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Golf Course Valuation For Tax Assessment Purposes

What is the appropriate method to value a golf course for tax assessment purposes when the owners bought the property intending on redeveloping the same for residential purposes sometime in the future?  That issue was recently decide by an appellate level court sitting in New York City. In the Matter of Hampshire Recreation, LLC v. Board of Assessors (Second Dept. March 16, 2016).

The property at issue was the Devereaux Emmet-designed Hampton Country Club, a private, 117 acre golf course, situated on the Long Island Sound in Westchester County. The club, located in the Town – and partially in the Village – of Mamaroneck, sold in 2010 to Hampshire Recreation, LLC for $12.1 million.  In light of this purchase price, both the Town and the Village set the assessment for the Club at $12 million, reflecting the amount of the sale price attributable to real property.

Hampshire Recreation, in turn, challenged both the Town and the Village’s new assessments in Westchester County Supreme Court via an Article 7 tax certiorari proceeding.  Hampshire Recreation claimed that, based on capitalization of the Country Club’s income, the property was worth $4.8 million in 2010 and $4.7 million in 2011 and 2012.

Generally, in real property tax dispute litigation (commonly referred to as “tax certiorari”), a recent arm’s length sale price is considered to be the best indicator of a property’s value.  However, property must be valued based on its use at the time of valuation, not on any contemplated or potential future use.

The evidence presented at trial in Westchester County Supreme Court established that the $12.1 million purchase price was based on Hampshire Recreation’s plans to potentially redevelop the property for residential use in the future. Since a recent sale price based on speculation of future development is not a proper indicator of value for tax certiorari purposes, the Appellate Division ruled that the income capitalization method was the best way to value the Country Club.  Accounting for several mistakes in the calculations made by Hampshire Recreation’s appraiser, the Court set the assessments for the property between $5.2 and $5.4 million for the years and jurisdictions at issue.

Hacker Murphy, LLP is home to one of the largest, most experienced, and most successful groups of tax certiorari attorneys in the State of New York, and has successfully handled cases similar to the Hampshire Country Club on many occasions.  Contact us for a free consultation: Pat Seely, Esq.