The COVID-19 crisis has placed great pressure on commercial real property taxpayers in Nassau County who already pay some of the highest real property tax rates in the Country.
In Nassau County, commercial properties are assessed for purposes of real property taxation based on the value of the real property, which is determined in large part on the real properties’ potential to generate income. The ongoing COVID-19 crisis has already crippled many commercial property owners this year through mandatory closures or defaulting tenants. There appears to be virtually no end in sight for some commercial owners and operators. The threat of present and possible future restrictions on operations makes tenants anxious to terminate current leases and wary to enter into new leases. As a result, it is important that property taxes be grieved by either the property owner or tenant to ensure that the real property is not being over assessed.
In any taxing jurisdiction a property is taxed on the “tax status” date based upon current conditions. In Nassau County, the next tax status date is January 1, 2021. These real property assessments can be grieved based upon an overvaluation and/or overassessment. While the next evaluation by the taxing authority will presumably reflect the adverse impacts on commercial property values due to the COVID-19 crisis and hopefully lower the assessed value for such real properties, it is more important than ever for property owners and their tenants to grieve their real property assessments to make sure that their properties are not being overvalued and over-assessed.
However, the issue as to who has standing to challenge these commercial taxes where the property is leased must be addressed before filing any such grievance. Most triple net leases require the tenant to pay all real property taxes on the property, and the tenant is often authorized under the lease to grieve the assessments underlying the taxes the tenant is required to pay. The property owner/landlord in a triple net tenancy has no interest or incentive to grieve that assessment because the tenant pays all of the taxes and would be the sole beneficiary of a successful grievance.
In a decision which came out just a few months before the COVID-19 crisis hit, the Appellate Division, Second Department (which covers Nassau County), issued a decision which could undermine a tenants’ ability to grieve its commercial real property taxes. In DCH Auto v. Town of Mamaroneck, 178 A.D.3d 823 (2d Dep’t 2019), the Appellate Court affirmed a lower court decision which dismissed tax certiorari petitions filed by a net tenant even though the lease provided that the tenant/petitioner has the right to contest any assessment at its sole cost and expense and could settle any such proceeding without the consent of the owner. The Appellate Court ruled that the tenant/petitioner failed to satisfy a condition precedent to bringing the petitions because the administrative grievances filed with the assessor were not filed on behalf of the owner or an agent of the owner as required by RPTL §524(3), RPTL §706(2). (See Matter of Larchmont Pancake House v. Board of Assessors, et al., 153 A.D.3d 521 (2d Dep’t 2017), aff’d. on other grounds 33 N.Y.3d 228).
Therefore, in order to reduce the real property’s assessed value to reflect the adverse impact due to COVID-19, a commercial tax payer must file a grievance for the January 1, 2021 filing period. It is important to ensure that a commercial tenant in Nassau County who files the grievance has right to grieve the tax assessment of its leased property. Similarly, in the event that there are no tenants, it is important for property owners to file the necessary timely grievance.
If you have any question concerning your Nassau County commercial property taxes due to COVID-19 or otherwise, please feel free to contact Andrew M. Mahony, Esq., Chair of the firm’s Tax Certiorari and Condemnation Group at (516) 746-8000 or email@example.com.