NYC’s new 467-m property tax exemption offers a substantial reduction in property taxes for non-residential properties converted to residential rental use but, unlike the expired 421-a property tax exemption, it imposes a new cash flow issue by requiring payment of all property taxes (and other Department of Finance (“DOF”) charges) at the time the application for 467-m benefits is filed with NYC’s Department of Housing Preservation & Development (“HPD”): Per 467-m(13)(d):
- Such application [for 467-m benefits] shall also certify that all taxes, water charges, and sewer rents currently due and owing on the property which is the subject of the application have been paid or are currently being paid in timely installments pursuant to a written agreement with the department of finance or other appropriate agency.
This means Developers must plan on paying (or being current on a payment plan with DOF or another agency for) all property taxes, water charges and sewer rents until HPD has approved the application for 467-m benefits. Since the application for 467-m benefits can only be filed after the “Completion Date” of the conversion (the date a TCO or CO is issued for all residential areas of an Eligible Multiple Dwelling), Developers must plan to address DOF charges for the existing building for years while the conversion to residential use is ongoing. These property tax payments should be budgeted for by Developers or a payment plan should be entered into so that HPD will process the application for 467-m benefits. We have been considering this issue and developed strategies for Developers to plan for this issue. We have also been considering lenders’ perspectives on this 467-m issue.
Upon HPD approval of the application for 467-m benefits and issuance of a 467-m Certificate of Eligibility, DOF is expected to implement the 467-m exemption retroactively. Any property taxes overpaid would result in credits for overpayment, however this might not occur until several months or longer after the 467-m application is filed with HPD.
If you have questions about a 467-m conversion, please contact Daniel M. Bernstein for further information and see our other alerts on 467-m located here: