Thanks to Daniel Sciannemeo, MAI for providing a recent decision by the Honorable E. Loren Williams (Westchester Supreme Court) in Cedar Manor Acquisition LLC v The Assessor of the Town of Ossining. (Index No. 62538/2020; Filed 9/28/21).
In a well written decision, Justice Williams discussed the effort to reduce the taxes on property which was a nursing home business enterprise. The property sold for $23,715,000 which included the purchase price of the real estate and the business enterprise. The transfer tax form filed with the County Clerk indicated that the real estate was apportioned in the amount of $18,800,000. The parties used two well known appraisers. Both used the capitalization of income approach. Petitioner’s appraiser, Bob Sterling, used multifamily housing rents and Medicaid capital reimbursements to value Cedar Manor, but did not consider the recent purchase price.
The Town’s expert, William Beckmann, MAI, used the subject’s sale and statistical data from CBRE. Sterling rejected using the sale of the subject because it included a going-concern. The Manor argued that the purchase price was based on the seller’s flawed appraisal.
Ossining argued that the law is clear that Petitioner carries the burden of proof by a preponderance of evidence. Sterling’s appraisal was fatally deficient because he used market data for multifamily homes instead of nursing homes. Further that the Petitioner’s failure to value the subject property as a nursing home is a “derogation of Real Property Tax Law Subsection 302” because Sterling’s report is based in part on rents from studio apartments.
It also argued that a recent arms-length sale is evidence that should be given the highest rank with respect to the value of the subject property.
Justice Williams literally wrote a text book on the law. It is worthy of reading in full.
“The challenged real property assessments are presumed valid as a matter of law, and the petitioner has the initial burden of rebutting that presumption and producing substantial evidence that a credible dispute exists as to the valuation of the subject property.” Board of Managers of French Oaks Condominium v Town of Amherst, 23 NY3d 168, 175 (2014); FMC Corp. v Unmack, 92 NY2d 179 (1998). “Substantial evidence will most often consist of detailed, competent appraisal based on standard, accepted appraisal techniques and prepared by a qualified appraiser.” See Matter of Niagara Mohawk Power Corp v Assessor of the Town of Geddes, 92 NY2d 192, 196 (1998). Moreover, Matter of Niagara, sets forth that Petitioner’s appraisal must be based on “objective data and sound theory.”
“The ultimate strength, credibility and persuasiveness are not germane for the threshold inquiry. The Court’s inquiry is limited to a determination of whether the documentary and testimonial basis proffered by the Petitioner is based upon sound theory and objective data.” Matter of Niagara Mohawk Power Corp. v Assessor of the Town of Geddes, 92 NY2d 192, 196 (1998).
“As a general rule, the sale of real property is an arm’s-length transaction, if recent and not explained as extraordinary, is the best evidence of value for tax assessment purposes because it directly reflects the property’s market value and does not require the court to engage in speculation.” Blue Hill Plaza v Assessor of Orangetown, 280 AD2d 544 (2d Dept 2001) citing 50540 Realty, Inc v Tax Commission of City of New York, 136 AD2d 699 (2d Dept 1988). “The best evidence of value, of course, is a recent sale of the subject property between a seller under no compulsion to sell and a buyer under no compulsion to buy.” Matter of Allied Corp v Town of Camillus, 80 NY2d 351, 356 (1992). A recent sale has been characterized as evidence of the “highest rank” in determining market value.” Rite Aid Corp v Huseby, 130 AD3d 1518 (4th Dept 2015) See Matter of F.W. Woolworth Co. v Tax Commission of City of New York, 20 NY2d 561, 565 (1967). “Petitioner maintains that the $51,000,000 sales price is not indicative of the fair market value of the property since it was an arbitrary figure established as a business convenience” …. “We must reject its claim that the $51,000,000 figure does not represent the sales price of the subject property, particularly as it may be reasonably inferred that it is continuing to utilize the $51,000,000 sales price to obtain corporate and income tax advantages.” Matter of Meditrust c/o Conifer Park Inc. (The Mediplex Group Inc.) v Rosalie Fahey, as Assessor of the Town of Greenville, et al, 226 AD2d 999 (3d Dept 1996). “The Court further held that the sale of the property in question was an arms-length transaction, and that the price paid by the purchaser in this matter was consistent with the value of the property as determined by respondents’ expert (subject to market trends).” Rite Aid Corp v Otis, 102 AD3d 124 (3d Dept 2012).
The Court concluded, it’s the price that Manor paid in an open market that determines value in this case. “As a general rule, the sale of real property in an arm’s-length transaction, if recent and not explained as extraordinary, is the best evidence of value for tax assessment purposes because it directly reflects the property’s market value and does not require the court to engage in speculation.” Blue Hill Plaza v Assessor of Orangetown, 280 AD2d 544 (2d Dept 2001) citing 50540 Realty, Inc v Tax Commission of City of New York, 136 AD2d 699 (2d Dept 1988). “Generally, the best evidence of value, if not explained away as abnormal in any fashion, is a recent sales price established in an arm’s-length transaction” Meditrust v Fahey, 226 AD2d 999, 1000 (1996), citing W.T. Grant Co v Srogi, 52 NY2d 496, 511, 438 NY2d 761, 420 NE2d 953.
The sale between the Manor and Seller was an arms-length transaction, there is no testimony in the record or evidence presented at trial that disturbs that fact. In his appraisal, Sterling says the Manor “was legally bound to agree” to Cushman’s value of the subject property (Petitioner’s Exhibit 1, pg. 14). However, the Manor could have rejected the sales price or the appraisal as flawed, because they were not “legally bound” to accept fraudulent numbers. Moreover, the Manor agreed to the appraisal being done by Cushman. Cushman’s appraisal set the value attributed to the subject property, purchased in an open market, without coercion, in an arms-length transaction, as $18.8 million dollars. “The best evidence of value, of course, is a recent sale of the subject property between a seller under no compulsion to sell and a buyer under no compulsion to buy”. Matter of Allied Corp v Town of Camillus, 80 NY2d 351, 356 (1992). A recent sale has been characterized as evidence of the “highest rank” in determining market value.” Rite Aid Corp v Huseby, 130 AD3d 1518 (4th Dept 2015); See Also, Matter of F.W. Woolworth Co. v Tax Commission of City of New York, 20 NY2d 561, 565 (1967). Sterling’s position that the Manor lacked the ability to do anything other than accept that price, fails crucially short of explaining this reasoning in rejecting the sale.
Based on the foregoing, this Court finds Petitioner has failed to maintain its burden and in addition this Court finds the Petitioner’s appraisal uncredible. Therefore, the Manor failed to withstand the Court’s threshold inquiry of producing “substantial evidence” to overcome the validity of Ossining’s assessments, and their petitions for the years 2017, 2018, 2019, and 2020.
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