Challenging Your Real Estate Taxes In Today's Challenging Environment

Tax certiorari. Even the name remains obscure in Latin, perhaps in an effort to make the entire process seem difficult and hard to manage for the average real estate owner. For co-op and condo boards, however, the tax certiorari proceeding is a real opportunity to reduce real estate taxes for their buildings and for their shareholders. The real estate tax rate in New York has gone up 18.5 percent since last year, making it more important than ever to exercise your building's right to lodge a protest.

By encouraging all of the buildings under our management to protest their assessed values each and every year, conscientious tax attorneys can save hundreds of thousands of dollars for their clients. Filing an annual protest is common, and because tax certiorari attorneys are typically paid on a pro rata share of savings, there is very little downside to making this a yearly event. According to the 2002 Annual Report of the New York City Tax Commission, there were "42,797 applications covering more than 131,000 separately assessed tax lots, encompassing $72 billion, or 70 percent of the 2002 taxable assessments citywide (net of exemptions).

"This corresponds roughly to $8 billion of the city's anticipated 2002-2003 real estate tax levy, 35 percent of the city's 2002-2003 overall tax revenue and about 18 percent of the city's entire 2002-2003 expense budget," says the commission's report.

You can see that we are talking about real numbers here, and that the city will fight to keep these tax dollars flowing into their coffers. However, what many aren't aware of is that, according to the commission's report, "the [Commission] took remedial actions in 2002 which, in the aggregate, offered the equivalent of an estimated $62 million in actual relief to aggrieved taxpayers."

A Brief Overview of the Process

To be sure that your building isn't overlooked in this pile of applications, or miss the opportunity to file for an assessment reduction, it's important to understand the basic operation of the process and be aware of filing deadlines. According to Richard Steinberg of the Manhattan law firm of Brandt, Steinberg & Lewis, the city's Department of Finance publishes the assessments on January 15th of each year. Buildings have until March to file a protest with the Tax Commission.

These protests are the beginnings of an appeals process, in which over 9,000 of these applications were deemed "not eligible for substantive review" by the Tax Commission last year. The reasons given for this ineligibility ranged from late or incomplete filings to "legally fatal" defects in execution to the application having the required Department of Finance statements missing, late or improper. This is one reason that experienced tax certiorari attorneys should handle all such proceedings.

Once the application is accepted for review, says Steinberg, "A meeting is scheduled [with the Tax Commission] where we explain our protest, and either an acceptable settlement is made, or we move ahead and file a judicial proceeding. In many cases, we have to go ahead and file a protest the following year, before an answer is given on our judicial proceeding, and we get two or three years resolved at the same time."

Using Attorneys to Represent Your Interests

According to the 2002 Annual Report, "the assessment set by the Department of Finance is presumed correct, and the burden is on the applicant, first to offer evidence to overcome the presumed correctness of the assessment at issue, and then to prove by a preponderance of the evidence that the assessment should be reduced or otherwise corrected as claimed."

Acceptable evidence might include comparing the building's assessment to similar buildings in the neighborhood, or proof that the building's value has been overestimated by the city. The research involved is technical, and is best left to professionals.

Now comes the good part. Each applicant, or the applicant's designated representative, gets to have a personal hearing. And according to the Annual Report, "the attorney general's policy is to allow 15 minutes per hearing - a reasonable time frame which both reflects the practical realities of the agency's mission, workloads and resources and affords applicants and/or their designated representatives ample opportunity to advocate for relief in a typical case."

So, in addition to having to make sure that all of your forms are filled out correctly and on time, you have 15 minutes to plead your case each year. In most cases, the people who will hear your plea are members of the Appraisal & Hearings Group, and part-time commissioners.

Many of these people are attorneys themselves, who are deeply ingrained in the Tax Commission culture, and in our opinion, need to be approached in a certain manner by professionals they feel understand all of the implications of the proceeding. We would not consider allowing any of our properties to advocate for themselves.

Here in New York City, tax certiorari proceedings should be handled by experienced attorneys who work on a contingency basis; they get paid only if they are able to reduce your tax bill. Therefore it is in their best interest to get as much of a reduction as they can for your property. In most cases these tax certiorari attorneys are paid between 12 percent and 20 percent of your actual tax savings.

While time-consuming, the process does seem to work, according to AKAM's Timothy Carr, general manager of Le Havre, a 1,024-unit complex on 27 acres overlooking the Whitestone Bridge. "We received $1.2 million in February of this year, which represented the settlement of five years worth of tax certiorari protests, through the 2002 tax year," according to Carr.

The law firm of Podell, Schwartz, Schechter & Banfield handled Le Havre's tax certiorari protest. The money "was deposited into reserves to fund the current and future capital improvements we are working on," says Carr. "Right now we are finishing up the installation of 27 boilers, which will cost $4.2 million, and an $800,000 Local Law 11 project. We are about to embark on a roofing project, so the money will be well spent. In addition, this cash infusion helps us avoid raising maintenance fees or charging assessments to pay for these projects."

Make Sure to File Each Year

"It is a terrible mistake not to make the protest each year," says Steinberg. The responsibility of a good management company is to help buildings keep costs down. It is incumbent upon each managing agent to make sure that each building files a tax certiorari proceeding every year, using a qualified attorney. In our experience, we have seen tremendous tax reductions for the properties we manage, and that in turn, translates directly to each shareholder/owner as a lower real estate tax bill.

Michael Sansone, AKAM's chief financial officer, agrees. "The tax certiorari process is a real opportunity for boards to lower the tax bills for all of the owners they represent. In these days of escalating costs, I see many boards forced to raise maintenance fees and common charges to cover their expenses. Attempting to reduce real estate taxes more than makes sense - it should be an essential part of each building's financial plan for the year."

Assessing the Scandal

Last year was an interesting one for the Department of Finance, which sets the assessments, and the Tax Commission, which determines reductions. As many of you are aware, 18 current and former assessors were indicted and charged with accepting huge kickbacks over the years in return for keeping assessments artificially low for certain real estate owners, mostly large commercial buildings.

These indictments have made the entire proceeding more difficult for both of these agencies, since they have to hire new assessors and must come up with a system to make sure such behavior does not occur again. In addition, they must decide what should be done with those properties that significantly underpaid in the past. While this shouldn't directly affect many co-op or condo buildings, it will most likely slow down proceedings, since the two agencies will have to devote time and energy to dealing with this problem, which will take resources away from their already backlogged proceedings calendar. As the Tax Commission put in their report, "the effects of the assessor's scandal will be felt through the 2003 review season and, possibly, beyond."

Where does all this leave co-op and condo boards? While the agencies involved, and the system of protesting your assessed value is complicated, hiring a professional to walk your paperwork from application to review is, without question, a process that must be done each year. With perseverance, and a little luck, you may be able to send out a notice to your shareholders, which reads, "We are pleased to announce that the results of our annual tax certiorari proceedings have lowered your real estate taxes."

Michael Berenson is president of AKAM Associates, Inc., an independently owned residential management firm in Manhattan.

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9 Comments

  • can you recommend a firm which specializes in apealing real estate taxes. My company in in Somerset New Jersey.
  • That is a great story, but what with individual owners who get taken by the assessor and officer who hears the case. My feel is they already had a decision made even before I presented my case. I felt my case was really well defined with lots of data to back it up, and all they could do is use 1 small bit of data as excuse not to lower my taxes. Also the fact that the town rep. used the marketing ad from the sale of the house as an excuse 'how great this property is'. I was stunned, shocked and have no idea what the next step is after this 'Tax certiorari' hearing... Any thoughts are appreciated. Ome Willem, Conesus, NY
  • I am an owner in a building that went condo 10 years ago. In 2008 our taxes were reduced by a firm that does this procedure.for the building. However, my individual real estate taxes are way out of line compared to other apts. of the same size , better location in the bldg. % of common interest, etc. How do I get my taxes reduced so they are in line with others in this building.
  • and have you calculated the textbooks not purchased, teachers released, programs cut, and schools closed because you advocte corporations tying up millions of dollars of tax funds hoping a few appeals will come through. Have you checked with your local school district and municipality how your tactics affect your services?
  • I manage 2 small (34 units each) residential buildings on the Upper East Side of NYC. In 6 years of hearings I received 1 refund this year on one building. Is that expected? Should I change to a smaller law firm that will fight my case more effectively?
  • I always believe in using smaller firms if possible, as they are cheaper and more likely to have the name attorneys handle your case themselves. Of course, I am biased in saying this, as I am a small firm partner, so take that with a grain of salt.
  • america is the new north korea good luck in the court system where all the players except you know each other
  • It would be great if the Council could create a "Best of Tax certiorari of the Year" Report. NY Magazine produces a Best of Doctors in NYC (of different specialtyies) so such'best of' studies are done.
  • I have been told that is illegal in NYC for tax ceriorari attorneys to represent buildings of under 10 units. Is that correct?