March 12, 2024

NYREJ: Increased market risk can work to lower property taxes

We’ve now seen an extended period of time when risk and corresponding cap rates at which properties are trading have risen significantly. The reasons behind risk elevation are well known to commercial investors, starting with interest rates and inflation, but also including increases in labor costs as well as prices for goods and services and even availability of materials. These are just some of the factors that have heightened risk and led investors to shy away from consummating deals. Even though caps rates are rising, there are circumstances surrounding many sales that have suppressed cap rates and support the position that the true cap rate environment is even higher than the raw data indicates. These higher cap rates have a direct impact on an owner’s property tax case and when analyzed properly, can reduce the tax burden. 

After closer examination, even the few sales where buyer and seller have been able to agree, frequently turn out not to be truly market transactions. Many buyers who have moved forward with purchases in the current environment are users. Users are buying buildings with the intent to occupy and run their businesses at the property. This is a far different set of criteria for purchase as compared to an investor buying a property and looking for a positive return. Users are known to overpay for properties that fit their specific business needs, such as layout and configuration, as well as proximity of vendors and customers. Existing businesses must also purchase at a proximity that will allow their employees to continue to have similar commutes or risk losing some of their workforce. A user’s biggest motivation may simply be to stop paying exorbitant rent costs and start building equity in a property. Regardless of the reasons, users have different motivations thaninvestors. Thus, user transactions distort cap rates downwards where a true market transaction would produce a lower price and higher cap rate. 

Another sales trend that has come to almost a complete stop are speculative purchases. The practice of buying a location, and then waiting for tenants to occupy space has always been chock-full of risk, but given the factors cited earlier, the consequences are now much worse. The fall out from rising interest rates has made the carrying cost of a mortgage at a property with any sort of vacancy unbearable. The exodus of retail tenants provides the primary example of the dangers of buying vacant properties. Vacant banks and drugstores can no longer be purchased with the expectation that a similar tenant will sign a lease. Rather, the only transactions that are occurring for these types of properties are ones where the purchaser has bought the property for a change in use. In those instances, that purchaser is not paying a price for the real estate that presently exists at the property, but rather for that real estate plus the right to change that property to a more a profitable use. This is another example of a higher price providing cap rate data that is artificially low because of the circumstances surrounding the transaction. 

These factors can, and should, support owner’s pursuits of lower property taxes. The reason being that New York state courts have identified that commercial properties should not be valued based on sales, but rather the income stream to each individual property. For this reason, comparable sales are rarely considered when reviewing commercial property tax cases. Therefore, all the factors contributing to higher risks must be considered in an income analysis when analyzing a property for tax purposes. 

New York law requires that all properties be taxed equitably. This compels assessors to strip away factors such as user purchases and change of use and focus on the true value of the underlying real estate. New York state judges also recognized that long-term leases may not indicate the current values as market conditions change. This has been extremely evident with leases signed post-COVID, particularly in the retail and office sectors. The courts require the assessor’s income analysis to go to the market and support their rent with current transactions to show an old lease agreement is not artificially high. By the same token, property owners must provide data if they are to prove that the old lease agreement is no longer indicative of the current market rent. 

No property sector is immune to inflation and increased costs. By highlighting the elevated risk in commercial real estate, property owners can strengthen their case to reduce their property tax burden. By translating the variables of an income approach to current market conditions, and ultimately applying an accurate capitalization rate, commercial property owners can avail themselves of income analysis that will yield a proper taxable value and reduced property taxes. 

Brad Cronin, Esq., and Sean Cronin, Esq., are partners at Cronin & Cronin Law Firm, PLLC, Mineola, N.Y.

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Brad W. Cronin, Esq.

Brad W. Cronin is the founding Partner at Cronin & Cronin Law Firm. He has over 40 years of Legal Experience. Brad represents a cross section of many of the largest New York developers, property owners, national corporations, REITs and retail chains. He has extensive trial experience having successfully litigated and resolved high profile cases throughout New York State which has resulted in a number of landmark decisions in the field of Tax Certiorari. 


Over the years Brad’s reputation for honesty and integrity has led to long term relationships with municipal assessment officials. His expertise and extensive experience along with his reputation has resulted in some of the highest property tax reductions in New York State.


Brad has been selected as a Who’s Who of Long Island Business News for the past 7 years in the fields of Tax Certiorari law and Real Estate Law. Each year Long Island Business News honors business leaders whose creative approach to challenges and positive results help to make Long Island better.

For over 30 years Brad has earned the highest rating awarded by Martindale Hubbell in both competency and ethics in his field. This is an honor bestowed on him by his peers for his professional excellence.


Brad is a columnist for the New York Real Estate Journal’s “Ask the Expert” quarterly feature discussing current real property tax issues. Some issues addressed are Hurricane Sandy’s effect on property taxes, Nassau County’s Disputed Assessment Fund, emerging market trends, New York’s property tax rates, and how your purchase price can affect your taxes.

Brad has been an invited speaker and participant on various panels involving different subjects affecting tax certiorari and valuation of property such as condominiums, environmental contamination, and reviewing changes in the tax certiorari field. As a member of the Nassau and Suffolk Condemnation and Tax Certiorari committees, he has worked to implement changes to facilitate the timely resolution of commercial tax protests.

Brad currently serves as executive member of the steering committee and served as Co-President of the Long Island Real Estate Group for three years. This organization has supported various Long Island charities, as well as real estate related projects, educational real estate programs and networking events. He is Cofounder of the North Shore University Hospital Department of Medicine Leadership Circle Committee and serves on the Village of Plandome Planning Board.

Sean M. Cronin, Esq.

Sean M. Cronin is a founding partner at Cronin & Cronin Law Firm with over 20 years experience. He specializes in negotiating tax certiorari matters for prominent developers, national REITs and tenants in Nassau, Suffolk, and Westchester counties, as well as the five boroughs. He is responsible for successfully reducing the assessments, and thereby the real estate taxes, on many of the largest properties in New York State thanks to his expertise in property valuation issues and knowledge of market conditions and demographics. His clients include developers and owners of all property types, including office buildings, industrial buildings, shopping centers and retail locations, restaurants, apartment buildings and condominium complexes, golf courses and assisted living facilities. 


Sean is an Executive Board member and past Co-President of the Long Island Real Estate Group, a charitable organization created to support local communities.   He is an Executive Board Member of Vision Long Island which advances more livable, economically sustainable, and environmentally responsible growth on Long Island through Smart Growth.   Sean is an Advisory Board Member of the Viscardi Center and on the Board of Advisors of the Energeia Partnership. He is an active member of the Chaminade Lawyer’s Association and Real Estate Group as well as the Washington & Lee Alumni Association. 


Sean is featured regularly in the New York Real Estate Journal’s “Ask the Expert” section and has been quoted in various publications, including the Long Island Business News and Newsday. He has been recognized by the Long Island Business News as a “Who’s Who in Commercial Real Estate” multiple times, most recently in 2023 and by the Long Island Herald as the Top Tax Certiorari Attorney in 2023. 

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