For many years, New York City has tried to mitigate the high costs of housing by offering tax credits to owners of condominiums and other cooperative units. In its present form, the city's tax abatement program offers reductions of between 17.5% and 28.1% on property taxes, depending on a condo unit's assessed value. These abatements are not automatically granted, however, and eligible recipients must go through a detailed application process.
That process was the subject of recent litigation between a condo developer and the purchases of one of the units. The developer sponsored a 95-unit residential condominium in Manhattan. The developer had to file an offering plan with the State of New York. An offering plan is essentially a detailed manifest of the condominium's offerings and the physical aspects of the units. The offering plan may also spells additional terms or conditions of a condominium purchase.
In this case, the developer's offering plan explained it would undertake the necessary actions to apply for and secure a city tax abatement for all of the units in the condominium. The offering plan further stated that should the developer successfully obtain an abatement, the individual unit owners would then be liable to reimburse the developer for its legal costs. Of critical importance, the offering plan said the condo's Board would be responsible for collecting each owner's share of these legal costs.
The developer successfully obtained a tax abatement for the condominium in 2007. But for some reason, the condominium's Board did not collect the necessary funds from the unit owners to reimburse the developer's costs. The developer then began its own collection efforts. One unit owner refused to pay, so the developer filed suit in Manhattan Civil Court.
In a decision issued on March 11 of this year, Judge James E. d'Auguste dismissed the lawsuit and ruled in favor of the unit owner. The judge said this was a straightforward case: The developer's own offering plan granted the Board had exclusive authority to enforce collection of any reimbursements related to the tax abatement application. By delegating this power exclusively to the Board, the developer no longer had an independent right to take independent collection action against the individual unit owners.
When the owner purchased his unit, he signed a purchase agreement that incorporated the offering plan, the condominium's by-laws and other documents filed with the New York attorney general's office. Judge d'Auguste said the developer drafted all of these documents and knew its contents. Had the developer chosen to reserve the right to collect the reimbursements, it could have done so, the judge said, but it is not the role of the courts to re-write the plain language of these documents after the fact.
Be Careful When Drafting Contracts
As this case demonstrates, even sophisticated real estate developers can fall prey to their own poor contract drafting. Condominium sales, like all real estate transactions, are complicated legal undertakings that require experienced counsel. If you require the services of a qualified New York real estate attorney, contact our office today.