Memorandum in Opposition to
S2439, Little (Local Government Committee), A4901 McLaughlin (Real Property Taxation Committee) on calendar in Senate- 4/20/05 advanced to third reading

We oppose the subject bill, which will amend the Real Property Law and Real Property Tax Law to lift the “ceiling” on the assessment of all condo and. co-op units of three or less stories.

The present law provides for co-ops and condos to be assessed on the same basis as comparable rental properties, notwithstanding their form of ownership. As a practical matter, and as interpreted by court decisions, this results in these propertys’ assessments being arrived at by way of an income approach (by ascribing a rental value to the property), not by way of their sales prices. Very often, using an income approach results in a lower value and, therefore lower assessed value, than would result from using a pure sales approach to value.

This bill would not affect condominiums in Nassau County or New York City, as these “special assessing jurisdictions” have a classified assessment roll which provides for 3 or less story condos to be included in Class One, along with other single family houses. While that would appear to result in higher taxes for these condominiums, the classified roll allows for a more favorable assessment ratio and tax rate for single family residences, so that the net result of the higher market value is offset by the lower ratios and tax rates enjoyed by single family homes. Cooperatives, however, are defined by statute as commercial properties (Class 2), regardless of the number of stories. Therefore, it would be financially disastrous to assess cooperatives based on their market sales yet also continue to tax them at the commercial tax rates, which, in Nassau County, are typically double the class one residential rates.

Outside of the two special assessing jurisdictions, the impact of increasing assessments on. condos and co-ops of 3 stories or less is highly discriminatory. These projects typically vary from townhouses, semi-attached villas, garden apartment style units or detached homes located on clustered mini individual lots (or a mix of the above). All of these types of condominium projects normally contain large common areas with common amenities. These developments provide much needed housing to both the entry level and senior housing market, to whom a lower purchase price and lower carrying costs are critical. Increasing the taxes charged on these developments would severely impact their marketability and affordable. Of greatest concern would be the immediate impact of dramatically changing the tax structure on existing property owners who purchased their homes based on prices which were set based on the current tax structure and who could not afford to see a dramatic increase in their monthly carrying costs. If forced to sell because of this tax increase, the units’ values would also be reduced due to the increased tax burden.

The initial rationale for imposing restrictions on the as of condos and co-ops was to insure that owners of similar properties were not penalized because of their form of ownership, and for those in rental complexes to be able to purchase their own unit through the conversion process, and enjoy the benefits of home ownership. This rationale remains just as vital today as it did when these statutes were enacted.

We urge defeat.

Respectfully submitted,

Robert Wieboldt
Executive Vice President
Legislative Representative