BILL NUMBER:A9790

TITLE OF BILL:
An act
to amend the real property tax law and the real property law, in
relation to the assessment of condominiums and cooperatives

PURPOSE OR GENERAL IDEA OF BILL: To require
market-based assessments
on real property, owned or leased by a cooperative corporation or on
a condominium basis, which is converted or constructed on and after
January 1, 2011.

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.