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My co-op just implemented a "one time assessment to offset real estate taxes" of 3.25/share.
When I asked about it, the management agent said "the assessment is against an abatement (credit) offered by the Dept of Finance. Generally speaking it is a credit that the City of New York sends to the Coop which is normally assessed against to keep increases low."
Is this typical? can anyone chew it down for me a bit more?
Does it come out to 17.5% of your taxes?
If so it it is that tax abatement program who's name or term I can't remember that is offered to most condo and co-op buildings that don't have other abatements (421,etc).
I vaguely recall some light talk about it might not be renewed but I think that went away.
MAybe this your co-op building up a reserve in case it's rejected but I dont think so.
Or...maybe someone F'ed up and didnt send the paperwork in on time or properly that led to disqualification this year.....just guessing with what I have to go on.
yes it is common. It is a good accounting to increase the coop reserves and at the same time increase your cost basis for future gains (assuming there will be some). we do the same at our coop.
If I correctly understand what you are asking, taxes are about 40% of maintenance, maintenance is about 7200/year, which makes this assessment of about 700 dollars = 3.8% of the total yearly taxes.
I am still unsure what this is for, sorry not an expert, any other ideas?
STAR program? Most coops will do this.
Completely common. In my view painless and prudent. The shareholder never feels the loss since they never really "held" the refund money. The coop scooped it up before it got to the shareholder. And as noted above, because it is a special assessment, the owner can add all such assessments to her cost basis when selling the unit and thus claim reduced capital gains. The coop obviously benefits because the reserve fund or operating budget get the windfall. I believe the better practice is to devote the money to the reserve fund versus the operating budget. That way, if the rebate program stops, there is no impact on building expenses and maintenance doesn't suddenly have to increase to make up the shortfall. In other words, the building should pay its expenses from a reliable, steady income source and not temporary programs. The reserve fund to cover rainy day expenses (which all buildings have sooner or later) is the better place to sock away the assessed rebate money.
And yes, this is the STAR rebate program ("School Tax Relief Program").
These property tax abatements used to be applied to the co-op who used them to build reserves. Now, they are applied directly to the shareholder's accounts, so the co-op assesses the shareholders the amount that they used to receive. For the shareholder, it's a zero-sum game - you receive a credit that you pay back to the corporation in the form of an assessment.
The current property tax abatement is set to expire next month, however, it is supposed to be extended for another 4 years.
Yes that's it, the STAR rebate.
And I misread OP's statement and thought management was billing everyone the 3.25 "additional."
So disregard >Or...maybe someone F'ed up and didnt send the paperwork in on time or properly that led to disqualification this year.....just guessing with what I have to go on
This is a relatively new learned tactic.
Sometime around 2004 coop landlords discovered that they could simply take tax rebates such as the "STAR Rebate" or the "Cooperative and Condominium Tax Abatement" away from the tenant shareholders in the name of budget management for the "corporation."
It quickly took hold and is now widely practiced in larger coops where the sponsor remains perpetually entrenched in the operations of the building.
This, along with many other financial inequities such as "FlipTaxes" are illegal in condo's or any other form of actual home ownership. In fact, "flip taxes" were originally implemented to tax only the Inside buyers who purchased their apartments at steep discounts from the landlord and immediately sold for huge profits. But Coop landlords quickly learned that they could continue this practice on all the sales, except of course for the landlord (sponsor ). Now, when you buy a Coop your "investment" is immediately worth 2% less then you paid. (on average)
Assessments, by definition are supposed to be imposed only when unexpected expenses arise. NOT when unexpected windfalls occur.
Imagine if your stock broker told you that you just received a dividend from a mutual fund but the brokerage firm was imposing a one time fee. Every time there's a dividend.
You can expect any financial relief or windfall that the building may enjoy to be taken and hidden in the abyss of the "financial report."
And if there really IS an unexpected common expense for the building you can rest assured that there will STILL be an assessment for that.
In my experience as a coop dweller, maintenance fees actually increased faster after my coop began this practice.
There should be legislation that prevents coops from taking windfalls that home owners should enjoy and be required to balance their budgets in a way that does perpetually favor the sponsor.
There should be legislation that prevents coops from taking windfalls that home owners should enjoy and be required to balance their budgets in a way that does NOT perpetually favor the sponsor.
Honest question. How does it favor the sponsor?
It doesn't. andwin saw something nasty in the co-op woodshed but won't tell us what it was. Just rants.
The co-op budgets for net RE taxes. If it doesn't take back the $400 or whatever it is per apartment, it would just have to raise maintenance by that amount.
"Honest question. How does it favor the sponsor?"
With respect to flip taxes the sponsor doesn't have to pay them. Holder of unsold shares.
But in order to get the tax garnishment assessment through they had to make it appear that the sponsor was paying the "assessment" as well since technically he doesn't qualify for the rebate.
You have to hire an accountant who can dissect your financial report to find it. Mine did.
Look for uncategorized payment to the sponsor or managing agent (who is also times an entity owned and operated by the sponsor).
But it's only a matter of time before they figure out how to cloak it completely. They're constantly evolving to meet new challenges.
One thing you can rest assured on. If the sponsor was really going to be out of pocket on an annual assessment when the residents would not - It would NEVER Happen. He'd rather let the tenants take their measly tax break rather than incurring an avoidable expense himself.
It just takes a little common sense to see that.
Interesting. So the assessment goes against all shares whether sponsor owned or individually owned. Owners that qualify for the rebate are basically flat. The sponsor is secretly paid back for the assessment because they didn't get the rebate. Owners pay into the operating budget but the sponsor doesn't.
"It doesn't. andwin saw something nasty in the co-op woodshed but won't tell us what it was. Just rants..."
I've seen so many things in the Co-op woodshed that I could write a book. 23 years and standing. I've either experienced or have been witness to almost all of the war stories people have read about in Coop folklore.
But here's the first thing I saw, didn't even realize what I was witnessing at the time.
During our buildings conversion there was an elderly woman who was keeping her apartment on my floor so she could continue to see her lifelong Doctor in Manhattan but spent most of her time in New Jersey with a relative.
She had been in the apartment with her husband since the building opened. When her husband died in the 1970s she kept the apartment.
She called me from New Jersey one day crying for help because she was being evicted. As it turns out the landlord stopped cashing her rent checks. Of course, there was no notice given. No notes left on her door, no threatening letters until the eviction proceedings.
This woman had the money. Her husband was a doctor and left her very well off.
I personally tried to rectify the situation for her by calling the "managing agent" myself since she was barely able to articulate what was happening. They were actually somewhat taken aback since they were obviously well aware that she had no children or anyone to come to her defense so they did not expect any sort of organized resistance.
They were unresponsive and unwilling to resolve the problem.
The speed at which they cleared her apartment and prepared it for market was stomach churning.
Her lifelong belongings and keepsakes were tossed out onto the street.
The woman was about 80 years old. They couldn't have waited a few more years?
This was in a "non-eviction Coop" mind you. So this had to be very carefully orchestrated or they'd have the AG up their butt.
That's how they role in sin city.
I always thought that co-op sponsors pay monthlies based on their shares just like everyone other owner. Therefore, these tax abatements and assessments affect the sponsor exactly the same as any other shareholder. Is this wrong?
Also, the analogy of the stock broker imposing a penalty when the shareholder receives a dividend is flawed. Co-op shareholders hold shares in the corporation that retains the assessment, so the shareholders still "own" the money even if they don't directly control it.
I think his point is that the sponsor doesn't qualify for the rebate so they worked the system to get the assessment back in some form. So while the actual owners are contributing a rebate that is rightfully theirs, the sponsor is not contributing.
The net effect is zero for both sponsor and non-sponsor shareholders.
Let's say a 100-unit co-op has 20 unsold units, and the rebate per apartment is $400.
The co-op assesses the shareholders a total of $40,000 (100 x $400.)
$32,000 of that is paid for by non-sponsor shareholders' rebates (80 x $400.)
The co-op therefore has an extra $8,000 on the books, which it pays to the sponsor. The sponsor was assessed $8,000 and gets $8,000 back, so a wash. The rest of us were assessed $32,000 and got $32,000 back, so again a wash.
andwin, your 80-year-old neighbor was rent-controlled or rent-stabilized but was living elsewhere. The landlord would of course try to evict her. I would. That's how it works. If you want to keep your RC/RS status but live somewhere else, you've got to make sure the landlord can't prove it.
It was sweet of the landlord to let her get away with it as long as she did, but naïve to expect him to give her insider pricing at conversion, too.
and not even living in Florida.
She could have at least moved down to florida.
"…Co-op shareholders hold shares in the corporation that retains the assessment, so the shareholders still "own" the money even if they don't directly control it."
That one literally made me burst out loud in laughter !
Thank you for that.
one of my buildings gave us the rebate -- the other kept it
"…The sponsor was assessed $8,000 and gets $8,000 back, so a wash. The rest of us were assessed $32,000 and got $32,000 back, so again a wash..."
A wash for the sponsor based on that description. But shareholders loose their legally mandated tax rebate.
THAT's Not a wash.
The shareholders increase revenue for the building but the sponsor does not. What's so hard to understand about that?
Just like the shareholders stocks are worth 2% less than the sponsors due to the flip tax.
The funny thing is, our building attorney tries to convince shareholders at the annual meeting that the sponsor has to actually pay into the reserve fund.
A bold faced lie.
But I've learned to expect that from lawyers.
"…your 80-year-old neighbor was rent-controlled or rent-stabilized but was living elsewhere…"
That was never established. She spent time elsewhere for companionship, but lived in New York her entire life.
"The landlord would of course try to evict her. I would. That's how it works"
No, she had rights as senior and a RS tenant. The landlord let her stay because he was legally obligated to.
"If you want to keep your RC/RS status but live somewhere else, you've got to make sure the landlord can't prove it."
He couldn't prove it. That's why he stopped cashing her checks and didn't give notice until it was too late.
"…It was sweet of the landlord to let her get away with it as long as she did, "
Did you actually say it was "sweet" of him? Really?
As I said, he let her "get away with it" because it was the law. And if he had the opportunity I'm sure he would have exercised it years earlier.
The fact that he resorted to an underhanded tactic to pull it off during the Co-op conversion was despicable by nearly anyone's standards. Especially considering that she only had a few more years to live.
These parasites don't know from "sweet" or any other emotion shared by the majority of humanity.
The fact that you attempt to justify it is off-putting at best. I'm sure you must be a very successful and prolific NY Real Estate Developer.
"… naïve to expect him to give her insider pricing at conversion, too…"
She had no interest in buying. She was 80 years old with no heirs! What the heck was she going to do with it!?
Frankly, it never crossed my mind that THAT was what the landlord was afraid of.
Despicable, regardless of how you spin it.
I love the way coop boards feel entitled to the tax break. hell, if you need money, assess away. dont be a pussy and assess just because you know people are getting a rebate.