Sticker Shock Over Condo’s Tax Bill
Oct. 16, 2017 — Brooklyn couple’s tax bite increases seven-fold in two years.
In 2015, Laura Ljungkvist and Paul Reimer paid $2.1 million for a sparkling new three-bedroom condo apartment on Atlantic Avenue in Boerum Hill, Brooklyn. The StreetEasy listing tallied the monthly taxes at $223. The Schedule A section of the condo offering plan, which buyers use to figure out carrying costs, provided the same estimate.
The couple is now paying about seven times as much – around $1,500 a month in taxes, the New York Times reports. And that’s with a 421a tax abatement for the building, which effectively cuts their taxes by a third but phases out over 15 years.
How is it possible for real estate taxes to soar so dramatically? The simple answer is that the couple got walloped by a perfect storm: the tax projections in the offering plan were overly optimistic, given that the building is located in an area in the midst of rapid residential growth and skyrocketing property values; the plan was vague about the limits of their tax abatement; and while someone who is buying an older apartment can scour years of tax history to anticipate how high taxes might go, Reimer and Ljungkvist had to rely on the limited tax predictions in the offering plan.
“No one can 100 percent predict what the Department of Finance is going to do and the sponsor doesn’t make any guarantees,” says attorney Pierre E. Debbas, a managing partner at Romer Debbas. He says tax estimates are usually accurate. “But every now and then there’s an outlier that could be off.”
The tax opinion letter in the offering plan predicts taxes only for the first year the building is fully operational. After that, a buyer is on his or her own. The city, meanwhile, reassesses properties every year and assessments and taxes usually only go in one direction — up. The estimate of the Atlantic Avenue condominium’s tax bill turned out to be extremely low compared with reality, and neither the couple, nor their lawyer, saw a red flag.
“If we had known” that the taxes would rise so high, Ljungkvist says, “we never would have bought this place.”