“A recipe for disaster”: Fighting property taxes in a pandemic

The Tax Commission's plan has lawyers bracing for chaos

TRD New York /
May.May 26, 2020 07:30 AM
The process for challenging property assessments is so antiquated, officials won’t do Zoom meetings. (iStock)

The antiquated process for challenging property assessments relies on paper filings and in-person hearings. (iStock)

It’s cumbersome. Antiquated. Arcane. And definitely not Covid-ready.

The system for challenging property assessments in New York City was already behind the times when the pandemic struck. It has for decades relied on in-person hearings and staffers poring through hundreds of thousands of documents — not exactly conducive to work-from-home.

For the New York City Tax Commission, which receives tens of thousands of protest filings annually from property owners, the coronavirus outbreak was also terribly timed. It hit just before tax assessment challenges were to be heard.

Still, the commission has been trying to make the best of it. Its rookie president, Frances Henn, and veterans on her staff managed to complete telephone hearings on 243 properties assessed at $90 million and up. Their owners accepted reductions that shaved $2.24 billion, or about 5.5%, off their assessed value. The savings will be on their tax bills due July 1.

That’s 243 down, about 32,000 to go.

With offices closed, the documents behind closed doors and no way to meet in person, Henn sent a rather extraordinary message last week to the attorneys who inhabit the cottage industry of tax certiorari — property tax protests.

“Given the volume of cases and the many difficulties resulting from the Covid-19 crisis, it is extremely doubtful that we would have enough time to do any teleconferences and still finish by year’s end,” she wrote. “Moreover, teleconferences present privacy concerns for teleworking staff.”

With Zoom meetings ruled out and the stacks of files inaccessible, the Tax Commission is requiring owners’ attorneys to scan and submit documents. With rare exceptions, hearing officers will rule with no back-and-forth discussion.

This hasn’t sat well with everyone. Tax certiorari attorney Jeffrey Golkin calls in-person hearings “a hallmark of the current tax review process” and a constitutional right in New York. “Put them on hold until the dust settles and when the government opens the city,” he demanded.

But by law, owners have until Oct. 24 to start a court action if they reject the Tax Commission offers. Waiting for live hearings could push up against that deadline. So Henn has moved forward into what for her commission is largely unknown territory.

Golkin called the plan “a recipe for disaster.”

Lockdown response

Since the city began shutting down in mid-March, Henn and other officials have scrambled. A filing deadline was pushed back a week, and Gov. Andrew Cuomo allowed forms to be notarized via video conference.

In one of many firsts for the Tax Commission, Henn and some of her most experienced hearing officers ventured out into the epidemic to retrieve from their offices the paper files for the 243 high-value hearings — major office buildings plus certain department stores, malls, hotels and commercial condominiums.

The $2.2 billion in reductions lowered the city’s overall assessed value to $271.5 billion. That total, incidentally, is up nearly 7 percent from a year ago — reflecting the pre-Coronavirus era, when the economy was humming. But just getting a number was crucial. Now the final tax roll can be certified today, on schedule, by the city’s finance commissioner, Jacques Jiha, allowing the City Council to set tax rates.

Unlike the $90 million-and-up properties, the remaining 57,000 cases will not get telephone hearings. With “extremely limited exceptions, we will be doing our reviews on papers submitted,” Henn wrote in her note.

In the past, Tax Commission hearings on all applications, even for small homeowners, have been conducted in person. Hearing officers were even dispatched to the outer boroughs to hear homeowners and other lawyerless owners argue their cases.

This year, tax cert attorneys’ scanners have been on overdrive making images of the applications, supplemental forms, addendums, income and expense statements, rent rolls, comparables and leases. Lawyers can also upload their analysis and a narrative in lieu of their normal presentation.

Fortunately for the Tax Commission, not all of the 57,000 or so requests for assessment corrections each year need a review. About 44 percent have defective applications or were filed merely to maintain legal rights. Still, that leaves roughly 32,000 decisions to make.

The Tax Commission is also requesting that all the previously filed applications, income and expenses, relevant addendums, and other materials for both fiscal year 2021 and 2020 to be scanned and uploaded. Counting both years, that is more than 60,000 applications, each with two to four (or more) pages of the formal document, supplemental forms and reams of analysis and attachments.

The Tax Commission is providing some leeway. For instance, some documents will not require a notarized signature this year, although Henn says “greater weight” will be given to certain notarized forms. And Henn has pushed back the start of the hearings to June 15 to give practitioners time to get files from their own vacated offices, have discussions with clients and scan all those documents, said Dara Iryami, a partner with Goldberg & Iryami and the first female president of the Real Estate Tax Review Bar Association.

Henn told practitioners the documents must be uploaded as PDFs to Box.com. Creation of virtual boxes began in mid-May and they are being filled with the forms and other materials already piled up and abandoned in Tax Commission offices.

The “scary part,” noted a different tax certiorari professional with 25 years of experience, is that while the Tax Commission has a half dozen information technology staffers, “just one IT guy” is now in charge of setting up the on-line boxes to host the uploaded documents. This was confirmed by officials.

With their support staff holed up for the pandemic, many attorneys and property owners who don’t normally scan documents will have to do so themselves — in some cases by the thousands.

The road not taken

If you’re thinking this could all be avoided — and property owners given some pandemic relief — by just freezing current assessments and tax rates, you’re not alone. Industry groups including the Real Estate Board of New York, the Council of New York Cooperatives and Condominiums, the Hotel Association of New York City, Building Owners and Managers Association and others have called for exactly that. (They also want a lower interest rate on overdue payments.)

For this to happen, the City Council would likely have to pass a home-rule message and get it approved in Albany.

It seems, though, that the City Council will proceed as usual, setting tax rates for the bills due on the first day of the city’s fiscal year, July 1. And the assessments on which those bills are based will not reflect the financial damage caused by the coronavirus: Nothing that happened after Jan. 5 is considered.

Indeed, the city’s Department of Finance, which also provides a request for review mechanism, posted on its website: “Please note that any event occurring after January 5, 2020, does not constitute a basis for a property owner to file an RFR application for the 2020-21 tax year.”

Moreover, properties now granted assessment cuts won’t likely see lower tax bills or refunds until at least January. And applications to the Tax Commission had to be filed by March 1 or 15, depending on the kind of property — before anyone knew a financial catastrophe was about to happen.

The Tax Commission’s reviews are required to be independent of the city administration, yet most often they uphold the assessment generated by computers and assessors at the Department of Finance. Even when the evidence shows a property’s value has dropped substantially, only limited assessment cuts are made, tax certiorari attorneys say.

According to its annual report, last year the Tax Commission offered lower assessments on just 10,577 of 57,021 applications. Nearly 9,000 were accepted, totaling $5.5 billion in assessment reductions. This corresponds to $614 million in actual tax relief.

Cases can take years to resolve, during which time the billed taxes still must be paid. Property owners who don’t take the Tax Commission’s offer can file a court petition, challenge their assessment again next March and seek two years of review from the Tax Commission. They can reject the offer again, file another court petition and repeat the process annually until they work out an agreement with the city.

But this is rare, even in a city with 1.1 million property owners and more than 50,000 annual tax challenges. City lawyers know that a court challenge is extremely costly for property owners. In 2019 the city settled just 16 such cases, conceding only about $2.2 million in assessment reductions — an average of just $138,000. Nearly always, the buck stops with the Tax Commission.


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