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Discrepancy found in title
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We are in contract and in the last steps of financing; soon to close. We just found that the unit has tax abatement which was not communicated to us and which will increase our monthly costs (we found this information in the title). What are our reasonable options? Can we breach the contract? Are we proctected meaning that can we still have our deposite back?

????

Tax abatement info is readily available --- that's Apartment Buying 101. Did you go through the financials? Your broker? Your attorney?

You can always "breach the contract", but it'll cost you at least your deposit, and the current owner may sue you for performance.

Shah, go to the first page of your contract on the right side. I believe it is paragraph 5. That paragraph contains a representation by the seller as to the amount of the property taxes on the date that the contract was signed not today. Check if that number was correct at that time. If the number is not correct, you may be able to terminate and get your money back. But, if it is incorrect, it needs to be material (i.e. off by at least 7 or 8%). If the number is correct then check your rider as there may be a clause (but probably not) that says that if the taxes increase by more than a certain percentage you can terminate and get your money back. Good luck.BTW, you should be asking your lawyer these questions.

how did your atty miss a tax abatement in the offering plan?

I also am curious how you missed this. normally this information is front and center or when real estate taxes seem low one would ask. Also quick research of the tax lot information on the NYC website would have shown calculation of taxes.

I am not an attorney but unless yours put in some great language in a rider there is no way you are getting out of the contract with your deposit back. Unless of course you asked and you were lied to and then maybe you have a chance.

If this is a new unit then it would be in the offering plan as urbandigs asked. But even if it is a resale of a condo did your attorney not review it as it would have been there to begin with.

How large is the discrepancy? Are we talking "year 3 in a 10-year abatement" or "year 9 in a 10-year abatement"?

I am not a lawyer, but I feel that in addition to your atty/broker missing the obvious (everyone who makes fun of buyer's brokerage please note that attys aren't always thorough) ... it is a duty of the seller and seller's agent to properly represent the financial condition of the apartment.

ali r.
DG Neary Realty

Ali G - Are you accusing a fellow REBNY member of misconduct? Or more seriously, fraud?

Ignored comment. Unhide
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Apt_Boy -- listing agreements are generally written so that seller's broker is working off facts provided by seller; I don't know what piece of property we're talking about, and I haven't seen this particular listing agreement, but liability is probably on the shoulders of the seller rather than seller's agent.

That said, let's go back to digs' comment: how did buyer's atty miss the tax abatement?

ali r.

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So ali is accusing a fellow REBNY member on either willful blindness or mere negligence and incompetence, but not fraud or misconduct. At least we got that cleared up

Did I miss something? Do you know who seller's agent is? Have we established that he/she is a REBNY member?

ali r.
DG Neary Realty

Ali G. - No one forced you to respond to the question and no one forced you to respond in the manner that you did. Deflecting the points made is not the answer, whether the broker is REBNY is not the point, you specifically stated that it is the seller/seller broker duty of revealing this info. No one told you to make that statement. Yor can not backslide and point the blame elsewhere, you put in squarely in the lap of the seller/seller broker.

AB, I'm not backing down from that. I believe that when parties enter into a real estate transaction, they should disclose material facts. That seems to me to be a basic standard of practice.

ali

I am not sure of the point of this sidetrack. I think it is healthy to hear a broker state the obvious that nothing material should be hidden with the view towards someone on the buyers side coming up with the correct question.

I still think there is something missing. Who is this Shah person and if they were so concerned why have they not responded to the comments all day.

I would also think if they are working with a buyers broker they should also be helping with knowing these things either prior to taking someone to a listing or at least after. If real estate taxes seemed low I would hope that a broker would realize and ask the question.

To me something is just missing. if this is a condo and they clearly break out common charges from RE Taxes it is actually pretty clear to even the untrained eye that if real estate taxes seem quite low, knowing that taxes are not cheap in manhattan that someone would bring up the question.

Thanks everyone for your responses or at least being on the same page with us on how ridiculous this may sound.
Lawman, what is presented in the contract is the abated amount (20% lower than the full amount).
It is not a minimal amount. It is not like 1041 tax abatement. Basically the terms of the abatement are not clear and the city/state can stop it at anytime. The reason we did not get suspicious was that the tax amount is already pretty high.
One question of course is who missed it and maybe a more important question is what we can do. I don't disagree with the comments some folks made (such as the seller or seller's broker should have told us, our broker/attorney should have noticed it, the seller is dishonest, etc.), but am not sure whether these can help us at this point. Again, my question is what we can do. What is the rule of thumb for these kinds of misinformation/mispresentation of facts. Is there any law protecting us so that we can come out of the contract. Can we re-negotiate the price? I appreciate sharing any information.

Good Morning Shah, I assume the amount in the contract was the amount that the seller was paying on the date that the contract was signed. I also assume that there is not a clause in the rider that says if taxes go up by 20% you can terminate. You say that you are in the "last steps of financing". I assume that means that you received your mortgage commitment and the bank is aware of the actual amount of taxes. I also assume that the contract was contingent on financing (lot of assumptions here). You have to ask yourself one question: are you prepared to refuse to close and risk losing the down payment. If that answer is no and there is nothing else in the contract that would allow you to terminate, then close. You can try to refuse to close and demand some price adjustment because of the tax increase and if the seller caves then good for you. If he doesn't cave then close. If the answer is yes, and if the contract is contingent on financing then I would make sure that the bank is aware that the taxes have gone up and, in addition, if anything has changed negatively in your financial picture since the date that you applied for the mortgage, i.e you changed jobs and your income is lower, your investment portfolio has decreased in value,other real estate that you own has decreased in value,you incurred a new debt, then maybe you can get your lender to withdraw the commitment. Now, if the time period within which you were to get a mortgage commitment (probably 45 days from the date of the contract) has expired, that presents another huge problem for you but we have nothing else to hang our hat on. Additionally, we all have an obligation to deal in good faith in our transactions. I would argue that the seller breached that obligation because he did not disclose the tax increase, but that is a weak argument because the seller will say that he delivered the offering plan and therefore he disclosed it. I would then commence litigation against the seller and the broker. I can't say here whether you should sue your lawyer as that is your call. The action would be based on a breach of contract by the seller (the obligation of good faith) and I would simultaneously put a lien on the property (called a lis pendens). That will tie up the property and the seller will not be able to sell to anyone. The only additional risk that you face is the legal fees (I also assume that the standard contract language has not been modified and that your damages are limited to the down payment). The retainer will be about 7,500. Obviously, get a good litigator. I am not a litigator but I can refer you to one. If you want to go offline to discuss, contact me at pfp600atgmail. Note, for the record, I do not represent you and you should consult with your own lawyer before you follow any advice that I have given here. Good luck to you. Btw, the taxes were due on July 1. What is the date of your contract?

I don't know what kind of abatement that is, or how the terms can be unclear (is this property in NYC?). Anyway, read your contract. The usual form of real estate contract people use in NYC does not have any representation as to any abatements. Elsewhere, some form of contracts do. The NYS bar association form contract, for example, has such a rep in paragraph 11. Without something in your contract, you are likely out of luck unless you asked the question and were lied to. And, these days a 20% rise in proprty taxes is just what happens in a typical few year period.

I am still missing something as you say it is not clear as to what the abatement is for. please go to the following website and plug in the tax block and lot number https://a836-propertyportal.nyc.gov/error.aspx?aspxerrorpath=/searchdetails.aspx It will list out the property information and then list specifically what exemptions are in place.

Now for example if they have a veterans exemption which would not stay in place and they listed the taxes as being the lower amount, you may have some wiggle room in my opinion because it is not something you verify prior to signing.

Also what kind of numbers are we talking about? If you are talking a few thousand dollars a year more in taxes you probably would be wasting time paying a lawyer to litigate and get you out because the price differential on the property is probably not that great.

An abatement 20% lower than the full amount sounds like the property is in the seventh or eighth year of a ten-year 421(a) exemption; if that's the case, then the buyer's property taxes are going to pop next year or the year after that.

ali r.
DG Neary Realty

Ali the comment that they city could stop at any time does not jive with a 421a abatement. Shah needs to just go to the city website plug in the lot information and then have the answer. We are all wasting time speculating.

Until anyone understands what it is the abatement is will then determine if indeed there was something that was being hidden.

I still though feel there may be issues because if someone asks me what my real estate taxes are I probably would answer what I am paying and not think about abatements. While the listing broker probably should have made sure prior to posting the details that it was the full amount, it is possible it was overlooked and not deliberate.

However I am still unsure what effect if any this had on price as I would assume there are comps in the building and they had to have known as they were bidding what was a fair price with or without factoring in real estate because it should not matter.

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This is absolutely on you or your attorney to find or verify.
If your buyer's broker made full commision, you can yell at him/her for not being thorough for you.

But this sounds strangely like something I discovered during my coop purchase. I cant find the paperwork to verify to the forum what this is exactly but when I was submitted a copy of the maintenance bill for the unit I was buying, it showed the abatement amount for the year on that particualr month. It was around 20% of my yearly maintenace. Memory is very foggy but it's some abatement to small coop buildings.
There is never a guarantee the city will renew but if it's the same thing as mine, it's given every year.

Of course if your purchase is a condo, never mind.
But if it is a condo and less than 10 years built, you should know better, and your lawyer should def know better to look for a 421a and the like.

Eligibility
Ownership -- Condominium owners and cooperative tenant-shareholders may not own more than three dwelling units in any one property. Units held by sponsors or their successors in interest are not eligible.

Other Exemptions -- Properties receiving a state or local tax exemption or abatement, such as J-51 Exemptions, 421a, 421b, or 421g may not be eligible.
Level of Benefit
The Abatement given to eligible units is based on the average assessed unit value in the building, as indicated in the chart:

Average Assessed Value Per Unit
Abatement
Less than or equal to $15,000 25%
Greater than $15,000 17.5%

http://www.nyc.gov/html/dof/html/property/property_tax_reduc_coop_condo.shtml#eligibility

OT: I'm in a similar situation as shah. We were within weeks to close when the bank questionnaire showed a lawsuit on the condo. Should my attorney have uncovered a lawsuit against the HOA for $3mil before we got that far?

Thanks for all comments. Specially detailed information of Lawman, truthskr10, and others who pointed to specific information. I followed up with truthskr10 comments. As a non lawyer, I think my condo unit will stratify the conditions (as class 2C) and this could be the explanation.
In summary, my understanding is:
“The Cooperative and Condominium Tax Abatement Program give partial tax relief to owners and tenant-shareholders of Residential Class 2 properties. This is because Class 1 properties (i.e., one-, two-, and three-family homes), are assessed at a lower percentage of market value than Class 2.”

Now my question is a very specific and clear question. Should this type of abetment be disclosed and mentioned by the seller’s agent and in the contract? The contract states the exact amount of tax that the seller paid last year with abetment. So, technically the statement is true but it is not the whole truth which is the amount is after “Rolling Abetment”. This is something that Lawman could comment or I might need to contact offline for it.
Complexity is that if you verify tax information with the city finance department, they will give you tax value without abetment and verify that building does not have abetment. They may go as far telling you that title company info is not correct.

Shah you still have not given any information. I believe now we know it is a condo unit. If you go to the website I gave in prior responses you will get the specific answer to your question. You are still stating you are not sure what the abatement is which would be incorrect because it is easily verifiable.

If it is a yearly abatement that has always existed then technically the seller is being truthful as to what his real estate taxes are. Would you hold him liable say when the taxes go up 60% in one year because the city changed the formula as they did in the current tax year we are in? Also if you are able to easily verify on the city website what the taxes are, whose responsibility is it?

I think as a non lawyer, you would have a hard time getting any sort of concession as you were free to ask any questions and do your due diligence prior to putting in an offer on the apartment. This is not an issue of an abatement not being disclosed when the seller knew it was coming.

Also if this really is a yearly abatement that the city gives then it is already baked into the price and I am sure they are all selling with the idea they will exist. Trying to negotiate on what the city may or may not do will get you nowhere, especially if the price you are paying is in line with recent sales.

btw what sort of difference are we talking about yearly in actual dollar terms? And if you want I would be happy to look up your tax lot if you want to give the info.

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