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Volume 4 - Opinions of Counsel SBEA No. 61

Opinions of Counsel index

Assessments, generally (restrictions in deed) (right of reverter) - Real Property Tax Law, § 306:

Restrictions in a deed conditioning ownership upon use of a golf course which are personal to the owner need not be considered by an assessor in assessing the golf course.

Our opinion has been requested as to the effect, if any, of use restrictions contained in deeds to a golf course upon the value of the golf course for taxation purposes.

The property in issue belongs to a not-for-profit corporation and apparently constitutes the golf course. The property was conveyed to the golf club under two deeds and each deed contains the following provision:

together with the appurtenances and all the estate and rights of the parties of the first part in and to said premises, for so long as lands described above are used by the party of the second part for golf club purposes and for no other purposes, and this conveyance is made upon the express conditional limitation that in case said lands shall ever cease to be used by the party of the second part for golf club purposes, then and in that case, the estate granted to the party of the second part shall thereupon become void and the title to said lands shall revert back to the parties of the first part, their successors or assigns, who may thereupon enter said lands, as if this conveyance had not been made.

The attorney for the golf club maintains that the aforementioned deed restrictions require that the land used as a golf course should not be assessed on the basis of its highest potential use (which, we assume is for development purposes) but should instead be assessed on its use as a golf club, for nonprofit purposes. In that connection the attorney states that: “In New York State the higher courts have consistently considered golf courses as special purpose property.”

The standard of assessment of real property established by New York State law (Real Property Tax Law, § 306) is that “all real property shall be assessed at the full value thereof” and “assessments shall be against the real property itself which shall be liable to sale” for unpaid taxes (id., § 304). Case law has construed the term “full value” to mean fair market value, and the concept of economic highest and best use is a part of “fair market value”. Exemption statutes permit the preferential assessment of agricultural and forest lands which satisfy the requirements of the particular statutes (Agriculture and Markets Law, Art. 25AA and Real Property Tax Law, § 480a). Property exempt under these statutes is assessed on the basis of per acre factors ascertained and established by the State Board of Equalization and Assessment reflecting only the farm and forest land value.

However, the result flowing from the in rem concept established by the sections of law cited above has been succinctly stated by the Court in People ex rel. Gale v. Tax Commission, 17 App. Div.2d 225, 233 N.Y.S.2d 501, as follows (at page 504):

The tax levied is a tax upon the whole land, and not merely on the interest of a particular person therein. “Where the fee is privately owned, the real property tax attaches to the combined interest of all the parties interested in the land and the improvements thereon.” . . . So, to comply with statutory provisions and to achieve the essential indiscriminate and full measure of taxation of real property as a whole, it is not generally proper or necessary that separate legal interests in a piece of property be independently assessed.

Thus, under this concept, all property is assessed without regard to restrictions or encumbrances which are personal to the owner and not imposed under compulsion of law (Knickerbocker Village, Inc. v. Boyland, 16 App.Div.2d 223, 226 N.Y.S.2d 982, aff’d, 12 N.Y.2d 1044, 190 N.E.2d 239, 239 N.Y.S.2d 878).

The only exception, of which we are aware, to the above stated general rule, that all property is assessed without regard to restrictions or encumbrances which are personal to the owner, is the different treatment accorded certain easement interests (see, Tax Lien Co. v. Schultze, 213 N.Y. 9 106 N.E. 751). This exception need not be discussed since it is not involved in this factual situation. The attorney for the golf club mentioned the existence of New York cases declaring golf courses to be specialty property for valuation purposes. This could be for purposes of ascertaining the value of improvements on the basis of replacement cost less depreciation. But the “highest and best use” concept for valuing the land to our knowledge has not been repudiated.

On the basis of the law above-cited, therefore, it is our opinion that the restrictions conditioning ownership upon use of a golf course need not be considered by the assessor in assessing the golf course for taxation purposes. These restrictions are personal to the owner and were not imposed under compulsion of law. In effect what we are saying is that the assessor values both the interest of the golf club and the reverter interest of the grantors. Where the reverter interest is included, the assessor can assume the land can be used for non-golf purposes.

November 25, 1974

Updated: