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On The Board’s Agenda: Property Tax Considerations For Condominiums and Cooperatives

Published in the CAI-LI Issue No. 23, Winter Newsletter by Christopher Byrnes, Esq. Read the article here; http://www.nytaxreview.com/wp-content/uploads/2014/03/SS-CAI-2014-Winter-Article.-CB.pdf

According to a recent study by the Tax Policy Center, Long Island has among the highest residential property taxes in the United States.  In particular, Nassau County is one of ten counties nationwide where the average residential tax bill exceeds $8,000.  For many homeowners, property taxes are the single greatest annual expense after a mortgage. For current retirees and those considering retirement, real estate taxes pose the largest financial burdens, along with health care costs.

Living in a region with such an ominous distinction, it is important for condominium and cooperative boards to take a proactive approach to ensure that property tax assessments remain fair and equitable.  It could even be said that boards have an obligation to take affirmative action to challenge their assessments by having a lawyer reviewing assessments every year. Since experienced lawyers in the field charge contingency fees to review and challenge assessments, retaining qualified counsel has no financial impact on the board’s annual budget. Conversely, it may have a positive impact on the finances of unit owners and shareholders alike.

The role of the board will vary depending on the type of community association involved. In cooperatives, property taxes are ultimately the responsibility of the Board of Directors, with the expense being passed to shareholders indirectly through monthly maintenance charges.  The Board has sole authority to commence a property tax appeal.  The Board, either directly or through its managing agent, is responsible for selecting legal counsel and monitoring the status of the case.  The Board alone may approve any settlement, and proceeds need not be remitted to shareholders – – they remain a corporate asset. Boards can elect to use tax refunds to enhance building reserve funds, commence long-delayed capital projects as well as reducing monthly maintenance costs to owners, since annual tax bills are reduced.

For condominiums, property taxes are levied against unit owners directly, who have legal standing to challenge their tax assessment individually.  Under New York State Law, however, unit owners can designate the Board of Managers as their agent to commence and manage a property tax appeal. This is advantageous in most circumstances, as legal fees and litigation costs can be significantly reduced.  As with cooperatives, selection of legal counsel, management of the appeal, and ultimate approval of settlements are all Board responsibilities. In a condominium, however, the proceeds of the lawsuit must be distributed to individual unit owners and are not to be treated as a Board asset.

Property tax litigation (formally known as “tax certiorari”) is a highly specialized field, with procedural rules which differ greatly from more traditional areas of law.  Statues of limitations – the deadlines by which appeals must be commenced – are among the shortest in any area of law, and are rigidly enforced.  Boards should select experienced counsel to ensure that these rules are followed, and that their community’s rights to fair and equitable tax assessments are preserved.

Our firm has published several articles which provide greater detail on the topic of selection of counsel and management of the tax appeal by the board. Please call Chris Byrnes at #516-742-7430 for a re-print of those articles. Chris Byrnes is an Associate at Schroder & Strom, LLP, with a large practice in condominium / co-operative real estate tax appeals.