In Matter of Waldbaum, Inc. v. Finance Adm'r of City of N.Y. (74 NY2d 128 ) the Court determined that the partial, or fractional, lessee was not a party sufficiently aggrieved to warrant its personal challenge of an assessment in a tax certiorari proceeding and therefore lacked the necessary standing (id. at 132).
Factors considered by the Court included (1) the lack of a provision in the lease obligating the lessee to pay real property taxes on the leased premises, the lessee only obligated to pay rent "which may be affected, in part, by an increase in the landlord's tax obligation"; (2) the lack of a provision in the lease permitting the lessee to contest the assessment in the owner-lessor's name; and (3) the remote and consequential impact, rather than a direct impact, of the assessment upon the lessee's pecuniary interests (id. at 131). The Court held that:
"[a] fractional lessee lacks standing to maintain a tax certiorari proceeding unless the lease expressly confers the right to assert the lessor's undivided property interest in a challenge of the assessment, or unless the lessee is required to pay directly the taxes levied against the lessor's undivided parcel. In either instance, the assessment must also have a direct adverse affect on the challenger's pecuniary interests." (Id. at 132.)
In so holding, the Waldbaum Court reasoned that:
"Implicit in the precedents upholding the right of a nonowner to maintain a tax certiorari proceeding has been the requirement for an undivided tax liability. In each cited case, the party aggrieved was, by contractual rearrangement of the obligation, made wholly responsible for the entire tax levy in the stead of the owner-taxpayer. ... The adverse impact on a petitioner's pecuniary interests 'must not be a remote and consequential result, but a direct one' (Matter of Walter, supra, at 357)"
The Court of Appeals held that the contractual rent formula was "an insufficient predicate for allowing the lessee to bring a personal tax certiorari proceeding in lieu of or in addition to the owner-lessor" (id. at 135). In so holding, the Court determined that such a rent formula "renders the impact of a tax increase legally remote and only consequential" as it "had an actual impact on Waldbaum's pecuniary interest only to the extent that it exceeded the 'percentage rent' Waldbaum owed on its gross annual sales" (id.).