Q.: I live in a two-bedroom penthouse in a 174-unit condo building in Midtown, with approximately 1,800 square feet of interior space and 900 square feet of outdoor space. I bought it eight years ago for $2 million. My annual property tax is $60,000. I have seen real estate listings in the city with much lower taxes, such as a four-bedroom house in the Bronx with taxes of $696 a month, and a one-bedroom in Turtle Bay listed for $1.6 million with taxes of $894 a month. Why is my property tax bill so high, and can I appeal it? Or are there ways to lower it?
A: Property taxes for condominiums in New York City are calculated differently than taxes in other dwellings, so comparing tax bills without considering property type won’t be useful.
Most condominiums are Class 2 properties, and the city assesses them as if they were market-rate rental buildings for the purpose of calculating taxes. Your Fifth Avenue apartment is taxed this way, and your building’s would-be net operating income is part of the tax calculation.
“The net operating income will be dramatically higher for a Fifth Avenue apartment versus an apartment of similar size in most parts of the Bronx,” said Brett J. Gottlieb, a partner in the real estate department at Herrick, a law firm in Manhattan.
In larger condominiums, the city determines a building’s market value, including estimated income and expenses, by comparing it to rental buildings that are similar in size, location, number of units and age. The city also uses assessor reviews and statistical modeling of similar properties. It then applies a capitalization rate — the expected rate of return based on the income assigned to the property — to the building’s estimated net income.
After the city sets the taxes for an entire building, it divides the tax amount for each unit owner. This is typically done by unit size, depending on the terms set in your building’s offering plan.
As a condominium owner, you can contest your own property tax bill, but by law you have to do a valuation of the entire building. This can be a complicated process requiring professional help. A tax certiorari lawyer is more likely to take your case if you can enlist all unit owners to contest the building’s assessment, said Peter E. Blond, a lawyer at Brandt, Steinberg, Lewis & Blond LLP, a Manhattan firm that handles tax matters.
For weekly email updates on residential real estate news, sign up here.