E. L. Nezelek Development Corp. v. City of Binghamton

• Decision Date: 30 March 1978
• Citation: 403 N.Y.S.2d 577,61 A.D.2d 1108
• Parties: In the Matter of E. L. NEZELEK DEVELOPMENT CORP., Appellant, v. CITY OF BINGHAMTON, Respondent.
• Court: New York Supreme Court — Appellate Division

Page 577

403 N.Y.S.2d 577

61 A.D.2d 1108

In the Matter of E. L. NEZELEK DEVELOPMENT CORP., Appellant, v. CITY OF BINGHAMTON, Respondent.

Supreme Court, Appellate Division, Third Department.

March 30, 1978.

Jerome K. Frost, Troy, for appellant.

Tobin & Dempf, Albany (Michael L. Costello, Albany, of counsel), for respondent.

Before MAHONEY, P. J., and MAIN, LARKIN, HERLIHY and KANE, JJ.

MEMORANDUM DECISION.

Appeal from a judgment of the Supreme Court, entered January 5, 1977 in Broome County, which dismissed petitioner's application, in a proceeding pursuant to article 7 of the Real Property Tax Law, seeking a reduction of realty tax assessments.

Real property assessments are presumed valid and the challenger has the burden of proving by clear and convincing evidence the erroneousness of the levy (Matter of Cannon Point North v. Tax Comm. of City of N. Y., 30 A.D.2d 522, 290 N.Y.S.2d 505. See also, Matter of McNamara v. Board of Assessors of Town of Preble, 39 A.D.2d 817, 332 N.Y.S.2d 687; Matter of Putnam Theat. Corp. v. Gringold, 16 A.D.2d 413, 419, 228 N.Y.S.2d 93; People ex rel. Railroad Fed. Sav. & Loan Assn. v. Halpin, 4 A.D.2d 956, 957, 167 N.Y.S.2d 736, revd. on other grounds, 5 N.Y.2d 925, 183 N.Y.S.2d 285, 156 N.E.2d 811). That burden, with respect to commercial property, can be met, as here, by proof of income or rent from bona fide leases which, when capitalized, establishes true value of the subject property.

The petitioner's proof of negotiated leases and income and expense statements indicated that the full value of the subject realty was $480,000 in 1973, $475,000 in 1974 and $460,000 in 1975. Inherent in such values is lease income or gross rental income of the available rental space, sometimes referred to as economic rent income, of $189,558 for 1973 and $196,855 for both 1974 and 1975. The respondent City claims the rental value or economic rent of the property for each of the three years was $279,960, which, when capitalized, established a true value of the realty for each of the three years at $1,000,000.

The trial court accepted the gross rental values of respondent City as established by alleged comparable rentals in the same area, and rejected petitioner's proof of such values as evidenced by actual leases of the rental property. The court reasoned as follows: "The appraiser for the owner * * * has used actual rents paid by those * * * tenants without further inquiry or documentation concerning the fair rental value or economic rent value of this space * * * . He offered no relevant evidence that the rents actually paid * * * are related in any way to the economic rental value of the space." (Emphasis added.) While actual rent received under a lease, whether favorable or unfavorable to the owner, is not the sole criterion of true value, it is an important and relevant guide in determining the fair rental value, which, when properly capitalized, is the best evidence of full value for assessment purposes (Real Property Tax Law, § 306; Sharwill Gardens v. Calistri, 20 A.D.2d 842, 247 N.Y.S.2d 925). Bona fide rentals paid by tenants are highly significant in determining true value (Matter of Pepsi-Cola Co. v. Tax Comm. of City of N. Y., 19 A.D.2d 56, 240 N.Y.S.2d 770). Indeed, this court, in Matter of Dunn Garden Apts., Inc. v. Commissioner of Assessment & Taxation of City of Troy, 11 A.D.2d 879, 203 N.Y.S.2d 375, while recognizing that rental income is not the sole factor in fixing assessments,...