New York City is the fifth largest taxing jurisdiction in the Country - only the Federal Government, and the States of California, New York and Texas collect more taxes. The real estate tax is the City's largest revenue source, which accounts for roughly 50% of its budget.

Just because a building has a high vacancy rate doesn’t mean that its taxes will necessarily go down. That is because the NYC Department of Finance (DOF) assesses property on a “stabilized” basis. This means that DOF will impute rent for the vacant space above what it considers to be a stabilized level. Often, however, the costs associated with this imputed rent do not get adequately reflected in the valuation process, resulting in higher assessments.

The good news is that you can manage your tax burden by challenging your property tax assessment. Each year, DOF reassesses all the one million parcels of property within its jurisdiction. On January 15,  DOF will release the tentative assessment roll for the upcoming tax year that begins on July 1.

Now is the time to start thinking about your property tax appeal strategy. Property owners and net lessees who are responsible for 100% of the real estate taxes have the right to contest their assessment by filing an appeal with the NYC Tax Commission.

To do so, an Application for Correction of Tentative Assessment must be filed with the Tax Commission by February 28 (normally March 1) (March 14 for 1-3 family residential properties, normally March 15). A Supplemental Application with an audited income and expense statement is also required for income producing properties. The Supplemental Application must be filed by March 24.

Hogan Lovells is one of the few full-service law firms with an entire practice group specializing in New York City real estate tax assessment appeals (aka tax certiorari). Our tax certiorari team is available to provide you with additional information about the intricacies of the City’s assessment and appeal process.

Authored by Joe Giminaro.