The Philip Degaetano Living Trust, with Philip Degaetano as Trustee, filed a legal action against Jacques Jiha, Commissioner of the New York City Department of Finance (DOF), over a property tax assessment dispute. The petitioners claimed that their property at 16 East 129th Street, Manhattan, a three-family brownstone, was misclassified by the DOF as an 11-unit apartment building, leading to an inflated property tax assessment. They sought to have the property reclassified correctly and to receive a refund for the overpaid taxes.
Timeline of Events
January 2003: Philip Degaetano purchased the property for about $410,000 from a developer who had renovated the property as part of New York City’s Department of Housing and Preservation “HomeWorks” program. Under HomeWorks, small vacant City-owned buildings were completely rehabilitated to create one- to four-family homes for sale to individual homebuyers at market prices. As a condition of purchasing, buyers were required to occupy at least one unit as their primary residence.
June 2003: The Department of Buildings granted the property a new certificate of occupancy indicating it had three apartments.
January 15, 2020: The DOF issued a Notice of Property Value (NOPV) for the subject property, stating it had 11 residential units and was tax class 2, and the estimated property tax was $23,250.
January 28, 2020: Petitioners filed a Request for Review (RFR) with the DOF contesting the tentative real property tax assessment for the tax year 2020/21, asserting that the property was misclassified and should be tax class 1. Two weeks later, the DOF assessor inspected the subject property.
March 2, 2020: Per DOF’s suggestion, petitioners submitted an Administrative Review Application (ARA) to the DOF, seeking reclassification of the property for tax years 2015/16 through 2020/21, alleging a clerical error or error in description.
May 6, 2020: The DOF issued a “Determination of Request for Review,” denying the RFR submitted by petitioners, stating that the proposed changes by the assessor were not entered timely to avoid illegal increase.
May 15, 2020: A representative from the DOF emailed petitioners explaining why the RFR was denied and why the ARA review was taking longer to complete. DOF agreed the property warranted reclassification to tax class 1, with an estimated market value of $2,287,000, but if DOF made the change as petitioner requested, the property tax would have increased to $28,552. They were past the legal deadline of February 14th to increase taxes, and so DOF was precluded from making the change.
August 2020: Petitioners commenced an Article 78 action, challenging the DOF’s denial of their RFR and alleged ARA determination, seeking reclassification of their property and a refund for overpaid taxes. Petitioner thought his property tax should be $5,640.
Judicial Decision:
- After over three years, in June 2024, the court dismissed the petition, and ruled in favor of the City, with Judge Arlene P. Bluth citing that:
- Article 7 of the Real Property Tax Law is the exclusive procedure for reviewing property assessments; Article 78 was improper.
- Petitioners had not exhausted their administrative remedies, as the ARA determination remained pending.
- The court acknowledged a significant delay in resolving the proceeding, which had been fully briefed and pending for over three years. The court apologized for this lengthy and inexcusable delay in the resolution of the case.
Insight:
This case was fully briefed by January 2021. The court ruled on it 41 months later in June 2024. By then, DOF had long since already corrected the misclassification in May and June 2021.
According to DOF account history, DOF changed the tax class from 2 to 1 going back to tax year 2015/16. The 2020/21 taxes, which were the original subject of dispute, were reduced to $18,943, based on an effective market value of $1.5 million. That’s a tax savings of less than $5,000.
Today’s tax year 2024/25 taxes are $21,413 based on an effective market value of $1.8 million and a full market value of $2,159,000.
Please note that the author had no involvement in this case.