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Volume 5 - Opinions of Counsel SBEA No. 83

Opinions of Counsel index

Real property, definition of (bank vault door) (bank drive-up teller window) - Real Property Tax Law, § 102(12)(b):

Since vault doors and drive-up teller windows installed by banks for use in connection with bank business are actually annexed to the realty, are clearly adapted to the use or purpose to which the realty is appropriated, and an intended permanent accession to the freehold is evident, they are real property within the meaning of paragraph (b) of subdivision (12) of section 102 of the Real Property Tax Law.

Our opinion has been requested as to whether bank vault doors, walk-up and drive-up teller windows installed in a bank are real property for taxation purposes under the provisions of subdivision 12 of section 102 of the Real Property Tax Law.

The company requesting the opinion has submitted various information about the equipment. For example, the purchase agreement contains a clause that “it is the intention of both parties that the sale and installation of such equipment does not constitute improvements to real property.” Also some of these items will be installed by banks located in a leased building rather than in one owned by the bank. Furthermore, apparently there is an active market for used vault doors. (A brochure shows purchase prices advertised which range from $5,000 to $11,000 per door.)

The drive-up windows range in size from 4 feet wide to 8 feet wide and from 3 feet to 7 feet high with weights of up to 1,200 pounds. The windows are completely assembled at the factory and are screwed into openings specially cut for them. Electrical connections also are prepared for the windows. The vault doors are from 3 to 10 inches in thickness, 34 inches wide and 78-½ inches high. Both the drive-up windows and the vault doors may be removed without material injury to either the facility where installed or the equipment itself.

It has been our opinion for some years that vaults, including modular vaults (3 Op.Counsel SBEA No. 74), vault doors, drive-in windows and night depositories are real property for taxation purposes under the provisions of subdivision 12 of section 102 of the Real Property Tax Law. Our reasoning has basically been as follows:

Subdivision 12(b) of section 102 of the Real Property Tax Law includes in the definition of real property “... other articles and structures, substructures and superstructures erected upon, under or above the land, or affixed thereto . . .” (3 Op.Counsel SBEA No. 74).

In order for “articles...erected upon, under or above the land, or affixed thereto” to be considered real property, the courts have held that the following conditions must be met: (1) the article must be actually annexed to the realty or something appurtenant thereto; (2) the article must have been adapted to the use or purpose to which that part of the realty with which it is connected is appropriated; and (3) the party installing the article must have intended to make a permanent accession to the freehold. (People ex rel. National Starch Co. v. Waldron, 26 App. Div. 527, 50 N.Y.S. 523; People ex rel. New York Edison Co. v. Wells, 135 App. Div. 644, 119 N.Y.S. 1057, affd, 198 N.Y. 607, 92 N.E. 1097; People ex rel. Federal Telephone and Telegraph Co. v. Longwell, 131 N.Y.S. 361.)

As to the first condition - annexation - we think there is no question but that the drive-up windows and vaults would be considered “actually annexed” to the realty. A vault door is as attached to the realty as the door in any building. A drive-up window is installed in an opening especially made for it and is attached to special electrical connections. (See, New York Mobile Homes Ass’n. v. Steckel, 9 N.Y.2d 533, 175 N.E.2d 151, 215 N.Y.S.2d 487.) In fact the drive-up window could be said to be annexed by its own weight. In Snedeker v. Warring, 12 N.Y. 170, a statue weighing three or four tons was found to be annexed although it was “attached” to the land only by its own weight.

Second, the drive-up windows and vault doors are clearly adapted to the use or purpose to which the realty is appropriated. In other words the realty is being used for a bank purpose and the equipment is in fact essential for bank use.

Third, we believe a sufficient “permanent intent” exists as permanency of intent has been found by the courts under similar circumstances. This permanency, we believe, exists even though the doors and windows are installed on leased premises under a contract specifying that the equipment shall remain personal property.

The leading case on the classification of trade fixtures for taxation purposes, People ex rel. National Starch Co. v. Waldron, supra, established this as one of the criteria. However, subsequent cases have clearly held that where the legal title to a structure or article erected upon the land or affixed thereto lies is not controlling for taxation purposes. Thus, trade fixtures used in connection with a business being conducted on leased land or in a leased building have been found to be taxable real property (Herkimer County Light & Power Co. v. Johnson, 37 App. Div. 257, 55 N.Y.S. 924; People ex rel. Federal Telephone and Telegraph Co. v. Longwell, 131 N.Y.S. 361; Interstate Lien Corp. v. Schmidt, 180 Misc. 910, 44 N.Y.S.2d 709; see also, People ex rel. Knickerbocker Safe Deposit Co. v. Wells, 181 N.Y. 245, 73 N.E. 961). That this is still the law can be inferred from dicta of the court in the case of Martin v. Gwynn, 18 App. Div.2d 851, 236 N.Y.S.2d 755. There, the taxable status of machinery and equipment installed by a corporation on land belonging to another was involved. The court stated that “there can be little doubt that on general principles of law this plant would be treated as real property,” citing the Herkimer County Light and Power Co. case, supra, as authority.

We have been informed that one unreported opinion National Bank of North America v. Board of Assessors, by Justice Hogan, Supreme Court, Nassau County, October 15, 1974, held that vault doors and ventilator, night depository, head and chest, drive-up windows and teller rails were not real property for taxation purposes. The opinion insofar as it relates to this issue, is as follows:

At issue here, in the first instance, is whether certain property annexed to the real estate is taxable. At common law it was based upon the intent of the owner. In New York the test is whether it is removable without impairment of the real estate and whether it is economically feasible. City of Lakawanna [sic] v. St. Bd. of Eq. & Assessment, 21 A.D.2d 318, 250 N.Y.S.2d 369; ASSESSMENT FOR REAL PROPERTY TAX PURPOSES, Kramer, Adelphi University Press. . . .

At the outset, it must be made clear that the determination of whether a particular item of property is personalty and thus not subject to taxation as real property depends upon the facts of each case. At issue herein, is the status of the vault door and ventilator, night depository, head and chest, drive-up windows and teller rails. The uncontroverted evidence demonstrates that these items are not structural in nature, are removable and are not permanently affixed either in physical sense or by virtue of intention. In fact, these items are used only so long as the bank utilizes a specific location and can be and have been removed when the bank vacates. Hence, the Court finds these items are clearly personal property and are not subject to real estate taxation both under the statutory test as well as at common law (Real Property Tax Law §102, subdivision 12(f); City of Lackawanna v. State Board of Equalization and Assessment, 16 N.Y.2d 222; Marine Midland Trust Co. of Binghamton v. Ahern, 16 N.Y.S.2d 656 and cases cited therein). (Emphasis supplied)

We think the Court has misapplied and misconstrued the holding in the City of Lackawanna case, supra. It is understandable in view of the fact that the headnote written for the Appellate Division opinion (21 App. Div.2d 311) implies that the “statutory test in determining whether property is real property for tax purposes is movability and not intent of owner as in the typical common law fixtures problem; this test encompasses both economic as well as physical considerations.”

The Appellate Division opinion as well as the Court of Appeals opinion were concerned with the “statutory test” of the 9-A Corporation exemption (Tax Law, Article 9-A) accorded movable machinery and equipment by paragraph (f) of subdivision 12 of section 102 and not the tests applicable to whether “articles” attached to land are real property for taxation purposes. In any event this is now under appeal.

In conclusion, therefore, it is our opinion that bank vault doors and drive-up windows installed by banks for use in connection with bank business are real property for taxation purposes under the principles discussed above.

We note that no consideration has been given to paragraph (f) of subdivision 12 of section 102 of the Real Property Tax Law. This paragraph provides for the exemption of certain movable equipment owned by a 9-A corporation and used for trade and manufacture. Banks are not 9-A corporations.

December 2, 1975

Updated: