Vacancy Stats: A New Reporting Requirement

The city council passed a packet of five bills this summer in an effort to better understand – and possibly rectify – the problems plaguing brick-and-mortar retail operations in New York City.

One of the bills would require the city’s Department of Small Business Services (SBS) to create an online searchable database of all commercial properties in the city. The database would include the location, size, use, availability, and monthly rent of each commercial space, as well as contact information for its landlord. Those landlords would be responsible for submitting this information annually and whenever the property is vacated.

This becomes a board issue when you consider the number of co-ops and condos that have empty commercial space. Co-ops and condos, as Class 2 properties, have to fill out Real Property Income and Expense (RPIE) statements, unless they qualify for a Claim of Exclusion. Excluded buildings include those with an actual assessed value of $40,000 or less, and residential buildings with 10 or fewer units. Within the packet of bills passed by the city council is a requirement that all buildings with ground or second-floor commercial spaces must fill out additional information about those commercial spaces – and would require even those buildings previously excluded from filing an RPIE if they have vacant commercial space. The new information added to the RPIE filing includes the size of the commercial space, the duration of vacancies, the annual rent charged to every commercial tenant, rent escalations, and concessions.

The real question, though, is why? “It’s a fishing expedition,” says real estate tax certiorari  attorney Benjamin M. Williams, a member of the law firm Rosenberg & Estis. “The city is going to get all this information, and then they have to figure out what to do with it. So what if the data tells you that the vacancy rate on Broadway between 59th and 72nd Streets is 18 percent? What are they going to do about it?”

It’s possible that the city could be considering a vacancy tax, Williams says, in an effort to get landlords to rent faster at potentially lower prices to avoid the tax. Whether or not that comes to pass, there are penalties in the current bills for buildings that do not fill out the RPIE correctly. These penalties range from $300 to $100,000, depending on the assessed value of the building, meaning one thing is clear: the city has figured out how to monetize noncompliance without justifying the new requirements. And co-op and condo boards might be on the hook.