421a class recalculation turned down by court

Real Estate Weekly, April 20, 1994 by Lois Weiss

The New York State Court of Appeals turned down a request by attorneys to form a class of owners that would have automatically received a recalculation of their 421a benefits even if they had not filed an application to do so or already agreed to a refund without interest.

Because of this decision, however, individual owners and attorneys who have not completed the refund process for tax certiorari decisions for the affected buildings can still apply for a refund with interest.

According to Richard L. Claman, a partner with Seiden, Stempel & Bennett who handled the case for the firm, while there is no class, anyone with an open tax cert as of March of 1992, who has not yet fully processed a refund on the 108 Fifth Avenue issue, still has their individual right to file papers before Judge Parness to get interest on the refund. "It's not a lot of money for most people," he admitted. "But for some people it may be worth the expense."

The original 108 Fifth Avenue case arose when tax payments under the 421a program were being made based on the application of the phase-in percentage to both the increased value from the new construction and to the pre-construction assessment - known as the "mini-tax." So the Department of Finance was counting the pre-construction value twice, once in the mini-tax, and once as part of the phase-in. The attorneys argued this was double taxation and Justice Stanley Parness agreed, ruling in their favor in January of 1992.

The city has estimated there were around 13,000 different lots in different years that had open actions, Claman said, and volunteered to give money back on the merits. But the city refused to grant interest, amounting to some 9 percent, on the overpayments unless the owners filed individual papers before Justice Parness.

"|That's silly,' we said," recalled Claman. "But the city said unless you get a class certified., that's what you have to do."

While the law firm's action for a class certification was before the courts, the city mailed out refund applications but did not explain there was another option available to taxpayers, i.e. to file papers with Judge Parness and receive interest on the matters.

Even though this may seem unfair, Claman said, "Once those applications are processed, interest is waived."

Tax certiorari attorney Joel R. Marcus, a partner with Pottish Freyberg Marcus & Velasquez, who as past - president of the Real Estate Tax Review Bar was involved in discussions with the city on the matter, praised the city's action.

"I have to say the city was straight in notifying the [attorneys] of the refund and I don't fault them for not mentioning they could get a refund with interest by going through the courts. Besides," added Marcus, "it has always been the policy that if there was a voluntary settlement, you waive interest. "

Marcus noted the refund on an individual condominium unit, for example, with work out to around $24, so in most cases it does not make sense to pursue the interest. "If you complicated it by filing a motion and delaying it, we're talking about 2 or 3 years of interest. It wouldn't amount to a great deal of money. "

Additionally, he said, merely filing the Request for Judicial Intervention and the motion could require an outlay by taxpayers of several hundred dollars in filing fees.