Officials temporarily halted a tax break for more than 1,700 property owners, including every single owner at the luxury condominium tower at 56 Leonard Street.
The Department of Housing Preservation announced on Friday that 1,788 properties didn’t comply with the requirements of 421a by failing to file a final certificate of eligibility. The property owners, along with more than 3,000 others, were warned in December 2016 that they’d lose the tax break if they didn’t file the certificate within 13 months. They allegedly missed that deadline and, as a result, had their benefits revoked. Together, these owners avoided paying $66 million in taxes in 2018 thanks to 421a, according to HPD. They have one more chance to recoup the tax break.
Based on data provided by HPD, the owners of all 145 units at 56 Leonard — the jumbled 60-story tower in Tribeca where a penthouse sold for $47.86 million last year — had their 421a benefits suspended. Under the old 421a, condo owners were required to file a final certificate of eligibility before “the first taxable status date” after construction was complete. This followed a preliminary certificate of eligibility that was required before construction was completed. The new version of 421a does away with that step and only mandates a final certificate of eligibility, a change that made some industry professionals wary since it would take away the developers’ certainty of receiving the tax break. Officials argued it would ensure property owners complied with 421a’s requirements prior to them actually receiving the benefit.
The Alexico Group’s Izak Senbahar, which developed 56 Leonard Street, said the final certificate was filed at the completion of construction. “We expect it to be reinstated,” he said.
Owners of other properties that were contacted by HPD told The Real Deal in 2016 that they had purchased or rented their homes long after the first set of owners had initially applied for 421a. They didn’t realize that they weren’t in compliance.
Other projects hit hard by HPD’s latest crackdown were the Oosten at 429 Kent Avenue, where 80 condo units lost 421a; and Parkside Tower at 136-21 Latimer Place in Flushing, where 87 units had the benefit revoked. They have until May 1 to file the final certificate.
“Owners receiving valuable tax benefits need to live up to their end of the deal,” HPD Commissioner Maria Torres-Springer said in a statement.”While the vast majority of building owners follow the law, those who do not will lose their benefits unless they fulfill all of their obligations.”
In December 2016, officials notified property owners of 3,103 multi-family rental buildings — which have a total of 37,141 apartments — that they would lose their tax break if they failed to comply within 13 months. That followed two other crackdowns, including one in September that revoked benefits at 35 buildings that collectively received a windfall of $4.5 million. These enforcement actions were en extension of an investigation launched in 2014 by Gov. Andrew Cuomo and Attorney General Eric Schneiderman.
When state legislators revived 421a in April, they severely limited the kinds of condo projects that would receive the benefit. The Leonard Street project secured a 10-year break before Manhattan condos were excluded. According to the city’s Department of Finance, the benefit expires for owners in 2022.
(Source: The Real Deal)