Challenging Your Tax Assessment: Tactics from a Tax Attorney, Part 2

Most certiorari attorneys maintain databases of these income-and-expense filings along with other data available from the Department of Finance (DOF) as to building size, age, class and number of units, and apartment, retail, garage and office square footage. After examining all this, the attorney checks his/her database seeking comparable rental buildings of similar age and type. This helps determine if your condominium or cooperative is being over-assessed. Further, he or she may often adjust your expenses to reflect those of comparable rent-producing buildings. Typically, management fees and repair/maintenance expenses are lower in co-ops and condos then in rentals. Additionally, since units are owned by individuals responsible for their own painting and appliances, adjustments are made to reflect those expenses as well.

Using this model, net operating income can then be capitalized using a capitalization rate appropriate to the area and the income. At a typical Tax Commission hearing, your attorney presents the preceding analysis, along with a list of comparables, to a hearing officer.

One of the major problems co-ops and condos face is the effect of rent deregulation and rising market rents, and, with it, the comparable rates for area buildings. And if your building has shareholder-owned commercial space, the commission applies market rents and not the actual maintenance collected, which is generally less.

Decisions, Decisions

The tax commission never makes determinations at the hearings themselves; you get two to six weeks later. If the commission makes an offer to reduce your assessment, your must accept that offer within 45 days or it's automatically withdrawn.

When an offer is made, your attorney contacts your managing agent or the board to discuss the pros and cons. If you accept the offer before the publication of the final assessment roll, your reduced assessment will be reflected on your July tax bill. If you accept after the roll is closed, the reduced assessment will generally be reflected prior to the payment due for the next tax period in October or January. In those instances, a credit for the overpayment of taxes will appear in the DOF records. You must make a refund application to obtain that overpayment; a refund arrives within two months.

If no offer is made, or if it's is made and you don't accept it, then your attorney, by October 24, must file a petition with the New York State Supreme Court. This allows a further review by the tax commission or the city's corporation counsel.

The majority of buildings must file all these forms every year, and it can take several years to obtain an acceptable reduction on one or more back years.

Two Years Later…

After two years of unsatisfactory results before the tax commission, your attorney may file a Real Property Income and Expense (RPIE) with the corporation counsel. This form requires much more detailed income-and-expense data than either the Tax Commission or RPIE forms, plus information on mortgage, depreciation, insurance and building-employee wages. While this procedure can be initiated with two open petitions or tax years, attorneys generally accumulate three or more petitions first.

Basically, the same analysis he or she conducts for the tax commission must be presented to the corporation counsel (which is also called the city's law department). In recent years, the city's policy on offering reductions is that a property must be over-assessed by more than 10 percent. So if your co-op or condo is over-valued by only eight percent, say, no reduction is offered. And unfortunately, few properties are over-assessed by 10 percent — making this policy a difficult hurdle to overcome and leaving you unfairly burdened.

This law-department review is known as a "pre-trial conference" and is not before a judge but is between your certiorari attorney and the city's legal assistant. The city operates on the legal assumption that the DOF has set an appropriate assessment, and so it's typical for a case to be conferenced several times before an offer is made. These conferences take three or more months to be rescheduled, often adding another year or two to the process. Even worse: While reduction offers by the city attorney generally have no time limit for acceptance, the city can withdraw an offer at any time while it wends its way through the department's internal approval process, which can also take more than a year.

If the reduction ultimately is approved, the city orders the DOF to correct its records and adjust the assessment, creating tax credits over several years. Your certiorari attorney will apply to have the credits refunded as an overpayment.

Obtaining a reduction of the assessment and an appropriate refund is not fast, easy or a sure thing. But it is a viable possibility, and one you shouldn't discount.

Eric Weiss is a partner at Tuchman, Korngold, Weiss, Lippman & Gelles

PART 1 >>

Adapted from Habitat January 2009. For the complete article and more, join our Archive >>