Volume 5 - Opinions of Counsel SBEA No. 51
Assessments, generally (open space lands) (easements) - General Municipal Law, § 247; Real Property Tax Law, § 306:
Where as a condition to the approval of a subdivision, a town planning board encumbers a portion of such lands so as to preclude the use of the property for other than passive recreational use, the encumbered parcel will have only a nominal value for taxation purposes irrespective of where the title to the parcel resides.
Should the town take title, the parcel would either be exempt as being used for a public purpose, or nominally valued pursuant to section 247 of the General Municipal Law. The proximity of this parcel to the others in the subdivision will be reflected in the assessments of the latter parcels.
Should title to the encumbered parcel be deeded to a not-for-profit corporation made up of the individual property owners in the subdivision, express or implied easements would exist in favor of such owners. The sales of these parcels will reflect the existence of the open space restrictions. In the absence of sales, it seems reasonable to assume that the value of the easements appurtenant to the lots approximates the market value of the recreational area, as if unencumbered, and that the value of each individual lot has been increased by an amount which is pro rata this value.
Our opinion has been requested as to the proper method of assessing a parcel of land located in a town which will be encumbered with a conservation or open space restriction (see, Real Property Tax Law, § 306).
Pursuant to authority granted by the town board under section 281 of the Town Law, the town planning board is granting approval to an owner-developer for the creation of approximately 28 half-acre building lots in a one acre zoned district. Section 281 permits the planning board to make as a condition to the variance the availability of part of the land for park, recreation, open-space or municipal purposes. In this case, the planning board has made one of the conditions the preservation of approximately 11.6 acres of land in its natural state. The encumbrance would preclude the use of the property for other than passive recreational purposes and no structures or improvements could be constructed thereon.
The question has arisen as to whether the encumbered property should be deeded to a not-for-profit corporation made up of individual property owners in the subdivision or to the town. A factor which will apparently be of importance in deciding which alternative should be adopted is the property taxation consequences. The town board is concerned that if the encumbered parcel is dedicated to the town, the total assessed value for the subdivision area will be reduced by reason of lower assessments on the individual parcels which would not have rights to the encumbered parcel.
The law governing assessments under a situation such as this is quite clear. There appears to be no question that the encumbered parcel would have only a nominal value for taxation purposes irrespective of where the title resides.
In the case of Crane-Berkley Corp. v. Lavis, 238 App.Div. 124, 263 N.Y.S. 556, park property was required to be set aside as a condition for the approval of a subdivision plat pursuant to the then section 179-l of the Village Law [now § 7-730]. There the court applied the doctrine of estoppel and said that in effect the requirement that property be set aside for park purposes was the equivalent of a grant of a private easement to individual lot owners and its result was to destroy the taxable value of the park lands. The actual title had remained at the time of the trial in the name of the developer but a covenant with the individual lot owners permitted the developer to dedicate the park parcel to the village (see also, People ex rel. Poor v. O’Donnel, 139 App. Div. 83, 124 N.Y.S. 36).
Should the town take title, the property would either be exempt as used for a public purpose or valued at a nominal taxable value pursuant to section 247 of the General Municipal Law. This section provides that property in which a municipality acquires an interest for open space purposes must be valued for taxation purposes as limited by any limitation on the future use of the land. Since no use can be made of the property, it would have no value. There remains therefore the crucial problem of the effect of the use of one method vis-a-vis the other on the assessed value of the individual parcels in the subdivision.
Should the title be conveyed to a not-for-profit corporation composed of the individual property owners, we assume express or implied easements would exist in favor of the individual property owners so that the property could be used by the individual property owners in common with each other only for passive recreational purposes. In this event, the method of assessing dominant estates where there are easement interests will apply. Under this method, the value of the dominant estate is increased by virtue of having the benefit of the easement (Tax Lien Co. v. Schultze, 213 N.Y. 9, 106 N.E. 751). The court in this case stated (at p. 11) as follows:
When an easement is carved out of one property for the benefit of another the market value of the servient estate is thereby lessened, and that of the dominant increased practically by just the value of the easement; the respective tenements should therefore be assessed accordingly.
With regard to the lots in the subdivision, the problem is to determine the extent to which their market value would be increased, and this problem is not easily solved where the easement interests are negative or restrictive in nature. One author suggests that the proper addition to the value of the dominant estate is “determined largely by the opinion of real-estate experts, aided by occasional selling prices, since easements are sometimes the subject of separate sales” (Bonbright, Valuation of Property, p. 497). Recent sales of property in the development could possibly give some indication of the value since such sales should reflect the easement value. In other words, development property would in all probability reflect the existence of the open space and particularly open space which cannot be used by the general public. In the absence of sales, it would then seem reasonable to assume that the value of the easements appurtenant to the lots approximates the market value of the recreational area as if unencumbered and that the value of each individual lot has been increased by an amount which is pro rata this value. In any event, the ultimate object is to equitably assess the individual lots at their market value as reduced to the level of assessment of all other property on the town assessment roll.
On the other hand, if the recreational parcel is dedicated to the town, then it becomes open space for the benefit of the entire town and no extra value can be imputed as a matter of law to the individual lots. Of course the fact that the 11-acre parcel is near at hand would most probably benefit the individual lots and make them more desirable. Thus in a general way, this benefit will be reflected in the sales prices of the individual lots. But this indirect effect on the sales price is no different than the sales price of any property which is contiguous to an area which must remain open space in perpetuity. Perhaps a crucial factor would be the degree to which the general public would be able to use the area if the town owns it.
In the long run, the answer will rest on opinion as based on the most reliable criteria available - the sales prices of the individual lots.
October 14, 1975