Nassau Cty ordered to reassess Class I

Real Estate Weekly, Jan 20, 1993 by Lois Weiss

A Nassau County Supreme Court judge ruled recently that the county should reassess its homes and small condominiums because its assessing methods are unconstitutional.

That county has not been reassessed since 1938 and lawyers argued land values and market values are no longer assessed at a uniform percentage of value throughout the county's disparate towns.

Jay M. Herman, a tax certiorari partner with Koeppel, Martone, Leistman & Herman who represented some of the petitioners, said the county uses 1938 construction costs but has not updated or revalued the properties in 50 years.

While Justice Leo F. McGinity said using the cost of construction in and of itself was not unconstitutional, he noted the application of the methodology in attempting to look back to 50-year-old costs was fundamentally flawed.

In his decision in Chasalow vs. Board of Assessors and Board of Assessment Review of County of Nassau, the judge said taxpayers "are met with a perpetuation of an illegal system that necessarily grows in proportion as each tax year passes."

As each house on a block challenges its assessment and wins, Justice McGinity noted, the others are faced with paying a higher burden. Meanwhile, unless it comes to the county's attention, houses with improvements do not face assessment increases.

In particular, the judge said, the county has not made distinctions in land values between land located in more desirable locations from land that is, for instance, near a railroad track or highway or in a less desirable town.

M. Allan Hyman, a tax certiorari partner with Certilman Balin Adler & Hyman who represented some of the Small Claims petitioners at the original hearings, said the judge, who hears most of the assessment claims in Nassau County, has seen that assessments based on 1938 replacement costs clearly do not work.

"Any system based on 1938 cost fails on its face to assess at a uniform percentage of value," Hyman noted.

Every time a case is tried or settled, Hyman said the judge observes the amount of reduction in assessment that the county is required to pay by way of tax refunds --"hundreds of millions of refunds."

"So he sees first hand the way property is improperly and erroneously assessed," Hyman explained. "His level of frustration has increased over the last few years as to how the county doesn't work."

As properties increased in value over the period of time from 1938 to 1992, the assessment system has not allowed for enormous differences in land values, Hyman added.

He used Garden City, which is "desirable" and the Town of Hempstead, which "has severe problems" as examples where in 1938 the land values were comparable.

In 1938, identical houses in these two towns had similar values but over time, a tremendous disparity was created. The property may be worth less in Hempsread but the land is assessed the same.

The Chasalow matter grew out of a 1989 Article 78 review of 10 Small Claims determinations at which the county was not heard. At that time, Justice MeGinity maintained the county had shifted the responsibility for assessing from the County Board of Assessor to the court system.

He ordered a revaluation of Class I but upon appeal by Nassau County, was ordered by the Appellate Division, Second Department to allow the county to plead its case on the equal protection issues. They did so at the rehearing, but to no avail.

Herman said he and his co-counsel are writing the order, as directed, for Justice McGinity to sign and expects the county will be given 18 months to reassess its properties. Even so, lawyers say, the county will probably appeal.

In his decision, McGinity suggested that the county use the millions of dollars in refunds about to be given to 900 income- producing properties to pay for a county-wide reassessment. Hyman said this was a non-binding judicial observation that showed how badly the current system is working.

There is also a serious problem with current legislation, Hyman said, that would make it practically impossible to reassess the properties and raise assessments to the proper level. The 1981 amendment that created the special assessing units of New York City and Nassau County limited Class I assessment increases to 6 percent per year with no more than a 20 percent increase over five years. New York City will face this same law in any attempt to redistribute its tax burden.

In a related Class I condominium matter that Herman litigated, The Greens vs. Board of Assessors et al, Justice McGinity decided last September that the rules and regulations of the Nassau County assessors were in violation of county government law when it came to grading newly constructed property based on 1938 construction costs. "This is another residential case that will go up on appeal," Herman said.