Oops! Clerical Error! When the City Wants Its J-51 Tax Abatement Back

Before we get into that, let's all acknowledge an ambivalence about this: One co-op got a windfall, but you and I as taxpayers bore the brunt of that gift. That being said, there are doubtlessly times when cooperatives and condominiums don't receive tax breaks they're due, and so like bad referee calls in sports, it may very well all even out.

Sittin' on the Docket of the Bay

The six-story, 108-unit co-op at 9281 Shore Road in Brooklyn's Fort Hamilton, on the coast of New York Bay, received a J-51 tax exemption in tax year 2004/05 for improvements made to the 1940 building in 2002. Based on the formula through which Department of Finance assessors determine an increase in the property value as a result of capital improvements, the DOF granted the co-op a four-year tax partial tax exemption worth $603,000.

In July 2012, though, the DoF said this was a mistake and that the calculation should have been based on three years, not four. The department said the co-op was unjustly credited with $153,000 and that now, as a result of revised property-value assessment, the building owed an additional $565,671 in property taxes and interest for 2004 to 2013. That's right: Even in admitting it made a mistake, the DoF still wanted thousands of dollars in interest.

Not so fast, said Podell, Schwartz, Schechter & Banfield, the co-op board's law firm. The attorneys told the Kings County Supreme Court that according to the City Charter, any application by the tax commission to correct an assessment has to be rendered by a deadline that the DoF missed in this case. Otherwise, the assessment "shall be deemed to be the final determination of the tax commission" in the absence of "illegality, irregularity in vital matters, or fraud."

Ah, yes, but (answered the DoF) there's an exception to this in the case of clerical error. That's all this is. A clerical error. Y'know, Bob Cratchit was working late on Christmas Eve and well….

Oh, Sure, Blame the Clerk

Now, New York City's Administrative Code doesn't define "clerical error." Longstanding case law, however, defines it as a mistake of form rather than one made "in the exercise of any judgment or discretion." And since the New York State Assessor's Manual says J-51 is only a three-year exemption, well, y'see … slam-dunk.

A judgment or an

interpretation of law

cannot be considered

a clerical error.

Annnnnd it's batted away. As Judge Karen B. Rothenberg wrote in her March 27 decision, "[T]he history of the J-51 tax abatement program indicates that there is no strict guideline for determining the value of the exemption," and that per a 1946 precedent, such exemptions and abatements are up to each locality and their "changing circumstances." Therefore, she wrote, "The use of four years as opposed to three is in the nature of a judgment or an interpretation of law and therefore cannot be considered a clerical error." Also, she said, citing two other precedents, New York courts have traditionally held that this kind of erroneous property assessment "is not a clerical error."

There was more reasoning, but you get the idea: Quoting an 1884 decision, Rothenberg said that citizens rely on tax judgments based on public tax rolls, and for assessors to change their minds after the fact "with little or no notice, to correspond with some unregistered judgment and opinion known only to themselves," well, that ain't fair.

The court threw out the co-op's $565,671 bill for back-taxes and interest.

Moral of the story: Co-op and condo boards need to be able to rely on tax assessors' judgments, and the DoF can't go back and claim that an error in same is just some innocent clerical mistake.

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