"If possible -- without having the property tax tail wag the business dog -- time your closing for after the cycle ends."

Buyers of commercial real estate most frequently ask their property tax attorney one simple question: "Will the real property taxes for this property increase if I buy it for this or that amount?" The simple answer is no, unless the municipality has planned revaluation or a comprehensive plan to review all properties in the assessing unit. Otherwise, reassessment on sale violates the Equal Protection clauses of the US and New Yoark State constitutions.

Rule 1. Before contracting to purchase a property, as your real property tax attorney if the municipality is planning a reassessment or comprehensive review.

If not, draw a big sigh of relief and do no more unless the purchase price shows a reduction. Feel free then to disobey many of these rules and advise the assessor of the sale. However, many assessing units in New York State such as New York City and Nassau County do reassess each year or periodically. These are rules to minimize the effects of reassessment when the purchase price shows a probable increase in assessment.

Rule 2. Do nut use press releases heralding your purchase. If you must publicize the purchase, wait a reasonable period until after the reassessment to do so.

Assessments are often increased as a result of unnecessary publicity about a sale. This is particularly important toward the end of the reassessment preparation period. It makes no sense to publicize your sale toward the end of this period so that the assessor cannot possibly miss it. Nassau County and New York City assessment rolls are published on January 1 and January 15, respectively, each year. NO deed can be filed in New York State without filing a form notifying the Assessor of your sale and the price of the sale. It can take many months tfor the County Clerk to forward such form to the Assessor. No law requires you to arrange for the local newspapers or trade magazines to advise him or her as soon as possible.

Rule 3. Do ot give approval or allow your seller or mortgagee to issue a press release.

Rule 4. Re-read and implement Rules 2 and 3 listed above.

Rule 5. Time your closing for the end of the reassessment cycle.

Generally, reassessments are finalized 30 ro 45 days prior to the publication date. If possible -- without having the property tax tail wag the business dog -- time your closing for after the cycle ends or as late in the cycle as possible. Assessment rolls once completed on a tentative basis cannot be reopened because the assessor has learned about a purchase price.

Rule 6. Take advantage of IRS apportion rules -- and apportion early.

Section 197 of the Internal Revenue Code allows a property owner to apportion a purchase price into its various component parts. These parts include real estate such as land and building, which are subject to real property tax, and non-real estate components not subject to real property tax, and non-real estate components not subject to real property taxation, such as furniture, fixtures and equipment (FF&E) as well as intangibles. Apportionment results in shorter amortization periods for non-real property components, as well as a lower value on the deed, which strengthens the argument that the real estate portion of the sale is truly less than the total consideration.

The temptation and general practice is to do this apportionment within the year following the transition. While such apportionment can help with income tax consequences, a delayed apportionment will do little to help the owner's property tax representative argue that the total consideration paid is not the actual real estate value. Assessors love to defeat apportionment arguments by pointing to the deed and transfer taxes.

Rule 7. Consider paying sales taxes on the non-real property portions of the property conveyed.

Another thing assessors love to do is ask a simple question. "Did your client pay sales taxes on the FF&E and intangibles?" Few purchasers want to pay 8.5% sales tax instead of a .25% transfer tax. But consider that real property taxes in New York City and Nassau County range from 5.5% to 9.5% and these taxes must be paid annually. The one-time payment of sales taxes, which support the argument that certain components are not really real property, is better than annually paying these high real property taxes. Payment of sales taxes will not guarantee a lower real property tax assessment, but it helps. The reassessment on the sale can be minimized by using these rules.

The views expressed in this article are those of the author and not those of Real Estate Media or its publications.

William D. Siegel is a senior partner in the Oyster Bay law firm of Siegel Fenchel & Peddy, P.C. and the New York State member of the American Property Tax Counsel. He can be reached at wds@nytaxappeal.com