Abatements Just Part of City's Imbalanced Tax System

A new nationwide study has revealed that property taxes in New York City are the most imbalanced in the nation, with co-op shareholders and condo unit-owners paying nearly five times as much as owners of one-, two-, and three-family homes. A group called Tax Equity Now recently filed a lawsuit, asking the courts to impose long-overdue reforms. And by way of adding a little insult to injury, the city’s Department of Finance (DOF) has saddled property managers with an onerous task the department used to handle: proving that a condo apartment is the owner’s primary residence, a prerequisite for receiving an abatement on annual property taxes.

The inequities don’t end there. Even if the condo apartment is the unit-owner’s primary residence, managers still have to explain to certain unfortunate owners why the apartment they bought – and are living in – may not be eligible for an abatement during the current tax year. It comes down to when the apartment was purchased.

“To be eligible for 2017-18 abatement, which is given out in spring 2018, a buyer must have bought the apartment as a primary residence by January 5, 2017,” explains Tom Schmitt, chief financial officer at Charles H. Greenthal & Company, a management firm. “So if somebody buys in July 2017, they wouldn’t be eligible till the 2018-2019 abatement,” which is distributed in spring 2019.

However – and this is tricky – the apartment itself might still get an abatement for spring 2018 even if it was bought after January 5, 2017. “It’s based on the seller’s status,” Schmitt says. “Let’s say they were primary residents, and the city gave an abatement which comes out in 2018,” the year after the apartment was sold. “Now let’s say the buyer is not the primary resident. The buyer will receive that abatement [in spring 2018] based on the seller’s status. But it’ll disappear next year when the city updates its records. So the buyer gets the abatement the first year, but not the next year” – since he or she is not the primary resident – “and they call and ask, ‘Why didn’t I get the abatement?’ It uses up a lot of our time” to explain.

Conversely, if the seller was ineligible and the buyer is eligible, the buyer won’t get the abatement the first year. “The buyer will say, ‘But this is my primary residence,’” Schmitt says. “And you have to explain that since they bought it after January 5, the first year [of abatements] is based upon the seller’s status. And if it wasn’t the seller’s primary residence, you won’t get the abatement till the following year.”

Will this new condo-abatement certification task continue to be required of managing agents? The industry is pushing back. “A couple of groups that we’re members of – the Council of New York Cooperatives & Condominiums and the Real Estate Board of New York – have been in communication with the Department of Finance,” says Dennis DePaola, an executive vice president of Orsid Realty. “Those efforts led to the extension of the [2016-17 tax year’s] February 15 deadline to March 10. But that’s very little relief since the overall process is so flawed.”

But at the least the DOF seems willing to listen. “The Department of Finance has engaged building managers and industry groups as we have transitioned to the online filing process,” says a DOF spokesman, “and will continue to consider any changes within the law that may make the co-op/condo abatement process more effective and efficient.”