Volume 9 - Opinions of Counsel SBEA No. 41
Assessment roll (designation of owner) (life estate and right of occupancy contrasted) - Real Property Tax Law, § 502:
A grant of “exclusive life use” of premises creates a life estate in the premises, as opposed to a right of occupancy, if the instrument creating the interest contains no evidence of intent to the contrary.
We have been asked whether a person who has been granted the “exclusive life use” of premises should be considered the owner of the premises for purposes of assessment administration. The answer depends upon whether the grant creates a life estate or a mere right of occupancy.
As we have stated, if a person holds a life estate in real property, he or she must be considered the legal owner of the property, both for purposes of the designation of the owner on the assessment roll (RPTL, § 502) and for purposes of exemption administration (see, e.g., RPTL, §§ 458, 458-a, 467), as long as the life estate is in effect (see, 1 Op.Counsel SBEA Nos. 34, 59, 88; 3 id. No. 45). On the other hand, if a person holds merely a “right of occupancy” in real property, he or she should not be considered the owner of the property for these purposes (5 Op.Counsel SBEA No. 12). It is therefore critical to differentiate between these two types of interests.
An instrument creating an interest in real property must be construed in accordance with the grantor’s intent, as expressed in the instrument creating the interest (Real Property Law (RPL), § 240). But since life estates and rights of occupancy bear more than a superficial resemblance to one another (both entailing the right to occupy premises for life), determining whether a grantor intended to create one or the other requires a particularly careful construction of the grant.
Life estates
The construction of a grant may be facilitated where a grantor has explicitly characterized the interest being created as a “life estate,” but a grantor may create a life estate without describing it as such. Life estates are commonly created by the grant of the “use and possession” of property for a person’s natural life (see, e.g., 5 Op.Counsel SBEA No. 12). It is the term “use” which signifies that the grant is a life estate. “A bequest or devise of the use of a piece of property during the natural life of a person gives to that person a life estate in the property and not merely the right to occupy it” (In re Gaffer’s Estate, 254 A.D. 448, 5 N.Y.S.2d 671 (3d Dept. 1938), emphasis added).
The grant of the “use” of the property is critical because it indicates that the grantor gives the grantee not only the naked right to occupy the property, but also the right to any other “rents and profits” that the property may provide. For example, a life tenant may sell his or her estate to a third party {*}, may rent some or all of the property to a third party, or may harvest any crops that grow on the land. The right to rents and profits is an essential characteristic of a life estate (see, generally, Warren’s Weed New York Real Property, Vol. 3, “Life Estates” (4th Ed., 1990)).
The corollary to the right to rents and profits is the obligation to pay “charges,” such as taxes, mortgage interest, insurance and repairs. The life tenant is obliged to pay such charges, unless the instrument creating the life estate explicitly imposes these duties upon another party, because the life tenant is required to protect the future estate of the remainderman or reversioner against “waste.”
Rights of occupancy
By contrast, a right of occupancy entitles the grantee to nothing more than the occupancy of the premises (see, Carpenter v. Carpenter, 131 N.Y. 101, 29 N.E. 1013 (1892)). Thus, the grantee may not otherwise enjoy any rents and profits that the property might provide beyond occupancy, such as by selling or leasing the premises or by harvesting crops grown on the premises. By the same token, the grantee is not considered the legal owner of the property and so is not obliged to pay carrying costs.
Rights of occupancy have been created by instruments conferring upon grantees the right to “make their home” on premises (Rizzo v. Mataranglo, 16 Misc.2d 20, 135 N.Y.S.2d 92 (N.Y.C. Mun. Ct., 1953), aff’d, 16 Misc.2d 21, 186 N.Y.S.2d 773 (Sup. Ct., App. Term, 1954), appeal denied, 285 A.D. 814, 137 N.Y.S.2d 837 (2d Dept., 1955)), the right to “occupy” premises (Bartholomew v. Horan, 37 A.D.2d 643, 322 N.Y.S.2d 401 (3d Dept., 1971); see also, 5 Op.Counsel SBEA No. 12), and the right to “live in” premises (In re O’Neil’s Will, 8A.D.2d 631, 185 N.Y.S.2d 393 (2d Dept. 1959), reargument and appeal denied, 8 A.D.2d 734, 187 N.Y.S.2d 994 (2d Dept., 1959)).
Where less specific language has been used to create the interest, it may still be construed as a right of occupancy if the rents and profits are explicitly withheld from the grantee (In re Fike’s Estate, 59 Misc.2d 1047, 301 N.Y.S.2d 394 (Surrogate’s Ct., Erie Co., 1969)), if the instrument refers only to activities associated with occupancy (McFarland v. State, 5 Misc.2d 884, 160 N.Y.S.2d 247 (Ct. CL, 1957)), or more generally, if traditional words of conveyance such as “use” do not appear in the instrument (Carpenter, supra; Rizzo v. Mataranglo, supra; Friedman v. Jordan, 98 Misc.2d 686, 414 N.Y.S.2d 455 (Sup. Ct., New York Co., 1979), aff’d, 71 A.D.2d 554, 418 N.Y.S.2d 552 (1st Dept., 1979)).
But where the lifetime “use” of premises has been granted, the interest has consistently been construed as a life estate rather than a right of occupancy (In re Gaffer’s Estate, supra; In re Rogers’ Will, 251 A.D. 478, 296 N.Y.S. 872 (2d Dept., 1937); In re Perkins’ Will, 55 Misc.2d 834, 286 N.Y.S.2d 586 (Surr. Ct., Albany Co., 1967); In re Missett’s Will, 136 N.Y.S.2d 923 (Surr. Ct., Westchester Co., 1954); In re Sisk’s Will, 197 Misc. 1086, 96 N.Y.S.2d 237 (Surr. Ct., Kings Co., 1950); In re Holzwasser’s Will, 177 Misc. 868, 32 N.Y.S.2d 25 (Surr. Ct., Westchester Co., 1941)). Thus, a grant of “exclusive life use” of premises should be construed as granting a life estate in the premises, absent evidence in the instrument clearly indicating that the grantor intended otherwise.
November 12, 1991
{*} In such a case, the third party has what is known as an “estate pur autre vie,” which will terminate upon the death of the life tenant, whether or not the conveyance so provides (RPL, § 247).