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Condo Tax Abatements: a New Burden for Property Managers

Frank Lovece in Legal/Financial on May 5, 2017

New York City

Condo Abatements
May 5, 2017

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 politically fraught, 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.

“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 re-certify 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.”

Filing for co-ops is easier, DePaola says. “It’s a transfer of stock,” rather than a sale of actual property, 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.

Regardless of which form the manager chooses, it spells one thing: more work.

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