Realty Law Digest

This case involved a Real Property Tax Law (RPTL) Article 7 proceeding. The trial court had utilized an “income capitalization” methodology “rather than a ‘comparable sales’ or market approach,” because it had found that the subject property had functioned more like a cooperative corporation (co-op) than a homeowners’ association (HOA).

The property consisted of approximately 239 acres of land containing 283 seasonal cottages and other improvements, including a marina which could accommodate 153 boats. The property is situated on a single tax lot. The petitioner was organized as “a not-for-profit corporation for the purpose of holding title to the…property and its common improvements for the benefit of its parent company” (Club) and the club’s 283 members (members). The club was formed “under the former Membership Corporation Law, the predecessor to the Not-For-Profit Corporation Law, for the purpose of providing facilities for the recreation and enjoyment of its members…during the summer months and to promote social activities during the winter months. The Club is the sole shareholder of the petitioner….” Each of the members owns one of the cottages. However, “the owners do not hold title to the land upon which the cottages are situated.”

When an individual wants to purchase a cottage, he or she negotiates with the present owner. Sale contracts are in a form prescribed by the Club’s board of directors. After the buyer and seller reach an agreement, the prospective purchaser then applies for membership in the Club, and, upon acceptance, the purchaser completes the transaction with the owner selling the cottage. Once the transaction is completed, the former owner surrenders his or her Club membership certificate, and a membership certificate is issued to the new owner. No deeds are issued because the dwellings are considered by the Club to be personal property. Since no land interest is conveyed, the cottages cannot be purchased with the proceeds of a mortgage loan. Additionally, due to the nature of this sales procedure, the sales are not publicly recorded.

All members are required to abide by the petitioner’s bylaws. The bylaws, among other things, restrict construction to 800-square-foot cottages. The bylaws permit the owners to demolish their cottages and construct new ones, or to move a cottage off of the premises and replace it, with the approval of the Club’s board of directors. Members are not permitted to rent or lease their cottages.

The Club collects dues from the cottage owners, and provides staff and services such as lifeguards, gate personnel, maintenance, and recreational events. The Club also collects fees for the use of the boat slips at the marina, at a rate of $35 per slip per season. The petitioner is entrusted with the maintenance of the facilities and common improvements, and pays the real property taxes, which are assessed against the petitioner rather than the individual Club members. Funds for paying the real property taxes are remitted by the Club members through their Club dues.