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Category: Property Taxes

Those Nasty And Forgettable Post Closing Tax Adjustments:

October 21st, 2011 — 9:26am

So the deal is closed.  The seller scoops up the checks, the buyer grabs the keys and all is done.  Well, sort of.

Sellers often include a provision in the contract rider providing that they are entitled to any tax refunds that the Purchaser receives after the closing which were applicable for the period of time that the Seller owned the unit.  For example, suppose a unit closes on June 30, 2011 and it turns out that the unit was entitled to a $1,200 tax refund for the period ending on June 30, 2011.  When the tax refund is ultimately received by the Purchaser after the Closing, the Seller would be entitled to that refund AFTER THE CLOSING. Continue reading »

This seems reasonable for condominiums but not necessarily so for co-ops since co-op owners typically do not even benefit from tax refunds as co-op boards usually charge an assessment to each unit owner equal to the amount of a tax refund.  If that is the case, then it would be unfair for the Purchaser to have to pay BOTH the co-op and reimburse the Seller for this refund.

A fair solution is to modify the contract rider to provide that the purchaser need not pay the seller any portion of the tax refund received that is ultimately charged back to the purchaser by way of assessment.

The City of New York Department of Finance website has a database  which shows the tax refunds per building, but you will need to know the Block and Lot Number of your building to be able to calculate the tax refund for your building.

Comment » | News, Post Closing Matters, Property Taxes, Simple Solutions

February 25th, 2011 — 2:07pm

STAR. What exactly is  STAR? STAR is a New York State tax relief program that lowers property taxes for owner-occupied primary residences (click here for a STAR Exemption FAQ sheet).  Meaning, to be eligible for the STAR reduction, you must own a property that you use as your primary residence.  The STAR exemption applies only to school district taxes. There are two levels of STAR benefits – Basic STAR and Enhanced STAR. Continue reading »

For Basic STAR, there is no age limit, but beginning July 1, 2011, annual adjusted gross income must be $500,000 or less (previously there was no income limit.).  To be eligible for Enhanced STAR, you must own a property that you use as your primary residence and be 65 or older.  In addition, the total annual income of all the owners of the property must be $79,050 or less.
Your primary residence is typically the home that you occupy for most the year and is generally the place where you vote and where your car is registered.  If you own more than one property, only your primary residence can receive a STAR tax reduction.  STAR applicants may be asked to prove “primary residence” and, in the future, certify that the property is still the primary place where they reside.
The level of the STAR benefit s set every year by the State, based on the type of property you own.  For example, each tax year from July 1 – June 30, owners of Class 1 properties (that is 1-, 2- and 3-family homes and some condos) can save approximately $200 in property taxes if they had the BASIC star reduction and about $380 if they had the Enhanced STAR reduction.  The benefit depends on the level set by the State.
Basic and Enhanced STAR applications must be filed by March 15th.  Applicants that are received by that date and approved will result in lower property taxes beginning July 1st of the next tax year.
STAR Legislation specifically requires cooperative apartment corporations and their managing agents to be responsible for the administration of the tax reduction received by the cooperative apartment owner.  Most people who receive the STAR exemption will see the tax savings indicated directly on their tax bills.  However, for cooperative apartment shareholders, the tax savings will appear on the school tax bill for the cooperative cooperation.  The corporation, through its managing agent, must credit the tax savings against the fees of the cooperative apartment shareholder who has received the exemption.
Owners of co-ops also receive the tax reduction beginning on July 1st.  However, management companies receive a report from the DOF each November breaking down the total exemptions by apartment/unit.  Therefore, co-op management cannot refund the tax reduction to individual co-op owners until November, at the earliest.  It is left to the discretion of the management company how to pass along the tax savings to individual shareholders.

-Nahum Palefski, Esq.

Comment » | Definitions and Concepts, News, Property Taxes

February 24th, 2011 — 3:40pm

SCRIE: The Senior Citizen Rent Increase Exemption(SCRIE) offers assistance to eligible seniors from having to pay certain rent increases. Senior citizen tenants who reside in rent control or rent stabilized apartments can apply for SCRIE through the NYC Department of Finance (“DOF”) and may be entitled to an exemption from future rent increases (click here for the application).If the tenant is approved, the owner of the building will receive a corresponding credit against their real estate taxes from the City of New York.  Continue reading »

Applicants must meet ALL of the following eligibility requirements:

  1. Be 62 years of age or older;
  2. Rent an apartment that is regulated by the Division of Housing and Community Renewal (DHCR) (i.e. rent controlled or rent stabilized apartments or hotel stabilized);
  3. Have an annual household income of $29,000 or less;
  4. For applications received in 2010, income eligibility is established by the applicant’s income from calendar year 2009; and
  5. Pay more than one-third of the household’s aggregate disposable income for rent.

After receiving the application, the SCRIE office will send the tenant an acknowledgment letter with an assigned docket number.  The landlord will also receive a notification that the application has been filed.  After going through several layers of review, the Department for the Aging (“DFTA”) will notify the tenant that the process has been approved or denied.

If the tenant is approved, a notification stating the effective dates of the exemption period, the amount the tenant is responsible for paying, and the amount of the Tax Abatement Credit (TAC) will be mailed to the landlord.  This is known as an Order of Approval.  The landlord will receive an Owner Approval Order.

When the landlord receives the Owner Approval Order, it must repay the tenant any retroactive portion of the rent that is due. The tenant will stop paying the full collectible rent and begin paying only that portion authorized under the SCRIE Program.

The DOF maintains a SCRIE account for each landlord to track the tax abatement credits and debits. The DOF will apply credits from the landlord’s account to offset any taxes due the next tax period. The landlord will receive a quarterly Statement of Account reflecting credit or debit activity.

A landlord who believes that a tenant does not qualify for the SCRIE benefit may appeal that tenant’s SCRIE approval. An Appeal must be filed within 60 days of the date of the Owner Approval, Denial or Revocation Order, with all required documentation to the support the appeal. The landlord must also notify the tenant, in writing, that the appeal has been filed and the reason for the appeal.

After reviewing the Appeal, the DOF will notify the landlord if more information is needed.  If not, a hearing will be scheduled, or a decision will be made regarding the Appeal.

Nahum Palefski, Esq.

Comment » | Definitions and Concepts, News, Property Taxes

NYC Property Taxes on the Rise Again

February 15th, 2011 — 8:28pm

Property owners in New York City will see a significant increase in property taxes this year as announced by the NYC Department of Finance in January (Click here for DOF Press Release).

According to the Wall Street Journal, the tax increase, which will take effect in July, will result in a 7.5% rise for co-op owners, 9.6% for condo owners and 2.8% for single family home owners. Continue reading »

Building owners should also take note that taxes on rental buildings will increase as well (9% for rent-regulated apartments and 8.1% for unregulated apartments).

Although the Department of Finance cites improved earnings and a more accurate valuation procedure as reasons for the tax increase, skeptics will question whether property values increased sufficiently to justify the tax hike.

However, the new rates are not final and property owners can file an appeal with the NYC Tax Commission through the Department of Finance website.  Owners of one-to-three family homes have until March 1, 2011 to challenge assessments while other owners have until March 15, 2011.  We recommend retaining the services of a tax certiorari attorney to assist you in any challenges you may pursue.

Potential purchasers can expect a corresponding jump in maintenance costs for co-ops as result of these tax increases. Typically, among the main drivers behind maintenance increases have been higher property taxes.  Co-op boards have little choice but to raise these charges as a means of offsetting higher property taxes.  For buildings whose owners do not file an appeal with the City, purchasers can expect these extra tax costs to be passed on to the shareholders.

Nahum Palefski, Esq.

Comment » | News, Property Taxes

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