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Volume 11 - Opinions of Counsel SBRPS No. 76

Opinions of Counsel

Agricultural exemption (conversion) (transfer of development rights); Zoning (transfer of development rights) (effect on property receiving agricultural assessment) - Agriculture and Markets Law, §§ 305, 306; Real Property Tax Law, § 481; Town Law, § 261-a:

A transfer of development rights associated with property receiving an agricultural assessment under section 305 or 306 of the Agriculture and Markets Law does not constitute a “conversion” of the use of such property.

We have received an inquiry concerning the effect of participating in a transfer of development rights [TDR] program (Town Law, § 261-a) {1} on the agricultural assessment program (Agriculture and Markets Law [AML], Art. 25-AA; Real Property Tax Law, § 481). The assessor advises that a property owner who currently enjoys the benefits of an agricultural assessment has sold 11 development rights from his 26.60 acre property to an individual who used those development rights to create a larger yield in a subdivision than would otherwise have been permitted by zoning. {2}  While no construction has occurred yet in the subdivision, it is imminent. The question is whether a “conversion” of agricultural land receiving an agricultural assessment has occurred (AML, § 301(8)), and if it has, which property is liable for the payment (AML, §§ 305(1)(d) and 306(2)).

A “conversion” of “land used in agricultural production” (AML, § 301(4)), for the purpose of the agricultural assessment program, must involve “an outward or affirmative act changing the use of agricultural land and shall not mean the nonuse or idling of such land” (AML, § 301(8)). Such a conversion of land previously used to produce for sale “crops, livestock or livestock products,” as those commodities are defined by AML, section 301(2), must cause “a sufficient change in the use of the lots such that they could no longer be used for agricultural production” (Pezzo v. Mazzetti, 202 A.D.2d 935, 937, 609 N.Y.S.2d 699, 701 (3d Dept., 1994)). In the event formerly agriculturally productive land is so converted, a payment may be owed if the conversion occurs within an applicable time period after such property last benefited from receiving an agricultural assessment. {3} 

The town’s TDR Program authorizes a process by which development rights are transferred from one lot, parcel or area of land in any sending district to another lot, parcel or area of land in one or more receiving districts (see, 12 NY Jur2d, Buildings, Zoning, and Land Controls, § 178). Such a transfer of development rights is irreversible, because the town’s code provides that no development rights may be transferred back to the sending parcel once the TDRs have been transferred.

It appears that certain agricultural lands in the town may qualify to be included in a “sending district” that may convey eligible development rights to properties in a “receiving district.” {4}  It also appears that such transfers of development rights by the owners of agriculturally productive land are intended to provide an incentive for keeping the seller’s land in farm production.

It is our opinion that a “conversion” of agricultural land has not occurred in this matter. To the contrary, the seller of the development rights has executed a “Deed of Conservation Easement” which states that this property “shall remain open lands actually used in bona fide agricultural production.” {5}  As previously noted, we have presumed that the land owned by the purchaser of the development rights is not engaged in commercial farming and has not benefited from an agricultural assessment. Accordingly, neither the land of the seller nor the land of the buyer at this time has been converted to a nonagricultural purpose for which a payment is owed by either party pursuant to section 305(1)(d) or section 306(2) of the AML. {6}  Moreover, the possibility that the land owned by the seller of the development rights might in the future be so converted has been minimized by the perpetual use restrictions imposed by the conservation easement.

October 7, 2005

{1}  Section 261-a(2) of the Town Law states that “a town board is hereby empowered to provide for transfer of development rights subject to the conditions hereinafter set forth and such other conditions as the town board deems necessary and appropriate that are consistent with the purposes of this section.” The town in question enacted a local law adopting such a program.

{2}  We presume that the purchaser of the development rights is not engaged in commercial farming and that the purchaser’s land has not benefited from the agricultural assessment program as the recipient of an agricultural assessment value (AML, § 304-a).

{3}  If the converted land is located within an agricultural district, “no payments shall be imposed if the last assessment roll upon which the property benefited from an agricultural assessment, was more than five years prior to the year for which the assessment roll upon which payments would otherwise be levied is prepared” (AML, § 305(1)(d)(i)). If the converted, formerly agriculturally productive land is situated outside an agricultural district, such a payment is owed if the conversion occurs “at any time within eight years from the time an agricultural assessment was last received” (AML, § 306(2)(a)(i)).

{4}  The terms “sending district” and “receiving district” are defined in section 261-a(1) of the Town Law and the code of the town in question.

{5}  The “Deed of Conservation Easement” appears to comply with Town Law, section 261-a(2)(c), which provides that “the burden upon land within a sending district from which development rights have been transferred shall be documented by an instrument duly executed by the grantor in the form of a conservation easement, as defined in title three of article forty-nine of the environmental conservation law” (see also, Environmental Conservation Law, § 49-0305). The deed states the grantor of the property’s development rights agrees “that the parcels of real property described herein are open lands actually used in bona fide agricultural production . . . and shall remain lands actually used in agricultural production.” The deed also states “[t]his covenant shall run with the land in perpetuity.”

{6}  We note, in passing, that section 261-a(2)(d) of the Town Law provides that within one year after the transfer of development rights, the assessed values placed on affected properties are to be adjusted to reflect such transfer. The assessor herein did not raise any valuation question.