Bribery scandal rocks industry: City caution expected in future assessments.

With the recent indictment of city tax assessors, real estate attorneys are expecting the city to exercise more caution with property tax assessments in the coming months.

"I expect that, for a period of time, there will be extreme sensitivity with respect to tax assessments," said Jeffrey Moerdler, a real estate lawyer with the firm of Mintz, Levin, Cohn, Ferris, Glovsky & Popeo.

Moerdler, who has served on the tax certiorari committee of the New York Bar Association, also questioned whether there would be delays with tax assessment process this year due to the decreased staffing levels in city tax assessor's office. So far, 18 assessors, including 15 of the 38 working in Manhattan, have been indicted. Tax assessments were issued several weeks ago and the deadline for filing objections to the assessments has passed, but analyzing objections is a process that takes months and could be hampered by a lack of staffing.

The indictments, handed down last week by the United States attorney's office, charged the assessors with racketeering, bribery and fraud for reportedly taking $10 million in bribes to alter assessments on 500 buildings in the last 35 years. At the center of the tax assessment scandal is Albert Schussler, an 85-year-old tax consultant who worked for many prominent building owners to reduce tax bills. Under the indictments, Schussler reportedly approached tax assessors prior to a building assessment and offered a bribe in exchange for a reduced assessment.

Building owners have not been implicated in the matter and several owners who reportedly benefited as a result of the bribes have said they were unaware of any wrongdoing.

The indictments also cast a spotlight on the common -- and legal -- practice of building owners that hire attorneys and other consultants in an effort to reduce tax bills, called certiorari work in the legal profession.

Many law firms with real estate departments have lawyers that devote some, if not all, of their time to certiorari work. However, unlike Schussler, most attorneys doing certiorari work file objections to tax assessments after they are issued, usually in January or February of each year.

Not only is the practice legal, it is prudent, attorneys said.

"I encourage all my property owner clients to do it," Moerdler said. "You won't get a reduction every year, but you might get one every once in a while."

By law, assessments must be 40% of a building's fair market value but determining value is not an exact science. If a building has recently been sold, calculating the fair market value is relatively easy. But, if hasn't been sold recently, determining value is much more difficult, experts said.

Each year, the city tax assessor's office calculates the value of the city's buildings, but a variety of assessment methods are used. Some values are calculated by review and appraisal of a building, others by analyzing the income and expense statements of a particular building, they said.

There may be information, however, city officials do not know. For example, a common circumstance that can alter valuation occurs when a building is faced with a large lease set to expire in a few months. Assessors may be unaware of the change in revenue stream as a result of the looming lease expiration.

Attorneys were divided over whether it is appropriate for an attorney or consultant to approach an assessor prior to the assessment being released. It's common in other parts of the country, but whether it's widely used in New York City is unclear.

Gary Rosenberg, a partner at Rosenberg & Estis, said he doubts the scandal will impact certiorari work, but said owners may pay more attention to the people they hire to do it.

"If anything, (building owners) will rely less on consultants and more on attorneys who do certiorari work," said Rosenberg said.