BILL NUMBER: S2959

SPONSOR: KAVANAGH
 
TITLE OF BILL:

An act to amend the real property tax law, in relation to assessments of
residential cooperative, condominium and rental property

 
PURPOSE:

This bill would clarify Section 581 of the real property tax law in
relation to the assessment of real property owned or leased by a co-op
or on a condominium basis.

 
SUMMARY OF PROVISIONS:

Section one of the bill creates a new subdivision five in Section 581 of
the real property tax law. This new section would clarify that current
law does not require real property owned or leased by co-ops or on a
condominium basis be assessed based on the income the parcel would
generate if it operated as a rental property.

              

Section two of the bill sets forth the effective date.

 
JUSTIFICATION:

Section 581 of New York's Real Property Tax Law provides that: real
property owned or leased by a cooperative corporation or on a condomin-
ium 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 condo-
minium basis." The City of New York interprets this provision to require
co-ops and condo buildings with at least four units to be valued by the
Department of Finance (DOF) as if they were standard rental properties.
Rental properties are valued based on the income they generate and so
condo and co-op buildings must also be valued using this approach.
However, because condos and co-ops do not generally generate income for
their owners, the income from "comparable" buildings must be used to
impute income to them. DOF uses statistical modeling to select the
rental buildings used for these comparisons.

While a rental building may be similar to a co-op building in its size,
location, number of units, and age, it may differ in other ways that
make it less valuable than the co-op property. For example, the average
value of the three buildings DOF selected as comparables for a very
valuable building on the Upper East Side of Manhattan was, according to
DOF, approximately $188 per square foot. Meanwhile, a single unit in
this building recently sold for $54million-or approximately $4500 per
square foot. Indeed, the most valuable rental buildings in Manhattan are
valued by DOF at well under $500 per square Foot, less than one ninth of
the per square-foot sales price of the unit described above.

This bill would seek to address those major irregularities in co-op and
condominium assessments by making clear that localities are neither
required to base co-op and condo valuations on comparable rental proper-
ties, nor comparable co-op and condo properties. Through this clarifica-
tion, the State is allowing localities to more accurately assess the
value of their co-op and condo properties in a manner that is most suit-
able to the locality.
 
LEGISLATIVE HISTORY:

2021-2022: S6834 (Kavanagh) - LOCAL GOVERNMENT:

 
FISCAL IMPLICATIONS:

To be determined.

 
EFFECTIVE DATE:
This act shall take effect on the one hundred eightieth day after it
shall have become a law and shall apply to assessment rolls prepared on
the basis of taxable status dates occurring on or after the first of
January next succeeding the date on which this act shall have become a
law.