Volume 9 - Opinions of Counsel SBEA No. 54
Real property, definition of (floating restaurant) - Real Property Tax Law, § 102(12)(b):
Where a floating restaurant is securely moored and a walkway for patrons is in place, it may be considered real property, provided there is an intent of permanence and it is in place on taxable status date.
Our opinion has been requested as to the taxable status of a floating restaurant. Photographs of the subject indicate that it is a large, two-story structure; a notation next to the photographs indicates that it is mounted on a 30’ x 110’ barge. The photographs also show an apparently well constructed walkway connecting the restaurant to the shore. Four anchor chains secure the barge in place and there are also utility connections. We are advised that the restaurant was first in place in June of 1989.
Section 300 of the RPTL provides that all real property within the State is subject to taxation. The term “real property” is defined for purposes of taxation in RPTL, section 102(12)(b), as including:
(b) buildings and other articles and structures and superstructures erected upon, under, or above the land, or affixed thereto....
In making a determination as to whether a particular improvement constitutes real property pursuant to this definition, the courts consider the common law test relating to fixtures. That test requires that three conditions be met:
(1) the improvement must be actually annexed to the real property, or something appurtenant thereto;
(2) the improvement must be applied or adapted to the use or purpose to which that part of the realty with which it is connected is used; and
(3) the improvement must be intended to be a permanent accession to the land.
In 1978, the Court of Appeals considered the taxable status of four barge-mounted power plants in Consolidated Edison Co. of New York v. City of New York, 44 N.Y.2d 536, 378 N.E.2d 91, 406 N.Y.S.2d 727 (1978). There, the barges were “connected to the pier by a 'spud and clamp’ design system which allows for vertical movement...[as well as] linear” (44 N.Y.2d at 539, 406 N.Y.S.2d at 729). Despite the uncontroverted claim that all connections could be severed and the barge put to sea in eight to 12 hours, the Court noted that “when detached, the plants cannot perform operations for which they were designed or serve the purpose for which they were constructed” (44 N.Y.2d at 542, 406 N.Y.S.2d at 731). The Court found certain facts to be persuasive on the question of classification: (1) that more than ten million dollars was spent in modifying the existing pier and installing the necessary lines, services and circuits, and (2) that a group of permanent pile clusters was installed to serve as a protective shield for the barge against passing ship traffic. The conclusion of the Court was that the barges were taxable real property. This decision from the State’s highest court was consistent with a trial court precedent issued two years earlier.
In Capri Marina & Pool Club v. Board of Assessors, 84 Misc.2d 1096, 379 N.Y.S.2d 341 (Sup.Ct., Nassau Co. 1976), the Court considered the classification of a barge used as a restaurant. In addition to utility and sewer connections, the barge was “locked in place by steel bands or rings fastened to the hull of the barge, and wrapped around a series of pilings implanted in the bay floor that surround the barge” (379 N.Y.S.2d at 343). In holding the barge/restaurant to be real property as defined by Real Property Tax Law, section 102(12)(b), the Court rejected an analogy (made by the petitioner) to yachts moored to marina piers: “Although these may be secured by tielines and have electric and water connections, there are no steel bands, sewer or other connections which would evidence an intention for permanent annexation. From the very nature of these vessels, their use and purpose, the contrary is true” (id. at 345). The Court then compared the physical (steel bands v. tielines) and functional (restaurant v. yacht) connections, the intentions of the parties, and held the barge to be taxable real property.
The Consolidated Edison and Capri Marina decisions would appear to indicate that the subject should be classified as real property. However, in both those cases, the barges in question had been in place for several years, while in this instance the subject has been in place only a few months. Thus, while instructive, the precedents are not conclusive here.
Consolidated Edison and another Court of Appeals decision, Metromedia, Inc. v. Tax Commission, 60 N.Y.2d 85, 455 N.E.2d 1252, 468 N.Y.S.2d 457 (1983), indicate the tendency of the courts to consider the intent of permanence of the item to be a crucial factor in determining whether it is real property, rather than the actual manner of affixation. For example, advertising signs attached to elevated railways, which were found to be taxable real property in the Metromedia case, were attached with only a few bolts and were readily removable. Nonetheless, it was the intent of permanence which the Court found to be determinative. This test was most recently considered in South Seas Yacht Club v. Bd. of Assessors and Bd. of Assmt. Review of County of Nassau, 136 A.D.2d 537, 523 N.Y.S.2d 157 (2d Dept. 1988), where the taxable status of houseboats and barges was reviewed. The lower court had granted partial summary judgment in favor of the assessing unit on the issue of the taxable status of the houseboats and barges. However, the Appellate Division reversed, finding that the lower court relied on insufficient evidence regarding the intent of permanency of the affixation, which the court noted was the most significant of the above-mentioned three tests. The court also noted that the intent of the owner of the improvement is determined not from the owner’s statements, but from the actual circumstances.
When applied to the facts of this inquiry, these precedents indicate that the taxable status of the subject floating restaurant hinges on whether there is an intent of permanence relative to its affixation. The subject barge has been in place since June, and the owner has stated his intent to move it to some other location from late October to May, annually. While this statement may be gratuitous and is not controlling, we are also advised that the winter conditions (e.g., ice) on the river may force the movement of the subject to avoid damage.
If the subject must be moved to avoid winter damage, this would seem to refute an intent of permanence. We are aware from other inquiries relating to marinas that there is a type of “bubbling” system available, which acts to prevent freezing, and the owner’s statement notwithstanding, it might be used to eliminate the need to move the unit in question.
Accordingly, it is necessary to wait until taxable status date (RPTL, §302) to resolve the issues of intent of permanence and presence on taxable status date. The subject may not be assessed if it is not in place on taxable status date.
October 30, 1989