Merrick Holding Corp. v. Board of Assessors of Nassau County
| Decision Date | 02 November 1978 |
| Citation | 410 N.Y.S.2d 565,45 N.Y.2d 538,382 N.E.2d 1341 |
| Parties | , 382 N.E.2d 1341 In the Matter of MERRICK HOLDING CORP., Respondent, v. BOARD OF ASSESSORS OF the COUNTY OF NASSAU, Appellant. |
| Court | New York Court of Appeals Court of Appeals |
Merrick Holding Corp., the owner of land improved by a 29-store shopping center complex in Nassau County, brought this consolidated certiorari proceeding to review the amount at which the property was assessed for the 1968-1975 tax years. The valuation had been arrived at by the income capitalization method. However, instead of accepting actual rental income as a basis for its computations, the county's board of assessors first increased it by amounts, termed "leasehold bonuses", which reflected the difference between the rentals payable to Merrick under long-term leases with three major tenants and the appreciably higher market rental value of the leased spaces. The dispute between the parties focused on the validity of these add-ons.
Special Term, though decreeing some reductions on the basis of other issues not here relevant, upheld the application of the leasehold bonuses and entered judgment accordingly. But the Appellate Division, pointing out that the county's appraiser had conceded that the three leases "were 'not necessarily improvident when they were made' " and taking the view that, without proof of improvidence, it was "improper to apply the leasehold bonus principle to a selected portion of leases in a shopping center in the absence of (undefined) special circumstances", reversed on the law and remanded for a new determination (58 A.D.2d 605, 606, 395 N.Y.S.2d 233). On remand, Special Term, then granted the taxpayer's motion for summary judgment, eliminated the add-ons and entered a new judgment reducing the assessment correspondingly. On the county's appeal to us, * we now conclude that the order of the Appellate Division should, in turn, be reversed and the matter remitted for review of the facts. Our reasons follow.
The command of section 306 of the Real Property Tax Law that all property be assessed at full value does not pronounce an inelastic approach to valuation. Nor does the legislative directive specify a particular method for establishing value. And courts, being under no compunction to do so, have not confined assessors to any one course. To ensure that the existence of varied and multifaceted patterns of land use and ownership does not frustrate the design that each contribute equitably to the public fisc, courts have upheld any fair and nondiscriminatory method that appears most likely to achieve that end (see Blooming Grove Props. v. Board of Assessors of Town of Blooming Grove, 34 A.D.2d 953, 312 N.Y.S.2d 85; cf. Matter of Hellerstein v. Assessor of Town of Islip, 37 N.Y.2d 1, 4-5, 371 N.Y.S.2d 388, 390-391, 332 N.Ed.2d 279, 280-281; People ex rel. Jamaica Water Supply Co. v. State Bd. of Tax Comrs., 196 N.Y. 39, 51-53, 89 N.E. 581, 584).
Thus, though commonly the most accurate standard is provided by the sales prices of comparable properties located within the same or similar competitive area in which a parcel being assessed is located, in the absence of sufficiently reliable market data, alternative methods, such as income capitalization or, where necessary, reproduction cost, may be employed (Matter of City of New York (Salvation Army), 43 N.Y.2d 512, 515, 402 N.Y.S.2d 804, 805, 373 N.E.2d 984, 985; Matter of Great Atlantic & Pacific Tea Co. v. Kiernan, 42 N.Y.2d 236, 240, 397 N.Y.S.2d 718, 721, 366 N.E.2d 808, 811). Not surprisingly, as to income producing property, income capitalization has been the preferred mode (1 Bonbright, Valuation of Property, p. 216; see Caroldee Realty Corp. v. Board of Assessors of County of Nassau, 73 Misc.2d 41, 340 N.Y.S.2d 774 (shopping center); Roosevelt Nassau Operating Corp. v. Board of Assessors of County of Nassau, 68 Misc.2d 183, 326 N.Y.S.2d 628 (shopping center)).
Consequently, the board's employment of income capitalization rather than cost or market in the present case was not exceptional (see, generally, Graham, Market Valuation of a Regional Shopping Center, 32 Appraisal J. 589). But the appropriateness of this method does not take away from the reality that its application, calling as it does for the exercise of judgment by the appraiser, furnishes, at best, no more than an estimate of the present worth of the benefits to be reaped from the property at issue (1 Bonbright, Valuation of Property, p. 218). The goal at all times remains full value. To that end, assessors may devise reasonable methods that assure that the income they accept as the basis for capitalization is as close a reflection of true value as possible.
Our recent holding in G.R.F., Inc. v. Board of Assessors of County of Nassau, 41 N.Y.2d 512, 393 N.Y.S.2d 965, 362 N.E.2d 597, reflects this flexible approach to problems of valuation. Having found that the circumstances warranted no hard and fast choice between a strict income capitalization approach and one based on cost of reproduction, we there emphasized that "(p) ragmatism * * * requires adjustment when the economic realities prevent placing the properties in neat logical valuation boxes" (G.R.F., Inc. v. Board of Assessors of County of Nassau, 41 N.Y.2d 512, 515, 393 N.Y.S.2d 965, 968, 362 N.E.2d 597, 599, Supra ).
In short, categorization must yield to more exact means of arriving at value. Since other factors may tend to qualify the reliability of actual income as a sole measure of value, the per se rule articulated by the Appellate Division, which would interdict them, must be rejected. For, though realized income will often turn out to be the surest indicator of full value (see Rockaway Crest Section 1 v. Tax Comm. of City of N. Y., 38 A.D.2d 759, 329 N.Y.S.2d 620; People ex rel. Gale v. Tax Comm. of City of N. Y., 17 A.D.2d 225, 230, 233 N.Y.S.2d 501, 506), when fair market rents exceed rental income the latter may, in whole or in part, be made to defer to more precise means of fixing a base on which to compute capitalization (see Encyclopedia of Real Estate Appraising (Friedman ed., 1968), pp. 40-41; 1 Bonbright, Valuation of Property, p. 229; see Babcock, The Valuation of Real Estate, pp. 384-385).
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