Deadlines Loom to Offset Renovation Costs With New J-51

The clock is ticking for boards hoping to take advantage of the newly passed J-51 rules to offset their co-op and condo renovation costs. With the mayor's signature on December 18 setting the new legislation into law, boards face a tight timeline: applications must be filed within four months of either the law's effective date or a project's completion. "If your work is already done, the application filing deadline is April 18, 2025," explains attorney Benjamin Williams, head of the property tax department at Rosenberg & Estis.

For buildings seeking eligibility, several key criteria must be met. The property's average assessed valuation needs to fall under $45,001 per apartment, with this value determined at construction's start rather than its completion, says Williams. He emphasizes this timing distinction as particularly crucial for buildings near the threshold. Additionally, properties must have at least three apartments and have a valid Certificate of Occupancy.

The timeline requirements create a specific window of opportunity. Eligible work must have commenced no earlier than December 30, 2019, with completion falling between June 29, 2022, and June 30, 2026. Projects cannot exceed 30 months in total construction time. For those contemplating future renovations, Williams advises careful consideration of timing, noting that "certain advance notifications and filings may be required to obtain eligibility."

While NYC Housing Preservation and Development (HPD) has yet to release a comprehensive list of qualifying projects, several categories are expected to make the cut. Energy efficiency improvements and projects aimed at Local Law 97 emission compliance are likely to qualify, encompassing everything from boiler and HVAC system upgrades to facade repairs. Window and roof replacements, plumbing and sewer line repairs, elevator and fire safety upgrades, and environmental hazard removal projects are also anticipated to be eligible. However, the certified reasonable cost must exceed $1,500 per dwelling unit for consideration.

The program won't cover everything, though. Cosmetic changes and luxury amenity additions likely won't qualify for the abatement. This means upgrades to lobbies, gyms, or roof decks won't be eligible unless specifically identified in the final rules. HPD plans to open applications on their website soon, even as they finalize the rule making process.

The financial benefits can be substantial for qualifying properties. The program allows eligible owners to offset 70% of their capital improvement costs against their NYC property tax bill, with benefits spread over time. The maximum annual benefit caps at 8.3% of the improvement costs, meaning a building receiving a $120,000 tax credit could see around $10,000 in annual tax reductions over 12 years.

Real-world applications of the program are already taking shape. At 221 East 18th Street, a 60-unit prewar co-op in Brooklyn's Prospect Park South, board president Dan Winckler is hoping to use the tax abatement to offset costs associated with electrification. "Our boiler's old and it would be great to replace it with heat pumps but that requires at least some electric changes if not a full retrofit," he explains. While engineering studies initially put the cost beyond their available capital funds, Winckler says the tax abatement, which the co-op is eligible for, makes the project "within reach in a much nearer term." Certain co-ops with regulatory agreements may also qualify for the program even if they exceed the average assessed value threshold. For example Penn South, a limited equity co-op comprising 15-buildings in Chelsea, was explicitly added to the rules as eligible for J-51 in 2013.

The program's complexity demands careful attention to compliance. "About one-third of the law is dedicated to compliance and penalties," Williams notes, highlighting how property owners face not only fines but potentially even 90-day jail terms for rule violations. This underscores the importance of thorough due diligence and proper legal guidance throughout the application process.