Taxes may be inevitable, but that does not make them infallible. Most people may not question their property taxes, but doing so may be to your benefit.
The New York City Department of Finance is charged with estimating values of New York City residential and commercial properties, with tax rates set each year by the Mayor and City Council. The annual tax rates are applied to property values to help determine each homeowner’s annual tax liability. In mid-January, the Department of Finance mails out Notices of Property Value to property owners throughout the five boroughs. The Notice will indicate how the city estimated its market value for the upcoming tentative assessment roll published on January 15th.
According to the Department of Finance, state law requires the Department of Finance to value most condos and co-ops as if they were in residential rental buildings, which are valued based on their income producing potential using the Real Property Income and Expense statements they file each year.
Most properties in New York City, with the exception of one-, two-, and three-family homes and utilities, are valued by what is known in appraisal parlance as the “income approach” to value. Under this valuation method, the city uses actual or estimated income and expenses to arrive at a net operating income, which is then capitalized to determine present value. The Notice of Property Value will show each of these underlying components, however, it will not show the square footage breakdown, as between retail, residential, garage etc. Since many taxpayers are not familiar with the income approach, the tendency is to simply file away the Notice without too much scrutiny or thought as to its tax consequences.
While the income, expenses and cap rate may be subjective variables in the assessment equation, the square footage of the property is not. The city refers to a property’s square footage as the “gross building area” because it taxes property owners on every square inch of the property, from outside brick to outside brick.
Most of the time, the city simply uses the same square footage it has had on file for decades in valuing properties. But what if the use of the property has changed? Was this information correct to begin with when obtained decades ago? Assessments are presumed correct. However, if you think that your square footage is overstated, you’ll need to contest the gross building area. To do this, you’ll need an engineer’s report along with a stacking plan delineating the space with the actual use and setting forth the square footage calculations. An overstatement of the square footage can easily lead to a burdensome tax implication over time.
Whether it’s a structure demolition, an excavation, or the alteration of an existing building, large construction projects sometimes cause big problems and inconvenience your neighbors. In worst case scenarios, the dispute can even become the subject of a lawsuit.
But a new building going up or a major change being made to an existing building in the neighborhood needn’t cause undue consternation. As with so many aspects of city living, communication is key to preventing disputes, and settling them quickly when they’re unavoidable. Lack of communication can make the imaginations of neighbors run wild; knowing a simple fact such as how long the project is expected to go on can go a long way toward calming some residents’ fears.
Legally speaking, a builder /developer’s responsibility to neighboring buildings during construction is to minimize smaller problems, such as noise, dust, and the like. Simply put, the developer shouldn’t be creating an undue amount of disruption. But what qualifies as ‘undue’? Some residents are more sensitive than others, and the question of whether or not the construction is creating too much noise can be a concern. That doesn’t mean annoyance at the noise level points to anything that’s illegal. For example, just because a project is extending past the allowable work time of 7 a.m. to 6 p.m. doesn’t mean there’s a violation; the builder may have been given a special permit to work at night. If a resident thinks the contractor is in the wrong, he or she can always call the DOB to determine if such a permit exists, or otherwise, file a complaint.
Serious construction-related problems, like structural damage from excavation and/or blasting, or water damage from an accidentally-broken water line, can and do happen during projects. Who is liable for them and how are they resolved depends largely upon the specifics of the contractor’s insurance or the developer’s insurance. The possibility of such damage is part of the reason why it’s necessary for the developer to have access to adjoining buildings from the start of the project, so that he can note things such as existing cracks in the foundation and not be liable for them later on. Creating a record of the state of the property at the outset can save significant time and money down the road.
In the context of a cooperative or condo association, the term “budget” may refer to one of two things: the operating budget or the capital budget.
The operating budget covers recurring monthly expenses such as payroll and salaries, taxes, utilities, insurance and general maintenance items. In creating and managing an operating budget, co-op and condo boards use previous years’ budgets as predictors for the coming year’s expenses, and factor in other considerations, such as the balance of cash inflow and outflow, collection of arrears and late fees from delinquent residents, and potential emergencies. How do condos and coops earn income? As with all things, it depends on the property. Income can come from rental monies, dues, assessments, interest on bank accounts, financial penalties, user fees or security deposits.
Capital budgets apply to long-term, big-ticket items, like new roofs or an HVAC overhaul – in other words, expenditures that relate to improving building conditions and consequently, increasing the value of the building. Capital budgets typically span several years and are prioritized following a capital needs assessment or building survey, conducted by an architect or engineer, who evaluates all aspects of the building and determines the priority of improvement projects as well as cost.
Budgets are an integral part of an association’s financial plan. But who is responsible for creating the budget? Typically the budget is created by someone in the accounting department of the management company, in most cases the chief financial officer if they have one, or an outside CPA, if the management company does not have a qualified accounting person on staff to prepare the budget in house, or if the property is owner-managed. Once the first draft is complete it is presented to the board or the owner(s) for review. Once the budget has been agreed upon, unit owners or shareholders should be notified of any changes or increases. While offering plans and bylaws typically allow for unit owners and shareholders to receive annual financial statements and year-end tax deduction information, boards should also consider providing more information than that. The more everyone understands about the rationale behind budget increases, the less likely it is that the board will be facing serious backlash.
We previously discussed privacy concerns surrounding security cameras and your right to privacy as a condo unit owner or a cooperative shareholder, but what about their intended purpose for surveillance and security? These cameras can bring a comforting sense of security to residents, but if no one is monitoring them, than security is no more than a fairy tale. Properly used, surveillance camera and closed circuit television monitoring systems (“CCTV”) can be a powerful deterrent to criminal activity and provide building occupants with enhanced security, but what if no one is watching? Let’s say that your building has such a system. Is your building liable if a tenant is attacked in front of a security camera and no one comes for help? Is the building guilty of negligence?
A plaintiff alleging that a community association’s security measures were inadequate must demonstrate that: 1) the association had a duty to provide security, and 2) it failed to take reasonable steps to fulfill those obligations. In one extreme example, the owners of an office building installed fake cameras in a public space where a woman was brutally attacked and raped. Unaware that these cameras weren’t real, the victim appropriately expected someone to come to her aid. A jury found the building owners negligent and awarded the victim $1 million. Dummy cameras aside, even bona fide security systems can lend themselves to liability if they’re not properly maintained and reviewed. At the very least, if the CCTV is not “live managed” be sure that all tenants are well aware that video footage is only reviewed after an incident has been reported.