One of our clients recently asked us to investigate the accuracy of their building’s square footage as listed on New York City’s Notice of Property Value. In order to contest the gross building area of a parcel, the city requires an engineer’s report along with a stacking plan delineating the space with the actual use and setting forth the square footage calculations.
During our investigation we discovered that not only was the city overstating the total square footage of the building, it had also overstated the retail and residential areas when in fact such space was being used for parking. The overstatement and mischaracterization of the square footage had enormous tax implications over time. In fact, ultimately the result of discovering this error in the city’s records resulted in a $3.6 million refund to the client.
Correcting the Discrepancies
You may ask: But why the discrepancy in the first place?
The New York City Department of Finance is charged with estimating values of New York City residential and commercial properties. New York State and City real estate law is applied. Tax rates are set each year by the Mayor and City Council. The rates are applied to property values to help determine each homeowner's annual tax liability. In mid-January, the Department of Finance mails out Notices of Property Value to property owners throughout the five boroughs. The Notice will indicate how the city estimated its market value for the upcoming tentative assessment roll published on January 15th.
According to the Department of Finance, state law requires Finance to value most condos and co-ops as if they were in residential rental buildings. Finance values rental buildings and other commercial properties on their income producing potential using the Real Property Income and Expense statements they file each year.