Taxpayer Wins in Long Island City Vacant Land Property Tax Misclassification

Facts:

Ciampa 24, LLC, the Petitioner, owns a parcel of vacant land located at 41-37 24th Street in Long Island City, Queens, New York, identified as Block 414, Lot 13. The property is zoned as M1-5 (manufacturing) and R9 (residential) and has been classified by the New York City Department of Finance (DOF) as Building Class V1 (Zoned Commercial or Manhattan Residential) and Tax Class 4 (commercial). The Petitioner argued that the property should be reclassified as Building Class V0 (Zoned Residential; Not Manhattan) and Tax Class 1 (residential) for fiscal years 2018 through 2023. The Petitioner contends that this misclassification led to an overcharge of approximately $135,000 in real estate taxes. The DOF denied the request, prompting the Petitioner to file a CPLR Article 78 proceeding seeking judicial review and correction of the classification​.

Issue:

The primary legal issues are:

1. Whether the DOF’s classification of the property as Tax Class 4 and Building Class V1 was erroneous and should be corrected.
2. Whether the Petitioner is barred from seeking reclassification due to a prior settlement agreement for the tax years 2017/18 and 2018/19.
3. Whether the proper legal procedure was used by filing under CPLR Article 78 rather than RPTL Article 7.

Rule:

1. Property Classification and Correction: Under RPTL § 1802(1)(d), all vacant land located outside of Manhattan that is zoned residential must be classified as Tax Class 1. NYC Administrative Code § 11-206 and 19 RCNY § 53 allow the DOF to correct clerical errors or errors in description related to property classifications.
2. Settlement Agreement Preclusion: Settlement agreements typically prevent further litigation on settled matters unless the right to pursue specific issues is explicitly reserved.
3. Exclusive Remedy Doctrine: Disputes concerning property tax assessments and classifications generally fall under the exclusive remedy of RPTL Article 7. However, exceptions allow challenges under CPLR Article 78 for certain administrative decisions.

Application:

1. Property Classification: The Court found that the property, which is zoned M1-5 and R9, should have been classified as Tax Class 1, Building Class V0, based on its residential zoning component. The DOF’s refusal to correct the classification despite similar precedents and clear statutory guidance was deemed arbitrary and capricious.
2. Settlement Agreement: The Respondents (City of New York, DOF) argued that the Petitioner was barred from seeking reclassification for the tax years 2017/18 and 2018/19 due to a prior settlement agreement. However, the Court found that the DOF did not raise this settlement as a defense in the initial administrative decision, making it improper for the Respondents to rely on it during judicial review.
3. Procedural Vehicle: The Court rejected the Respondents’ argument that RPTL Article 7 was the exclusive remedy, noting that CPLR Article 78 was appropriate in this case due to the administrative nature of the DOF’s error and the specific relief sought by the Petitioner.

Conclusion:

The Court vacated and reversed the DOF’s determination, ordered the reclassification of the property as Tax Class 1, Building Class V0 for fiscal years 2018 to 2023, and remanded the matter for recalculation of the taxes based on the correct classification. The Petitioner is likely entitled to tax relief amounting to approximately $135,000, as the incorrect classification led to significant overcharges over the contested period.