Filing fee error could cost city $1M.

A minor technicality in a city law may force the city to cough up more than $1 million, following a class action suit filed on behalf of recent home sellers.

Last year, a seller, Stephen Schwartz, of Manhattan, discovered that a new city law, which raised the fee for filing a real property transfer tax return from $25 to $50, neglected to include provisions for coops and condominiums.

"He noticed they no longer had the legal authority (to collect the fee)," said Schwartz's attorney Robert J. Miller, of Reed Smith LLP.

Last year, Schwartz sold his East 57th Street coop apartment and filed a corresponding return, without sending a $50 check to cover the filing fee. The state promptly sent back the return with an explanatory note.

"The state rejected the form," Miller said. "It would not affect the transaction."

Since then, Schwartz and his attorneys, Aaron Shmulewitz and Miller, filed a class action suit, arguing that all fees paid since Jan. 1, 2003 on co-ops and condos were illegal and should be refunded.

"The city continued to collect the $50, when you filed a transfer form for shares," Miller said. The city quickly dropped the fee and will be refunding all of the fees collected, an amount Miller estimated is between $1 million and $1.5 million.

"It was clear, to us at least, that when the law was changed, they could only collect the $50 for the sale of real estate, real property," Miller said.

Meanwhile Sam Miller, an attorney with the city's Department of Finance, attributed the miscue to a "technical" error and said the department would be going to the state capital to change the law, so they may resume collecting the fee again--legally this time.

"It was technical error in the bill," he said. "We should have been able to collect (the fee). We're going to go up to Albany."