Requires market-based assessments on real property owned or leased by a cooperative corporation or on a condominium basis

Summary of specific provisions

Section 1 adds (d) to §581.1 of the Real Property Tax Law (RPTL), which removes the limitations in that section on assessments on condominiums and cooperatives converted or constructed on and after January 1, 2011 in any municipal corporation, other than New York City and Nassau County.

Section 2 removes from §339-y of the Real Property Law (RPL) the valuation and assessment limitations from condominium and cooperative units converted or constructed on and after January 1, 2011.

Section 3 contains the effective date.

Justification

Currently, §339-y of the RPL limits the assessments that can be placed on condominium units, other than those classified in the Homestead Class, in municipalities applying a dual tax rate. Section 583 of the RPTL limits the assessments that can be placed on condominium units, other than those classified in the Homestead Class, in municipalities applying dual tax rates, residential cooperatives and multiple dwellings. Chapter 293 of the Laws of 1997 enables municipal corporations, other than New York City and Nassau County, to provide that "converted condominiums" (i.e. residential condominium units which have been converted to condominium ownership from conventional ownership) shall be assessed without regard to the assessment restrictions otherwise applicable to condominiums (RPTL, §581(1); RPL, §339-y(l) (f). This also allows local governments to decline to grant these benefits to converted condominiums, thereby removing the incentive to convert existing housing to condominium ownership to reduce taxes. Pre-existing condominiums are not affected by the changes made by Chapter 293, which is similar to this proposal.

Section 339-y of the RPL provides for restricted assessing of condominium property. Essentially, the statute requires that the sum of the assessments of the individual condominium units must not exceed the value of the entire complex if it was sold as a single entity. In many cases, however, sale as a single entity is either unrealistic or impossible. Although not structured as a partial exemption, this assessment restriction amounts to the same thing.

Studies have shown that the values of the individual units based on a pro-ration of the value of the entire development are usually significantly lower than the market prices of the same units, sometimes by as much a 2550%.

Section 581 of the RPTL, enacted in 1981 and amended in subsequent years, reinforces these provisions and extends them to other types of multi-unit property. This law affords cooperative apartments the same assessment restrictions as a condominiums, but (a) limits the application of these restrictions to property assigned to classes other than Class 1 in special assessing units and (b) requires that the restrictions be ignored for purposes of computing taxes on homestead class property in those taxing units using the split tax rate provisions of Article 19 of the RPTL.

The general rule is that the time the sum of the assessment of individual condominium units must not exceed the value of the entire complex if it was valued as a single entity. The restriction tends to reduce condominium and cooperative assessments by preventing the use of sales of units in the assessment process. (Note, however, that this restriction does not apply to condominiums in Class 1 in a special assessing unit or in the homestead class of an approved assessing unit which uses dual tax rates.)

In contrast to specific exemptions targeted at multi-unit property, which are available to low income residents, for example, no compelling rationale has ever been offered for the subsidy these assessment restrictions seem to contemplate. Furthermore, the Office of Real Property Services, assessors and other local officials generally consider the restrictions an unreasonable state mandate which unfairly limits the revenue-raising abilities of local governments. Assessors and appraisers also cite the difficulties they encounter when they are forced to ignore market information-usually the best indicator of value--in developing estimates of taxable value.

This bill in no way eliminates existing statutes on condominiums and cooperatives. Rather, the bill prevents conversion, after January 1, 2010 purpose of receiving a beneficial tax assessment. In addition, it removes the tax benefit from newly created condominiums and cooperatives.

Prior legislative history

A. 10747/S. 7029 of 2005/2006

Fiscal implications

This bill will ensure distribution of the real property tax assessment for local governments and school districts. There are no fiscal implications to the State.

Effective date

This act shall take effect immediately and shall apply

to assessment rolls prepared on the basis of taxable status dates occurring on or after January 1, 2011.