Looking for a Home? Advice Regarding Property Taxes and More
By Joseph A. Bollhofer, Esq.
There are many things to consider when buying a home. Property taxes are one of the most important factors in determining affordability. Unfortunately, buyers sometimes are unpleasantly surprised when the next property tax bill comes.
There are two reasons for this:
1) Sometimes the property is not fully assessed because the previous owner had not legalized all structures by obtaining Certificates of Occupancy (for living spaces) or Certificates of Compliance (for all other items, such as decks, inground pools and detached garages). When sellers market their homes for sale and there is a structure on the property that does not have a certificate, they usually will obtain the certificate, after which property taxes increase.
2) The property owner might enjoy the benefit of certain property tax exemptions, which reduce taxes. These exemptions can include an Enhanced Star Exemption, for those over 65 who qualify financially, a Senior Citizens’ Exemption, for those seniors who have even less income, and Veterans’ Exemptions. The exemptions are ultimately removed after the deed to the purchaser is recorded, and the taxes increase to their “non-exempt” status.
Many buyers are unaware of these circumstances when they offer to buy a house. If they ask the seller or a real estate broker before contract signing about the amount of the taxes, they sometimes are not told that there are tax exemptions. Likewise, without doing some pre-contract inquiry, buyers often will not know until after contract signing whether a Certificate of Occupancy for a structure on the property has not yet been issued. Again, once it is issued, the property will be reassessed and the taxes increased.
A wise buyer will visit the municipality’s tax receiver or assessor to determine whether there are any property tax exemptions in existence. (Copies of tax bills often can be obtained online.)
He or she also will visit the municipality’s building department to determine whether Certificates of Occupancy are in existence for all structures. Sometimes, this can be a complicated task. If the home to be purchased is a simple two-story rectangle with an inground pool and detached two car garage, the task is not complicated. However, many homes have additions that have been built over the years. In order to adequately determine if all required Certificates of Occupancy exist, all of the dimensions of the house would need to be determined. Sometimes sellers have an accurate survey, but sometimes not.
Buyers should also be aware that a Certificate of Occupancy is necessary when interior space in the house, although not increasing the footprint of the house, is converted to living space, such as a garage conversion.
Doing this homework ahead of time, and asking follow up questions of the seller or real estate agent, also likely will avoid a contract in which the closing is delayed because the seller has only begun the process of obtaining a Certificate of Occupancy or Certificate of Compliance. Worse yet, if the seller needs to obtain a municipal variance approval for a structure that is too close to a property line under existing zoning codes, the process will be delayed, probably for a couple of months, and there is no guarantee that the variance application will be approved.
Even if a variance approval is not necessary in order for the seller to obtain a certificate, closing is often delayed because the structure must be inspected by the building department, must have a valid electrical inspection certificate if there are any electrical devices, and must have a valid plumbing inspection certificate if there is any plumbing. If the structure does not comply with the current applicable codes, it must be “brought up to code”. This could involve making changes to the structural aspects or rewiring, etc.
Sellers’ attorneys often will include in a contract a provision that the sellers responsibility to make any such changes or corrections in order to obtain a certificate is limited to a certain dollar amount, and that the seller is not required to obtain any variance. In a contract that is poorly worded, the buyer may be in for a very unpleasant surprise.
This matter could be even worse if the buyer is obtaining mortgage financing and the lender will not close without the required certificate.
You can see that these problems could turn what should be a pleasant experience into a nightmare, including litigation. In circumstances where the buyers are selling their own house or otherwise soon will have no place to live, the problem is compounded.
Suffice it to say, it is extremely important to pay diligent attention to these issues before you commit to purchasing a house.
There are other issues to consider, which are beyond the scope of this article. I invite you to read my other articles regarding buying and selling a home. You will find them on my website at www.BollhoferLaw.com.
Copyright 2020 Joseph A. Bollhofer, Esq.
Editor’s Note: Joseph A. Bollhofer is an attorney practicing law since 1985 in the areas of real estate, elder law, Medicaid and estate and business planning and administration. He is also the president of Downstate Title Agency, Inc. His legal advice has appeared several times in Newsday’s “Ask the Expert” column, a weekly feature dedicated to elder law and estate planning issues, and in Bar Association journals. He is a member of the National Academy of Elder Law Attorneys, and of the Elder Law and Surrogate’s Court Committees of the Suffolk County Bar Association, currently serves as chair of the SCBA’s Real Property Law Committee, and is a member of the Real Property, Elder Law and Trusts & Estates Law Sections of the New York State Bar Association. His office is located at 291 Lake Ave., St. James, NY. He can be reached at info@bollhoferlaw.com or 631-584-0100.