NYC data errors: thorn in industry's side.

NYC data errors: Thorn in industry's side

New York City real estate computer records have been so sloppily maintained that they cause constant problems for property owners. Aware of the problem, the Department of Finance is embarking on an ambitious project to correct at least the pre-1989 records.

Problems due to keypunch errors run the gamut, owners complain. Property ownership and mailing addresses are often improperly recorded so that taxes and other bills are sent to the wrong parties. Additionally, building owners complain they sometimes do not receive notices of in rem proceedings until the tenants themselves are notified to send rentals to the city. Real Property Income and Expense booklets go awry as do other updates and letters from the Department of Finance. Payments are often keypunched to the wrong blocks and lots and in the wrong amounts, and double payments, until now, were never used to offset later charges or charges from other accounts. Even banks paying taxes from escrow receive faulty information from the city.

"There is always a problem with getting accurate information from the city," said John Gilbert III, president of the Rent Stabilization Association, citing particularly the receipt of in rem notice.

Errors are numerous, but, even so, Department of Finance Assistant Commissioner Bob Huber said, "we don't consider it a problem.

"There are certainly instances where we haven't been maintaining correct information, but there are 900,000 properties in the city," Huber said. "It's not widespread, and I wouldn't categorize it as horrible or bad." He admitted, however, that even if only 2 percent of the property records were wrong, it could still create problems for thousands of properties -- 18,000 at that.

The history of payment records were in such poor shape that when the city released a list of credits under Finance Commissioner Carol O'Cleireacain's new open policy, they warned that approximately one in five were incorrect. Even so, 73,200 parcels received real estate credits totaling $33.4 million on their July tax bills. "We don't think we sent any money back that's fallen into the wrong hands," Huber said.

Attorneys who represent thousands of other parcels had to check histories and sign affidavits attesting to the credits being correct, but those properties are being sent refunds through the city's normal refund process, which can take over a year and which became even more backlogged because of the work created by the credit project.

A Department of Finance letter was to be mailed this week, apprising property owners of water and sewer credits and giving them an accounting of all double payments up to July 1, 1991. Huber, said in December, owners will receive an accounting for this fiscal year and, from now on, a general accounting stating all credits and charges will be sent out twice yearly.

Huber said those owners with outstanding water and sewer credits, even if represented by attorneys, may be getting a check if they are entitled to a refund, but, for the first time, credits will be applied against all open charges, including real estate taxes.

Old Owner Card

To Be Updated

In August, Huber said, the department made a decision to begin reviewing and revising pre-1989 records, however, they are still discussing how they will implement this project.

Prior to 1989, he said, the city would first send owner transfer cards to "audit enforcement for a desk audit." After that, the cards would go to keypunch for changes of ownership. "It sometimes took nine months," Huber said. "It could be lost, or the keypunch operators suddenly found 30,000 dumped in their laps at once."

Since 1989, Huber said, instead of going to the audit unit first, the card goes to the keypunch unit which, he said, now handles about 3,000 per month. There is also a quality control check system whereby people with a hard copy randomly check the keypunchers' data. But not every entry is checked, Huber admitted.

Additionally, because of a new law, the cards are always provided and must be filled out at closings, Huber noted. "We assume there is not a problem with post-1989 records, but if there is an error they can refile a card or call taxpayer assistance to find out the procedure," he said.

Nevertheless, owners who sent in updated cards, even a year ago, complain their bills are still being sent to wrong addresses and a thorough data checking system would be more than welcome.

The Reality and Human Tragedy

"People don't know about changing these addresses, said one property manager who recently spent time waiting at Central In Rem to pay off the taxes on a property whose owner had not filed a change of address.

"It's not just the landlors," he said after speaking with his fellow "waiters." "It's the little people, the immigrants, and the single-family homeowners who just don't know they have to fill out these forms."

Another large property owner, John Werwaiss, for the second year in a row, had the same property go in rem because of a water charge that was sent elsewhere. Carolyn Harris, office manager of Werwaiss & Company, said she spent last fall filing new owner registration cards on all of their properties after the first fiasco.

Explain how registration cards will be updated to one property owner who was more than upset when a building she last owned in 1989 turned up this year on a public list with her name on it. She supposedly owing nearly $700,000 in back real estate taxes from July 1990.

Talk about keypunch errors with an owner who, in the course of his business, paid a bill he received for Block XYZ Lot 1. He realized he does not own this property only when the property which he does own, Block 1XYZ Lot 1, went in rem. He was sent the bill for the wrong block and lot.

Banks and other lenders also receive notice of outstanding charges.

Banks have the ability to check all data through computer systems, and officials said they frequently pick up city errors when they take over the administration of properties or loans.

These banking institutions are also beginning to recognize that due to mergers, there is a tremendous overcapacity of computer resources which could be put to use by the city. Melton L. Spivak, vice-president, director of Corporate Property Taxes/Legal at Manufacturers Hanover Trust, said "If you took that capacity, the personnel, the hardware and software and applied it to the city, you could implement the best tax administration in the country. It would be tremendously efficient."

Spivak believes a bank-operated property tax collection system would also create an incentive for people to pay when their credit rating is at stake.

One attorney, who represents several banks, scoffed at this idea, saying banks don't even both passing on the city' notices to their own borrowers.

Other owners have even tried legal action against the city. One owner did not file an owner's registration card when he purchased a building. He did not receive a "change by notice upward in his property tax assessment, and so was unable to file a timely protest.

Notice Provisions Constitutional

Assistant Corporation Counsel Gary F. Marton said, in 1983 the U.S. Supreme Court declared invalid the State of Indiana's public notice provision in the Mennonite case. Since that time, he said, the city's notice law has been under attack. "We've had dozens and dozens of lawsuits brought where they said the foreclosure was bad; you didn't give us notice," he said. "We won all but one or two or three of them" This past spring, Marton said, two cases were argued at the Court of Appeals and the city won both.

In Rem Actions Commenced

Real estate attorneys blame bad record keeping for the huge number of properties against which the city begins foreclosure actions. If the bills went to the right place, they charge, many owners would not have to suffer through the reclamation process. Although no records are kept, experienced professionals claim as many as three quarters of the in rem problems are due to city errors. "People who are going to abandon are going to abandon," said one expert who asked not to be identified, "but many of the others just did not know about the charges."

Marton said this year in rem actions have been commenced against 14,455 properties, while last year the city filed against 14,504.

Marton said he expects 5 percent of each action to end up actually owned by the city. Last year, however, there was nearly a two-fold in rem vesting increase from the previous year, going from 930 in 1989 to 1,586 in 1990.

Prior to a property going in rem, the city does two mailings. One at the beginning of the action is based on statute, Marton said, and is mailed to the address on the owner's cards. In the absence of the filing of the card he said, the city mails a notice to the latest address for the annual assessments. "On top of that, they mail to the most recent owner from transfer tax returns," he said.

Since 1985, towards the end of the proceeding, the city does a search for mortgages and recorded deeds and mails a notice to those names and addresses.

Marton said the city register's office is only computerized back to 1982, so for dates before that time, the clerks must go through the written books, which are kept in five-year periods "It's a huge amount of work for deed from 1930," Marton said, "but it seems to pick up most people and I'd be hard pressed for the city foreclosing on a property after 1985 where someone would be in a position to complain that we foreclosed on them.

"It's really up to the owner to see that the taxes are getting paid and that the payment is being made with appropriate instructions," Marton added.