Volume 9 - Opinions of Counsel SBEA No. 32

Opinions of Counsel index

Special assessing units (transition assessment) (demolition of real property) - Real Property Tax Law, § 1805:

Section 1805 of the Real Property Tax Law does not authorize separate transition assessments for land and improvements constituting a single parcel.

We are asked whether transition assessments were properly calculated in three cases, each involving the full or partial demolition of an improvement real property in Nassau County, a special assessing unit subject to Article 18 of the Real Property Tax Law.

Section 1805(3) of the RPTL applies to all parcels except those in class one and class two (RPTL, § 1802(1)) which have fewer than eleven residential units and which are not subject to the provisions of RPTL, § 581(1). Specifically, section 1805(3) provides that:

If the assessment appearing on an assessment roll completed on or after [January 1, 1982] for any parcel . . . is greater than the assessment appearing on the previous year’s assessment roll, the assessor shall determine a transition assessment for such parcel for the fast assessment roll on which such greater assessment appears and for each of the succeeding four assessment rolls by computing the difference between such greater assessment and the assessment appearing on such previous year’s assessment roll and adding the following percentages of such difference to the assessment appearing on such previous year’s assessment roll: in the first year, [20%]; in the second year, [40%]; in the third year, [60%]; in the fourth year, [80%]; and in the fifth year, [100%]. If the assessment of a parcel is increased during a period for which transition assessments have been established because of any prior assessment increases, such new increase shall be phased-in over a five-year period as set forth in this subdivision, and such phased-in increases shall be added to the transitional assessments previously established for the prior increase; provided, however, that if in any year any such transition assessment exceeds the actual assessment for such year, taxes imposed on such parcel for such year shall be based on such lesser actual assessment. (emphasis added)

RPTL, § 1805(5) provides in relevant part:

Nothing in this section shall prevent placing on the assessment roll new property, additions to or improvements of existing property or formerly exempt property or the full or partial removal from the roll of property by reason of fire, demolition, destruction or new exemption and such increase or decrease in value shall not be included in the computation of the limitations prescribed by this section. (emphasis added)

RPTL, § 102(11) defines a “parcel”, in relevant part, as a “separately assessed lot, parcel, piece or portion of Teal property” (see also, 9 NYCRR 190-1. 1(g)). An “assessment” is “a determination made by assessors of . . . the valuation of real property . . .”(§ 102(2)). The term “real property”, of course, encompasses structures as well as land (§ 102(12)(a) and (b)). Thus, a “parcel” includes land and any improvements thereon, unless the assessor has separately assessed the improvements (see, 1 Op.Counsel SBEA No. 95), a practice which we discourage because of potential problems in enforcing the collection of taxes (see, 5 Op.Counsel SBEA No. 13).

Reading the statutes as applied to an improved parcel, we believe that each time the assessment of the parcel (i.e., the land valuation plus the building valuation) is increased for reasons other than those specified in RPTL, § 1805(5), Nassau County is required to establish a transition assessment for the first assessment roll on which the increase appears and for each of the next succeeding four assessment rolls. If, during the five-year period for which transition assessments have been established, the assessment of the parcel is decreased for one of the reasons set forth in RPTL, § 1805(5), that same provision prohibits the County from adjusting the transition assessments. Instead, RPTL, § 1805(3) requires that taxes be imposed on the lesser of the transition assessment or actual assessment established for the parcel.

In the first example presented, a 95,000 square foot building was demolished prior to the taxable status date for the County’s 1987 assessment roll. For the 1987 assessment roll, we conclude that the parcel should be assessed on the basis of the actual assessment of $262,370, since the actual assessment is less than the transition assessment for that year:

EXAMPLE 1

In Example 2, a 30,000 square foot building was demolished prior to the taxable status date for the 1987 assessment roll. Example 2 differs from Example 1 in that, when the County took account of the decrease in value attributable to the demolished improvement, the County also increased the value of the land by almost a corresponding amount. Nevertheless, the total assessment did not increase in that year, so there would not be a second transition assessment beginning in that year. The second year of the first transition assessment would be in effect, however, and so, applying the principles discussed above, we conclude that the taxable amount on the 1987-88 assessment roll should be $113,370, determined as follows:

EXAMPLE 2

In Example 3, 15,000 square feet of a 136,000 square foot building was demolished prior to the taxable status date for the 1987 assessment roll. Example 3 seems to be similar to Example 1, except that the improvement is only partially demolished. We conclude that the parcel should be assessed (or entered) on the 1987 assessment roll on the basis of the actual assessment of $328,010, as follows:

EXAMPLE 3

There is no authority in section 1805 for the establishment of separate transition assessments for land and improvements constituting a single parcel.

June 1, 1988

{*}  Computed without regard to the demolition occurring between the 1986-87 and 1987-88 rolls, as required by RPTL, § 1805(5).