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Volume 11 - Opinions of Counsel SBRPS No. 83

Opinions of Counsel

Agricultural exemption (qualified lands requirement) (rented land - license) - Agriculture and Markets Law, § 301; Real Property Tax Law, § 481:

Land being used for agricultural purposes under the terms of a license may qualify for an agricultural assessment as rented land if the requisites otherwise applicable to qualifying rented land are satisfied.

We have received an inquiry concerning the agricultural assessment program (Agriculture and Markets Law [AML], Article 25 AA; Real Property Tax Law, § 481). The assessment official requesting our opinion submitted a deed which includes the following provision: “Also granting . . . to [the grantors’ son] the right to personally use the above-described premises for pasture land so long as he shall own and operate the adjacent property.” The question is whether this deed provision interferes with the current fee owner’s eligibility for an agricultural assessment for the land.

AML, section 305(1)(a), provides that: “Any owner of land used in agricultural production within an agricultural district shall be eligible for an agricultural assessment pursuant to this section. *** Such assessment shall be granted only upon an annual application by the owner of such land on a form prescribed by the state board of real property services.” {1}  Therefore, in order to answer the question, it is necessary to determine ownership of this property for the purposes of section 305, and the effect of the interest held by the grantors’ son on the land’s right to receive an agricultural assessment.

Land may qualify as being “used in agricultural production” when such land is farmed by the owner of the land or by a person who rents the land from its owner (AML, § 301(4)). In our opinion, it is implicit in the terms “owner” and “renter” set forth in section 301(4) that an “owner” not only has a legal interest in the land, but also has the authority to lease the land to a “renter” who will use the land for a commercial agricultural purpose.

The portion of the deed in question might be interpreted as granting either an “easement” or a “license” to the grantors’ son.

Although it can be difficult to distinguish an easement from a license in real property, there are differences. An appurtenant easement implies an interest in land, which ordinarily is created by a grant and is permanent in nature. A license, on the other land, implies no interest in land, is personal to the holder, is not assignable, and is of limited duration (49 NY Jur2d, Easements, § 3).

We construe the deed provision as more closely resembling a “license” because the deed does not give the grantors’ son [hereafter the licensee] the right to assign his right to use the land to another party and its duration is limited to the period when he “shall own and operate the adjacent property.”  Since the deed does not grant the licensee indicia of ownership, but only a license to use the land for an agricultural purpose, it is our opinion that the fee owner of the land is the “owner” for the purposes of the agricultural assessment program.

It appears from the aforementioned deed provision that the licensee, and not the fee owner, will be conducting whatever commercial agricultural activities occur on this land “so long as he shall own and operate the adjacent property.” We were advised that those agricultural activities will be limited to using the rented land as pasture for the licensee’s livestock. Accordingly, it is our opinion that this land will qualify for an agricultural assessment only if the license to use the pasture land is tantamount to a “written rental arrangement of five or more years” that complies with AML, section 301(4)(b). {2}

There are several similarities between the license in question and a written rental arrangement that complies with section 301(4)(b). The first similarity is that the license is conveyed by a written instrument. The second similarity is that the fee owner apparently conveyed the license for consideration because we presume that the purchase price for the property was reduced to reflect the value of the license. {3}  The third apparent similarity, based on our assumption that the land was used as pasture by the prior land owners when they owned the property, is that the land was used for a valid agricultural purpose during the two years before the license became effective. The fourth apparent similarity is our presumption that the licensee’s adjacent farm operation is “eligible for an agricultural assessment” as required by AML, section 301(4)(b). {4} 

Despite the aforementioned common characteristics, the license herein is distinguishable from a written rental arrangement that satisfies section 301(4)(b), because the license’s duration is not based on a specified minimum number of years. The deed instead states that the license will last “so long as [the licensee] shall own and operate the adjacent property.” In contrast, section 301(4)(b) requires that an eligible written rental arrangement must be for “five or more years.” Accordingly, it is our opinion that a written rental arrangement for a period of at least five years must be executed in this situation in order to comply with section 301(4)(b). {5}  The land owner could prove the existence of such an arrangement by submitting an Agricultural Assessment Written Lease Affidavit (RP-305-c) to the assessor as an attachment to the agricultural assessment application.

March 14, 2006

{1}  A similar provision applies to “land used in agricultural production” that is located outside an agricultural district (AML, § 306(1)).

{2}  AML, section 301(4)(b), applies to “land of not less than seven acres used as a single operation for the production for sale of crops, livestock or livestock products, exclusive of woodland products, which does not independently satisfy the gross sales value requirement, where such land was used in such production for the preceding two years and currently is being so used under a written rental arrangement of five or more years in conjunction with land which is eligible for an agricultural assessment.”

{3}  In a prior opinion (8 Op.Counsel SBEA No. 64), we stated that an eligible written rental arrangement must be accompanied by the payment of legal consideration by the lessee.

{4}  We note that in 1987, when 8 Op.Counsel SBEA No. 64 (cited in endnote 3) was written, the “in conjunction” farm land owned by the renter had to qualify for an agricultural assessment. The current requirement, which was added by L.1997, c.357, is that such “in conjunction” farm land owned by the renter must be “eligible for an agricultural assessment.”

{5}  We think that our statutory construction of section 301(4)(b) is consistent with the policy the Legislature has adopted regarding tax recapture payments that are owed after formerly agricultural land is converted to a non-agricultural purpose. AML, section 305(1)(d)(i), states that “no [such] 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.”