Homeowners at The Landing at Dobbs Ferry found a way to minimize the impact of a new federal tax law last year by converting their homes to condos.
But when they tried to make the conversion to save about $1 million a year on property taxes, local government officials and the New York State attorney general, they claim, thwarted their plan.
On Aug. 20, the homeowners’ association sued Attorney General Barbara D. Underwood in Westchester Supreme Court to compel her to recognize The Landing as a condominium.
Underwood and Assistant Attorney General Constance Leperides, the homeowners allege, have been working in concert with local government officials “to obfuscate and delay the conversion process to prevent The Landing from being recognized as a condominium in time to receive the favorable tax treatment that motivated its conversion.”
Underwood responded through her spokeswoman, Rachel Shippee.
“It’s a shame that the association is trying to muddy the waters by involving us in its dispute with the town,” Shippee said in an email. “We reject their claims and will continue to fulfill our statutory responsibility to protect New Yorkers.”
The Landing is composed of 103 homes in 36 buildings built in the late 1990s to 2003.
Last year, the homeowners decided to respond to a new federal tax law that capped state and local tax deductions. Their properties were being taxed as single-family homes based on their fair market or resale values. Converting from a homeowners’ association to a condominium would make the homes taxable at a lower rate.
They would save about 40 percent on property taxes, averaging nearly $10,000 per home.
The village of Dobbs Ferry and town of Greenburgh would collect about $1 million a year less or have to shift the tax burden to other property owners.
The homeowners, after five months of discussions, deliberations and communications, approved the plan unanimously.
In March, Elefante & Persanis LLP asked the attorney general’s Real Estate Finance Bureau for a “no action” letter, confirming that the Landing was not required to file an offering plan.
Offering plans are required, the complaint stated, when condominium units are sold to first-time owners. Units in The Landing had been sold and resold for two decades.
The attorney general is bound by its own precedent, the complaint stated, because it had granted a no-action letter in 2016 to Fairway Green in Mamaroneck under similar circumstances.
Instead, the attorney general’s office denied the request for a no-action letter on April 23.
The following day, government officials from Greenburgh and Dobbs Ferry met and discussed The Landing in a meeting that was videotaped and posted on Greenburgh’s website.
An official seems to say that someone in the attorney general’s office was purposely unclear and unforthcoming to The Landing about what was needed, according to a transcript of the meeting.
“So I think that’s been taken care of for this year,” an unidentified official said. “So they will not get their condo conversion.”
The discussion shows that local and state officials were working together to block the conversion, the complaint stated, in “what appears to be illegal, concerted conduct evidencing a misuse of official powers for improper purposes.”
The goal, according to the lawsuit, was to delay the process to give the town time to enact a law that would prevent preferential tax treatment for condo conversions.
The Landing was also facing a May 1 deadline to have its status as a condominium certified by the town tax assessor. But the assessor, the complaint stated, refused to do so.
The lawsuit does not name the village, town or any local officials as defendants.
As the May 1 deadline approached, attorneys for The Landing went back to the law books. They discovered, the complaint stated, that they could simply file a declaration with the county clerk. They would not need attorney general approval.
The declaration was filed on April 30.
The attorney general then allegedly tried to “undo” the conversion by demanding that the homeowners revote.
The mandate is improper, the complaint claimed, because the homeowners’ association rules require only a two-thirds majority, and owners had already given unanimous approval.
“This position constitutes a transparent, backdoor attempt to nullify the April 30th conversion,” the complaint stated, “and force a do-over.”
Shippee said the office is protecting homeowners.
“Our role here, as in all cases, is to ensure that homeowners understand the benefits and risks involved with any conversion to a condominium so that homeowners are aware of all potential impacts (from insurance to mortgages, ownership and more) before making such a critical decision.”
“Nobody in the Landing,” the complaint stated, “wants the AG’s ‘protection.’”
The Landing had entered into a “Twilight Zone,” the complaint stated, in which standard operating procedure no longer had any meaning.
The homeowners’ association has asked the court to direct the attorney general to “stand down,” recognize its status as a condominium and provide the no-action letter.
The Landing is represented by Andrew Schriever, Kempshall C. McAndrew and Troy Lipp of Cuddy & Feder LLP in White Plains.