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Every year, New York City gives a property tax abatement to co-op shareholders and condo unit-owners. But in 2013, the city changed the rules of its 15-year-old abatement program to specify that only owner-occupied apartments are eligible. If you rent or sublease your apartment or use it as a pied-á-terre, tough luck.

Managing agents were responsible for filing proof of primary residency for co-op apartments, but they didn’t have to do it for condominium apartments, since the Department of Finance (DOF) already collected that information. That changed in December 2016, when the DOF announced that managing agents (or, in the case of self-managed buildings, other designated individuals) were now responsible for confirming which condo units were owner-occupied. And not only did they have to do it right away for the 2016-17 tax year, they also had to do it for the 2017-18 tax year just one month later.

“The law requires that building managers collect information from both condominiums and cooperatives,” says a DOF spokesman, explaining that until now, the department had been using information that condo owner-occupiers were already submitting for the STAR (School Tax Relief) exemption. However, an audit found that this procedure was “not meeting statutory requirements.”

“The city has passed on to us all the responsibility of tracking down the primary-resident status not only of shareholders but of unit-owners as well,” says Tom Schmitt, chief financial officer of Charles H. Greenthal & Company, a management firm. He describes the change as “huge,” because it means managers now must do detective work in order to fill out the required forms. That costs them time and money – costs that ultimately, directly or indirectly, make their way to condominium associations.

“It’s actually one of the most complicated issues that we deal with,” says Dennis DePaola, an executive vice president of Orsid Realty. “We’ve had to hire additional staff who are going through lists, finding errors, writing letters to unit-owners – all these things. It’s an extraordinary expense, a waste of everybody’s time and money.”

Moreover, says Schmitt, because the DOF “has put the onus on us to recertify primary-resident status, owners call us with questions. And if we can’t figure it out, we have to call the Department of Finance, and it can take weeks for them to get back to us.”

Who Gets What

Filing for co-ops is easier, DePaola says. “It’s a transfer of stock,” rather than a sale of actual property, as with condos. And because managing agents represent the corporation that issues the stock, the company holds copies of all the documentation, so the owner-occupier information is already in-house. But condo sales are private transactions between a buyer and a seller. A condo board has a right of first refusal but little in the way of power to demand copies of sale contracts or tax documents.

Complicating matters is the issue of who’s eligible for the abatement and who isn’t. An apartment owned by a trust is eligible if that unit is the beneficiary’s primary residence. However, you can’t own more than three apartments in any one development – and only one of those can be your primary residence. Also not eligible: sponsor units; units owned by a business (LLC); pieds-à-terre; units being rented out; and properties already receiving certain government assistance or subsidies, such as a Housing Development Fund Corporation or a Mitchell-Lama building, among other types. And you can’t be receiving a J-51 exemption, or a 420a, 421b, 421c, 421g tax incentive.

The manager or other designated individual must fill out the Cooperative and Condominium Property Tax Abatement Renewal and Change Form at http://on.nyc.gov/1cgaNA1. Depending on what the agent and the condo board prefer, there are two versions. One is a completely online submission, and the other is a form you can download and mail.

Yet while the process of collecting and confirming all the condo owners’ information can be time-consuming, it can become less difficult once the first year’s batch is done. Nathan Hurley, a financial analyst with New Bedford Management, says, managers must look up “who sold during that period and who moved in during that period. If there were only three or four sales, then you only have to file for three or four units” – plus any which an owner has vacated and is now renting out. “So you’re filing for new ownership or to update residency.”

Social Insecurity

Yet beyond the relatively simple filling out of forms is the lengthy process of accessing information. “We strongly urge managing agents to obtain Social Security numbers if the owner has one,” the DOF spokesperson says, adding that, “having the Social Security number associated with the abatement curtails unit-owners from getting abatements on units for which they do not qualify.”

Some condo unit-owners are reluctant to give building managers their numbers, however. “People are worried, even though there are federal requirements on the safe storage and transmission of Social Security numbers,” says DePaola, the Orsid executive. “So on top of all these time constraints, we’ve got all this sensitive information we’ve got to keep protected to prevent identity theft.”

New Bedford is addressing owners’ concerns with “an online submission portal with secure file sharing,” Hurley says. “The portal has bank-level encrypted security. Unit-owners can upload sensitive documents to verify primary residency and provide Social Security numbers.” The company also is launching an online portal through which “residents will be able to indicate if the unit is their primary residence and access the secure file sharing.”

Then there’s the issue of pertinent information that you’re not allowed to request. “It’s Kafkaesque,” says Schmitt, of Charles H. Greenthal. “It really is. They expect us to determine eligibility when we can’t ask certain questions” because of federal and local regulations regarding protected classes of people. For example, certain military veterans, disabled homeowners, disabled crime victims, and others are eligible for different abatements and not this one. “But,” Schmitt says, “I’m not allowed to ask, ‘Are you disabled?’ ”

Eligibility Instability

Managers still have to explain to irate condo unit-owners why the apartment they bought – and are living in – may not be eligible for an abatement this year. It comes down to when you bought the apartment. “To be eligible for 2017-18 abatement, which is given out in spring 2018, a buyer must have bought the apartment as a primary residence by January 5, 2017,” explains Schmitt. “So if somebody buys in July 2017, they wouldn’t be eligible till the 2018-2019 abatement,” distributed in spring 2019.

However – and this is tricky – the apartment itself might still get an abatement for spring 2018 even if it was bought after January 5, 2017. “It’s based on the seller’s status,” Schmitt says. “Let’s say they were primary residents, and the city gave an abatement which comes out in 2018,” the year after the apartment was sold. “Now let’s say the buyer is not the primary resident. The buyer will receive that abatement [in spring 2018] based on the seller’s status. But it’ll disappear next year when the city updates its records. So the buyer gets the abatement the first year, but not the next year” – since he or she is not the primary resident – “and they call and ask, ‘Why didn’t I get the abatement?’ It uses up a lot of our time” to explain.

Conversely, if the seller was ineligible and the buyer is eligible, the buyer won’t get the abatement the first year. “The buyer will say, ‘But this is my primary residence’ And you have to explain that since they bought it after January 5, the first year [of abatements] is based upon the seller’s status. And if it wasn’t the seller’s primary residence, you won’t get the abatement till the following year.”

Will this new condo-abatement certification task continue to be required of managing agents? The industry is pushing back. “A couple of groups that we’re members of – the Council of New York Cooperatives & Condominiums and the Real Estate Board of New York – have been in communication with the Department of Finance,” DePaola says. “Those efforts led to the extension of the [2016-17 tax year’s] February 15 deadline to March 10. But that’s very little relief since the overall process is so flawed.”

But at the least the DOF seems willing to listen. “The Department of Finance has engaged building managers and industry groups as we have transitioned to the online filing process,” says the DOF spokesman, “and will continue to consider any changes within the law that may make the co-op/condo abatement process more effective and efficient.”

Abatement percentages  
Average Assessed Value Benefit Amount Per Year
$50,000 or less 28.1%
$50,001 - $55,000 25.2%
$55,001 - $60,000 22.5%
$60,001 and above 17.5%

 

Source: NYC DOF

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