriction on the use of real property intended to preserve the physical condition of that property (Environmental Conservation Law, § 49-0305(1)).

Although section 543 of the Real Property Tax Law prescribes the method of assessing State-acquired conservation easements, there are no specific statutory directions for assessing conservation easements held by private owners. Since such easements are not included in the definition of “real property,” set forth in section 102(12) of the RPTL, they cannot be assessed as separate parcels on an assessment roll. Given that property is subject to taxation unless exempt by law (RPTL, § 300), and that it must be assessed at the locally applicable uniform percentage of value (RPTL, § 305(2)), the question is how the assessor is to consider the valuation effect, if any, of the conservation easement.

There is no statutory provision currently requiring local assessors to consider conservation easements in valuation of lands subject thereto (compare, General Municipal Law, § 247; see, 5 Op.Counsel SBEA No. 85). Nonetheless, the easement should be entered in the parcel’s inventory of assessment information in the same way as an assessment restriction (see, 9 NYCRR § 190-1.3(a)(2)(v)).

Generally, in determining value for assessment purposes, assessors should take cognizance of any restrictions on the economic benefits that can be obtained from real property - or limitations on the possible uses to which that property might be devoted - that adversely affect the value of that property. However, a restriction which might affect sales price does not necessarily influence the valuation of real property for assessment purposes. For example, in John P. Burke Apartments v. Howe, 98 A.D.2d 595, 471 N.Y.S.2d 405 (3d Dept., 1984), the Appellate Division held that where a property owner voluntarily accepted restrictions on rental prices in exchange for HUD subsidies, he could not later claim that restricted (or contract) rent should be used in valuing the property rather than the market rent for similar property in the area. {1}  In a case where a taxpayer has granted a conservation easement to an entity other than the State, a court might well conclude, based on the rationale in Burke, that the taxpayer has realized a benefit from such grant (e.g., a payment of money or federal estate or income tax benefits) and, having accepted that benefit, may not then claim a diminution in value. {2}

Statutory conservation easements created pursuant to title 3 of Article 49 of the Environmental Conservation Law have not yet been construed by the courts. However, as interests that the holder may enforce in a judicial proceeding (see, Environmental Conservation Law, § 49-0305(5)), conservation easements would likely influence the sale price of a subject parcel. Thus, it might be argued that conservation easements should be considered in determining the value of the land for assessment purposes. In the absence of a specific statutory provision governing assessment, the assessor, though subject to possible administrative and judicial review, must decide whether conservation easements should be considered, and, if so, what form that consideration will take. We note that in the first significant case in which an issue of valuation of a common law (i.e., non-statutory) conservation easement was presented, it was held that the easement at issue did not diminish the value of the burdened parcel, and, in fact, an increase in assessment after the grant of the easement was sustained (Adirondack Mountain Reserve v. Board of Assessors, Town of North Hudson, 99 A.D.2d 600, 471 N.Y.S.2d 703 (3d Dept., 1984), aff'd, 64 N.Y.2d 727, 475 N.E.2d 115, 485 N.Y.S.2d 744 (1984)).

Similarly, in Ross v. Town of Santa Clara, 266 A.D.2d 678, 698 N.Y.S.2d 90 (3d Dept., 1999) the court held that a common law conservation easement that had resulted in a substantial federal income tax deduction for the petitioner did not reduce the current value of the tract in question. It noted that “the limitations on the land were, in large part, merely redundant to restrictions that [the Adirondack Park Agency] already placed on the property” (266 A.D.2d at 681, 698 N.Y.S.2d at 92).

The analysis of the impact of conservation easements is proceeding on a case-by-case basis, with the outcome depending on individual circumstances. An analogy may be drawn to the decision in Katz v. Mt. Kisco, 82 A.D.2d 654, 442 N.Y.S.2d 795 (2d Dept., 1981), where a taxpayer alleged that the mere fact that a parcel had been designated as a freshwater wetland (Environmental Conservation Law, Art. 24) reduced its value. The Appellate Division rejected this conclusion and held that only evidence of sales of comparable restricted parcels or the denial of a permit to perform a regulated activity could support such a conclusion (see also, 6 Op.Counsel SBEA No. 20).

Our advice to assessors is to ascertain what the restrictions actually mean and whether similar restrictions that are in place have affected the market value of other parcels. If it is likely that the owners would have sought to do something that is now forbidden and this prohibition diminishes the value of the parcels, then the assessor may consider a lower assessment. If there has been no discernible effect on the value of the parcels, then there is no basis to lower the assessments.

April 10, 2002

{1}  The use of the restricted contract rents would have resulted in a significantly lower value. Note that the Burke decision was discussed at length in 10 Op.Counsel SBRPS No. 34.

{2}  We note that, on a theoretical level, this view is consistent with the concept of the value of property being the worth of the bundle of rights of ownership of the property, irrespective of whether the holder of title enjoys all those rights (see, Bonbright, Valuation of Property, Vol. 1, p.496).