421a Tax Abatement Confusion
I recently purchased a new construction 3 family. It was built attached to another 3 family. I’ve owned it for about 5 months. The developer told me that he is trying to complete a tax abatement, which will save us about $6000 a year. I did not factor the tax abatement into my negotiations to…
I recently purchased a new construction 3 family. It was built attached to another 3 family. I’ve owned it for about 5 months. The developer told me that he is trying to complete a tax abatement, which will save us about $6000 a year. I did not factor the tax abatement into my negotiations to buy the property, so it would all be gravy to me.
However, I just learned that if we receive a 421a tax abatement, the units are supposed to become rent-stabilized for the duration of the benefit. Is this always the case, and are there any ways around it? Also, I wonder if I can stop him from proceeding with this, since it was not described to me and was not part of our sales agreement. I would not have bought the property if I thought it could/would become rent stabilized.
I believe the reason the developer wants to get the tax break is to reimbursed from the city for the taxes he paid during the building etc.
Any feedback would be appreciated. Signing off for the night….
Yes, developer wants to complete the application to get a nice tax refund.
This is a good if you are interested in the 421(a) because it takes forever to complete and is good if someone with more experience is following the process.
You will be paying taxes until the 421(a) certificate is issued.
The taxes you paid from closing to exemption time will be refunded to you (you will have to make sure that the refund is property split between you and the developer)
Once the certificate is issued, You can request the refund online: http://www.nyc.gov/html/dof/html/contact/contact_app_proprefund.shtml
If you are not interested in the 421(a) you might be able to stop the application but it could get messy because it was probably filed together with the next building. Talk to a lawyer and a 421(a) specialist first if you want to withdrawn the 421(a) application.
Good luck either way, I have been waiting for over 3 1/2 years for my 421(a) app to be approved. If and when I get through I am only told that it is still pending.
It’s not real rent stabilization. You need to speak to a smart real estate / landlord tenant lawyer who can explain your rights to you. You definitely want the tax exemption, and with proper counsel the rent stabilization won’t be a burden. You can set your initial legal rents very high, much higher than market, and offer your tenants preferential rents. That makes the rents effectively market, since you can raise or lower them at will upon renewal up to the very high legal rent. Also, the stabilization ends when the 15 or 25 year exemption period ends. Make sure your developer is on board, because he’s the one who will be making the initial rent filing with HPD.
Construction did begin in 2007. It’s a 3 family in Brooklyn.
“rent-stabilized for the duration of the [tax] benefit”
That is the quid pro quo. But I agree, if the application is withdrawn there would be no commitment.
yes there was a decision that says that for apartments on the east side of Manhattan that accepting some tax benefits meant that apartments already in rent stabilization must stay so. But if it applies to your situation I don’t know. You really need to talk to a lawyer who specializes in this area. It can always be withdrawn prior to its completion.
But since a six family is subject to the rent rules anyway you need to talk with your lawyer.(and if it was historical two threes on one parcel it may always be anyway)….
when did construction begin? if it’s after Dec 27, 2007 (and it sounds like that might be true for you), three family homes are not eligibile for the 421a exemption. But to be sure, i would contact HPD. they are the ones who handle 421a applications and will be able to let you know what your options are.
So i’d call 311 and ask if you can talk to someone about the 421a program at HPD.