It is not uncommon for municipal planning departments to require applicants who are seeking land use approvals involving multiple contiguous parcels to consolidate or merge the properties to form one single larger parcel. Consolidation or merger typically results in a new tax map number, a new single tax bill for the consolidated or merged lots, assurances to the municipality that the otherwise single unconsolidated or non-merged lots will not be individually sold off post land use approvals and that the proposed project which is subject to the land use approvals will be assessed for real property tax purposes as one single improved unit (versus partially improved and partially vacant land).
Consolidation or merger of single parcels into one larger parcel provides for certainty when it comes to ownership of the lands subject to the approvals and provides the municipal assessing unit with certainty as to the use of the lands while imposing a single tax class and assessed value to the overall project. Consolidation or merger is most often required prior to issuance of a building permit or Certificate of Occupancy. Consolidation can be set forth as a covenant or condition in a written and signed Declaration of Covenants and Restrictions, which is recorded against the property in the applicable County Clerk’s or County Registers Office. Similar to any other covenant or restriction, failure to comply with the covenant or restriction to consolidate can result in revocation of the relevant land use approvals.
In a recent Second Department case involving a real property tax assessment dispute, failure by the property owner to consolidate or merge six individual parcels that form the boundaries of a shopping center gave rise to unequal tax assessments among the six parcels, resulting in the exact problem that municipalities try to avoid by requiring consolidation or merger.
In re Blauvelt Mini-Mall, Inc v. Town of Orangetown, as a condition of site plan approval granted in 1992, the Town required that six individually owned parcels be merged into one single parcel forming the boundaries of a proposed shopping center. Despite the condition, no formal steps were ever taken to effectuate the merger. The facts of the case do not indicate whether the merger requirement was reduced to a recorded Declaration of Covenants and Restriction with revocation language.
Over the years, although a formal merger was never accomplished, the Town assessed the shopping center as one real property taxable unit by undervaluing five of the parcels while overvaluing the sixth parcel. This valuation strategy lead to the unequal tax assessments that consolidation or merger seeks to avoid. What is interesting about this case from a land use perspective is the fact that despite the 1992 Town directive to consolidate or merge the lots, the Appellate Division reversed the trial court holding that directed the merger by stating that “[n]one of the parties sought merger of the parcels or similar relief, merger of all the parcels at issue into one tax lot is not supported by the record, and merger of all the parcels could be potentially prejudicial to the petitioner.”
Hence, despite all outward appearances by the property owner to use the unconsolidated parcels as one consolidated improved shopping center parcel, failure to take the necessary steps to consolidate, such as transferring all six parcels into one deed, providing one overall property description or metes and bounds instead of six individual metes and bounds, and modifying the official tax maps to reflect one single parcel, the petitioner in this case could potentially benefit from the unequal tax assessments to the detriment of the municipality. Likewise, even though the Town conditioned site plan approval on consolidation or merger of the lots, failure by the municipality to insure that consolidation actually occurred seems to have resulted in a waiver or estoppel against the municipality, which is not typically applicable to municipalities.
Author note: Although the facts of this case do not indicate the basis for under valuation of five parcels and over valuation of the sixth parcel, it would likely be reasonable that the five undervalued parcels are perhaps being assessed as vacant land containing only parking areas, or open space, while the sixth parcel houses the actual shopping center structure. If this is the case, petitioner could easily argue that parcels one to five should receive a lower vacant land assessment, while only parcel six should receive a full commercial improved real property assessment. Allowing this fact pattern to exist provides for uncertainty in tax assessments.