In New York State, property is frequently not assessed at 100% of full value. Most jurisdictions assess at a fraction of full value, which is called “ratio.” In fact, in Nassau County, the “ratio” (depending on the type of property) is well below 1%. Although the determination of ratio is complicated, suffice to say that, as a practical matter, the applicable ratio for each taxing jurisdiction is determined by the New York State Office of Real Property Services (previously State Board of Equalization and Assessment).

Over the last 30 years, the courts have established certain standards for the valuation of office and industrial type properties. The cost approach is rarely, if ever, used, although construction costs of recently constructed properties are deemed good evidence of value. The income approach is generally adopted – even when the property is owner-occupied. In the latter instance, the courts will arrive at an “economic rental” based on expert evidence and apply an income approach capitalized into fair market value.

Use of the market approach (i.e., whole to whole comparables) is permissible and, in fact, has been utilized by some courts in cases involving large industrials; but is not often adopted. If, however, the subject property is purchased recently in an arms-length transaction, the courts will view the sales price as substantial evidence of full market value.

Posted in: Tax Certiorari