New York's Cooperative and Condominium Community

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Condo Tax Rebates — Divvying Up Money, Stepping into a Minefield

Good news! Your condo association is getting a real estate tax rebate following a successful "tax certiorari" appeal, which many condo boards routinely file on behalf of unit-owners. It's a rite of spring, when co-ops and condos alike challenge the often too-high assessments that the New York City Department of Finance (DOF) places on buildings in order to calculate how much real estate tax each building or condominium unit must pay.

Now what? With co-ops, each shareholder pays his or her share of the tax as part of the monthly maintenance charge. Rebates go to the corporation, benefiting each shareholder proportionally. But condo associations are different and more difficult — hitting legal and ethical issues of which even many professionals have been unaware.

With condo buildings, each apartment is a separate piece of real estate, and every unit-owner pays real estate taxes to the city individually. However, most boards have authority under their bylaws to file appeals on behalf of all residential units, says attorney Joseph B. Giminaro, a special counsel at Stroock & Stroock & Lavan. Therefore, while the city issues rebate checks to the condominium association as a whole, the association, by law, must pass along to each unit-owner his or her share.

Along with the rebate, the DOF also provides each condo association's attorney with a printout — called a consolidated check notice — that gives the rebate amount for each "lot" (each parcel of real estate, which includes individual condo apartments). Logically, you should be able to determine shares by reviewing the list and cutting a check to each unit-owner.

A single condo apartment can

have past and present owners,

each due a varying amount.

Unfortunately, it's not that simple.

"It's very ambiguous, and there are people who do it a number of different ways," says one veteran tax-certiorari attorney who asked for anonymity after habitually encountering "tons of misinformation" and not wishing to enter the fray. The city, he explains, doesn't necessarily send one lump-sum check but may send several that are spaced apart and may also send a rebate for more than one tax year at once.

That means some units will have been sold during that time — and so a single apartment can have past and present owners, each due a varying amount.

Issue an Assessment

What most condo associations do, taking their cue from the co-op model, is charge each unit-owner an assessment roughly equal to his or her rebate on the consolidated check notice.

"A board of managers can pass an assessment whenever it chooses," notes Carl Cesarano, a principal in the CPA firm Cesarano & Khan. "Let's say we get a $50,000 refund. As a condo board, we feel we have a need for $50,000 more in the treasury. We have an assessment" based, for example, on some percentage of the monthly common charge the each unit pays.

Because of tax exemptions for such groups as seniors and veterans, taxpayers living in identical apartments paying identical common charges might have owed different tax amounts, and so are due back different rebate amounts. So, if the assessment is $150, based on a percentage of the common charge, "the unit-owner who's due [a] $200 [rebate] gets $50," says Cesarano, "and the unit-owner who's due $100 owes $50." Sometimes this takes the form not of cash but of common-charge credits and debits.

Unclaimed Refunds 

Under New York State's 1943 Abandoned
Property Law and its 1960 updating,
unclaimed refunds are turned over to
the State after five years. The comptroller's
office then tries to locate the rightful owners.
You can download the "Handbook for
Reporters of Unclaimed Funds" and check
on your own assessment.

The 232-unit, 50-story Highpoint at 250 East 40th Street in Manhattan created such an assessment. "[E]ach unit-owner's appropriate share … will appear as a credit on the February 2009 condominium fee bills … based upon the actual tax refunds due to each unit-owner," wrote Timothy J. Fine, executive vice president of Charles H. Greenthal Management, in a January 16 letter to unit-owners, announcing the result of a multiple-year tax rebate. Simultaneously, the board imposed a special assessment. "In the case of almost all the unit-owners, their share … will be approximately covered by the real estate tax refund credit described above," Fine explained in the letter. Those exempt from paying tax or who hadn't paid their taxes had to pay their share of the assessment out-of-pocket.

Any condo board or unit-owner can check the city's figures for themselves at a public, online site that gives each unit's assessed value, tax bill and rebate amount (see above).

Are the city's figures accurate? "I've had some good results when people call us, such as brokers setting up a listing, asking us about taxes, … and we've referred them to the Department of Finance," says Fine. "We've gotten calls from unit-owners who want verification, and we've referred them" to the DOF. "Over the past three or four years, I have gotten no blowback from the numbers that the city gave people."

But how does a condo board legally — and ethically — divvy up the tax rebate when a prior unit-owner may have sold a condo and moved away two or three years ago?

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