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Tax foreclosures starting.

The city is using its legal teeth to crack down on delinquent property taxpayers. The top 200 delinquents owe about $570 million, with the top four alone owing some $104.9 million. The top ten have $198.64 million outstanding.

Yet because of bookkeeping and ownership issues, it's unlikely most of that money is even due or will ever be collected, although some of the private owners on the list are starting to come through with the big bucks.

But it's the sheer amount of money owed by so many individuals and companies that now has officials aggressively working to transfer viable properties to new ownership.

"It's the city being more efficient, and the sooner the city reminds owners about the lack of tax payments the better it is for the owners, who can more easily deal with it," said Steven Spinola, president of the Real Estate Board of New York (REBNY). "The city is doing their job and getting more efficient. It's better they do this on a routine basis rather than having people rack up the bills."

Many of the properties on a list provided by the Department of Finance to Real Estate Weekly are actually owned by the city, state and other government agencies and would be considered exempt if all the proper paperwork was completed by someone, somewhere at some time.

Instead, since everyone knows the New York City Housing Authority owns 2401 Adam Clayton Powell Boulevard, and that the public library owns a condominium parcel at the old B. Altman's Building, city Finance officials regularly cull these same blocks and lots from tax lien sale lists, even while the computer continues to blindly add up interest at 18 percent per annum.

Americans are not alone in their failure to file forms. Four of the top ten scofflaws are foreign governments that collectively owe $97.79 million on their Manhattan digs. Together, there are 17 countries in the top 200 owing $122 million.

The Libyan Arab Republic owns 309 East 48th Street, which CoStar lists as a 98,000 square-foot office building. While the bottom floors are used for offices, floors 11 through 23 are used for residences. They owe some $25.5 million in property charges.

While the city may insist some or all of the foreign government property is not used for exempt purposes, these diplomats simply ignore city officials and all paperwork.

The city will have the last say, however, because if these buildings are ever sold, they will collect.

Elizabeth Dvorkin, chief of Tax and Condemnation for the city's Corporation Counsel, said "We have been very effective in the past collecting the delinquent taxes at the time they decide to sell the building, or want to get a mortgage on the property. I would not write off that money."

So the Ivory Coast, said by brokers to be seeking shelter closer to the United Nations, could find themselves down $1.5 million in past due charges if and when they sell their ritzy townhouse at 46 East 74th Street.

There are also, however, plenty of private sector buildings on the delinquent lists. There are three large apartment buildings along Shore Front Parkway in Far Rock-away owned by Dayton Operating Co. that are the subject of numerous complaints by tenants and of special proceedings by the city because of violations and $57.5 million in arrears that started accumulating in 1985.

"It's an important part of the strategy to deal with private housing," said an HPD official.

In The Bronx, city records have Carlos E. Lopez as the owner of a small walk-up apartment building at 1544 Hoe Avenue. According to the city records, he owes $12,316,304.19, which started accumulating in July, 1978, and ranks as one of the top ten scofflaws.

Another private owner is Tiffany Associates at 783 Eldert Lane in Brooklyn. They owe $9.728 million, accumulating since 1988. The property has been pulled out of prior lien sales, as has the apartment building at Bedford Gardens at 555 Wythe Avenue in Brooklyn. The building has an in rem agreement and is working down its $15.7 million bill going back to July 1988.

The inclusion of one prominent landmark building on the list turned out to be an input keypunch error. The payment was applied to January 1, 2000, a representative of the owner said. That left the current period down more than $10 million, even while a credit balance was showing for January. A computer check made by REW confirmed the balance was paid.

Several Zar Realty Buildings remain on the list. REW confirmed that they have paid the amounts due at 2 Broadway, where the MTA has begun moving in and a mortgage just came through (See related story, Page 1). But charges at 90 Washington Street, comprising $1,186,550.23 due on October 27th, were still outstanding on October 22nd. That building will be empty when the Bank of New York moves out at the end of the month and the owners are in talks to get another office user in the entire waterview property.

Ironically, the 1.2 million square-foot building at 100 Church, which houses the Corporation Counsel, among other tenants, owes $3,021,615.

Mark Stein, vice president of leasing for Zar, says they are working with Finance officials to get the amounts paid for 90 Washington Street and 100 Church, as they have done with 2 Broadway, and are up to date on their other buildings at 260 and 261 Madison Avenue and 110 and 120 Church Street, which are undergoing residential conversion.

Also a regular on delinquent lists is the Flatotel at 132 West 52nd Street. Several times, city lists show, as the lien sales are readied, the taxes are paid off. The hotel's owners, European American Lodging, currently owe $2.619 million.

Properties having a lien-to-value ratio of 15 percent based on the taxes in arrears cannot be sold in the bulk lien sales, but can be included in the new in rem filings. Buildings are also excluded from the bulk lien sales if there are five or more B or C violations per dwelling unit or $1,000 or more unpaid Emergency Repair Charges.

But the in rem filings can include those buildings, as well as buildings that are subject to court appointed 7A administrators or have conditions dangerous to health and safety. These are now among the key buildings for the filings.

In the early part of this decade, the city stopped taking back properties through the in rem process, which it then had to manage. But that policy caused many owners to stop paying taxes, knowing that while interest would run, no one would take away the property.

The Giuliani administration developed the bulk lien sale program to bring in the dollars from such past due accounts, and each announcement of a sale and the accompanying surcharges have brought recalcitrant owners to the table.

"We have been running very successful lien sales and the compliance rate has shot way up," said Dvorkin of the tax payments.

But the properties that went for too long without paying owed too much in back taxes in relation to the value of the buildings. Nor did the bulk buyers want them, because it was obvious no one would ever pay the charges.

Meanwhile, all other taxpayers help support these properties. In order for the city to maintain a balanced budget, a reserve must be set aside each year for uncollectible amounts. That means the actual levy has to increase each year, and every other taxpayer has to contribute more to the pot.

So the more taxpayers that pay, the less everyone has to pay. "The reality is every owner has to pay their taxes. Otherwise the burden falls on the compliant owner," said Dvorkin.

To put it into perspective, to get that $570 million into city coffers, more than $10 billion worth of property would have to be taxed.

Yet three times that much is exempt from taxation because it is owned by the, United States, New York City and State or foreign governments. These entities account for half of the dollar value, and just under half of the total exempt valuation of the city of about $60 billion.

And while politicians and other activists complain, economic development incentives account for only $1.3 billion in exempt value, or just over 2 percent of the total exempt value.

Because of the numerous exempt properties - of course, that does includes Central and Prospect Parks, Governor's Island, the schools, airports and the beaches, among many others - fully taxable property comprises only $78.6 billion in assessed valuation, 56 percent of the city's total assessed value.

Armed with new legislation, the determination to collect money and the will to get properties into competent management hands, the city has begun tax foreclosure proceedings against several hundred properties.

"In general, we are selling all liens on all taxes," explained Dvorkin.

Whereas in the past, the city had to file actions by borough, the legislation now permits the city to foreclose on areas as small as a block. This means city workers can more easily administrate the work associated with the foreclosure, as well as the follow-up to ensure the property is sold or placed into competent management hands.

"These are targeted in rem actions," Dvorkin said. The new laws also enable the Department of Housing Preservation and Development (HPD) to invest its resources in a more effective way.

Rather than working on an in rem filing of 18,004 properties like in 1993, and later having actions withdrawn on 14,667 as the owners paid up or sold the buildings, the city officials can work on a few dozen or a few hundred properties. This work can include the signing of in rem agreements, providing the owners with building operations classes, suggesting targeted loans to fix violations and make improvements, and even with learning the administration and collection of rent.

The new statutes also provide a relatively speedy time-frame for redemption and/or transfer to new ownership, compared to old time-lines that stretched into years - allowing the properties to spiral further into debt and disrepair.

Now there is first a four-month redemption period during which time the former owner can come forward to pay off all the taxes.

After the in rem judgment is rendered, there's a statutory additional four months to enable the city to make the transfer to a third party. But this second four months can be interrupted by up to a 45-day period in which the City Council can elect to stop that clock to review the transfer, and can reject the new ownership, but not reinstate the former owners.

"In this setting the city never takes ownership to the property," explained an HPD official.

The city needs to keep the process moving, because if the transfer is not made in that second four-month period, the building automatically reverts back to the former owner. The foreclosure process could then start over.

The basis of this law, which requires prompt, affirmative action on the part of the city, is to cut down on the time of uncertainty for the tenants.

Since the administration developed the lien sales, "the compliance rate has shot way up," said Dvorkin. The new in rem program is also bringing in payments from those who want to keep their buildings, fix them up, or sell them while the market is hot.

In rem filings are being made by the Law Department in all boroughs, with varying numbers of buildings. The hope is to get the buildings paid up and fixed up, and for the worst buildings to be reinvigorated with new, housing educated ownership.
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Article Details
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Author:WEISS, LOIS
Publication:Real Estate Weekly
Geographic Code:1USA
Date:Oct 27, 1999
Words:1959
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