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SUPREME COURT OF NEW YORK, SPECIAL TERM, NASSAU COUNTY 1972.NY.44488 <>; 340 N.Y.S.2d 774; 73 Misc. 2d 41 December 22, 1972 CAROLDEE REALTY CORP., PETITIONER,v.BOARD OF ASSESSORS OF THE COUNTY OF NASSAU, RESPONDENT Koeppel, Hyman, Sommer, Lesnick & Ross, P.C. (M. Allan Hyman of counsel), for petitioner. Joseph Jaspan, County Attorney (Leon Friedman of counsel), for respondent. Howard T. Hogan, J. Author: Hogan

Howard T. Hogan, J.

Author: Hogan

 In this consolidated tax certiorari proceeding the parties at the opening of trial stipulated to withdraw and discontinue the writs for the years May 1, 1966, through May 1, 1971, for Lot 23, Section 8, Block 234 on the Land and Tax Map of Nassau County. The remaining property, Lot Numbers 17 and 18, Section 8, Block 235, comprises 3.83 acres as found by petitioner's engineer, improved at various times with several structures.

Both parties agree that during the years under review, the present use is its highest and best which consists of a restaurant, bank, medical office building, subsurface bowling alley, and a metal building used by an optometrist. In 1967, a store was demolished. Since 1969, the improvements have been fully rented. It was stipulated that the contract rents and "overages" for the years under review ranged from $152,400 per year to $402,907, which included arrears, with the actual collections ranging from $125,000 to $370,000.

Petitioner's values were bottomed upon a free and clear basis, disregarding the mortgage and insurance. The court has heretofore expressed its opinion that the presence or absence of a mortgage is of no concern to a tax assessor and, having stated its reasons therefor in Matter of Mid-Island Shopping Plaza v. Podeyn (25 Misc. 2d 972, 989, affd. 14 A.D.2d 570, affd. 10 N.Y.2d 966), it adheres to that opinion. To this may be added the insurance, likewise, for this too, in and of itself, is no determinor of value.

Petitioner and respondent valued the land by market data. The improvements were valued by petitioner as they existed on the dates under review, except as to those which were demolished and/or in construction during any one year. This property has substantial frontage along Union Turnpike in excess of 700 feet and a depth of 291 feet. Contiguous on the east is a community type shopping center.

With his economic approach, petitioner's appraiser elected a vacancy factor ranging from about 7 1/2 to 20%. To this was added a management fee ranging to 4%. In his analysis of estimated income and expense, he did not include the rent of $10,000 per year for the lease of the fixtures and chattels in the restaurant, but testified that his allocation of $50,000 per year included the contract rent of $40,000 plus his estimate of what the economic rent projection for overages should be. Between 1969 and 1971 the bank and the professional buildings were added. These were not fully rented until June, 1969. In 1969, the restaurant and trailer were vacant.

For raw land values for each of the years under review the experts found as follows:


May 1, 1966 $360,000 $650,000

May 1, 1967 400,000 750,000

May 1, 1968 435,000 750,500

May 1, 1969 480,000 792,500

May 1, 1970 525,000 834,000

May 1, 1971 545,000 834,000

In using the market data for land, both agreed upon one parcel as being comparable. This sale, at the northeast corner of Jericho Turnpike and Marcus Avenue about five miles distant, is an area of 6.81 acres and reflects a sales price of $146,843 per acre in January, 1971.

For location and time, principally, petitioner adjusted this downward 50%, but respondent held that the better way to value land was on a square-foot basis and noted that his same sale reflected a value of $3.30 per square foot. His values over the years of his comparables ranged from a low of $1.75 per square foot in 1961, to a high of $4.50 in 1966, which was a half-acre parcel in a superior location. Even these, however, he adjusted upward to reflect unit values ranging from $4 per square foot in 1966, to $5 in 1971. This court finds his adjustments for land as well as his basis of measurement lack support. The court adopts the one sale upon which both agree as being comparable, and by allocating 10% for superior location of subject property and 25% for time for the first five years, finds an indicated land value for the years under review as follows:


1966 3.38 acres $500,000

1967 3.38 acres 530,000

1968 3.38 acres 560,000

1969 3.38 acres 590,000

1970 3.38 acres 620,000

1971 3.38 acres 620,000 Applying these values to the stipulated ratios, the land assessments are sustained except for the first year.

Since the improvements varied from year to year, each of the years must be considered separately. The contract rents having been rejected by both, resort must be had to the "actual estimated" income or economic approach to find value. Implicit in the analysis of both appraisers is the finding that -- at least in the early years under review -- the tenants were paying a rental below economic rental which they have proscribed for the leasehold estate. They anticipate an income stream of not only what the contract rent provided but also the additional rent the owner could have received if the property were to be leased for the first time on a given tax status date. Both adopted this method despite the fact some of the tenants could not even make the contract rent until 1970 and despite the further uncontroverted evidence the owner made strenuous efforts to find tenants.

If contract rent is to be ignored, it must be demonstrated by clear, convincing evidence that the contract rent is below the true market.

Assessment (Real Property Tax Law, ยง 102, subd. 2) is the so-called true value at which property is assessed and the price at which the property will sell in the market under ordinary circumstances. In arriving at the "true value" for tax assessment purposes, appraisal is made of the property as a whole. The bona fide leases upon the subject property are matters which must be considered in determining market value for tax assessment purposes. While "assessments cannot be made to trail behind every turn in the fortunes of real property" and while there are instances "when property must bear a share of taxation proportionate to value even though it may then have no income, or an income inadequately focused to true value" (People ex rel. 379 Madison Ave. v. Boyland, 281 App. Div. 588, 590), nevertheless, "the actual rent realized is significant as an important factor in determining what the fair rental value is." (People ex rel. Gale v. Tax. Comm. of City of N. Y., 17 A.D.2d 225, 230; Woolworth Co. v. Commission of Taxation & Assessment of City of Plattsburgh, 26 A.D.2d 759, 760).

Rental income established by leases is a matter to be considered in determining the full value of the property for tax assessment purposes.

The burden of proof that the assessment is erroneous is upon the owner. When his proof, based upon the actual income and/or the fair estimated income obtained from the market, meets that requirement, the burden then shifts to the respondent to demonstrate by clear convincing evidence that the estimated economic rent, which respondent projects, reflects the prevailing market. In other words, the respondent must show, from market data or other evidence, that the leasehold income is unrealistically low, not representative of the fair rental value of the property and, consequently, may not be used as a basis for calculating actual value, that is to say, that the true value of the property for assessment purposes is to be ascertained as if unencumbered by such leases.

What have we here? Both experts chose the economic approach to valuation. Both estimated what they believed the income should be. "Value arrived at by capitalization of the fair rental value is, in ordinary cases, the surest guide to a sound appraisal." (Woolworth Co. v. Commission of ...

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