One of the most important considerations of any condominium unit buyer is the real estate taxes they will be paying after they purchase. When a building is being newly constructed, there is no tax history, so buyers must rely on tax projections made by the sponsor.
Under the condominium offering plan regulations, the sponsor is required to include a projection of the real estate taxes for first year of condominium operation. These projections are often made several years in advance, and the actual taxes will be impacted by changes in tax rates, assessments, some aspects of construction timing, and tax abatement programs. Because of quirks of the regulations, the actual taxes imposed will often vary from the estimates.
Adam Leitman Bailey, P.C. was contacted by one of its condominium sponsor clients when the real estate taxes that were assessed by New York City were significantly higher than those that were projected for a recently constructed building. Although some variation is always expected, and the offering plan contained disclaimers, a coalition of unit buyers objected that the tax discrepancy was larger than could reasonably have been expected. They demanded that the sponsor compensate them for the inaccuracies in the projections.
The firm used its detailed knowledge of the intricacies of condominium tax projections it obtained from representing both condominium buyers and sponsors to analyze the tax discrepancy, and the reasons why it appeared to have developed, and discussed it with all relevant parties. ALBPC applied the facts under the very limited case law in the area and the disclaimers the sponsor had included in the offering plan to recommend a course of action to the sponsor.
When the residents learned that they were paying significantly more money than was promised in the offering plan and marketing materials the residents threatened to hire a lawyer and sue.
The sponsor hired Adam Leitman Bailey and immediately sent him in to speak to the entire ownership of the building.
Mr. Bailey acknowledged the problem, promised to go after the persons who had made the mistakes and make them pay. The owners trusted Adam Leitman Bailey and he kept his word.
He brought in the sponsor/s accountant responsible for the tax numbers and put them in the offering plan. He cried property and even brought in the insurance policy demonstrating that the policy was fraudulent and would not pay any monies. The ALBPC team reached a settlement after an asset search to start the pot of money for the unit owners.
Adam Leitman Bailey was in touch with the malpractice attorneys respresenting the sponsor’s transactional attorneys that drafted the offering plan and they added a substantial amount of money to the pot.
ALBPC educated the owners on all of the disclosures in the offering plan and how if they sued the sponsor they were likely to lose any case. Further, in exchange for releases by every unit owner we would be able to make them almost whole in their potential losses and give them all of the sponsor’s rights to protest the taxes.
After extended negotiations, the parties entered into a confidential settlement which avoided the risk of litigation and potential regulatory problems. Adam Leitman Bailey, P.C. negotiated the complex settlement documents and supervised its multi-stage implementation.