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Volume 11 - Opinions of Counsel SBRPS No. 80

Opinions of Counsel

Phase out of redevelopment company exemption (applicability) (application) - Private Housing Finance Law, § 125; Real Property Tax Law, § 423:

The phase out of the redevelopment company exemption (Real Property Tax Law, §423) is to be automatically granted to such a company upon the expiration of its exemption pursuant to section 125 of the Private Housing Finance Law.

We have received an inquiry concerning the phase out of the redevelopment company exemption (Real Property Tax Law, §423). The question is whether a redevelopment company, whose property’s former exemption pursuant to section 125 of the Private Housing Finance Law [PHFL] has expired, is thereafter “automatically entitled to the exemption” afforded by section 423 or whether an exemption application is required.

RPTL, section 423 (added L.1974, c.941), sets forth in subdivision one a declining, nine-year period of tax exemption that is afforded “[a]fter the expiration of any tax exemption granted a redevelopment project pursuant to section [125] of the [PHFL], which exemption is not extended pursuant to such law” (emphasis added). {1}  Section 423 does not provide that the redevelopment company must file an application with the assessor in order in order to qualify the property for that declining, nine-year exemption. {2} 

We also note that the Governor’s Bill Jacket for chapter 941 contains memoranda from interested parties that clearly express the view that section 423 is intended to “automatically” provide the declining, nine-year exemption, beginning in the first year after an eligible project last benefits from exemption pursuant to PHFL, section 125. {3}  We believe such an interpretation is necessary in order to facilitate the affordable housing policy section 423 is intended to promote. Such a statutory construction has also been made by a federal and a State court (In re Dayton Seaside Associates, 257 B.R. 123 (U.S. Bankruptcy Court, S.D.N.Y., 2000); Akari House v. Irizzary, 81 Misc.2d 543, 366 N.Y.S.2d 955 (Sup.Ct., N.Y. Co., 1975)). {4} 

Based on the plain language of section 423, judicial precedent, and memoranda of interested parties issued when the bill to enact section 423 was before the Governor for executive action, in our opinion, the phase out of the redevelopment company exemption is to be automatically granted to such a company upon the expiration of its exemption pursuant to section 125 of the PHFL.

January 3, 2006


{1}  RPTL, section 423(1), concludes by providing that “during the tenth year after such expiration, the taxes which shall be payable shall be the taxes otherwise payable.”

{2}  We note in this regard that, as one court stated, “[a]n assessor may not add requirements not found in the exemption law itself” (Lufkin v. Town of Washington, 185 Misc.2d 779, 785, 713 N.Y.S.2d 914, 918 (Sup.Ct., Dutchess Co., 2000)).

{3}  For example, the Memorandum of the New York City Housing and Development Administration states “[t]he purpose of the ... legislation is to ameliorate the harsh financial effects of the sudden termination of the tax exemption.” The City’s Memorandum also states “[w]ithout such legislation, rents in projects where the exemption has terminated will be substantially increased to cover the additional tax burden.” The City’s Memorandum further states “[t]he effect of such substantial rent increases will be to cause tenants unable to bear the additional rent to either seek new housing elsewhere, or to fall into arrears on their rent and face summary dispossess proceedings.”

The Metropolitan Life Insurance Company also submitted a Memorandum to the Governor in support of chapter 941. Its memorandum states the company is the “owner of the Stuyvesant Town and Riverton Housing developments, which were built under the Redevelopment Companies Law about 25 years ago.” The company supported the enactment of chapter 941 because “[t]he imposition of full taxes would require substantial rent increases.” The company’s memorandum also states that “[b]ecause of possible hardship on the tenants, many of whom are senior citizens on fixed income, the sponsors of this bill introduced it in an attempt to ease the impact on tenants by proposing a 10 year phase out of tax abatement with a pass through of increased taxes in the form of increased rents.”

{4}  The Dayton court construed RPTL, section 423, to mean “[w]hen the tax exemptions provided to redevelopment companies under PHFL §125 expire (whether after 25 or 40 years), redevelopment companies ... are entitled to a nine-year transitional period in which the level of taxes is gradually increased” (257 B.R. at 128).

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