In the Matter of the Application for a Review under Article 7 of the Real Property Tax Law of the Tax Assessment by Happy Rehab, LLC, Petitioner, v  Assessor for the Town of Glenville et al., Respondents.

In the Matter of the Application for a Review under Article 7 of the Real Property Tax Law of the Tax Assessment by Happy Rehab, LLC, Petitioner, v  Assessor for the Town of Glenville et al., Respondents.

Supreme Court, Schenectady County, September 29, 2021

E. Stewart Jones Hacker Murphy, LLP (David Murphy of counsel) for petitioner.

Roemer Wallens Gold Mineaux, LLP (Benjamin Heffley of counsel) for respondents.

Higgins, Roberts & Suprunowicz, P.C. (Michael Basile of counsel) for Scotia-Glenville Central School District, nonparty.

Three proceedings are brought by petitioner under article 7 of the Real Property Tax Law to contest the assessed value of the single parcel of improved land owned by petitioner. The three proceedings cover the assessment for the tax years of 2017, 2018, and 2019. The assessment for each tax year is{**74 Misc 3d at 333} based on the value of the property on the taxable status date of each preceding year. Full market value of the parcel as set by the tax rolls is $2,566,207 for 2016, $2,652,708 for 2017, and $2,810,607 for 2018. Petitioner has obtained an appraisal of the parcel showing the full market value as $600,000 for the years 2016 and 2017. Petitioner has an updated appraisal for 2018 stating that the full market value for that year is the same. Respondents have submitted an appraisal showing the full market value as $1,360,000 on the taxable status date for all three years at issue. The respective experts testified at trial consistent with their reports.

The parcel is located at 801-901 Maritime Drive, parcel number 30-1-8.5, in the Town of Glenville. There are two structures, a 10,000 square foot office/warehouse building occupied by petitioner and an adjacent 14,550 square foot boathouse building rented pursuant to a long-term ground lease to a local not-for-profit rowing association. Prior to December 20, 2017, the main building (hereinafter Maritime building) was zoned riverfront recreation/commercial and land conservation. That was the designation when initially marketed and purchased by petitioner. As of December 20, 2017, petitioner received a revised designation of the Maritime building to a commercial planned development district (PDD) specific to the Maritime building only. The boathouse building remained the same. According to Local Law No. 14-2017 of the Town of Glenville (codified as Glenville Town Code, ch 270, attachment 4, § A270-209 [B]):

"Planned uses for the planned development include the existing 14,550 square foot Burnt Hills Rowing Association building, related accessory structures and uses that support the Rowing Association, in addition to a pediatric health and wellness practice to occupy the existing 10,000 square foot former Maritime Center building and the planned 5,356 square foot addition to same. Uses for the interior of the building include offices for staff of the pediatric health and wellness practice, a variety of private treatment spaces, therapy gym, yoga studio, rotunda, kitchen, patio, and a therapeutic pool for the planned addition to the building. Outdoor uses will include the addition of a handicap-accessible playground, handicap-accessible hiking trail, outside bike training/walking/running path, and parking lot improvements. Events and activities{**74 Misc 3d at 334} associated with child and family wellness will occasionally be held within the building and on the property, including open houses, birthday parties, family education and networking opportunities, and health/medical education and training."

With respect to vehicle access, the Glenville Town Code provides: "For vehicular traffic purposes, vehicle access to the planned development will be via Maritime Drive only, beginning and ending at Maritime Drive's northern terminus at its intersection with Alplaus Avenue. Mohawk Avenue is not to be used for access." (Glenville Town Code, ch 270, attachment 4, § A270-209 [E].) Thus, under neither zoning designation could the property be used as a traditional industrial [*3]grade warehouse/office property.

The physical layout of each building, to this court, appears to be somewhat unusual. The Maritime building is a 20-year-old building with a circular center cone and four ancillary pentagonal enclosed areas operated as a pediatric rehabilitation facility. It has no sprinkler system, has no raised loading dock/receiving facilities, and is heated by propane fuel. The boathouse building has no central heating or air conditioning and is a basic pole barn-type construction designed to provide unheated shelter for rowing shells and oars. It contains no plumbing, relies on "porta-johns" and heats a single desk office area and rowers changing room by means of propane. The boathouse lease to the rowing association runs through August 31, 2049, at an annual rent of $4,228 subject to future minor escalations. The property has no direct frontage on the Mohawk River; access is provided by means of an easement granted by an adjacent landowner.

The prior owner of the property, who operated a rowing center school, listed the property for sale on December 18, 2014, at an asking price of $949,000. Approximately four months later, on April 9, 2015, the asking price was reduced to $549,000. The property was listed with Berkshire Hathaway/Blake Realtors—Julie Gibbons, principal. Ms. Gibbons testified at trial that the reasons for the price change included a lack of meaningful response, other than showings to petitioner's principal Karen Dake in February of 2015; the existence of a below-market, 50-year lease on the boathouse; high utility costs due to necessity of using propane gas and poor insulation; lack of municipal water or natural gas service; the Maritime building's quirky layout and location; the high tax assessment{**74 Misc 3d at 335} imposed by the Town of Glenville; a growing delinquency in seller's mortgage payments; and the property's low-visibility, dead-end location.

[1] Ms. Gibbons testified that the property was actively marketed by Berkshire Hathaway for 468 days. Thereafter, the seller himself marketed the property for an additional 147 days until contract on October 16, 2016. The total marketing time was therefore over 600 days. The contract price was $550,000. Prior to petitioner's purchase, there were two purchase offers tendered in the amounts of $350,000 and $400,000. Both were rejected by the listing seller. Ms. Gibbons testified that during its 16-month listing period, Berkshire Hathaway listed the property in various national databases, issued a price reduction flier, circulated marketing brochures by mail and at broker association meetings, used word of mouth, and used online platforms. Based upon the foregoing, the court concludes that the property had an adequate exposure time on the market and was consistently and sufficiently marketed for a substantial period of time. Over that substantial period of time, there appears to have been little buyer interest, as reflected in the presence of only two offers, both of which were so low they were rejected by the seller.

Respondents make much of the parallel existence of foreclosure proceedings during the marketing period. They characterize the seller as being "under the gun." If that was so, the record would have reflected a sale under extreme compulsion wherein a normal marketing effort either was not possible or was not conducted due to the property's brief exposure time. The court finds that, as a matter of law, with active marketing by a professional broker over a period of 468 days, and additional marketing by the seller amounting to a total marketing time of over 600 days, the purchase contract was not entered into under undue duress and the price does not constitute mere liquidation value. As such, it may be said that the contract price of $550,000 is the best indicator of value (see Matter of Allied Corp. v Town of Camillus, 80 NY2d 351 [1992], citing Matter of W.T. Grant Co. v Srogi, 52 NY2d 496 [1981]).

[2] Although the court finds that petitioner's purchase price of the subject property is the best evidence of its value, the court recognizes petitioner's expert appraisal of $600,000, which included an analysis of the value, if any, of the adjacent boathouse. Petitioner's expert did not rely solely upon the relevant purchase price in concluding a $600,000 value. Rather, he{**74 Misc 3d at 336} considered that price along with various comparable properties, appropriately adjusted to account for differences arising from physical or legal characteristics. Based upon an evaluation of those comparable properties, petitioner's expert, Mr. Chris Harland, concluded that the market value is $600,000 and found that this value was supported by the consistency of an arm's length purchase of $550,000, adjusted upwards to account for a leased boathouse building. The court credits Mr. Harland's testimony that the restrictive zoning of the subject property is a critical issue in terms of identifying useful and reliable sales comparison properties. This testimony was not disputed by respondents' expert and was consistent with the testimony of the listing broker, Ms. Gibbons. Accordingly, the court credits the testimony of Mr. Harland, and discredits the testimony of respondents' expert for the reasons that follow.

Respondents' expert appraisal was performed by Mr. James O'Neil who subsequently passed away. Zackary Smith, an appraiser with the same firm, testified as to the contents of the O'Neil report. While the report noted the lease, its terms were not significant to development of value. There is no indication that respondents' appraiser requested or analyzed the lease itself, and therefore there is no indication that he was aware of its terms.^[FN*]

More important than failing to consider the lease, Mr. Smith conceded on cross-examination that comparable sales used in valuing the subject property must compete with properties reflecting "viable economic substitutes." It is uncontroverted that the parcel at issue is severely restricted under the terms of the PDD. It simply cannot be used for industrial purposes. However, respondents' report consistently referred to selected comparables as "light industrial." Not only is light industrial disallowed for the property pursuant to Local Law No. 14-2017 of the Town of Glenville, but the physical characteristics do not lend themselves to such use. The property is accessed through{**74 Misc 3d at 337} local roads at a dead end with no immediate access to commercial interstate highways. The property is not configured for industrial use. Indeed, the subject property's classification for all years at issue is "professional building," a nonindustrial designation. Respondents' appraiser selected comparables in heavily developed areas in close proximity to major highways reflecting larger, industrial gauge warehouse facilities markedly dissimilar to both the Maritime building and the boathouse building. Respondents' comparables comprised fully insulated metal or block-constructed, fully-sprinklered, industrial-grade structures with features such as loading docks, multiple overhead doors, industrial load electric service and full municipal utilities. The subject property has none of that, not even municipal water. Accordingly, the court concludes, based upon the testimony of respondents' expert, that his [*5]comparables are not "viable economic substitutes" and therefore, are accorded no weight.

In conclusion, the court holds that the $600,000 valuation opinion of petitioner's expert appraiser is well-supported by the $550,000 arm's length sale of the subject property in 2016 and is within the range of the $949,000 original asking price and the two rejected offers tendered during the property's listing period of $350,000 and $400,000. The $600,000 value developed by petitioner's expert is consistent, credible, clear, and well-supported by the weight of the credible evidence in the record. The $600,000 market value is hereby adopted by the court as the value of the subject property as of July 1, 2016, July 1, 2017, and July 1, 2018. The final 2017, 2018 and 2019 revised, corrected and reduced value is as follows: