Volume 11 - Opinions of Counsel SBRPS No. 23
First-time homebuyers of newly constructed homes exemption (scope) (completed buildings) - Real Property Tax Law, § 457:
The first-time homebuyers of newly constructed homes exemption applies to residential buildings only and may be granted to newly constructed residential property completed after the law’s effective date.
We have two related inquiries regarding the partial exemption for first-time homebuyers of newly constructed homes (Real Property Tax Law, § 457, as added by L.2001, c.529). The first question is as to which improvements may qualify for the program. The second question is whether the exemption applies to the improvement only or to the total assessment.
Section 457 authorizes municipalities to offer a partial exemption for newly constructed homes purchased by first-time homebuyers. The exemption is also available for certain improvements made to existing homes.
Chapter 529 of the Laws of 2001, which added section 457, took effect immediately upon its approval on November 28, 2001. It applies to “taxable years beginning on or after January 1, 2002” (L.2001, c.529, § 3).
The statute defines “newly constructed” as “an improvement to real property which was constructed as a primary residential property, and which has never been occupied and was constructed after the effective date of this section. ‘Newly constructed’ shall also mean that portion of a primary residential property that is altered, improved or reconstructed” (RPTL, § 457(9)(c), emphasis added).
Section 457 includes neither a specific “commencement” date nor a definition of what is meant by “completion” of construction (cf., RPTL, § 485-b(2)(b)(1), (3)). In the absence of judicial precedent on which to rely, in interpreting statutory language which, like the language here, is ambiguous, we normally look to legislative intent (see, McKinney’s Statutes, § 92), beginning with the bill sponsor’s memorandum in support and (where available, as here) published legislative findings to ascertain legislative intent. Unfortunately, neither addresses this issue.
Consequently, we must construe the applicable language, and, in doing so, are guided by the rule that in construing statutory language, words are to be given their natural and most obvious meaning (Matter of Alamo Associates v. Commissioner of Finance, 71 N.Y.2d 340, 520 N.E.2d 542, 525 N.Y.S.2d 823 (1988); McKinney’s Statutes, § 94). In our opinion, the most reasonable interpretation of the emphasized phrase is that the exemption applies to newly constructed residential property completed after the law’s effective date. That is, residential property, the construction of which was commenced prior to November 28, 2001, may qualify for the exemption so long as it was not occupied or completed prior to such date. {1}
For some guidance, we consider how the courts have interpreted related language of another exemption statute. Thus, in the context of the “business investment exemption” (RPTL, § 485-b), as to “completion”, it has been said, ‘completed’ must mean that the structure in question is finished to the extent that it is available for occupancy and meets the specifications contained in the site plans” (10-20 Glenwood Associates v. Assessor of the City of Binghamton, 142 Misc.2d 636, 640, 538 N.Y.S.2d 139, 141 (Sup.Ct., Broome Co., 1988)). This standard was cited as being “reasonable” in a subsequent decision of the Second Department: Matter of Ambald Realty v. Board of Assessors, 224 A.D.2d 412, 413, 638 N.Y.S.2d 97, 98 (2d Dept. 1996), which decision, in turn, was cited with approval by the Fourth Department: Matter of Braunview Associates v. Unmack, 227 A.D.2d 937, 643 N.Y.S.2d 253 (4th Dept., 1996). Moreover, where a permanent certificate of occupancy has been issued, case law indicates that this denotes completion of construction, and we believe the same interpretation should be applied for purposes of section 457 (see, Braunview, (supra); accord, A.P. Wide World Realty v. Assessor, 253 A.D.2d, 874, 678 N.Y.S.2d 342 (2d Dept., 1998)).
We recognize that an alternative conclusion would be to read the statute as being applicable only to residential improvements commenced after November 28, 2001. {2} It seems self-evident, however, that section 457 is intended, at least in part, as a stimulus to the building trades. To exclude newly constructed housing which was incomplete as of November 28 could render such stock less saleable, a result inconsistent with the Legislature’s apparent intent.
The statute defines “primary residential property” as “any one or two family house, townhouse or condominium located in this state which is owner occupied by such homebuyer” (RPTL, § 457(9)(b); emphasis added). Again, following the plain language statutory construction rule referred to above, in our opinion, the most reasonable interpretation of the emphasized phrase is that the exemption applies to the improvement itself.
We contrast many other exemptions that do not further define “real property” (e.g., RPTL, §§ 458-a(2), 467(1)(a)). In such cases, the exemptions are applied against the assessment of the residential portion of the property which may include the land value.
Section 457 is more akin to the residential improvements exemption (RPTL, § 421-f) that grants a partial exemption to “residential buildings” (§ 421-f(1)). We construed that section in 10 Op.Counsel SBRPS No. 50 and concluded that that exemption applies “to improvements made to a residential structure itself.” For similar reasons, we reach a similar conclusion here. {3}
January 17, 2002
February 25, 2002
{1} For purposes of this inquiry, we need not address whether a local law or resolution authorizing section 457 may restrict exemption to improvements commenced subsequent to a later date (e.g., the effective date of such local law or resolution).
{2} This approach would disqualify applications from those who might argue that their seemingly complete properties were still incomplete and undergoing (perhaps cosmetic) changes. Because the statute excludes previously occupied improvements (except for the alteration category-RPTL, § 457(9)(c)), however, our conclusion should not result in a large number of exemption recipients that the Legislature presumably intended to exclude.
{3} This interpretation should also result in a more consistent result vis-à-vis those existing homes that can receive the exemption when they are improved soon after acquisition (RPTL, § 457(2)(b)).