Governor proposes "recording" tax for financing of co-op apartments

The New York State budget proposed by Governor Paterson would create a "recording" tax on mortgages of New York City cooperative apartments. Such mortgages now are not subject to such taxes, which on residential condominiums and houses run a bit over 2 percent of the mortgage.

The tax could result in about $50 million in annual revenue for New York City, according to an article by Eliot Brown in yesterday's edition of the observer.com.

Matt Anderson, a spokesman for the state's Division of the Budget, told the observer.com that "Financing statements for co-ops are functionally equivalent to traditional residential mortgages, but because of a loophole in the current system, they are not subject to mortgage recording taxes."

"Obviously, we're very unhappy with it," said Arthur Weinstein, the vice chairman of the Council of New York Cooperatives and Condominiums, was quoted in the article as stating, adding that "In effect, it reduces the value of every co-op in New York City."

Recording taxes do not apply to co-op mortgages because a co-op buyer purchases shares in a corporation that owns a building, not a specific piece of real estate and therefore a co-op purchaser does not get a mortgage on property, but a loan backed by shares of the building. The proposed tax appears to apply to refinancing as well as new loans, according to the article.

"The Bloomberg administration says it did not lobby for the effort; it has not made any noticeable push for this co-op tax in the past. Still, the mayor warmly accepted the proposed offer from Mr. Paterson, testifying at a budget hearing in Albany in late January that it was 'good news'for the city," according to the article.

"Should the Legislature indeed approve the measure, the Bloomberg administration would need to implement it, and according to a mayoral spokesman, the city would seek to do just that," the article said.