Four of Manhattan’s biggest landlords are so dissatisfied with their property tax bills that they petitioned the court in the first week of the annual appeals season for a reduction — and will be joined by thousands of other owners in the next month.
The estate of Sol Goldman, Joe Sitt’s Thor Equities, the Kaufman Organization and the owner of the Biltmore rental tower filed their lawsuits at the start of the five-week window, which opened Sept. 9 and closes at 11:59 p.m. Oct. 24.
As of Friday, about 1,600 petitions had been filed with the New York State Supreme Court in Manhattan. The number of petitions filed last year during the window totaled 13,400, a review of court records shows.
Owners of virtually every major commercial building appeal the tax bill for most of their properties, although few expect to get breaks this year, according to attorneys familiar with process, known as tax certiorari. While some get a break right away, the rest file with the hope of getting a reduction in a future year.
The process begins each January after the city publishes the annual tentative assessment roll. Citywide, landlords filed more than 52,000 applications with the city’s Tax Commission, the first step in the appeal process.
Manhattan landlords filed more than 21,000 applications and resolved almost a fifth — about 4,700 — by striking deals with the Tax Commission last year, the agency said in its annual report covering 2012. A landlord who does not get relief through the Tax Commission can turn to the court. Most petitions are filed electronically in September and October.
Manhattan residential and commercial property owners were expected to pay approximately $15 billion in taxes on the $123 billion of assessed value that property owners applied for relief from last year in the borough.
That’s based on a 13.18 percent tax rate for most residential condos, co-ops and rentals known as Class 2 buildings, and a 10.28 percent rate on commercial properties such as office buildings and retail condominiums, known as Class 4.
So far this year, Thor Equities filed a petition for a cut at 530 Broadway in Soho, the Jack Parker Corporation filed for the Times Square high-rise the Biltmore at 271 West 47th Street, and Goldman filed for several buildings, including 929 Madison Avenue on the Upper East Side.
Most petitions are filed for strategic reasons: If an owner is negotiating with the city’s Law Department for a reduction under the petition process, it can only request a review and possible relief for the years that it filed a petition, Glenn Borin, co-manager of the tax certiorari group at law firm Stroock & Stroock & Lavan, told The Real Deal.
One of the biggest recent deals came just 18 months ago by the company that manages the Empire State Building. Malkin Holdings struck a deal worth about $16.9 million in tax savings that covered from 2003-2012. The city gave a $12.4 million refund and the rest will be in reduced future taxes on the Empire State Building, the Malkins reported last year in a U.S. Securities and Exchange Commission filing.
Sherman & Gordon is co-counsel for tax matters at the building, but managing partner Jonathan Sherman declined to comment on the settlement. Sherman, however, noted his firm is active before the Tax Commission and recommends accepting many of its offers.
“But owners with a longer-term horizon often fare better litigating, sometimes far better, than their peers who accept first tax reduction offers,” he said.
One of Manhattan’s most active filers is attorney Richard Steinberg, a partner with Brandt, Steinberg & Lewis. He was the first to file an electronic petition in Manhattan this year, on Sept. 9, on behalf of the cooperative building 1150 Fifth Avenue, a 14-story building at 96th Street.
Steinberg told TRD that it is easy for building owners to pursue the cases in court since his firm and others work on a contingency basis — making about 20 percent to 30 percent of the tax reduction — and the filing fee for each petition is just a few hundred dollars. He cautioned that the risk is high if a property owner doesn’t file a petition.
“If you don’t…, then you are out of the game [for that year],” Steinberg said, and the owner can’t seek relief in a future successful appeal.