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Volume 10 - Opinions of Counsel SBRPS No. 85

Opinions of Counsel index

Alternative veterans exemption (residency and occupancy requirement) (cooperative apartments); Assessments, generally (inventory and valuation data) (cooperative apartments); Exemptions, generally (transfer to non-exempt owner) (cooperative apartments) - Real Property Tax Law, §§ 458-a, 500, 520:

Where a municipality has authorized owners of cooperative apartments to receive alternative veterans exemptions, the exemptions are applied against the assessment of the apartment building parcel itself. The veteran/tenants receive their benefit from the cooperative apartment corporation through a credit against the amount of such taxes otherwise payable by or chargeable to such tenant.

In maintaining their assessment inventories of cooperative apartments, assessors may wish to arrange with the building’s managing agent for periodic review of the continued ownership and residency of exemption recipients.

A cooperative apartment which receives an alternative veterans exemption is subject to pro rata taxation when that apartment is sold.

We have been asked to explain the administration of the alternative veterans exemption (Real Property Tax Law, § 458-a) in a municipality which has chosen to offer it to tenant-stockholders [hereafter tenants] of cooperative apartment corporations in accordance with the provisions of section 458-a(6) of the RPTL.

Although a shareholder of a residential cooperative unit is not an owner of real property and is therefore not generally eligible to receive a real property tax exemption (see, 7 Op.Counsel SBEA No. 50), the veterans exemptions (RPTL, § 458 as well as § 458-a), the senior citizens exemption (RPTL, § 467) and the exemption for persons with disabilities and limited incomes (RPTL, § 459-c) all now include provisions authorizing municipalities that grant those exemptions to extend them to such tenants. The school tax relief [STAR] exemption (RPTL, § 425) mandates that such tenants receive that exemption. Each section includes a provision whereby, for purposes of such section, “title to that portion of real property owned by a cooperative apartment corporation in which a tenant-stockholder . . . resides . . . shall be deemed to be vested in such tenant-stockholder” (RPTL, § 425(2)(k)(i), 458(8)(a), 458-a(6)(a), 459-c(6)(a), 467(3-a)(a)).

The first question is if a separate parcel should be designated for each tenant or whether the aggregate exempt amount should be deducted from the apartment building’s total assessment. Section 458-a(6)(b) provides, in part:

that proportion of the assessment of such real property owned by a cooperative apartment corporation determined by the relationship of such real property vested in such tenant-stockholder to such real property owned by such cooperative apartment corporation in which such tenant-stockholder resides shall be subject to exemption from taxation pursuant to this section and any exemption so granted shall be credited by the appropriate taxing authority against the assessed valuation of such real property;

Consequently, the exemption is applied against the assessment of the apartment building parcel itself. {1}  The tenants receive their benefit as provided in the same section 458-a(6)(b) which continues, “the reduction in real property taxes realized thereby shall be credited by the cooperative apartment corporation against the amount of such taxes otherwise payable by or chargeable to such tenant-stockholder.”

The next question is what legal provisions exist for the assessor to monitor the ownership and residency of tenants who receive the exemption. There are no such provisions for veterans in cooperatives or, for that matter, veterans in general. Unfortunately (from an administrative standpoint), there are no requirements for reporting sales of shares in cooperatives akin to those applicable to transfers of real property (see, RPTL, § 574 and Real Property Law, § 333(1-e)), and section 458-a includes no application renewal requirement. Assessors are obligated to maintain an inventory of real property, including the names of the owners thereof (RPTL, § 500(1)), but the statute does not specify how the assessor should do so. As to cooperative apartments, since the assessor will be granting the exemptions to the building itself, he or she may wish to arrange with the managing agent for periodic review of the continued ownership and residency of exemption recipients.

Finally, we are asked if section 520 of the RPTL applies when a tenant-exemption recipient sells his or her shares. Although, as noted above, a tenant does not own real property, the Legislature has enacted provisions authorizing (or, the case of STAR, mandating) these certain exemptions. In doing so, the statutes deem a portion of the “title” to the apartment building to be vested in the tenant, and, it is the transfer of “title” which triggers section 520. Accordingly, it is our opinion that the legal fiction that a shareholder in a cooperative has “title” to real property for purposes of qualifying for an exemption from real property taxation, by necessary implication, extends to the transfer of such “title” by a sale of that shareholder’s interest to a non-exempt “owner.”

While it is true that each afore-cited exemption provision states that the authorization is for purposes of each such exemption, not to apply section 520 to transfers of cooperatives {2}  would be to grant them greater exemptions than those enjoyed by other exemption recipients who do own real property. {3}  In the absence of a clearly stated legislative intent to grant such tenants a greater benefit, we will not assume one. {4}

July 30, 1999

{1}  A formula for computing the alternative veterans exemption for cooperatives, as included in Volume 4 of the NYS Assessor’s Manual (§ 4.01, p.9.08 (1/1/99)), is:

Exemption for eligible tenant/shareholders of cooperative apartment corporation

Exemption = Assessed value x (n/N) x W.S.
where n = number of shares owned by eligible veterans
N = total number of corporation shares
W.S. = Percent of exemptions due to wartime service determined above

However, exemptions may not exceed the maximums established by local law.

{2}  Note, however, that section 520 does not apply to transfers of any property receiving a STAR exemption (RPTL, § 520(5)).

{3}  That is, although it is the new owner, not the exemption recipient, who is subject to taxation on a pro rata basis for taxes based upon the formerly exempt portion of an assessment, not to apply section 520 to this one class of transfer could skew the sales prices of some cooperative apartments vis-a-vis those of others and other types of property (by permitting the new owners to continue to receive their grantors’ exemptions).

{4}  Indeed, in the case of the senior citizens (L.1995, c.406) and veterans exemptions (L.1997, c.171), where the provisions for cooperatives were added to pre-existing laws, the sponsors’ memoranda indicate an intent to equate tenants with other property owners, viz.:

Fairness dictates that people should be treated the same no matter which type of living accommodations they have chosen (1995 NYS Legislative Annual, p.302).

This bill would, therefore, redress the existing disparities . . . by including cooperative housing . . . thereby giving veterans’ cooperative apartments the same tax exempt status that other veterans . . . enjoy (1997 NYS Legislative Annual, p.106).