New York Law Review

Tag: Trump-Equitable Fifth Ave. Co. v. Gliedman

  • Trump-Equitable Fifth Ave. Co. v. Gliedman, 69 N.Y.2d 350 (1987): Eligibility for Real Property Tax Exemption for Mixed-Use Condominiums

    Trump-Equitable Fifth Ave. Co. v. Gliedman, 69 N.Y.2d 350 (1987)

    When a building qualifies as a “multiple dwelling” under Real Property Tax Law § 421-a, the tax exemption applies to the entire building, including commercial units, up to the statutory limit, and is not to be applied on a unit-by-unit basis.

    Summary

    Trump-Equitable sought a tax exemption under RPTL 421-a for its mixed-use condominium building. The city only granted the exemption to residential units, assessing the commercial units separately. The Court of Appeals held that the exemption should be applied to the entire building, including commercial units, up to the statutory limit (12% of aggregate floor area), because the statute applies to ‘multiple dwellings’ regardless of whether they are rented or owned as condominiums. The Court reasoned that the city’s interpretation would effectively exclude all condominium property from the tax exemption.

    Facts

    Trump-Equitable owned a newly constructed 32-story mixed-use condominium building with 223 residential units and 5 commercial units (parking garage, drug store, fruit/vegetable store, bakery/cafe, children’s clothing store). The commercial space was less than 12% of the building’s total floor area. Trump-Equitable sought a RPTL 421-a tax exemption, claiming the entire building should be assessed at the pre-construction value of $757,000. The City only applied the exemption to the residential units, assessing the building at $1,621,691 by apportioning the pre-construction assessment and adding the value of the commercial units.

    Procedural History

    Trump-Equitable filed an Article 78 proceeding to annul the city’s determination and compel assessment at $757,000. Special Term granted the petition. The Appellate Division affirmed based on the Special Term opinion. The Court of Appeals reviewed the decision.

    Issue(s)

    Whether a tax exemption under RPTL 421-a for a “multiple dwelling” should be applied to the entire building, including commercial units within the statutory limit, or solely to the residential units.

    Holding

    Yes, because RPTL 421-a applies to “multiple dwellings” regardless of the form of ownership (rental, cooperative, or condominium), and the 1975 amendment to the statute expressly recognizes that commercial uses are entitled to a limited exemption based on floor area ratio.

    Court’s Reasoning

    The court reasoned that the statute’s plain language requires that the exemption be applied to the building as a whole, up to the specified commercial use limit. The court stated, “We are obliged to read the words of the statute in their natural and most obvious sense…and when we do so it appears that the Legislature intended all properties, regardless of the type of ownership, to receive the benefit of the exemption.” The Court dismissed the City’s argument that the primary purpose of the statute (encouraging residential building) would not be furthered by applying the exemption to commercial condominiums. The Court emphasized that the statute’s purposes were broader, including construction, employment, and stabilizing the city’s tax base. Granting a limited exemption to commercial space was consistent with the intent to incentivize development by allowing developers to maximize the value of the ground floor. The court found that the 1975 amendment to RPTL 421-a explicitly recognized that commercial uses are entitled to the exemption. The court stated, “…far from disqualifying commercial uses from the benefit of the exemption, the Legislature expressly recognized their limited entitlement to it by the 1975 amendment.” The Court also rejected the argument that this interpretation was inconsistent with Real Property Law § 339-y or RPTL 580 and 581, which deal with taxation of individual condominium units. The purpose of those laws was to ensure fair taxation and separate tax accounts for each unit, not to alter the application of the RPTL 421-a exemption at the building level. The Court noted that if its application offered an unfair tax advantage to commercial condominiums over other business properties, the New York City Council could restrict, limit or condition the eligibility of benefits. The court stated that because the statutory language is clear, the court must implement it as written and may not defer to an interpretation made by the agency charged with enforcement of the statute. The Court concluded that the city’s interpretation would effectively excise buildings held in condominium ownership from the statute and apply the exemption differently depending on the type of ownership, which was not the legislature’s intent.

  • Trump-Equitable Fifth Ave. Co. v. Gliedman, 62 N.Y.2d 535 (1984): Defining ‘Under-Utilized Land’ for Tax Exemption Eligibility

    Trump-Equitable Fifth Ave. Co. v. Gliedman, 62 N.Y.2d 535 (1984)

    A statute granting tax exemptions for construction on “under-utilized land” does not require “substantial” under-utilization; an agency interpretation imposing such a requirement is inconsistent with the statute.

    Summary

    Trump-Equitable sought a tax exemption under Real Property Tax Law § 421-a for Trump Tower, arguing the land was under-utilized prior to construction. The Commissioner of the Department of Housing Preservation and Development (HPD) denied the exemption, asserting the land wasn’t under-utilized. The Court of Appeals held that the HPD improperly imposed a requirement of “substantial” under-utilization, which is not mandated by the statute. The court found that the land was, in fact, under-utilized and that Trump-Equitable was entitled to the tax exemption.

    Facts

    Trump-Equitable constructed Trump Tower, a mixed-use building, on land formerly occupied by Bonwit Teller & Company. Trump-Equitable applied for a partial tax exemption under Real Property Tax Law § 421-a, which incentivizes construction on under-utilized land. The Bonwit Teller building was a 12-story department store that operated until 1978. On the relevant date, October 1, 1971, the building used only 66% of its potential floor area ratio and generated $30 million in revenue. The assessed value of the building was roughly half that of the land.

    Procedural History

    1. HPD initially denied the exemption, claiming the building was not functionally obsolete. This denial was overturned by the Court of Appeals in Matter of Trump-Equitable Fifth Ave. Co. v Gliedman, 57 NY2d 588.
    2. On remittal, HPD again denied the exemption, asserting the land was not under-utilized based on statutory interpretation and new regulations.
    3. Special Term set aside the second determination.
    4. The Appellate Division reversed Special Term and upheld the HPD’s denial.
    5. The Court of Appeals granted leave to appeal.

    Issue(s)

    Whether the HPD’s interpretation of “under-utilized land” in Real Property Tax Law § 421-a, requiring “substantial” under-utilization, is consistent with the statute’s intent and language.

    Holding

    No, because the statute only requires “under-utilization” and the HPD’s interpretation improperly adds a requirement of “substantial” under-utilization, exceeding the scope of the statute.

    Court’s Reasoning

    The court emphasized that statutory interpretation by an agency is given deference unless it is irrational, unreasonable, or inconsistent with the statute. However, when the statute’s words are clear, the agency’s expertise is less relevant, especially when the interpretation contravenes the statute’s plain language. The court noted that the statute requires only “under-utilization,” not “substantial” under-utilization, citing its prior holding in Matter of Trump-Equitable Fifth Ave. Co. v Gliedman, 57 NY2d 588. The HPD’s regulations, which define under-utilized land as “substantially under-utilized,” are therefore invalid. The court found that the Bonwit Teller site was, in fact, under-utilized, considering factors like the floor area ratio (only 66% utilized) and the assessed value of the building compared to the land. The Court directly quoted Kurcsics v Merchants Mut. Ins. Co., 49 NY2d 451, 459, stating: “there is little basis to rely on any special competence or expertise of the administrative agency and its interpretative regulations’, especially when the interpretation, as embodied in a regulation, directly contravenes the plain words of the statute”. The Court stated: “Whatever definition respondent may for the future give “under-utilized land,” short of more detailed definition of the term by the Legislature, on the extensive record accumulated by the parties before us the objective criteria establish that the Bonwit’s site was under-utilized, and that appellant is entitled to the exemption.”