Galef/Reichlin-Melnick Bill to Tax Some Newly Constructed Condos as Real Property Passes the Legislature

Existing condos/coops not impacted

Assemblywoman Sandy Galef and Senator Elijah Reichlin-Melnick announced that their bill, A03491B/S05946B, passed the legislature on June 2. If signed by the Governor, the new law would allow municipal corporations to value newly constructed and converted cooperative and condominium units as they would other real property.

Under the Real Property Tax Law and Real Property Law, the sum of the assessments of individual cooperative or condominium units is not allowed to exceed the value of the entire complex if it was valued as a single entity. The Office of Real Property Services, assessors and other local officials generally consider the restrictions an unreasonable state mandate that unfairly limits the revenue-raising abilities of local governments. The new legislation would alleviate the negative impacts of the current restrictions. Municipalities may adopt this taxing policy at local option.

“As the chair of the Real Property Taxation Committee in the Assembly, I am always on the lookout for alternative options for local municipalities,” said Assemblywoman Galef. “Historically, the law to be amended was intended to apply to condominium buildings with a large number of dwellings. Today, developers are taking advantage of the rule to create single-family homes at a preferable tax-rate. The amended law will not affect established condominium residences but will give municipalities the opportunity to determine the best way to assess new condos and coops in their communities.”

Senator Elijah Reichlin-Melnick stated, “There are numerous examples from across New York where developers are exploiting a loophole to build what amounts to single-family homes at a preferable tax rate. This bill empowers local governments to determine the best way to assess new condos and coops in their communities so all property owners are treated fairly.”

The New York State Conference of Mayors and Municipal Officials said, “This mandated and arbitrary assessment restriction places an artificial cap on the assessment of condominium and cooperative properties, forcing assessors and appraisers to ignore market resale information which is usually the best indicator of property values.

“This law, in effect, results in a ceiling on assessments that is based not on a type of property, but on a classification of ownership. Consequently, you may have a single-family home and a condominium that are physically identical and sell for the same price, but the property tax liability associated with each will differ significantly, sometimes by as much as 50%.

“This, in turn, unfairly limits the revenue-raising ability of local governments and only adds to the fiscal burdens they are currently facing, particularly in light of the 2% tax cap. For the foregoing reasons, the Conference of Mayors supports this bill.”

The New York State Assessors Association said it “supports legislation that will allow, at local option, market-based assessments of real property owned or leased by a condominium or a cooperative corporation, converted or constructed. It is imperative that the real property tax administration treat all properties equally. Section 399-y of the Real Property Law prevents equal taxation. Condominiums and cooperatives across New York State receive preferential tax treatment.”

The New York State Association of Counties said “Currently state law prevents municipalities from using the sale of condominiums or cooperative units in the assessment process because it stipulates that the sum of assessments of individual units cannot exceed the value of the entire complex if it was valued as a single entity. This typically reduces condominium and cooperative assessments, which creates an undue tax burden for homeowners relative to the owners of condos or co-ops. By allowing assessors and appraisers to use market information to determine the taxable value of condominiums and cooperatives, this legislation would address this equity issue and remove an unwarranted limitation on the ability of local governments to raise revenue.”

The New York State School Board Association also offered its support of the legislation.