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Volume 12 - Opinions of Counsel SBRPS No. 30

Opinions of Counsel index

Assessments, generally (methods of valuation) (condominiums - removal of assessment restriction); Condominiums and cooperatives (methods of valuation) (removal of assessment restriction) - Real Property Law § 339-y; Real Property Tax Law §§ 305, 581:

The assessment restrictions that normally apply to condominiums are partially lifted in approved assessing units which have opted to use homestead and non-homestead class tax rates. In such cases, the assessor is required to make and enter on the assessment roll two different assessed value determinations for each condominium unit: a “restricted assessed valuation” determined in accordance with the income or cost approach to value and a market-based “assessed valuation” using the sales approach. If a municipal corporation levying taxes on the roll uses class tax rates, condominiums are to be taxed based upon their market-based assessed valuations. If the municipal corporation does not use class tax rates, condominiums are to be taxed based upon their restricted assessed valuations.

We have been asked how and when assessors are to discontinue the assessment limitations applicable to condominiums. These limitations are set forth in sections 339-y of the Real Property Law and section 581 of the Real Property Tax Law.

We have previously addressed these provisions in 7 Op.Counsel SBEA No. 81 and 11 Op.Counsel SBRPS No. 124. As we explained in the former opinion: “Section 339-y of the Real Property Law requires that each condominium unit together with its common interest be assessed as one parcel and provides that the sum of the assessments of the units cannot exceed the valuation which the condominium as a whole would have if it were assessed as a parcel.” We explained section 581 in the latter opinion: “[I]n simplest terms, condominium units are to be valued for purposes of the real property tax by using a capitalization of income approach or a cost approach. A comparable sales approach, based upon the sales prices of individual units, may not be used.”

The assessment restrictions that normally apply to condominiums are partially lifted in approved assessing units (see RPTL art 19) which have opted thereunder to use homestead and non-homestead class tax rates (RPTL § 581 [1] [b] [ii]; Real Property Law § 339-y [1] [d] [ii]). In such cases, the assessor is required to make two different assessed value determinations for each condominium unit: a “restricted assessed valuation” determined in accordance with the usual restrictions (i.e., using the income or cost approach), and a market-based “assessed valuation” determined without regard to those restrictions (i.e., using the sales approach) (see generally, RPTL § 581 [2]). Both assessed valuations are to be placed on the roll.

Each municipal corporation which levies taxes upon that assessment roll will use one or the other of those assessed valuations, depending on whether it does or does not use class tax rates to levy its taxes. If the municipal corporation does use class tax rates, condominiums will be taxed based upon their market-based assessed valuations. If the municipal corporation does not use class tax rates, condominiums will be taxed based upon their restricted assessed valuations. This dichotomy appears to reflect a policy determination that where class tax rates are used, condominiums do not require preferential treatment because they will be included in the homestead class and will thus be taxed at homestead class tax rates.

Since a school district is considered a municipal corporation for this purpose (RPTL § 102 [10]), a school district which is in an approved assessing unit but which does not use class tax rates will levy its taxes upon the restricted assessed valuations of its condominiums, as explained above. Note, however, that both a restricted and a market-based assessment would still have to appear on the roll for each condominium, as also explained above.

June 12, 2009

Updated: