§581-a Q & A’s

Q.        May section 581-a apply to a single family home?
A.        Yes, if the single family home is a rental property subject to a regulatory agreement that complies with 9 NYCRR §2656.2(b).
 

Q.        May the owner of a residential rental property that is subject to a PILOT (payment-in-lieu of taxes) agreement that went into effect before section 581-a became effective request that the property be valued pursuant to section 581-a?A.        RPTL, section 581-a, does not address existing PILOT agreements.  The specific terms of a PILOT agreement must be negotiated by the parties to the agreement.
 

Q.        May a residential real property subject to a PILOT agreement receive the benefit of §581-a for the purpose of special district charges?
A.        Yes, unless the PILOT agreement provides otherwise.


Q.        May an assessor question the accuracy of expenditures and/or revenues stated in a property owner’s income documentation?
A.        Neither RPTL, section 581-a, nor Part 2656 of DHCR’s regulations prevents an assessor, subject to the boundaries of what is considered sound custom and practice, from verifying such items and requesting further substantiation. 
 

Q.        Does the “effective gross income” of a qualified rental residential property, for the purposes of section 581-a, include rent paid by the tenants and governmental rent subsidies paid to the property owner?
A.        Yes, “effective gross income” includes both types of income.  The latter category of income may consist of Section 8 rent voucher payments paid by a governmental agency to the property owner.

Q.  May a Rural Rental Housing Loan Agreement qualify as a “regulatory agreement” for the purposes of 9 NYCRR §2656.2(b)?
A.        Yes.  If the assessor is uncertain whether a purported agreement is a Rural Rental Housing Loan Agreement or another type of qualified regulatory agreement, he or she should ask the applicant to obtain confirmation from the agency that approved the agreement.

Q.        Should an eligible rental residential property’s real property tax payments be deducted when calculating  the property’s “net operating income” for the purposes of section 581-a?
A.        Yes. 
 

Q.        Has DHCR done any studies concerning applicable capitalization rates for rental properties that are subject to regulatory agreements?
A.        No.

 
Q.        What types of reserves are to be deducted when the “net operating income” of an eligible residential rental property is calculated pursuant to section 581-a?
A.        Reserves required by any applicable federal, state or municipal regulatory programs are to be deducted.  If the assessor is uncertain whether a purported reserve payment is required, he or she may ask the property owner for additional documentation.

Q.        If the property owner does not provide the assessor with the regulatory agreement and the required income documentation on or before taxable status date, may an assessor decide not to use the income approach prescribed by section 581-a to value an otherwise qualified rental residential property?
A.        The applicable DHCR regulation (9 NYCRR §2656.3) clearly states that “[t]he property owner(s) shall provide the local assessing unit with a copy of all applicable regulatory agreements and, on an annual basis, income documentation prior to the taxable status date.”  If the assessor does not receive the required regulatory agreement(s) and income documentation on or before taxable status date, the assessor may reasonably assume that the rental residential property is not eligible for §581-a, and value the property as a market rate property.  An owner who is dissatisfied with the tentative assessment placed on a property would of course have the normal recourse of administrative review before the municipal board of assessment review.