Many of our clients and colleagues have asked in recent weeks whether property damage caused by Superstorm Sandy may present any opportunities for local tax relief. Sandy affected roughly 81,000 properties and caused some $35 billion in property damage in New York alone, according to CoreLogic.
Natural disasters, which now occur with some regularity in various parts of the country including the Northeast, can often present challenging valuation issues for appraisers and assessors; because property taxes in New York are generally based on market value, there is potentially a direct relationship between disasters and your taxes.
One report suggests that these catastrophes may have a negative effect on the market in some areas. According to the report, “the effect that natural disasters can have on housing markets are certainly localized, but in those areas, they can have a chilling and immediate influence on home buyer confidence and stall mortgage operations, hurting home sales and having even more dire consequences when combined with other economic factors.”
Many assessors will look at the cost to repair or replace the damaged property as a proxy for the value loss, although with income producing properties the measure of value may focus more on whether net operating income was reduced on a stabilized basis.
It is also important to bear in mind that valuation for assessment purposes occurs as of a specific date each year, which will be unique for every local municipality. For instance, if the valuation date in your town or city is July 1, then the assessor will only be concerned with the property market as of that date and not what may have occurred afterward (until dealing with the next assessment roll). Likewise, many assessors will also need to work with yet another date, usually referred to as “taxable status”, which takes into account the physical condition of the property at another point in time. The two dates are often quite different—a confusing element of New York tax law that we will leave for another day’s discussion—but suffice to say that it is not as simple as presenting the assessor with a list of your damages and receiving a tax reduction.
Interestingly, in some cases of significant property destruction, be forewarned that an assessor might decide that your property’s value has increased. This might occur, for example, where the existing use of the property rendered the raw land more valuable than it was as improved. In short, give careful consideration prior to making any application for relief.
New York City homeowners may enjoy some specifically-targeted tax breaks in the wake of Sandy. Under a proposal from the office of Mayor Bloomberg that remains subject to legislative approval, the City would extend property tax payment deadlines, interest free, and might also provide refunds on property taxes that were already assessed for structures that were badly damaged by the storm. This latter measure would apply to more than 900 properties, which would receive reimbursements averaging about $800.