In January, the city sent out property tax notices for fiscal year July 2020–June 2021. The assessments were based on 2019 values, when New York City real estate was soaring. Depending on the size of the assessment, taxes were due on either a quarterly or semiannual schedule. As always, the first payment was due July 1, 2020. This year, however, many buildings were rudely awakened when their billing plan suddenly switched from quarterly to semiannual.
When a co-op or condo’s assessed value bumps the average value of units to over $250,000, that building’s property tax payments change from quarterly to semiannual. For condos, this is an easy number to determine. For co-ops, however, it may require some math on the part of management or the board. And while the total amount of taxes due doesn’t change, getting notified in January that the amount of money owed in July has doubled can cause serious cash-flow issues, considering that most budgets are adopted and approved the previous October.
“It basically hit (boards) at the exact wrong time,” says Allen Brill, a partner in the law firm Brill & Meisel, “because they have not adequately planned for the fact that they would have to come up with six months of taxes on July 1.”
In addition to suddenly trying to figure out how to pay a doubled property tax bill, buildings were also attempting to figure out if they had the right bill. “There was a significant number of properties which got the wrong bills,” says Paul Korngold, a partner at the law firm Tuchman, Korngold, Weiss, Liebman & Lindemann. “The city admitted they made a mistake and billed property owners semiannually who should have been billed quarterly. In my experience, this is the first time this has happened.”
To compound the error, the Department of Finance admitted that corrected bills would not be issued before the July 1 deadline but that any building that believed its billing was in error could continue to pay in quarterly installments while the city figured out the correct bills.
So what can you do when your tax bill suddenly doubles and late payments will incur an interest fee? Assess residents. The amount might be painful, but there aren’t many alternatives. Borrowing additional funds, at least as a stopgap measure, depends on the terms of the building’s underlying mortgage, since many have a provision explicitly barring other financing during the term of the mortgage. If your building has an existing line of credit, this might be the time to tap into it.
Adding insult to injury, boards’ first area of recourse in solving tax disputes was denied them this year by, of course, the coronavirus pandemic. Normally, when a building receives an assessment that seems unfair or inaccurate, the board can challenge it. With lockdown orders in place and a complete shutdown of the court system, many challenge hearings were postponed indefinitely or canceled, leaving co-ops and condos with high and possibly incorrect assessments – and the tax bill that comes with it.