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Understanding Property Tax: Exemptions and Grievances

A constant concern here on Long Island is the continued increase in Property Taxes and the ever-increasing cost of living.  The application for state program real estate tax exemptions (such as Basic STAR, Enhanced STAR or Veterans exemptions) may help to ease the burden, but there are instances where homeowners may not be eligible for such exemptions, or the exemptions are only a drop in the bucket in savings.

If a homeowner feels as if their property is being taxed too high, they have the opportunity to “grieve” their property taxes and request a review, and possible correction, of the tax assessment made on the property.  By doing so, the local Office of the Receiver of Taxes will review the tax assessment made on the lot(s) in question and determine whether or not the initial assessment was correct.  If the tax assessment is found to be incorrect, the Office of the Receiver of Taxes will reduce the tax assessment and therefore the property taxes. 

A tax grievance can only lead to two possible results, (1) the tax assessment will be reduced or (2) it will remain the same.  The tax assessment will not increase due to the review.  That said, the local tax office provides only a certain window of time to protest the assessment, so the homeowner must be diligent in understanding the time period in which a tax grievance can be made.

A homeowner can grieve their property taxes on their own; however, the process can be daunting.  The homeowner will need to provide evidence that the assessment was inaccurate, which includes collecting photographs and information regarding the sale price of five or more homes in the homeowner’s neighborhood.  These homes must have similar square footage and property size.

An alternative is for the homeowner to contract with a firm that specializes in tax grievance proceedings.  By contracting with such a firm, the homeowner can sit back and allow the firm to apply for a review of the tax assessment on their behalf.  When choosing to use a firm, make sure the firm has experience and knowledge in tax grievance proceedings.

The firm should also have the manpower and resources necessary to provide a more informed argument than the tax assessment is inaccurate.  Most firms will only charge the homeowner for their services if they are successful in reducing the tax assessment, usually an agreed-upon percentage of the value of the savings (i.e. 50%).

What may be tricky with the contracting of a firm is the term of the contract.  Most firms require a homeowner to contract with them for multiple years.  This may become an issue where the homeowner or the Estate of a deceased homeowner is attempting to sell the property during the term of the contract. 

Homeowners must be careful to read the fine print of the contract and understand what the term limit is and what effect the sale of the home may have on the contract. Most contracts indicate that the homeowner is still liable for the firm’s charge, even after the sale of the home, unless proper steps are taken to transfer the contract to the new homeowner.

Therefore, when you are selling the property to which a firm is contracted to reduce the property taxes, if the real estate attorney does not broach the subject, the homeowner or fiduciary of the Estate of a deceased homeowner should advise their real estate attorney of the contract.  The real estate attorney should then account for the need of an assumption of the contract by the Purchaser in the Contract of Sale. 

Most firms require the new homeowner to sign an Assumption Agreement prior to or at the closing of the sale of the house and for the signed Assumption Agreement to be transmitted to them immediately thereafter.

If the proper steps are not taken, the original homeowner or his/her Estate may be responsible for the payment of the firm’s services for the remainder of the term of the contract, even though the new homeowner is reaping the benefit of the reduction.

It is important that homeowners or fiduciaries of a deceased homeowner understand the terms of a contract made with a property tax reduction firm.  It may be difficult for the fiduciaries of a deceased homeowner, because they may not even be aware of the contract.  As such, the fiduciary should make a diligent effort to examine the deceased homeowner’s papers to ascertain whether a contract exists and to act accordingly.

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