Know your zone: The tax implications of vacant land in New York City and Nassau County - by Jeremy May

Vacant land in Nassau County and New York City falls under unique rules of taxation regarding how it is assessed and how annual tax bills are calculated. Both jurisdictions are classified as “Special Assessing Units” under Article 18 of the NYS Real Property Tax Law (RPTL). They are the only two assessing jurisdictions in the state with this designation, as they are the only jurisdictions to have four tax classes of property, while the rest of the state typically has only one tax class, with a few having two tax classes.

The most consequential provision in this context is RPTL §1802, which mandates that vacant land in either jurisdiction must be classified as either tax class 1 (residential) or tax class 4 (commercial). The classification of a parcel of vacant unimproved property is determined by the Department of Assessment (in Nassau County) or the Department of Finance (in NYC) without consulting the property owner. The choice of tax class can significantly impact an owner’s annual tax burden.

RPTL §1802(1)(d,e) specifies that vacant land in Nassau County or NYC zoned for residential use must be placed in class 1, with additional requirements for Manhattan depending on location. The statute also mandates class 1 status for vacant land zoned for non-residential purposes if it is contiguous to another lot used as a 1-3 family home owned by the same individual. In other words, if an owner possesses two adjacent lots and resides on one of them, the other vacant lot will be assigned to class 1, even if the land is not zoned for residential use. All other vacant parcels in Nassau County or NYC that do not meet these criteria default to class 4.

Why Does It Matter?
A straightforward example from Nassau County’s East Meadow School District for the 2023/24 tax year illustrates the difference. For 2023/24, the Nassau County class 1 level of assessment (LOA) was 0.1%. This means a vacant property valued at $1,000,000 would be assessed at $1,000. In contrast, the class 4 LOA was 1%, resulting in the same $1,000,000 property being assessed at $10,000 — a 900% increase. This change alone — without even factoring in tax rates — dramatically affects the bottom line.

In the 2023/24 tax year, class 1 property in East Meadow was subject to a combined tax rate of $2,727.51 per $100 of assessed value, resulting in an annual tax bill for the class 1 parcel (assessed at $1,000) of about $27,280. By contrast, the class 4 tax rate that year was $919.887 per $100, resulting in an annual tax bill of $92,000 for the same property, simply due to its classification. Being designated as class 4 can result in a substantially larger tax burden than class 1, making it costly for the owner to leave the parcel unimproved, with development pressure mounting as time and expenses accumulate.

What Should Property Owners Do?
Because the stakes can be so high, property owners should verify whether a vacant lot is truly eligible for class 1 designation. To start, it is essential to confirm the zoning regulations applicable to the property. If the parcel can legally accommodate residential or mixed residential/commercial uses, it cannot be placed in class 4 (Matter of Shore Dev. Partners v. Bd. Of Assessors, 82 AD3d 988, 990-991 [2011]; see also Matter of Shore Dev. Partners v. Bd. Of Assessors of County of Nassau, 112 AD3d 724, 725-726 [2013]). Additionally, it is critical to verify that the lot is indeed vacant. Courts have held that land is not considered vacant for classification purposes if it is put to a use that “was materially beneficial to the taxpayer” (Matter of Richmond Country Club v. Tax Commn. of the City of New York, 53 AD3d 661, 662-663 [2d Dept. 2008]). For example, in that case, the presence of tennis courts was deemed a material benefit, preventing the site from being classified as vacant residential land.

Owners should investigate whether their vacant land has been improperly assigned to commercial class 4. Consulting with a real estate tax attorney — often at no charge — can help determine if a reclassification could significantly reduce the annual tax bill, for instance, from $92,000 to $27,280. Real estate tax attorneys who specialize in tax classification litigation frequently pursue such changes for their clients, using one or more legal remedies to adjust the tax class.

Jeremy May, Esq. is an associate attorney at Schroder & Strom, LLP, Mineola, NY.