Techniplex v. Town & Vill. of E. Rochester

• Decision Date: 06 February 2015
• Citation: 125 A.D.3d 1412,2015 N.Y. Slip Op. 01101,3 N.Y.S.3d 521
• Parties: In the Matter of TECHNIPLEX III, A Partnership, Petitioner–Respondent, v. TOWN AND VILLAGE OF EAST ROCHESTER, Respondents–Appellants. (Appeal No. 1.).
• Court: New York Supreme Court — Appellate Division

125 A.D.3d 1412

3 N.Y.S.3d 521

2015 N.Y. Slip Op. 01101

In the Matter of TECHNIPLEX III, A Partnership, Petitioner–Respondent,

v.TOWN AND VILLAGE OF EAST ROCHESTER, Respondents–Appellants. (Appeal No. 1.).

Supreme Court, Appellate Division, Fourth Department, New York.

Feb. 6, 2015

Affirmed. Lacy Katzen LLP, Rochester (John T. Refermat of Counsel), for Respondents–Appellants.

Ward Greenberg Heller & Reidy LLP, Rochester (Daniel P. Purcell of Counsel), for Petitioner–Respondent.

PRESENT: SMITH, J.P., PERADOTTO, CARNI, VALENTINO, and DeJOSEPH, JJ.

MEMORANDUM:

Petitioners, related commercial entities with common ownership, commenced these RPTL article 7 proceedings seeking review of the real property tax assessments for three commercial properties located in respondents Town and Village of East Rochester for the tax years 2009, 2010, and 2011. In each of the appeals, respondents appeal from an order granting the respective petitions in part and ordering respondents to correct the assessment rolls and to refund the tax overpayments with interest. We affirm the orders in each appeal.

Contrary to the contention of respondents in all three appeals, we conclude that petitioners met their initial burden of presenting “substantial evidence that the propert[ies were] overvalued” ( Matter of Roth v. City of Syracuse, 21 N.Y.3d 411, 417, 972 N.Y.S.2d 161, 995 N.E.2d 123), thereby rebutting the “presumption of validity [that] attaches to the valuation of property made by the taxing authority” ( id.; see Matter of Board of Mgrs. of French Oaks Condominium v. Town of Amherst, 23 N.Y.3d 168, 174–175, 989 N.Y.S.2d 642, 12 N.E.3d 1072). “In the context of tax assessment cases, the ‘substantial evidence’ standard merely requires that petitioner demonstrate the existence of a valid and credible dispute regarding valuation” ( Matter of FMC Corp. [Peroxygen Chems. Div.] v. Unmack, 92 N.Y.2d 179, 188, 677 N.Y.S.2d 269, 699 N.E.2d 893; see Matter of East Med. Ctr., L.P. v. Assessor of Town of Manlius, 16 A.D.3d 1119, 1120, 791 N.Y.S.2d 778). “The ultimate strength, credibility or persuasiveness of petitioner's arguments are not germane during this threshold inquiry” ( FMC Corp., 92 N.Y.2d at 188, 677 N.Y.S.2d 269, 699 N.E.2d 893; see Matter of W.O.R.C. Realty Corp. v. Board of Assessors, 100 A.D.3d 75, 88, 951 N.Y.S.2d 36, lv. denied 20 N.Y.3d 862, 2013 WL 1197481). Here, petitioners submitted appraisals by a qualified expert who valued the subject properties utilizing the income capitalization approach to valuation, which is “generally regarded as the preferred method for determining the value of income-producing propert[ies]” such as those at issue in this case ( 41 Kew Gardens Rd. Assoc. v. Tyburski, 70 N.Y.2d 325, 331, 520 N.Y.S.2d 544, 514 N.E.2d 1114; see Matter of OCG L.P. v. Board of Assessment Review of the Town of Owego, 79 A.D.3d 1224, 1226, 912 N.Y.S.2d 715). Further, the appraisals “contained documentation and calculations to support the underlying methodolog[y] and the ultimate valuation” ( Matter of United Parcel Serv. v. Assessor of Town of Colonie, 42 A.D.3d 835, 838, 840 N.Y.S.2d 222; see 22 NYCRR 202.59[g][2] ). “The fact that some aspects of [the expert]'s valuation methodology may be subject to question goes to the weight to be accorded the appraisal[s] and not to ‘the threshold issue of whether petitioner[s] produced substantial evidence to rebut the presumption of validity’ ” ( OCG L.P., 79 A.D.3d at 1226, 912 N.Y.S.2d 715; see FMC Corp., 92 N.Y.2d at 187–188, 677 N.Y.S.2d 269, 699 N.E.2d 893).

We further conclude with respect to all three appeals that petitioners met their ultimate burden of establishing by a preponderance of the evidence that the three properties were overvalued and thus that the challenged assessments were excessive ( see generally Board of Mgrs. of French Oaks Condominium, 23 N.Y.3d at 174–175, 989 N.Y.S.2d 642, 12 N.E.3d 1072; FMC Corp., 92 N.Y.2d at 188, 677 N.Y.S.2d 269, 699 N.E.2d 893). Contrary to respondents' contention, Supreme Court did not err in relying upon actual rents rather than market rents in determining the value of the subject properties ( see Matter of Conifer Baldwinsville Assoc. v. Town of Van Buren, 68 N.Y.2d 783, 785, 506 N.Y.S.2d 853, 498 N.E.2d 417). It is well established that “valuation [is] largely a question of fact, and the [trial] courts have considerable discretion in reviewing the relevant evidence as to the specific propert[ies] before them” ( Matter of Consolidated Edison Co. of N.Y., Inc. v. City of New York, 8 N.Y.3d 591, 597, 838 N.Y.S.2d 458, 869 N.E.2d 634). “As a general rule, actual rental income is often the best indicator of value” ( Matter of Schoeneck v. City of Syracuse, 93 A.D.2d 988, 988, 461 N.Y.S.2d 641, citing Matter of Merrick Holding Corp. v. Board of Assessors of County of Nassau, 45 N.Y.2d 538, 543, 410 N.Y.S.2d 565, 382 N.E.2d 1341), although actual income “ ‘may be disregarded where it does not reflect full value’ ” ( Matter of North Country Hous. v. Board of Assessment Review for Vil. of Potsdam, 298 A.D.2d 667, 668, 748 N.Y.S.2d 428; see Merrick Holding Corp., 45 N.Y.2d at 543, 410 N.Y.S.2d 565, 382 N.E.2d 1341; Matter of Schachenmayr v. Board of Assessors of Town of N. Elba, 263 A.D.2d 731, 734, 693 N.Y.S.2d 701). Here, there is no evidence that the rents petitioners charged were arbitrary or the result of collusion or self-dealing ( see Merrick Holding Corp., 45 N.Y.2d at 543, 410 N.Y.S.2d 565, 382 N.E.2d 1341; North Country Hous., 298 A.D.2d at 668–669, 748 N.Y.S.2d 428), and respondents “failed to establish that the actual income was not reflective of the market for the years under review” ( Matter of County Dollar Corp. v. City of Yonkers, 97 A.D.2d 469, 475, 467 N.Y.S.2d 666, lv. dismissed 61 N.Y.2d 603, 472 N.Y.S.2d 1027, 460 N.E.2d 1360, rearg. denied 61 N.Y.2d 905, 474 N.Y.S.2d 1027, 462 N.E.2d 1205; see Matter of Troy Realty Assoc. v. Board of Assessors of City of Troy, 227 A.D.2d 813, 814, 642 N.Y.S.2d 734).

In addition to their general objection to the use of actual as opposed to market rents, respondents object to the valuation of two specific leased spaces at issue in appeal Nos. 1 and 2. In appeal No. 1, respondents contend that the court undervalued the subject property (Techniplex III) because it did not assign a market value to the restaurant located on the property. We reject that contention. The restaurant is operated by Tim Donut U.S. Limited (Tim Donut) pursuant to a 30–year ground lease with petitioners. During the tax years at issue, Tim Donut leased the land underlying the restaurant for $30,000 per year. Tim Donut owned the restaurant and therefore paid no rent for the building itself. Nevertheless, respondents' appraiser valued Techniplex III by estimating what the market rent would be if petitioners were leasing both the land and the building. He did so by comparing the rents paid by other fast-food restaurants “where[ ] the land and buildings are leased in their entirety.”

“The ultimate purpose of valuation ... is to arrive at a fair and realistic value of the property involved” ( Matter of Allied Corp. v. Town of Camillus, 80 N.Y.2d 351, 356, 590 N.Y.S.2d 417, 604 N.E.2d 1348, rearg. denied 81 N.Y.2d 784, 594 N.Y.S.2d 720, 610 N.E.2d 393; see Matter of Commerce Holding Corp. v. Board of Assessors of Town of Babylon, 88 N.Y.2d 724, 729, 649 N.Y.S.2d 932, 673 N.E.2d 127). The income capitalization approach to valuation “rests on the proposition that the value of...