The cherished tax abatement for the residents of co-ops and condos — a way of bringing their property tax bills in line with those of the owners of one- to three-family homes — now comes with a new condition. As of April 1, 2022, the tax abatement will be limited to buildings that pay their service employees the prevailing wage.
For buildings with unionized employees, which constitute the bulk of the city’s co-ops and condos, nothing will change. But the definition of “qualified properties” that will be eligible for the abatement now includes properties with an average unit assessed value of $60,000 or less, as well as co-ops and condos with fewer than 30 units that have an average unit assessed value of $100,000 or less. (A building’s or unit’s assessed value, which is used to calculate property tax bills, is a fraction of its market value.)
Leni Morrison Cummins, a partner at the law firm Cozen O’Connor, advises boards in non-union buildings to get busy. “Boards need to very quickly evaluate their wages and bring them in line with prevailing wages,” she says. “If boards don’t make this change, they’re about to become very unpopular.” Why? “Because property managers tell me that the amount saved by keeping the tax abatement far exceeds the cost of paying the staff the prevailing wage. Every building is different, of course, and every board needs to make an educated decision.”
Paul Korngold, a real estate tax lawyer at Korngold Powers, predicts a different kind of fallout from the new rule. “I think this is going to hit new properties, mostly in the outer boroughs, where the sponsor is using non-union workers and paying less than the prevailing wage,” he says.
And there’s another wrinkle: Co-ops and condos that apply for the tax abatement must now file an affidavit with their application, certifying that they are paying their service employees the prevailing wage for the duration of the abatement. “The board’s tax consultant or lawyer who applies for the abatement will get the affidavit for the board to sign and submit with the application,” says Nichole Thomas, an attorney at Nixon Peabody. The affidavits are public records and may be introduced before a court or administrative tribunal. When filling out the affidavit, therefore, Thomas has two words of advice for boards: “Don’t lie.”