March 3, 2020
NYREJ Ask the Experts: Reducing your property taxes: Timing is everything
Developers frequently inquire as to why two almost identical buildings in the same area can have significantly different tax burdens. A myriad of variables come into play when analyzing a property, but one aspect that is absolutely critical—and often misunderstood—is timing.
Timing can impact a property tax case in a variety of ways. Advancing a case at the right time can be the difference between a marginal tax reduction or a massive one. Take for instance the difference between negotiating the value of a retail property today as compared to just a few years ago. First, the operations have likely changed at the location and impacted the profit and loss statement. Additionally, the market data utilized in such an analysis, including estimated vacancy allowance as well as the proper capitalization rate, have both increased in recent years. If the case is advanced too early, there will not be an opportunity to incorporate beneficial information.
Proper timing can also prevent locking in taxes at a higher amount. In many New York state jurisdictions, when a property tax case is settled the assessment cannot be challenged for the subsequent three tax years. There are exceptions to the law, mainly a change in occupancy of 25% or greater, but, absent of meeting an exception, the property owner is barred from a further reduction until the fourth year after the settlement. Given the rapidly changing landscape in some market sectors, when a property case is settled can result in drastically different results.
Reduced operating statements and market data are just a couple examples of when timing can influence the tax certiorari case. A number of other timing elements can also work to an owner’s advantage or disadvantage each year. One such issue is the equalized market value for assessment purposes. Values are not always as they appear on notices and tax bills. Oftentimes, when a property owner reviews the town’s value in preparation of filing a grievance, the value they see is not the one they will actually be protesting. This is because the state-issued assessment ratio is not finalized until after the grievance period ends. This means that you may see a value on your bill that you believe to be acceptable but, in reality, you are challenging a higher value because the assessment ratio is subject to change.
There are a number of ways you can involve your legal counsel regarding the assessment ratio, in fact, they may be in the process of negotiating a new figure or even challenging it entirely. On the other side of the equation, the assessor may be disputing the figure as well. For this reason, there is a great deal of strategy and game theory that must be considered even beyond the operations of a property with each tax certiorari case.
Communication is also key. Your counsel must be aware of any upcoming lease expirations that will impact occupancy. Even if a new tenant is in place, the amount that tenant pays compared to the previous occupant’s rent must be considered. The vacating tenant may have been paying an increased rent because of step-ups in their lease while a new tenant may be starting at lower base rent. That new tenant may also be receiving a tenant improvement allowance that will have an impact on the following year’s net operating income. In that situation, this new data will not be reflected until that year’s financial statements are complete. When the economics are changing from year to year, it is critical for your counsel to have this information in order to make informed decisions and achieve the maximum reduction in your taxes.
Being aware of these changes allows your counsel to incorporate them into the decision-making process. This collaborative effort between property owner and counsel will provide for a greater refund for overpayment in taxes and an acceptable tax burden moving forward. The more information provided, the better prepared your counsel will be to know the optimal timing for your case.
Brad Cronin, Esq., and Sean Cronin, Esq., are partners at Cronin & Cronin Law Firm, PLLC, Mineola, N.Y
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Brad W. Cronin, Esq.
Brad W. Cronin is the founding Partner at Cronin & Cronin Law Firm. He has over 40 years of Legal Experience. Brad represents a cross section of many of the largest New York developers, property owners, national corporations, REITs and retail chains. He has extensive trial experience having successfully litigated and resolved high profile cases throughout New York State which has resulted in a number of landmark decisions in the field of Tax Certiorari.
Over the years Brad’s reputation for honesty and integrity has led to long term relationships with municipal assessment officials. His expertise and extensive experience along with his reputation has resulted in some of the highest property tax reductions in New York State.
Brad has been selected as a Who’s Who of Long Island Business News for the past 7 years in the fields of Tax Certiorari law and Real Estate Law. Each year Long Island Business News honors business leaders whose creative approach to challenges and positive results help to make Long Island better.
For over 30 years Brad has earned the highest rating awarded by Martindale Hubbell in both competency and ethics in his field. This is an honor bestowed on him by his peers for his professional excellence.
Brad is a columnist for the New York Real Estate Journal’s “Ask the Expert” quarterly feature discussing current real property tax issues. Some issues addressed are Hurricane Sandy’s effect on property taxes, Nassau County’s Disputed Assessment Fund, emerging market trends, New York’s property tax rates, and how your purchase price can affect your taxes.
Brad has been an invited speaker and participant on various panels involving different subjects affecting tax certiorari and valuation of property such as condominiums, environmental contamination, and reviewing changes in the tax certiorari field. As a member of the Nassau and Suffolk Condemnation and Tax Certiorari committees, he has worked to implement changes to facilitate the timely resolution of commercial tax protests.
Brad currently serves as executive member of the steering committee and served as Co-President of the Long Island Real Estate Group for three years. This organization has supported various Long Island charities, as well as real estate related projects, educational real estate programs and networking events. He is Cofounder of the North Shore University Hospital Department of Medicine Leadership Circle Committee and serves on the Village of Plandome Planning Board.
Sean M. Cronin, Esq.
Sean M. Cronin is a founding partner at Cronin & Cronin Law Firm with over 20 years experience. He specializes in negotiating tax certiorari matters for prominent developers, national REITs and tenants in Nassau, Suffolk, and Westchester counties, as well as the five boroughs. He is responsible for successfully reducing the assessments, and thereby the real estate taxes, on many of the largest properties in New York State thanks to his expertise in property valuation issues and knowledge of market conditions and demographics. His clients include developers and owners of all property types, including office buildings, industrial buildings, shopping centers and retail locations, restaurants, apartment buildings and condominium complexes, golf courses and assisted living facilities.
Sean is an Executive Board member and past Co-President of the Long Island Real Estate Group, a charitable organization created to support local communities. He is an Executive Board Member of Vision Long Island which advances more livable, economically sustainable, and environmentally responsible growth on Long Island through Smart Growth. Sean is an Advisory Board Member of the Viscardi Center and on the Board of Advisors of the Energeia Partnership. He is an active member of the Chaminade Lawyer’s Association and Real Estate Group as well as the Washington & Lee Alumni Association.
Sean is featured regularly in the New York Real Estate Journal’s “Ask the Expert” section and has been quoted in various publications, including the Long Island Business News and Newsday. He has been recognized by the Long Island Business News as a “Who’s Who in Commercial Real Estate” multiple times, most recently in 2023 and by the Long Island Herald as the Top Tax Certiorari Attorney in 2023.
