Tax Cap Protection for Coops – The Time Is Now!

Tax Cap Protection For Coops: The Time Is Now!

By Geoffrey R. Mazel Esq.

Last year at this time Coop shareholders throughout New York City were embroiled in a battle with the Department of Finance regarding the flawed valuations in the Real Estate Tax Assessments. Many of these flawed assessments occurred in Northeast Queens, a Coop rich area, with many of the valuations over 100% increases from the prior year. If left alone these increased valuations would have had devastating financial impacts on these Cooperative Corporations.

However, the shareholders of Northeast Queens protested in the form of Town Hall meetings attended by thousands of Coop shareholders and in public hearings before the New York City Council Finance Committee.

As a result, the Commissioner of Finance placed a temporary cap on these valuation increases as a short-term solution. The longterm solution is still being debated by members of the New York City Council and the New York State Legislature.

As a result of the unconscionable valuation increases posted for tax year 2011/12 by the New York City Department of Finance a flurry of legislative proposals have been introduced in the New York State Legislature. The purpose of these legislative efforts is to protect Coop owners from these types of wild increases in real estate tax increases.

The New York State legislature is responsible to set real estate classifications and parameters for valuations, while the New York City Council sets the tax rate. Therefore, the State legislature needs to enact new laws in order to reclassify Coops and to provide the necessary tax cap protections needed.

One of the significant proposals introduced in the New York State legislature bears bill number S5118 in the Senate and A8118 in the Assembly. This legislative initiative is designed to reclassify Coops and Condos from their current classification as class two properties to a new classification as class one a properties.

Currently, residential one, two and three family homes are classified as class one properties under New York State law. The big advantage of being classified as class one is that these properties enjoy tax cap protection from real estate tax increases. Section 1802 of the Real Property Tax Law states in pertinent part that “the assessor of any special assessing unit shall not increase the assessment of any individual parcel in class one…by more than six percent and shall not increase such assessment by more than twenty percent in any five year period.”

Under this bill, Coops would still be compared to rental properties for valuation purposes. Therefore, the only thing
that would change under this proposal would be that Coops and Condos would be afforded tax cap protections similar to residential one, two and three family homes.

In addition, another proposal in the New York State legislature bears bill number S4283 in the Senate and A4283 in the Assembly. This bill would simply classify properties held in Cooperative form for assessment purposes as class one properties.
The result would be that Cooperative’s would be afforded the exact same tax cap protections as one, two and three family residential buildings.

However, under this proposal Coops would then be assessed according to market value, which is the manner in which one, two and three family properties are currently assessed. Therefore, the valuation of a Coop unit would then be based on sales prices and not be compared to rental properties for valuation purposes.
Obviously, the imposition of this tax cap has resulted in cost certainty and great tax savings to the Owners of one, two and three family homes in New York City. The design of these legislative initiatives is simply extends these tax cap protections to Coop and Condo unit owners.

These proposals are designed to create a new residential property class for Coops and Condos in the City of New York to bring these properties more in line with the way in which residential one, two and three family homes are assessed. The theory being that Coops and Condos represent a valuable housing stock in the City of New York and deserve the same consideration and protections as one, two and three family residential buildings.

At this point, the merits of these proposals are being debated on the State and City level by elected officials and Coop advocate groups. One point is clear, it is time that Coop Owners be afforded tax cap protection and cost certainty currently enjoyed by one, two and three family residential homes in this City.
The crisis brought on by the New York City Department of Finance in the Coop community, with their unconscionable tax increases, must be curbed in order to protect the Coop housing stock, an invaluable asset in the City of New York.

Geoffrey R. Mazel Esq.
MANN Report Management, Vol. I Issue IV