Board & Managing Agent Alert: Take Action Before February 15, 2022 to Ensure Your Building Stays Eligible for the Co-op/Condo Tax Abatement

A bill signed into law by Governor Hochul in September places new limits on eligibility for New York’s Cooperative and Condominium tax abatement program.

Under the new law, a Co-op or Condo only qualifies for an abatement if it falls into one of the following three categories:

1. It has an "average unit assessed value" of $60,000 or less;
2. It has an "average unit assessed value" of more than $60,000 but less than or equal to $100,000 and fewer than 30 dwelling units; or
3. The building certifies by affidavit that all building service employees receive and will receive the "prevailing wage" for the duration of the property’s tax abatement.

The "average unit assessed value" is the residential proportion of a property (for co-ops, the percentage of shares allocated to dwelling units, and for condos, the percentage of common interest allocated to dwelling units) multiplied by the total assessed value of the property, divided by the number of dwelling units.

By way of example, in a hypothetical 100-share cooperative with 80 shares allocated to 10 residential dwelling units, 20 shares allocated to 1 commercial unit, and an assessed value of $1,000,000, the average unit assessed value would be calculated as follows: 

Residential Proportion of the Property:  .8 (80/100 shares)

Multiplied by: $1,000,000 (total assessed value) = $800,000

Divided by: 10 (number of dwelling units) = $80,000 average unit assessed value

Because the average unit assessed value of this building is $80,000 and it has 10 dwelling units, it would qualify under the second category above (requiring an average unit assessed value less than or equal to $100,000 and fewer than 30 dwelling units).

For buildings which do not fit into the first two categories, the board and management will have to determine whether its service employees receive at least the "prevailing wage," which is set by the Office of the New York City Comptroller (the wage schedule for building service employees may be found here: BuildingServiceEmployeeSchedule-2021-2022.pdf (nyc.gov)). If not, it is likely that the building will want to increase building service employee wages to maintain eligibility for the abatement. In general, the savings provided by the abatement would be expected to be significantly greater than any increase in labor costs associated with meeting the prevailing wage requirements, but boards and management would be well advised to do their own diligence and make a reasoned determination based upon the particulars of their building.

These new eligibility requirements take effect starting on April 1, 2022, the start of New York’s next fiscal year, but co-op and condominium tax abatement applications and renewal and eligibility change forms must be filed with the Department of Finance by February 15, 2022. In an abundance of caution, all buildings seeking to qualify for the abatement based upon payment of prevailing wages should be prepared to submit the affidavit of compliance together with the other forms on the earlier date.

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For more information on condominium and cooperative law matters or other real estate matters, please contact:

Devin W. Ness at +1 212 592 1627 or [email protected]
Peter I. Livingston at +1 212 592 1625 or [email protected]

@ 2021 Herrick, Feinstein LLP. This alert is provided by Herrick, Feinstein LLP to keep its clients and other interested parties informed of current legal developments that may affect or otherwise be of interest to them. The information is not intended as legal advice or legal opinion and should not be construed as such.