Real Estate Tax Assessments
Has anyone had any experience in changing the c of o and having RE taxes reassessed at a much higher rate? Right now, our taxes are very low on our brownstone which was legally used as a 4-family, but with no official c of o (but 4-family use pre-dated use of c of o’s). When…
Has anyone had any experience in changing the c of o and having RE taxes reassessed at a much higher rate? Right now, our taxes are very low on our brownstone which was legally used as a 4-family, but with no official c of o (but 4-family use pre-dated use of c of o’s). When we originally renovated it, we combined some apartments, legally filed all work, but didn’t officially file for a change of c of o (or an “official” one, that is, since there was no previous one) . We were informed by architect and contractor that it was not necessary to change c of o if house changed to smaller number of units, just if it changed to a larger number. They told us that the rule was in place because big co-op buildings are constantly combining units and don’t keep filing to change c of o’s each time. And, if we ever wanted to go back to a 4-family in the future, it was better not to change c of o now. Years later I heard that if you do a renovation that changes the c of o, even to a lesser number of units, your taxes are re-assessed and increase tremendously. (Even though your tax RATE is lower, the amount your home is valued at increases greatly.) Anyone had any experience? I’m also checking with a lawyer, but wondering what people’s experience has been?
technically, it’s the law (or the rules of the game at the DOB), but since older (like pre-60s) changes are exempt, there are many properties that are non-compliant. Plus, most banks don’t ask too many questions about this stuff..
still, if your architect is telling you not to get a c-of-o, he is going against his own professional code of conduct.
Poster above, do you have some professional knowledge that if you change the number of units, by law, you must change the c of o? This isn’t a question of “skirting” the law, it’s a question of whether if the building is occupied by a LESSER number of units you need to do so. For example, if I’m in a small co-op and I buy the adjoining apartment, does the entire co op need to file a change of c of o because I am combining 2? I have been shown many brownstones by agents who happily note that a house is a “legal 2-family being used as 1”, to point out that the buyer can restore the rental apartment. They even publicly advertise this. Or are all those people “skirting” the law as you say? Is it hurting their resale value? If so, why are brokers advertising it?
No one is trying to skirt the law here, I’m just wondering what specific law you are talking about and if co-ops follow it as well as brownstones owned by a single person.
The drawback to not changing the c of o to a lesser amount is that you would still have to meet all the code requirements of that higher c of o, for example, maintain fire escapes, etc. But as long as you do so, do you have some specific knowledge that it is illegal not to change the c of o?
It’s crazy for a licensed architect to recommend that you don’t apply for a C of O change when you’re changing the number of units in a building. It doesn’t matter that the house didn’t previously have a C of O. When you change the number of units, by law, you must file for a new C of O.
If you plan to sell your house, you may face major obstacles with the buyers lender if the C of O or building department/tax records do not match reality.
You may think you are smart by skirting the law, but it will catch up to you. I highly recommend you use a different architect next time. It’s a pain in the neck to go through the C of O alteration process, but like cheating on your taxes, it’s not worth the consequences.
The bottom line is that you always want to be in Tax Class 1. The assessment ratio of tax class 1 is kept artificailly low relative to the rest of the known universe. The commercial properties in the city subsidize 1,2&3 family houses. All you ever wanted to know about tax classes, valuations and assessments can be found here : http://www.nyc.gov/html/dof/html/property/property_val_valuation.shtml
In your situation, if your taxes seem low to you, I would not file anything or bring any attention to the city about it. You can see what your neighbors taxes are to help you determine how you are doing. Not having a c/o probably helps you. Why file for one if you don’t need it? The city may eventually catch up to you. You don’t say what your tax class is, but if they start raising your taxes, run as fast as possible and change yourself to a class 1.
the part that I define as “urban legend” applies to tax increases on 1-3 family houses… for 4+, it’s a different story.
First, those people in harlem lived in 4+ family houses, where the entire new value of the house is assessed. For 3 and less, it’s only the increased value that is immediately assessed.
I got a new c-of-o, with no change in tax class, and it hasn’t affected my taxes. I doubt it ever will… all the houses on our block our assessed about the same, regardless of the condition inside, which varies greatly. I think this worry is highly exaggerated. Notice that none of the people above actually had their taxes increase.. it’s more hearsay and urban legend.
Thanks very much for the helpful post above. I do wonder if people on this forum do commonly file for an official change of c of o’s. I was originally told not to, even though, like you, it probably would have lowered taxes somewhat at the time, because if we ever wanted to return the house to its’ original c of o, it is much more complicated to raise the c of o again.
I believe that requesting an official change of c of o status is different than doing a completely legal renovation that in effect combines 2 or 3 apartments for 1 use. Certainly I have seen many properties in which the broker explains that the house is a “legal” 2 family so even though the current owner is using it as a 1-family, it is totally fine to turn the garden into a rental apartment again. The big problem is with houses that are legal 1 families, but where the seller has been renting an extra apartment that the new buyer should know is not allowed. That’s why people don’t usually change the c of o when they combine apartments, because the next owner may want to have the rental apartment again, and would not be able to do so.
It’s possible I am wrong about this, so if someone knows differently, please post here. Or perhaps I should do a new post just asking who has officially changed c of o’s when doing a renovation?
We rennovated our house, going from a 4 family to a 3 family. This triggered a change in tax class (Class 2 to Class 1, I think). In any event, 1, 2, and 3 family houses are the same tax class and treated the same. At the time, our assessment went up due to the work we did but our overall taxes fell 25% since Class 1 properties are taxed at a lower effective rate than Class 2. I don’t know if the rate structure still favors Class 1 properties and/or if the tax people figured out that Class 1 properties are worth a lot more than Class 2 and will assess accordingly. I think my taxes are lower than they would have been if I didn’t change class, but I can’t be sure (and they’ve more than doubled since I bought 10 years ago). I do know the market value that the tax people gave my house is higher than I think it is worth (hey, its nice but did it go up 5 times in 10 years?).
The people who were hurt so badly in the NYT article did gut jobs on their houses. They bought cheap, spent a lot of money, and added a lot of value. Plus the City had historically under-assessed those properties and used the opportunity to catch up. Unless you are doing the same thing, it seems unlikely to have the same result. But never underestimate the City’s desire to mark your house to market and raise your taxes. If your taxes are low, and you’re absolutely convinced that despite changing the number of units in the building, this doesn’t trigger the need to file for a C of O (that sounds suspect, but maybe its just me), I wouldn’t do a thing. Even if the periodic cap keeps taxes low now, why put yourself on a path for higher taxes down the line (due to the new market value that the City will put on the building)?
does anyone know if a house whose c of o was changed to 3 family years ago but the dept. of finance still thinks it’s a 4 family would same on taxes if the Finance Dept. made the change in their records? thanks