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Certiorari cases go back to court.

After a nearly 10-year hiatus, the past year saw the resumption of trials in certiorari proceedings in New York City.

Although the city still makes a concerted effort to settle assessment disputes in pre-trial conferences, a growing number of cases are being placed on the court's trial-ready calendar, and it is anticipated that more trials will be conducted in the coming year.

Perhaps the most significant decision rendered in the past year was handed down by Manhattan Supreme Court Justice Stanley Parness last January in Matter of Estate of Goldman vs. Commissioner of France. After a trial in which the petitioner was represented by our office, the court reaffirmed a basic tenet of real property tax law: Assessments must be based on a property's existing use, not on its speculative potential for redevelopment a higher and better use.

The facts of the case were straightforward. in 1984 the petitioner purchased six contiguous lots on Lexington Avenue between 85th and 86th streets. The parcels were improved with four- and five-story residential walkups, some with round floor commercial space. The following year, a seventh lot was added to the assemblage.

Consistent with its policy, since renounced, of reassessing, commercial property at 45 percent of its sales price, after the transfers the city increased the combined assessments on the six lots by 187 percent, and on the seventh lot by 134 percent.

At the trial both the appraiser for the city and the appraiser for the petitioner agreed that the purchase price was not indicative of the value of the properties as currently improved. Rather, it included a premium based upon the assemblage and the potential to develop the site in the future to a higher and better use. As a result, the petitioner's expert valued the properties based upon the income capitalization approach. The city, however, attempted to defend the assessments on a highest and best use theory, arguing that it was permissible to value and tax property in the present based upon its potential failure use. Indeed, its trial appraisal treated the site as if it were already vacant land ready for immediate redevelopment, and did not even place a value on the existing

The court rejected the city's approach. in doing so, it said plainly that: "The law is clear that assessment value must reflect the existing use of the property. This, potential development of the property to a higher and better use, may not serve as the basis for assessing." Because the city's appraisal was based on an invalid legal theory, the court rejected it entirely, and held that the values found by the petitioner's expert were conclusive. The result is that the assessments between 1985 and 1990 will be reduced by at least $33 million.

While the court's decision broke no new legal ground, it has broad implications for other owners whose assessment challenges are waiting to be heard. There are undoubtedly numerous properties, especially those that were reassessed because of a sale, whose assessments were driven markedly higher based upon the speculative frenzy of the 1980's real estate market. The Goldman decision reaffirms that those assessments cannot be defended based upon speculative and unrealized potential, but must be based on a property's current condition and use.
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Title Annotation:appellate procedure
Author:Podell, Herbert S.
Publication:Real Estate Weekly
Date:Jul 22, 1992
Words:539
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