Volume 9 - Opinions of Counsel SBEA No. 46
School districts and BOCES exemption (improvements leased by school district) - Real Property Tax Law, § 408:
Improvements leased by a school district qualify for exemption under RPTL, § 408, where the subject lease provides for the school district’s payment of taxes and charges levied against the real property.
We have received an inquiry concerning the taxable status of real property leased by a school district from a presumably non-exempt entity and used for educational purposes. The lease pertains to a building situate on land already owned by the school district. The lease in question is a “Triple Net Lease,” which provides an option to purchase the real property “over a ten year period.” The question is whether this lease is sufficient to make the improvement exempt from taxation.
The taxable status of school district property is specified by section 408 of the Real Property Tax Law. Until 1985, that section provided that the exemption only applied to property owned by a school district. However, chapter 684 of the Laws of 1985 amended section 408 to provide that property leased by a school district may qualify for the exemption as well. As so amended, section 408 provides, in part, that:
[A]ll real property owned by a school district or board of cooperative educational services and all improvements thereon leased by such a district or board provided that such leased improvements are used for educational purposes and provided, further, that such lease provides that such district or board is liable for all taxation, special ad valorem levies and special assessments levied upon such improvements shall be exempt from taxation and exempt from special ad valorem levies and special assessments to the extent provided in section four hundred ninety of this chapter.
Thus, leased improvements situated on land owned by a school district are eligible for exemption provided the subject lease places liability for taxes, special ad valorem levies and special assessments on the school district.
A review of the relevant materials indicates that the school district owns the land under the leased premises and that the premises are used for an educational purpose. The only remaining question, then, is whether the subject lease provides for school district payment of taxes and charges.
The term “net lease” is defined as “a lease where, in addition to the rental stipulated, the lessee assumes payment of all property charges, such as taxes, insurance, assessments, and maintenance” (Boyce, Real Estate Appraisal Terminology, p. 148, emphasis added). The use of the adjective “double” or “triple” before the word “net” is a matter of style, and does not effect a definitional change in the term “net lease”. Therefore, given the information that the subject lease is net, we assume that it provides for school district payment of taxes and charges, and thus, that the real property in question is exempt pursuant to RPTL, section 408 as revised.
September 7, 1990
