Tax increase due to C/O change

I am converting a 4 unit Ft Greene rowhouse to 2 units. Work outlined in the approved Alt1 application is mostly done.

I recently found out that:
1- Potential tax increase in case of a C/O change can be pretty significant.
2- Using a 4 unit as 2 units is perfectly fine

One advantage of the C/O change is that it makes it easier to deal with banks and allows higher mortgage LTV ratios and better rates.

Does anyone have any insight as to the potential % change in taxes in this case? I am already paying $10K which seems high compared to the neighbors.

Is it an option to extend the Alt1 work and not go through with the C/O change to avoid a tax hike?

I’d appreciate any insight.

Thank you

jlrezz

in General Discussion 8 years and 8 months ago

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izrdwgkwjq | 6 years and 8 months ago

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Hi I am late to this forum but going through a similar renovation project and looking for advice. We are converting a 4 family to 2 family. Trying to figure our what our new taxes will after we change our building’s C of O from 2A to a 1. Any advice on who I can speak to get a guidance regarding tax implications of changing the C of O? Thanks

cobble12 | 8 years and 7 months ago

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Michael, send me email where you want the details of the expediter. And take advice from people who have actually done it. Lots of people give advice on this forum but most of them have never went through what they are giving advice on ….

murph | 8 years and 7 months ago

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Four units down to two, three down to one. So much for density. Unless this is done to fit in large families?

xchx | 8 years and 7 months ago

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resident2 – i don’t think that’s right-not in my experience. other thing to keep in mind- the values used for the new assessment basically bear no relation to reality, so you still could come out ahead.

You can estimate where yours will be assessed by looking at neighbors who are also 1 to 3 family. look at “Market value” not “assessed value”. you can look it up on this website:

http://nycprop.nyc.gov/nycproperty/nynav/jsp/selectbbl.jsp

What I was trying to say before is Right now your “assessed value” might be capped below your “market value”. You will lose this benefit if you change C of O. However, this still might not work out badly for you, depending on what the new assessment is.

resident2 | 8 years and 7 months ago

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It takes a 2-3 years for the new tax assessment to hit you.

xchx | 8 years and 7 months ago

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The value used for tax purposes can only go up a certain percentage every year. if you change CofO you trigger a new assessment. so if you are in park slope or some place where taxable values are way below actual values, this could be a big increase for you.

mrohrmann | 8 years and 7 months ago

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Going down in units shouldn’t present too much of a change and going from a 4 family to 3 or less should help your tax % go down but your assessed value will likely go up so depending on how those balance out will determine your cost base. The DoF has a slide deck available to run you through the math so that you can ballpark the changes.

orgcoun26 | 8 years and 7 months ago

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@cobble12 I would be grateful if you could pass the details along. Thank you!

orgcoun26 | 8 years and 7 months ago

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@cobble12 I would be grateful if you could pass the details along. Thank you!

cobble12 | 8 years and 7 months ago

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Michael, it was a very easy process because we use an expediter. It wasn’t quick but it was easy. Definitely hire an expediter. I can give you the contact of the one we used if you want.

cobble12 | 8 years and 7 months ago

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We recently did a gut reno and converted the C of O from a 3 unit to 1 unit. No changes in tax.

orgcoun26 | 8 years and 7 months ago

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@NEWFTGREENER…. I’m looking to buy a house that will require a change to C of O. Was it a difficult process for you? What are the things to look out for? Any pushback from D of B? Did you use an expediter? Many thanks!

orgcoun26 | 8 years and 7 months ago

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@NEWFTGREENER…. I’m looking to buy a house that will require a change to C of O. Was it a difficult process for you? What are the things to look out for? Any pushback from D of B? Did you use an expediter? Many thanks!

jlrezz | 8 years and 7 months ago

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@resident2, great points again. I am wondering if it makes sense to amend our current approved Alt1 to add the stoop in that case. It’d help us a lot if you can refer someone who has a lot of experience with this. Our architect or the expediters he works with aren’t very useful unfortunately.

resident2 | 8 years and 7 months ago

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An Alt 1 is for a change of use. You would not do an Alt 1 if you were not changing the use. An Alt 2 is for a minor alteration, moving a kitchen adding a bathroom etc
It is difficult to vacate the permits once issued and if you also pulled electrical & plumbing? You cannot just say it is now abandoned as if nothing has been done. In order to cancel the permits the DOB may well want to do an inspection to see what state the building is in now. Once you pull a permit to change the C of O, the current C of O is technically on hold pending the new one….

What you have to watch for is the $ amount listed on your initial building permit, they use this number as well as some other arbitrary info to establish the new tax assessment. I have seen long time owners that have changed the C of O as you are doing and got a minimal increase on their taxes. A lot seems to be due to if it is being done under “Old Code” or new code. But also a recent purchase is clear info of value plus the cost basis on the permit and you have a much higher basis of value.
Is see you also had a questi on about building a stoop. Why did you not put this on the original plan?
Try to avoid opening up more and more permits. The more permits the more cha ching, cha ching….. And these improvement increases on Real Estate taxes cannot be challenged

jlrezz | 8 years and 7 months ago

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Great insight! Thanks @resident2

Quick clarification question. Is Alt1 what triggers the reassessment or is it the C/O change?

We do have the renovation mostly completed. It’s time to close the permits and get landmarks and DOB inspections now. Our Alt1 application (which is in the system) entails a 4 to 2 conversion. Is it possible to close the permits and Alt1 without the conversion to avoid the tax hike? Just trying to find ways to stay on the legal side and delay the potential tax hike.

resident2 | 8 years and 7 months ago

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“One advantage of the C/O change is that it makes it easier to deal with banks and allows higher mortgage LTV ratios and better rates.” who told you that?
A Bank when they are looking to mortgage a property are looking at what is it being used as, so long as you are Under using and not over using it (over using can become a criminal liability issues) And in the Jumbo Mortgage realm, Banks look at the borrower for most of their lending decisions, some Banks will do it, some will not. But that is a decision that can just as much be about location etc. Some do Fort Greene, some do not…

Yes, the Real Estate tax increase will be pretty significant. An Alt 1 is creating a new property and opening up the tax assessment to a whole new assessment.

Your decision as to: do you down-use without filing for the change of use or do I file and pay a steep increase in Real Estate taxes is a choice that will depend on how long do you plan on being there? As well as what do you think maybe happening down the road when you do want to sell?

To resell a Luxury 2 family house a couple of years from now; without the C of O as a two family and a lot of work being done without a permit etc., may well be an issue to a lot of buyers and their attorneys that are looking for negotiating points.

On the other hand if you are planning on being there for many years… what does that matter? It also gives you future investment options; rent from a 4 family will always be a better bet than all your eggs in one basket as a two family.

Taking a quick look at some of the recent Real Estate tax re-assessments for the major rehabs and C of O changes in the area, it is pretty horrific $35,000 – $50,000 a year is not unheard of……. this is why people are beginning to head to the suburbs again where you at least get some better public schools and services etc and no NYC residents income tax.
It used to be that you got lower RE taxes but had to pay resident income tax, now if you are not in a Tax abated Condo development…… It is all going crash as the tax abatement expire.