WPCNR QUILL & EYESHADE. By John F. Bailey. April 19, 2006: WPCNR has been looking at the labyrinthine question of how new buildings as they open, come on the tax rolls, and are assessed.
In the WPCNR interview with David B. Jackson, Executive Director, Westchester County Tax Commission, we learned that “assessment (of a new condominium building) is based on the condominium’s Full Market Value, based on the income approach, as of that Taxable status date.” and that the City of White Plains could enact a surcharge on air rights. From the New York State Office of Real Property Services, we learned that taxing policy could be initiated from the city itself.
This lead us to the greatest real estate market in the world New York City, and the New York City Department of Finance. WPCNR wondered if a $360 Million building were built when it came on the tax rolls. Owen Stone, a spokesperson for the New York City Department of Finance handled our questions: here’s how it went:
WPCNR: What constitutes the definition of fully occupied as a timing trigger for upgrading a condominium’s assessment for tax purposes, or, if applicable, raising its Payments In Lieu of Taxes?
Mr. Stone: In NYC, if a building is ready for occupancy on April 15th, it is treated as fully taxable. PILOT arrangements vary depending on what is negotiated. There’s no difference between whether a building is ready for occupancy for condominium or other purposes. All properties are treated the same.
WPCNR: Does the “fully occupied state” occur when a condo development(or apartment rentals) are “sold out,” but not fully occupied with live tenants.
Mr. Stone: If a building is ready for occupancy, it is treated as fully taxable. (How many tenants or condo owners are living in it, or have “closed” does not come into play.)
WPCNR: Does the owner of a New York condominium complex pay taxes on a fully occupied basis, (A.) When he is sold out of all unites, but not fully closed, (B.) When a contract is closed are taxes/PILOTS increased with each contract closing or C.) Only when all contracts have been closed, or D.) only when all units are moved into.
Mr. Stone: None of the above (affect taxability). Trigger is whether the building is ready for occupancy. We often judge that based on whether a certificate of occupancy has been issued by the City’s Building Department.
WPCNR: Does the purchaser of an individual unit pay taxes on the property (his or her individual unit) when he has A.) Purchased the contract, B.) Closed on the contract, or C.) When he is actually living in the unit, or is subletting the unit?
Mr. Stone: That depends on what is negotiated with the developer. However, the taxable status date in NYC is January 5th, so the owner of property as of that date is technically liable for taxes for the following fiscal year. Typically, when a property transfers, the seller and buyer work out the details of who is liable for taxes. On the day that a property sells, we would pick-up the new owner in our database and we would assume that the new owner would be liable for all future taxes.
WPCNR: On PILOTS, are the PILOTS upgraded on an “as closed” or “as occupied basis”, or “only after fully occupied basis? What is the accepted practice in New York City taxation?
Mr. Stone: Depends on what is negotiated.
WPCNR, viewing the recent transferring of air rights in the City of White Plains, and New York City’s taxing of air rights, asked, is NYC contemplating a surcharge on air rights that a building owner could sell to a developer, (reflecting the true value of the property), or perhaps a charge on air rights as they are sold. Would NYC have to get state approval?
Mr. Stone: No. NYC air rights are taxed as real estate when they transfer. The value from the air right is not taxed until the air rights are utilized. That’s because NYC does not value property based on the highest and best use. Properties are valued based on current use.
WPCNR: When NYC inacted a tax rebate, did that have to be approved by the state?
Mr. Stone: Yes, the State provided the authorizing legislation.
