It is no secret that New York State, and Long Island in particular, has some of the highest property taxes in the country. As a result, the majority of property owners on Long Island challenge their real estate tax assessments annually. In most taxing jurisdictions on Long Island, the real estate tax assessment of a property cannot be changed for three years following a successful assessment challenge (the Moratorium). The Moratorium is found in Real Property Tax Law (RPTL) § 727, and was enacted primarily to reduce recurring, costly litigation for municipalities and taxpayers alike. While this Moratorium does prohibit tax assessors from increasing a property’s assessment, it also effectively prohibits any additional tax challenges by the property owner.

What happens if there is a significant change at the property during the Moratorium like a fire or the loss of a major tenant? Is it just “too bad, so sad” for the property owner? Thankfully, there are exceptions to the rule. In cases where circumstances at the property have significantly changed during the Moratorium, an exception is triggered. This may afford the property owner an opportunity for relief. Though there are a number of Moratorium exceptions enumerated in RPTL § 727, we will focus on two of them here.

The most obvious exception to the Mortarium occurs when significant damage or demolition has occurred at the property (the Physical Change Exception). While this exception would be triggered by a fire, flood, or similar catastrophe, we have seen it most frequently applied in the case of an intentional demolition of the property in connection with redevelopment or new construction. Whether the change occurs by way of catastrophe or demolition, it is important to note that the resulting change must be significant. For example, the demolition of a small shed on the property will likely not trigger this exception.

In addition to Physical Change Exception, there is also an exception where there has been a change in the occupancy rate of a leased property by 25% (the Occupancy Exception). The occurrence of this exception simply requires the occupancy of a property to change by 25% from one year to the next. This exception can be of particular relevance for multi-tenanted office buildings and retail properties, as their tenancies and economic performance can vary substantially from year to year.

It is important to note that while the exceptions discussed herein allow for a property owner to seek an assessment reduction prior to the expiration of a Moratorium, the provisions of RPTL § 727 also allow for exceptions in the tax assessor’s favor. For example, a change in assessment is permissible during the Moratorium where there has been an improvement to the property.

For property owners on Long Island, real estate taxes are often the largest, single expense associated with owning real estate. As a result, it is imperative that property owners remain attentive to real estate taxes, even after a successful real estate tax challenge. Property owners should consult with a knowledgeable certiorari attorney to ensure every avenue of reducing a property’s real estate taxes is being explored.

This article was written by partner Robert L. Renda and summer legal intern Lauren Smith and originally published in the New York Real Estate Journal.