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Volume 9 - Opinions of Counsel SBEA No. 3

Opinions of Counsel index

Condominiums (eligibility for small claims assessment review); Assessment review, small claims (eligibility) (condominiums) - Real Property Law, § 339-y; Real Property Tax Law, §§ 581, 730:

Condominiums in special assessing units which are classified as “class one” properties and condominiums in approved assessing units which are classified as “homestead” properties are eligible for small claims assessment review.

We have been asked whether condominiums which are not subject to the assessment limitations of section 339-y of the Real Property Law (RPL) are eligible for small claims assessment review.

The small claims assessment review program, codified as Title 1-A of Article 7 of the Real Property Tax Law (RPTL), was enacted by chapter 1022 of the Laws of 1981. RPTL, section 730(1), contains the jurisdictional requisites for small claims assessment review, and paragraph (a) specifically provides that the property for which review is sought must be “improved by a one, two or three family owner-occupied structure used exclusively for residential purposes other than property assessed pursuant to article nine-B of the real property law” (emphasis added).

Article 9-B of the Real Property Law (RPL), known as the “Condominium Act”, provides for the creation and legal status of condominiums. The only provision of Article 9-B directly relating to assessment administration is section 339-y, entitled “Separate Taxation.” Subdivision one of that section provides:

1.(a) With respect to all property submitted to the provisions of this article other than property which is the subject of a qualified leasehold condominium, each unit and its common interest, not including any personal property, shall be deemed to be a parcel and shall be subject to separate assessment and taxation by each assessing unit, school district, special district, county or other taxing unit, for all types of taxes authorized by law including but not limited to special ad valorem levies and special assessments, except that the foregoing shall not apply to a unit held under lease or sublease unless the declaration requires the unit owner to pay all taxes attributable to his unit. Neither the building, the property nor any of the common elements shall be deemed to be a parcel.

(b) In no event shall the aggregate of the assessment of the units plus their common interests exceed the total valuation of the property were the property assessed as a parcel.

(c) For the purposes of this and the next succeeding section the terms “assessing unit”, “assessment”, “parcel”, “special ad valorem levy”, “special assessment”, “special district”, “taxation” and “taxes” shall have the meanings specified in section one hundred two of the real property tax law.

(d) The provisions of paragraph (b) of this subdivision shall not apply to such real property classified within:

(i) on or after [January 1, 1986] class one of section [1802 of the RPTL]; or

(ii) on and after [January 1, 1984] the homestead class of an approved assessing unit which has adopted the provisions of section [1903 of the RPTL]; provided, however, that, in an approved assessing unit which adopted the provisions of section [1903 of the RPTL], prior to the effective date of this subdivision, paragraph (b) of this subdivision shall apply to all such real property (i) which is classified within the homestead class pursuant to [section 1901(e)(1) of the RPTL] and (ii) which, regardless of classification, was on the assessment roll prior to the effective date of this subdivision unless the governing body of such approved assessing unit provides by local law adopted after a public hearing, prior to the taxable status date of such assessing unit next occurring after [December 31, 1983], that such paragraph (b) shall not apply to such real property to which this clause applies.

Thus, with exceptions that are not relevant to this analysis, paragraph (d) of subdivision one makes the assessment limitations of paragraph (b) inapplicable to condominiums which are classified within class one in special assessing units and within the homestead class in approved assessing units. The question presented is whether these condominiums are “assessed” pursuant to Article 9-B of the RPL, so as to render them ineligible for small claims assessment review pursuant to section 730(1)(a) of the RPTL.

At the time of its enactment in 1981, the small claims assessment review procedure was restricted to one, two or three family owner-occupied structures exclusive of condominiums. Residential condominiums present a special definitional problem because each condominium unit, separately assessed pursuant to RPL, §339-y, can be essentially a single family owner-occupied dwelling. When chapter 1022 was enacted, however, all condominiums were subject to assessment restrictions by virtue of section 339-y(1)(b). The drafters of chapter 1022 clearly believed that condominiums were not analogous to single-family homes for purposes of small claims assessment review. In excluding condominiums from the program, the drafters used the exclusionary language which contains the reference to “assessed pursuant to article nine-B of the real property law.” While the legislative history of chapter 1022 is silent on this point, we do not believe that the drafters intended to exclude condominiums from small claims assessment review (SCAR) simply because they are separately assessed, especially since most, if not all, single family homes that qualify for SCAR are separately assessed. Rather, we believe that “assessed” as used section 730(1) is intended to mean “valued”, just as the term “assessment” as used in the RPTL means “a determination [of] the valuation of real property” (RPTL, §102(2)).

Small claims assessment review is a program expressly designed to confer a benefit upon owners of one, two and three family owner-occupied dwellings. Excluding owners of condominiums from small claims assessment review presumably was intended to free the trier of fact from the complex task of establishing the value of the entire structure as if it were a rental property (RPTL, §581) and then apportioning its value to the individual condominium (see, 7 Op.Counsel SBEA No. 81). Conversely, to include condominiums subject to the valuation restrictions of §339-y and RPTL, §581 would require complex proof which would not be appropriate for the type of simplified, expedited proceeding which the SCAR program was designed to accommodate.

However, these considerations do not apply where the condominium is not subject to the assessment (valuation) limitations of 339-y. That is, such condominiums may be valued using traditional valuation methodologies just as in the case of single family homes. Thus, the presumed rationale for denying condominiums the benefits of SCAR dissipates where they are treated like other residential properties in all other respects.

The restrictions of RPTL, §581 were added by chapter 1057 of the Laws of 1981, which also added Articles 18 and 19 to the RPTL, providing for differential tax liability determined by type or class of property. In special assessing units, all condominiums were originally defined as “class two” properties (RPTL, §1802(1)). For approved assessing units, Article 19 of the RPTL initially made no mention of condominiums. In 7 Op.Counsel SBEA No. 85, we concluded that any building or structure, used primarily for residential purposes, and which houses one, two or three families, belonged in the “homestead” class for Article 19 purposes, regardless of its form of ownership.

In response to that Opinion, the Legislature enacted chapter 800 of the Laws of 1983, which changed both the method of assessing certain condominiums and their classification for purposes of Article 19. For approved assessing units which elect or have elected to levy taxes on the basis of a homestead base proportion pursuant to RPTL, section 1903, chapter 800 made the following changes:

-For those approved assessing units which adopt homestead base proportions on or after April 30, 1983, RPTL, section 1901 was amended to expand the definition of the “homestead class” to include residential condominiums containing more than three dwelling units, except those condominiums which appeared on any prior assessment roll as other than condominiums (i.e., condominiums which were converted from conventional ownership). As of January 1, 1984, the valuation methodology prescribed in RPTL, §581 and the assessment limitation set forth in Real Property Law, §339-y were no longer applicable to residential condominiums located in these assessing units.

–For approved assessing units which adopted homestead base proportions prior to April 30, 1983, RPTL, section 1901 was amended to expand the definition of the “homestead class” to include residential condominiums containing more than three dwelling units; however, these assessing units were authorized for a limited period of time to adopt a local law, after a public hearing, to exclude condominiums with more than three dwelling units from the homestead class. The valuation methodology prescribed in RPTL, §581 and the assessment limitation set forth in Real Property Law, §339-y continued to be applicable, except that these assessing units were authorized for a limited period of time to adopt local laws, after a public hearing, providing that the §581 valuation methodology, the §339-y assessment limitation, or both, were inapplicable. These assessing units were required to adjust their homestead base proportions to take into account changes in the class designation of residential condominiums for the assessment roll prepared on the basis of the taxable status date next occurring on or after May 1, 1983.

The sponsor’s memorandum accompanying the bill (1983 Senate Bill No. 600-C) which was enacted as chapter 800, states that its purpose was to include all condominiums within the “homestead” class for purposes of Article 19.

Three years later, the Legislature enacted chapter 218 of the Laws of 1986, which amended RPTL, section 1802(1), to reclassify residential condominiums of less than four stories in height from “class two” to “class one” in special assessing units, so long as they had not been previously listed on an assessment roll as a dwelling unit in another form of ownership. Further, the valuation methodology limitations of RPTL, section 581 and the assessment ceiling provisions of RPL, section 339-y(1) were removed for these so-called “short” condominiums.

Thus, the assessment limitations of section 339-y(1)(b) continue to apply in those jurisdictions in which there is a single tax rate for all properties, both residential and non-residential. In those jurisdictions, assuming that all property is assessed at a uniform percentage of value as required by law (RPTL, §305(2)), the valuation limitations result in preferential assessments for condominiums relative to all other properties, including other residential properties.

However, where the value limitations are removed, condominiums retain their preferential treatment relative to non-residential property by virtue of the lower tax rate generally applicable to the residential classes in special assessing units and approved assessing units. Since the condominiums to which section 339-y(1)(d) applies are not valued pursuant to article 9-B of the RPL, the apparent reason for excluding this property from small claims is removed. Considering this circumstance, and because Title 1-A is a remedial statute (see, Town of Tonawanda v. Ayler, 68 N.Y.2d 836, 500 N.E.2d 869, 508 N.Y.S.2d 171 (1986)), the assessments of such condominiums should be reviewable in a small claims assessment review proceeding.

In closing, we note that the whole scheme of differential tax rates and condominium assessment limitations is under review by the courts and has been held unconstitutional by one court (Verga v. Town of Clarkstown, 137 A.D.2d 809, 525 N.Y.S.2d 272 (2d Dept. 1988)). Further review in the Court of Appeals is expected.

July 8, 1988

NOTE  Construes law prior to L.1991, c.552.

Updated: