Comments on the NYC Department of Finance’s Proposed Rules Governing Mergers and Apportionments of Real Property Tax Lots

The Real Estate Board of New York (“REBNY”) submits these comments on behalf of its membership of more than 17,000 developers, builders, owners, managers and brokers of real property in New York City.  The comments are categorized as general comments to the overall proposed rule and specific comments to components of the rule.  In the latter instance, the specific language of the rule is cited and commentary is italicized.



1.         Tax Lot Mergers.  In general, tax lot mergers should be permitted even where the ownership of the tax lots is not identical, based on the following considerations:

a.         Building Permit: The DOB will not approve the construction of a building that spans multiple tax lots and DOB therefore requires the existence of a single tax lot, with an associated street address in order to issue a building permit. Property owners should not be restricted by DOF’s requirement that multiple tax lots be in single ownership prior to issuance of such new single tax lot number. It is not always possible or practical to transfer a tax lot to the owner of the other tax lot or for both parties to transfer their tax lots to a new entity just for purposes of obtaining a merged tax lot. A frequent example is the case of a developer that intends to develop a site under ground leases from two or more adjacent property owners, none of which is willing to convey its property or to become part of a condominium structure. The parties should have the right to make any private arrangements between them regarding the future ownership of the project should one or both of the ground leases terminate. There would be no detriment to DOF because each of the property owners would be jointly and severally liable for the payment of any real estate taxes.

b.         Conversion to Condominium:  In instances where two or more tax lots are owned by multiple parties, who each intend to submit their respective ownership to a single condominium regime (and accordingly will be co-declarants of a condo declaration), the owners should be free to do so without being obligated, on an interim basis, to transfer ownership or to go through an unnecessary interim step of tax lot merger. The foregoing would often necessitate incredibly complex arrangements, which are time consuming, expensive and would only burden transactions. Therefore DOF should either: (i) confirm that there is no requirement to finalize a tax lot merger prior to the condo formation and allow the existing tax lots to be directly converted to condominium units pursuant to the condominium declaration (based on an RP-602, DOF would only issue a tentative single tax lot number to allow the issuance of DOB permits), or (ii) permit the tax lot merger to occur based on multiple ownership (see above, under a). 

2.         Tax Lot Subdivisions.  As a general rule of real property law, an owner’s tax lot may be lawfully subdivided into two or more parcels of real property. Each subdivided lot is capable of being transferred by a deed and each would constitute “real property”.  The RPTL states that all real property within the State is subject to taxation, unless exempt therefrom by law.  Based on the Administrative Code and New York State Codes, Rules and Regulations regarding DOF’s duty to maintain the Tax Map, courts have held that separate parcels should be separately assessed and taxed unless it can be demonstrated that it would be impracticable to separately assess each subdivided lot.  The following are general issues with the draft Policy:

a.         General.  There should be no restrictions on tax lot subdivisions other than, with respect to improved property, confirmation from DOB that that the subdivision does not create a zoning non-compliance or a non-compliance with the applicable building codes.

b.         Vertical Subdivisions. 

The current draft of the Policy does not address DOF’s requirements with respect to vertical subdivisions creating airspace tax lots and subterranean tax lots, but it should include same based on issues with the existing 2009 policy.

DOF has previously cited a policy from 2009 that required improvements in an air rights parcel to either merge with the improvements on the base lot or form a condominium with the base lot.  That policy stated certain administrative reasons for such requirements. 

The fundamental issue with this existing policy is that the implementation thereof would restrict an owner’s right to elect the form of ownership of its parcel, and it would therefore affect marketability, including sales, financing or leasing of properties that are partial tax lots.  In many cases, it is not practical or it is undesirable for an owner to create a condominium regime with the lower parcel. 

Vertical subdivisions should generally be permitted, even if the horizontal boundaries thereof do not coincide with the tax lots out of which they are subdivided (i.e. “irregular” tax lots).  There is no legal impediment to do so, since each tax lot would constitute “real property”.

In order to ensure that DOF can assess each resulting tax lot and administer it so that there is no loss of real estate tax revenue for the City, there are several possible solutions:

(i)         The owners of the airspace tax lot and the lower tax lot can enter into and record a restrictive declaration, for the benefit of DOF, providing for the assessment of both the lower tax lot and the airspace tax lot; DOF could advise as to the required terms of this restrictive declaration and how the “land” component of the upper parcel would be assessed (i.e. a percentage or the entire footprint of the underlying land). 

(ii)        DOF could approve a tax lot subdivision of an airspace tax lot and a lower tax lot, which would have the horizontal boundaries and be separated by a horizontal plane, but certain vertical elements of a building in the airspace parcel (such elevators and columns) would be constructed below the limiting plane, based on easements which would be contained in a recorded easement agreement between the owners.

(iii)       The subdivision of the lower tax lot and the airspace tax lot would be treated in the same manner as a condominium: the owners of the airspace tax lot and the lower tax lot would record in ACRIS (i) surveys (in lieu of condominium unit tax map drawings), showing the lot area(s) of the resulting parcels and any other information required by DOF, and (ii) a restrictive declaration for the benefit of DOF, that provides the basis for assessments of real estate taxes to the airspace tax lot and the lower tax lot (same as under (i) above.

In order to clarify on the Tax Map that there is a vertical subdivision, DOF could add a new letter designation on the Tax Map, which designation could indicate the existence of the surveys and the restrictive declaration (for example, a “D”), or alternatively, assign a new category of number designation (e.g. a “3000” number). 

Each of the foregoing options would ensure that DOF can both administer the resulting tax lots and not lose any tax revenue.

3.         Other Considerations

ECB debt may have been imposed for actions of a tenant or licensee.   While the proposed rule makes an exception for debt of prior owners, it may still be burdensome for the current owner to prove the debt attachment to DOF.  In instances where the violations are charged against the current owner, the ECB debt should not impede actions that the owner needs to take to make economic use of the property, which in turn would allow it to cure violations and pay off liens.  This is precisely the same reasoning applies to property tax debt.  It is neither necessary nor efficient to use the tax map as a means of compelling payment.  And in instances where the City records are in error, the owner will be compelled to sort out the issues with multiple city agencies that may not talk to each to each other efficiently such as DOF City Collector, DOF Tax Map Unit, ECB and the originating agency for alleged violations.



§ 54-02  Application for Mergers or Apportionments

(a)  Applications for mergers or apportionments are available on DOF’s website or can be requested by dialing 311.

(b)  Except as otherwise directed by DOF, all applications and all supporting documentation required by DOF must be submitted in person to DOF’s tax map office.  There are different document submission requirements for new buildings, alterations on existing buildings, vacant land, condominiums and lot mergers.  The current submission requirements, which are subject to change without notice, are set forth below: 

It is problematic that the submission requirements can change at any time, without notice.  This is inconsistent with the City Administrative Procedure Act and makes the promulgation of these rules largely meaningless. Land owners need to have some certainty so they can plan their development accordingly.

(ii)  Apportionments - Alterations on existing buildings and vacant land:

(1) Completed application for mergers or apportionments.

(2) An approved subdivision PW1 filing  for alteration of an existing building (not required for vacant land).

Clarify whether item (2) applies where (i) vacant land is being subdivided from a tax lot containing an existing building, (ii) vacant land is being subdivided from another vacant parcel of land, and (iii) where an unimproved airspace parcel is being subdivided from a lower parcel containing a building?

(iv) Lot mergers:

(1) Completed application for mergers or apportionments.

(2) Deed on record showing common ownership. (If the deed lacks a metes and bounds description but refers only to a filed map, a current metes and bounds description, prepared by a licensed surveyor must be provided.)

Policy should clarify:  for mergers where the tax lots are not in common ownership, and are subject to one or more ground lease(s) (pursuant to which the ground tenant will develop the property) and the underlying fee owners consent to the tax lot merger:

Either the underlying fee owners or the ground tenant should be allowed to submit the application for the tax lot merger for issuance of a new tax lot (which ground tenant needs to obtain a building permit), and, so long as the underlying fee owners consent to the merger.

In the event of a conversion of the property to a condominium (with each of the fee owners as co-declarants (as evidenced by an affidavit of authorization and intent to create a condominium executed by both owners), then DOF should allow the creation of either a fee condominium or a leasehold condominium.  The fee owners and ground tenant should be able to determine which form of condominium regime to establish and should not be limited by the existence of a ground lease.

This clarification is important in order to ensure that the parties have the right to create either a fee or a leasehold condominium.

(f)  All outstanding property taxes, property-related charges and tax liens must be paid before an application will be reviewed and approved.  Entering into an installment agreement is not equivalent to paying off outstanding taxes, and no merger or apportionment application will be reviewed and approved as long as there are outstanding charges pending on an installment agreement.

(g)  No application will be reviewed and approved by DOF if any owner of the property has outstanding environmental control board judgment debt.  Entering into an installment agreement is not equivalent to paying off outstanding environmental control board judgment debt, and no merger or apportionment application will be reviewed and approved as long as there are outstanding charges pending on an installment agreement. 

(h)  If an applicant has been advised that their application will not be reviewed because of their outstanding environmental control board judgment debt, and the applicant believes that they are not such environmental control board debtor, the applicant may appeal this determination in accordance with the appeal procedures set forth below in subdivision 54-04.

DOF needs to confirm that for simple re-configurations a single application for a subdivision/merger is sufficient.  

For more complicated reconfigurations (including irregular subterranean or airspace parcels) should multiple-step applications be submitted?

The City has the ability to preserve its lien for unpaid real estate taxes/assessments/liens by filing against each resulting tax lot. In addition, see notes under Item C below.

ECB has alternative liens to enforce its judgments; in addition, ECB debt may have been imposed based on actions of parties different from the fee owner, such as a former owner, tenant or licensee. it is also possible that such violations or liens were improperly filed.  Even in the event violations are charged against the fee owner, ECB should not impede actions that the owner needs to take to make economic use of its property. the same reasoning applies to property tax debt (see item B above), but the case for using the tax map to enforce ECB debt is even weaker as it may often relate to underlying charges that are not against the property.

§ 54-03  Approval by DOF

The provision that for the applicant must submit both approvals to DOF for final approval in order to complete the requested apportionment or merger where the New York City Department of Buildings is to provide such certification should only apply to land improved with building(s), and not to vacant land.

§ 54-04 Appeal Procedures

DOF should clarify the form, to ensure that there are no undue limitations for such appeal.

Legislative Memo
Senior Vice President of Management Services & Gov. Affairs
(212) 616-5233