Reason to Rezone

People who do not own condos are paying for them
Recent Newsday Articles on Condominiums

... That is not the view in Southold, where residents have been up in arms over plans to build The Heritage at Cutchogue, 130 high-end homes on 45 acres just outside the historic downtown.

As condominium owners, Heritage residents will get a total reduction of about $1 million in taxes each year. Alarmed about the impact on schools, the town added a covenant restricting it to owners aged 55 and older. But town board member Tom Wickham is dismayed about the changes it will bring to the hamlet his ancestors settled in the 1600s.

“Is that what we want for our community – is that the price we have to pay for all the condominium developments in our town?” he said. “This law is distorting the family composition of people living out here.”

• State bill could end tax benefits for condos, coops

• The Condo Law: How it works

• Tax Chart (here is the bottom line; owners of condos are not paying 2/3 of their fair share)

• Lawmakers differ on whether to drop condo tax break

• Supervisor favors bill to limit condo tax breaks

• Rezoning being weighed for condos in St. James


What is more valuable than a tax deduction or a tax credit? A reduced tax assessment.

While reducing taxes on rent-controlled and on price-controlled property occupied by senior citizens and persons with disabilities and persons limited incomes is reasonable, it is unreasonable to grant reduced tax assessments to owners of luxury condominiums.

Property tax on condos is assessed according to an appraisal of the income they could generate if they were wholesale rental units even though they are not rented. New York State law, section 581 of Real Property Tax, requires assessment of coops and condos based on capitalization of rental (or potential rental) income and as a single property not as separate units. The market value of property ownership is, and always will be, greater than that of property rental. The value of rentals does not include future appreciation or the right to continued possession. Who in their right mind would invest in improvement of rented property?

Owners of coops and condos pay lower taxes than owners of separate properties. A condominium unit comparable to a separate property that would be assessed at $500,000 is usually assessed at between $165,000 and $250,000. Condominium owners do not pay their fair share of property taxes. Owners of separate residential properties therefore pay more than their fair share of taxes.

In response to such obvious inequities in property tax bills, Southold Town government negotiated with the developer of the proposed Heritage at Cutchogue, and requested a restriction to owners over 55 years old. The idea was older owners will not have school age children. There are three main problems with such a simplistic solution.

  • First, if the development does appeal to local seniors, the residences they move out of may be occupied by younger owners with children.
  • Second, older residents will probably be retired and not serve in community service capacities.
  • Third, the Suffolk County Health Department allows developments restricted to "active seniors" to use septic systems even though the density is so high that an unrestricted development at the same density would be required to have a sewage treatment facility.

Unfortunately, proposals to grant local control over coop and condominium assessment, and thus to better equip communities to provide for assessment of coops and condominiums on an identical basis as that of other residential property have been repeatedly defeated by the New York State legislature.

NYS Real Property Tax Law § 581. Assessment of residential cooperative, condominium and rental property.

1. (a) Notwithstanding any other provision of law, real property owned or leased by a cooperative corporation or on a condominium basis shall be assessed for purposes of this chapter at a sum not exceeding the assessment which would be placed upon such parcel were the parcel not owned or leased by a cooperative corporation or on a condominium basis.
(b) The provisions of paragraph (a) of this subdivision shall not apply to such real property classified within: (i) on and after January first, nineteen hundred eighty-six, class one of section one thousand eight hundred two of this chapter; or (ii) on and after January first, nineteen hundred eighty-four, the homestead class of an approved assessing unit which has adopted the provisions of section one thousand nine hundred three of this chapter, or the homestead class of the portion outside an approved assessing unit of an eligible split school district which has adopted the provisions of section nineteen hundred three-a of this chapter; provided, however, that, in an approved assessing unit which adopted the provisions of section one thousand nine hundred three of this chapter prior to the effective date of this subdivision, paragraph (a) of this subdivision shall apply to all such real property (i) which is classified within the homestead class pursuant to paragraph one of subdivision (e) of section one thousand nine hundred one of this chapter and (ii) which, regardless of classification, was on the assessment roll prior to the effective date of this subdivision unless the governing body of such approved assessing unit provides by local law adopted after a public hearing, prior to the taxable status date of such assessing unit next occurring
after December thirty-first, nineteen hundred eighty-three, that such paragraph (a) shall not apply to such real property to which this clause applies.
(c) The provisions of paragraph (a) of this subdivision shall not apply to a converted condominium unit in a municipal corporation, other than a special assessing unit, which has adopted, prior to the taxable status date of the assessment roll upon which its taxes will be levied, a local law or, for a school district, a resolution providing that the provisions of paragraph (a) of this subdivision shall not apply to converted condominium units within that municipal corporation. A converted condominium unit for purposes of this paragraph shall mean a dwelling unit held in condominium form of ownership that has previously been on an assessment roll as a dwelling unit in other than condominium form of ownership, and has not been previously subject to the provisions of paragraph (a) of this subdivision.

2. Real property owned or leased by a cooperative corporation or on a condominium basis which is located in an approved assessing unit, or which is not located in an approved assessing unit but which is located in an eligible split school district which has adopted the provisions of section nineteen hundred three-a of this chapter, and is not subject to the provisions of paragraph (a) of subdivision one of this section, shall be assessed pursuant to the provisions of this subdivision.
(a) The assessor of an assessing unit in which such real property is located shall compute an assessment which would be placed on such parcel were the parcel not owned or leased by a cooperative corporation or on a condominium basis, which value shall be known as the restricted assessed valuation.
(b) The assessor of such assessing unit in which such real property is located shall compute an assessment which would be placed on such parcel without regard to the restrictions found in paragraph (a) of this subdivision or section three hundred thirty-nine-y of the real property law, which value shall be known as the assessed valuation.
(c) The assessor of such assessing unit shall enter the assessed valuation on the assessment roll of such assessing unit and the restricted assessed valuation in a separate column of the assessment roll of such assessing unit.
(d) A municipal corporation which levies taxes pursuant to article nineteen of this chapter shall levy such taxes against the assessed valuation of such parcels for taxes imposed by or on behalf of such municipal corporation.
(e) A municipal corporation which does not levy taxes pursuant to article nineteen of this chapter shall levy such taxes against the
restricted assessed valuation of such parcels for taxes levied by or on behalf of such municipal corporation.
3. Notwithstanding any other provision of law, real property occupied for residential purposes on a rental basis (as distinct from a cooperative or condominium basis) shall be assessed without regard to the value the property might have if converted to a cooperative or condominium basis or if sold or owned for the purpose of such a conversion.
4. For the purposes of this section, the term "cooperative corporation" shall include any corporation organized under any special or general law of this state, including, but not limited to, the business corporation law, the cooperative corporations law, the not-for-profit corporation law, and the private housing finance law, or the predecessor statutes thereof, primarily for providing housing accommodations to its stockholders or members and which is, or is to be, operated for the benefit of the persons or families who are entitled to occupancy by reason of ownership of stock or membership in the corporation.


NYS Real Property Tax Law § 581-a. Assessment of residential real property.
Notwithstanding any other provision of law, the assessed valuation of real property used for residential rental purposes where at least twenty percent of the residential units are subject to an agreement with a municipality, the state, the federal government, or an instrumentality thereof, which agreement restricts occupancy of those units to tenants who qualify in accordance with an income test, shall be determined using the income approach as applied to the actual net operating income, after deducting for reserves required by any federal, state or municipal programs. For the purposes of this section "net operating income" shall mean the actual or anticipated net income that remains after all operating expenses are deducted from effective gross income, but before mortgage debt service and book depreciation are deducted. The assessed valuation of real property used for such residential rental purposes shall be determined using the actual net operating income, and shall not include federal, state or municipal income tax credits, subsidized mortgage financing, or project grants, where such subsidies are used to offset the project development cost in order to provide for lower initial rents as determined by regulations promulgated by the division of housing and community renewal.

RPP - NYS Real Property Law § 339-y. Separate taxation.
1. (a) With respect to all property submitted to the provisions of this article other than property which is the subject of a qualified leasehold condominium, each unit and its common interest, not including any personal property, shall be deemed to be a parcel and shall be subject to separate assessment and taxation by each assessing unit, school district, special district, county or other taxing unit, for all types of taxes authorized by law including but not limited to special ad valorem levies and special assessments, except that the foregoing shall not apply to a unit held under lease or sublease unless the declaration requires the unit owner to pay all taxes attributable to his unit. Neither the building, the property nor any of the common elements shall be deemed to be a parcel.
(b) In no event shall the aggregate of the assessment of the units plus their common interests exceed the total valuation of the property
were the property assessed as a parcel.
(c) For the purposes of this and the next succeeding section the terms"assessing unit", "assessment", "parcel", "special ad valorem levy",
"special assessment", "special district", "taxation" and "taxes" shall have the meanings specified in section one hundred two of the real
property tax law.
(d) The provisions of paragraph (b) of this subdivision shall not apply to such real property classified within:
(i) on and after January first, nineteen hundred eighty-six, class one of section one thousand eight hundred two of the real property tax law; or
(ii) on and after January first, nineteen hundred eighty-four, the homestead class of an approved assessing unit which has adopted the provisions of section one thousand nine hundred three of the real property tax law, or the homestead class of the portion outside an
approved assessing unit of an eligible split school district which has adopted the provisions of section nineteen hundred three-a of the real property tax law; provided, however, that, in an approved assessing unit which adopted the provisions of section one thousand nine hundred three of the real property tax law prior to the effective date of this subdivision, paragraph (b) of this subdivision shall apply to all such real property (i) which is classified within the homestead class pursuant to paragraph one of subdivision (e) of section one thousand nine hundred one of the real property tax law and (ii) which, regardless of classification, was on the assessment roll prior to the effective date of this subdivision unless the governing body of such approved assessing unit provides by local law adopted after a public hearing, prior to the taxable status date of such assessing unit next occurring after December thirty-first, nineteen hundred eighty-three, that such paragraph (b) shall not apply to such real property to which this clause applies. Provided further, however, real property subject to the provisions of this subparagraph shall be assessed pursuant to subdivision two of section five hundred eighty-one of the real property tax law.
(e) On the first assessment roll with a taxable status date on or after the effective date of a declaration filed with the recording officer and on every assessment roll thereafter, the assessor shall enter each unit as a parcel, as provided in paragraph (a) of this subdivision, based upon the condition and ownership of each such unit on the appropriate valuation and taxable status dates. Units owned by a developer may be entered as a single parcel with a parcel description corresponding to the entire development, including the land under such development, and excluding those units appearing separately. Upon the first assessment roll where each unit is separately assessed, only an individual unit and its common interest shall constitute a parcel.
(f) The provisions of paragraph (b) of this subdivision shall not apply to a converted condominium unit in a municipal corporation other than a special assessing unit, which has adopted, prior to the taxable status date of the assessment roll upon which its taxes will be levied, a local law or, for a school district, a resolution providing that the provisions of paragraph (b) of this subdivision shall not apply to a converted condominium unit within that municipal corporation. A converted condominium unit for purposes of this paragraph shall mean a dwelling unit held in condominium form of ownership that has previously been on an assessment roll as a dwelling unit in other than condominium form of ownership, and has not been previously subject to the provisions of paragraph (b) of this subdivision.
2. With respect only to qualified leasehold condominiums:
(a) Each unit, its common interest, not including any personal property, and the proportionate undivided part of the real property which is the subject of a qualified leasehold condominium and is allocated to such unit (as expressed in the declaration), shall be deemed to be a parcel, shall be subject to separate assessment to the unit owner and shall be subject to taxation by each assessing unit, school district, special district, county or other taxing unit for all types of taxes authorized by law including, but not limited to, special ad valorem levies and special assessments. Neither the real property which is the subject of a qualified leasehold condominium, the building, the property nor any of the common elements shall be deemed to be a parcel. In no event shall the aggregate of the assessment of the units plus their common interests plus their proportionate undivided parts (as expressed in the declaration) of said real property exceed the total valuation of the property and said real property assessed as a single parcel owned in fee. No provision of this paragraph shall be deemed to subject to taxation any parcel or part thereof which, pursuant to applicable law, is either exempt from taxation or with respect to which no taxes are payable.
(b) For the purposes of section five hundred two of the real property tax law, both the unit owner and the owner of the real property which is the subject of a qualified leasehold condominium shall be deemed to be the owner of the parcel in which such unit is included; provided, however, that for the purposes of section nine hundred twenty-six of the real property tax law, only the unit owner shall be deemed the owner of the parcel in which such unit is included and only the unit owner shall be personally liable for the payment of any taxes assessed against such parcel. Only the fee owner of the land which is the subject of a qualified leasehold condominium, however, shall be deemed to be the owner of the parcel in which a unit is included for the purposes of determining whether such parcel is subject to or exempt from taxation or whether no taxes are payable with respect thereto.
(c) The taxes assessed against each unit, its common interest and the proportionate undivided part of the real property which is the subject of a qualified leasehold condominium allocated to such unit (as expressed in the declaration), shall constitute a lien solely on that
unit, its common interest and the proportionate undivided part of said real property allocated to such unit (as expressed in the declaration), and such taxes shall not constitute a lien on any other unit or the common interest of any other unit or the proportionate undivided part of said real property allocated to any other unit (as expressed in the declaration).
(d) At such time as the real property which is the subject of a qualified leasehold condominium is submitted to the provisions of this article, the assessing unit shall make provision so that the real property which (i) is not the subject of a qualified leasehold condominium and (ii) immediately prior to such submission was included in a parcel in which there also was included all or any part of the real
property which is (immediately subsequent to such submission) the subject of a qualified leasehold condominium, is established as a single parcel on the assessment roll and tax map of such assessing unit, separate and apart from any real property which is the subject of a qualified leasehold condominium.
3. All provisions of a declaration relating to a unit, its common interest and the proportionate undivided part of the real property which
is the subject of a qualified leasehold condominium allocated to such unit (as expressed in the declaration), which has been sold for taxes shall survive and shall be enforceable after the issuance of a tax deed for such unit to the same extent that such provisions would be enforceable against a voluntary grantee of such unit immediately prior to the delivery of such tax deed.
4. The board of managers may act as an agent of each unit owner who has given his written authorization to seek administrative and judicial review of an assessment made in accordance with subdivision one of this section, pursuant to title one-A of article five and title one of article seven of the real property tax law. The board of managers may retain legal counsel on behalf of all unit owners for which it is acting as agent and to charge all such unit owners a pro rata share of expenses, disbursements and legal fees for which charges the board of managers shall have a lien pursuant to section three hundred thirty-nine-z.
5. Notwithstanding the provisions of any general, special or local law to the contrary, in a city having a population of one million or more, the board of managers shall be authorized to act as the sole agent on behalf of all unit owners, without authorization of each unit owner, for the limited purpose of determining whether or not to waive prospectively the benefit of real property tax abatement and exemption for the property in order to qualify for a partial abatement of real property taxes pursuant to section four hundred sixty-seven-a of the real property tax law.


PROPOSED NEW LAW

NYS Assembly Bill Summary

BILL NO A01446

SAME AS No same as

SPONSOR Calhoun

Amd S581, RPT L; amd S339-y, RP L

Permits certain condominium units located within an assessing unit to opt out
of the assessment of residential cooperative, condominium and rental property
upon the adoption of a local law.

--------------------------------------------------------------------------------

A01446 Actions:
BILL NO A01446

01/09/2007 referred to real property taxation
01/09/2008 referred to real property taxation
--------------------------------------------------------------------------------
A01446 Votes:
--------------------------------------------------------------------------------

A01446 Memo:
BILL NUMBER:A1446

TITLE OF BILL: An act to amend the real property tax law and the real
property law, in relation to permitting the opting out of the
assessment of residential cooperative, condominium and rental property
upon the adoption of a local law

PURPOSE OR GENERAL IDEA OF BILL: Provides an assessing unit the
option of opting out of Section 581 of the Real Property Tax Law, and
the condominium assessment statute, upon the adoption of a local law.

SUMMARY OF SPECIFIC PROVISIONS:

Section One amends Section 399-y, subdivision (1), of the Real
Property Law by adding a new paragraph (g) that establishes that the
provisions of paragraph (b) shall not apply to condominium units
located within assessing units that have exercised their authority to
opt out of the condominium assessment requirements otherwise
prescribed pursuant to Section 581 of the Real Property Tax Law.

Section Two amends Section 581, subdivision (1), of the Real Property
Tax law (RPTL) by adding new paragraph (d) that would allow an
assessing unit, upon the adoption of a local law, to opt out of the
condominium assessment requirements as prescribed by this section,
thereby providing for the assessment of condominiums on an identical
basis to other residential property.

EFFECTS OF PRESENT LAW WHICH THIS BILL WOULD ALTER: Under current law
certain assessing units are required to assess condominiums pursuant
to Section 581 of the Real Property Tax Law which required in most
instances,... "that real property owned or leased by a cooperative
corporation or on a condominium basis shall be assessed at a sum not
exceeding the assessment which would be placed upon such parcel were
the parcel not owned or leased by a cooperative corporation or on a
condominium basis." This bill would allow such assessing units to opt
out of this section, thereby providing for the assessment of
condominiums on an identical basis as that of other residential
property.

JUSTIFICATION: Much debate has surrounded the way that condominium
units are assessed in New York State. Existing law requires that
condominiums are to be assessed by what income they could generate as
rental units. Since, the demands for rentals, in many circumstances,
are smaller than that of non-rented properties assessed values are
often times lower. Thus, what a condominium unit is assessed based on
the rental value versus that of a stand-alone property is lower. This
generates a taxing conundrum of sorts when a condominium unit that
could be assessed at $300,000 is being assessed at $150,000 based on
State law. Homeowners argue that condominium owners are getting an
unfair tax break because of how the units are assessed, prompting a
default disparity in property and school tax bills; in other words
condominium owners are not paying their fair share for similar
services. The inequities in tax bills pit condominium owners against
property owners and create headaches for local officials. This bill
authorizes a local assessing unit to opt out of Section 581 of the
Real Property Tax Law (upon adoption of a local law). By granting
local control over condominium assessment, communities will be better


equipped to provide for the assessment of condominiums on an identical
basis as that of other residential property.

PRIOR LEGISLATIVE HISTORY:

2003-04: A.9419 Held for consideration in Real Property Taxation
2005-06: A.2180 Held for consideration in Real Property Taxation

FISCAL IMPLICATIONS: This bill will generate additional revenue for
relevant taxing entities. There are no fiscal implications to the
State.

EFFECTIVE DATE: Immediately.


S T A T E O F N E W Y O R K
________________________________________________________________________

Bill # 1446

2007-2008 Regular Sessions

I N A S S E M B L Y

January 9, 2007
___________

Introduced by M. of A. CALHOUN -- read once and referred to the Committee on Real Property Taxation

AN ACT to amend the real property tax law and the real property law, in relation to permitting the opting out of the assessment of residential cooperative, condominium and rental property upon the adoption of a local law

THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEMBLY, DO ENACT AS FOLLOWS:

1 Section 1. Subdivision 1 of section 581 of the real property tax law
2 is amended by adding a new paragraph (d) to read as follows:
3 (D) THE PROVISIONS OF PARAGRAPH (A) OF THIS SUBDIVISION SHALL NOT
4 APPLY TO CONDOMINIUM UNITS LOCATED WITHIN AN ASSESSING UNIT THAT
HAS
5 ADOPTED A LOCAL LAW TO OPT OUT OF THIS SECTION.
6 S 2. Subdivision 1 of section 339-y of the real property law is
7 amended by adding a new paragraph (g) to read as follows:
8 (G) THE PROVISIONS OF PARAGRAPH (B) OF THIS SUBDIVISION SHALL NOT
9 APPLY TO CONDOMINIUM UNITS LOCATED WITHIN AN ASSESSING UNIT THAT
HAVE
10 EXERCISED THEIR AUTHORITY TO OPT OUT OF THE CONDOMINIUM
ASSESSMENT
11 REQUIREMENTS OTHERWISE PRESCRIBED PURSUANT TO SECTION FIVE
HUNDRED
12 EIGHTY-ONE OF THE REAL PROPERTY TAX LAW.
13 S 3. This act shall take effect immediately.

Email Neighbors@SaveCutchogue.com
Visit www.SaveCutchogue.com