Are We There Yet? Tax Fairness for Co-ops and Condos

Out of concern over escalating property taxes, The Action Committee for Reasonable Real Estate Taxes was formed in 1990. Created by The Council of New York Cooperatives and Condominiums (CNYC), the committee uncovered a gross disparity between the taxes paid by co-op and condo dwellers and those assessed to private homeowners and decided to do something about it.

In 1994, the Action Committee discovered that cooperatives and condominium apartments in buildings containing more than three units were paying three to five times more property tax than single-family homes of comparable value. Co-ops and condos were being taxed as Class Two income-producing properties, rather than as the single-family homes that most of them were, simply because they happened to be apartments in large buildings. The Committee began a successful lobbying campaign to equalize co-op and condo real property taxes.

Inspired by The Action Committee and backed by Mayor Giuliani and the City Council, the state legislature passed a bill introduced by assembly member Pete Grannis that provided partial abatements for fiscal years 1997 through 1999. This was intended as a stopgap measure until a more complete reform of the tax law could be drafted and implemented. The temporary abatement proposal mandated that a plan to definitively address the disparity be submitted by the City to the state Legislature by December of 1996. Such a plan was never submitted, however, so an amendment was passed to extend the deadline–as well as the partial abatement program–for two more years. The program was renewed again, but the sun set on that tax-abatement bill incarnation on June 30, 2001. A long-term plan to restructure the real estate tax laws has still not been submitted, however; an amendment to extend the program once again has been passed by the state legislature and is expected to be signed by Governor Pataki. With what looks like an indefinite cycle of renewal and no concrete, long-term abatement plan on the table, a shareholder or board member might well wonder about the prospects for future tax fairness for themselves and their buildings.

The Initial Inequity

Elliot Meisel, of Manhattan law firm Brill & Meisel, specializes in cooperative and condominium practice and associated tax certiorari work and describes the situation pre-abatement: "These buildings are multiple dwellings containing numerous residents in a relatively compact area, and generally require fewer city services than private homes, yet were paying disproportionately high real estate taxes. But the number of private homeowners far exceeds the number of co-op and condo owners, so from a political point of view, the co-op and condo owners had less leverage. The real estate tax law is very complicated and convoluted, and tax law is a state law. Most of the co-ops and condos are in New York City, so it’s always been a real difficulty for the political leaders who represent co-op and condo owners as part of their constituency to influence a change." Once the degree of inequity was brought to light in 1994, however, and the City of New York acknowledged that homeowners in housing cooperatives and condominiums paid far more than their fair share of property taxes, there seems to have been little disagreement that the situation should be righted.

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