Co-ops and Condos May Need to Pay Service Employees Prevailing Wages to Be Eligible to Receive The 467-A Tax Abatement
Governor Kathy Hochul continues to make waves within the real estate community by signing legislation that has significant detrimental effects on owners and landlords alike. After extending the eviction moratorium to January 15, 2022, she has now signed Senate bill S6350A, on September 6, 2021. This law was initially proposed under a different bill S6219 and while it passed both houses in June of 2019, and was delivered to former Governor Cuomo, he declined to sign it in a timely manner, causing the law to be pocket vetoed. It is now law, as signed by the new Governor Hochul under S6350A.
This new law only permits qualified properties to take advantage of tax abatements under Real Property Law, which are those condo or coop units with an average unit assessed value of less than or equal to $60,000, buildings that have an average unit assessed value of more than $60,000 and less than $100,000 and have fewer than 30 units, or a property certifying that all building service employees shall receive the applicable prevailing wage for the duration of such property’s tax abatement. The purpose of this new piece of legislation is to “ensure that building service employees employed at certain properties held in the cooperative or condominium form of ownership and which receive a tax abatement are paid the prevailing wage.”
The law prohibits most individual unit owners or shareholders in condominiums or cooperatives from obtaining or maintaining tax abatements under section 467-a of the real property tax law, if their boards do not pay their service employees prevailing wages. Service employees are defined under the legislation as “any person who is regularly employed at a building who performs work in connection with the care or maintenance of such building,” which includes, doormen, porters, handymen, window cleaners. The list is not exhaustive yet and does not include “persons regularly scheduled to work fewer than eight hours per week in the building.” The board is required to certify the payment of prevailing wages, which can become public record, so please be honest, as the Department of Finance or New York State Department of Labor can investigate, and tax abatements may be revoked for failure to pay the prevailing wage together with penalties.
Assembly bill sponsor, member Carmen De la Rosa, was quoted by stating her position in support of the legislation that “public funds should never be used to subsidize low wage jobs or undercut the industry standard.” It is critical to look ahead and make sure that employees are being paid the prevailing wage, in return for the significant tax abatement. Building management companies should make sure that service contracts contain terms specifically providing that payment of prevailing wages is a material obligation under the contract and include applicable prevailing wage schedules in the contract. How do you find out how much the prevailing wage is? The “Prevailing wage” is the wages and supplemental benefits paid to workers in the same trade or occupation, as determined annually by the Office of the Comptroller of the City of New York.
This potentially can mean large labor costs for certain condo / co-op buildings while others may not be affected by union contracts that already meet the prevailing rate. By no means is new policy being implemented by New York, in requiring prevailing wage rates as a condition for tax relief, as the same requirement can be found under the 421-a tax exemption law, requiring property owners to pay their building service employees the prevailing rates during the abatement period; however, this is new for the private luxury condominiums and cooperative and must be carefully complied with in order to avoid protracted investigations and sanctions.
