Real property tax assessment litigation in New York State [“tax appeal”, “tax certiorari”] is a nuanced and complex process that must comport with the requirements of state statute, court rules and case law precedent.  Consequently, the state legislature took pity on home owners by creating a residential tax appeal forum known as Small Claims Assessment Review [“small claims”].  The stated justification for small claims was to provide a simple and inexpensive tax appeal alternative for home owners to avoid the burden of a formal tax certiorari proceeding.  Despite the presumed simplicity of house cases, residential tax appeals should not be underestimated.

Case in point is a tax appeal filed by my firm via small claims for the owner of a house containing the owner’s small professional office used for the practice of psychiatry on an occasional basis as an accommodation to clients.

At the small claims hearing the municipality’s representative did not dispute our evidence of overvaluation, but instead argued that the owner’s professional office disqualified the house from small claims review because the house was not used “exclusively” for residential purposes as stated in the statute.  We contended that “exclusively” had already been liberally construed in related statutes to mean “primarily” or “principally”, that the home owner’s office was an accessory residential use under the municipality’s own zoning code, and that it was the intent of the legislature to disqualify mixed-use commercial/residential properties, not a home like the subject property, from small claims.  The hearing officer determined that the house did in fact qualify for small claims, and also granted a reduction of the real property tax assessment.

The municipality appealed the hearing officer’s decision on the sole issue of whether a residence containing a professional office of the owner-occupant can avail themself of the small claims forum.

The lower court ruled in favor of the municipality holding that the “exclusively” residential language “must be read to shut out premises having any other uses from the ambit of the [small claims] statute”.  The intermediate appellate court affirmed the lower court’s decision.  We were granted leave to appeal to the Court of Appeals, New York’s court of last resort, where we ultimately prevailed for the home owner.

In reversing the decisions of the courts below the Court of Appeals first noted that while statutes are to be construed based on ordinary meaning, a literal and narrow interpretation that would thwart the statute’s settled purpose should be avoided.  The Court distinguished between mixed-use properties that are both residential and commercial [ex. storefront with an apartment above], from a house like the one in question that had an occasional and incidental business use of the home owner.  The Court confirmed that the legislature did not intend to disqualify homes with any non-residential uses, but only properties that were mixed-use.  To deny expedited and inexpensive review to the home owner here would frustrate the statutory objective.  Specifically, a residential taxpayer who occasionally uses a portion of their home for business is no more able to expend the resources for a regular tax certiorari proceeding than the owner of a home without any incidental business use.

This tax appeal litigation of a house underscores that small claims is not always a small claim.