Tax Estimates in NYC New Development Offering Plans
By Thomas Kutzman on February 10, 2020
One of the most common questions from buyers in NYC new developments is: what will my property taxes be in the future? Unlike resale condos which have a visible tax history, new developments provide property tax estimates which may vary in the future. This is why real estate attorneys review offering plans of new developments during their due diligence process.
Prevu recently sat down with the partners and associates from Katz & Matz – a premier NYC-based real estate law firm - to get a better understanding of how to evaluate tax estimates in NYC new development offering plans.
In a new development offering plan in NYC, are there typically tax estimates listed?
Yes, but be forewarned, the projected taxes that are in the Schedule A, and that may be stated by the sales office, might NOT be what they will actually be in a year or two, once the building is fully completed. This happens a LOT.
So that is why lawyers read all tax opinions and do the math for future years, and not just rely on the one number they provide.
Who provides those estimates, the sponsor or the City of New York?
The sponsor, who also gets independent tax advice and counsel.
Are the tax estimates based on a mill rate and assessed value based on scheduled pricing?
The way that NYC assesses taxes is a great mystery. The price of a unit is only one component of what goes into an assessment. Zoning, property class, building classification codes and (believe it or not) what comparably sized units would rent for in the area, all go into arriving at an assessed value.
We know this is not a scientific answer but there is not a lot of rhyme or reason that goes into assessments.
In your experience, how far are the estimates typically from actual rates in the next 5 years?
Pretty damn far. That is why we encourage all buyers in new developments to have their real estate lawyer read all tax opinions.
DISCLAIMER: This material was provided for informational purposes only, and is neither intended to provide, nor should be relied upon as tax, legal, or accounting advice. Prevu and its subsidiaries do not provide tax, legal, or accounting advice. You are encouraged to consult your personal tax, legal, or accounting professionals before considering any transaction as your individual situation may vary.
