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Volume 11 - Opinions of Counsel SBRPS No. 81

Opinions of Counsel

First-time homebuyers of newly constructed homes exemption (purchase price limitation) (self-constructed home) - Real Property Tax Law, § 457:

A residence which is self-constructed in whole or in substantial part may nevertheless qualify for the exemption for first-time homebuyers of newly constructed homes, provided the value of the home fits within the locally applicable purchase price limit as established by the State of New York Mortgage Agency [SONYMA]. An independent appraisal should be submitted to substantiate the value of such property.

We have received an inquiry concerning the first-time homebuyers of newly constructed homes exemption (Real Property Tax Law, § 457). The assessor notes that the law refers to a limitation on the purchase price of property for which the exemption is sought, and asks how to proceed if there is “no” purchase price, that is, if the applicant/owner is a building contractor who has constructed his or her own home.

One of the statutory criteria is that the property be within certain “purchase price limits” (RPTL, § 457(2)(a)). {1}  While it seems obvious that the drafters of the law contemplated arms-length purchase prices as negotiated by “first-time homebuyers” (defined in RPTL, § 457(9)(a)) and building contractors who construct (or improve) a residence, we do not think that there was any intention to categorically exclude otherwise qualifying property that is self-constructed in whole or in substantial part.

It is a basic tenet of statutory interpretation that the construction given to a statute further its object, spirit, and purpose (McKinney’s Statutes, § 96). We have noted that one of the purposes of section 457 is to stimulate the building trades (11 Op.Counsel SBRPS No. 23). Another, as stated in the sponsor’s memorandum for the bill that enacted section 457 (L.2001, c.529), “is to assist potential homeowners in their ability to afford low to moderately priced housing in New York State” (2001 NYS Legislative Annual, p.311). To best effectuate both purposes, in our opinion, where an otherwise qualifying residence is self-constructed, either totally or in substantial part, the assessor should request the applicant to supply an independent appraisal of the property. The assessor should then compare the appraised value to the SONYMA purchase price limits to ascertain the property’s exemption eligibility. {2}

February 3, 2006

{1}  The limit is as defined by the State of New York Mortgage Agency’s [SONYMA] low interest rate mortgage program in the non-target, one family new category for the county in which the property is located and in effect on the contract date for the purchase and sale of the property.

{2}  Since a significant part of the purchase price of newly constructed homes is for labor costs, the submission of an independent appraisal for self-constructed homes should help to avoid the exemption being extended to other than low or moderately valued homes.