A collision of factors has led Mr. Reimer and Ms. Ljungkvist to this point. The tax projections in the offering plan were overly optimistic given that they live in an area in the midst of rapid residential growth and skyrocketing property values. The plan was also vague about the limits of their tax abatement. While someone who is buying an older apartment can scour years of tax history to anticipate how high taxes might go, Mr. Reimer and Ms. Ljungkvist had to rely on the limited tax predictions in the offering plan. It is not clear how common it is for buyers to experience a confluence of events like this — a perfect storm.
Still, why were they caught so off guard? “This is a mystical process,” said Alex Barrett, the principal of Barrett Design, the building’s developer, about how taxes are calculated for his projects. “Hell if I know how it happens. We rely on these consultants to tell us: ‘This is what it’s going to be.’”
Seeking more clarity, I called Paul J. Korngold, who is something of a tax guru in the world of residential real estate. If you’re building a condo, he is one of a handful of the top tax lawyers you would hire to figure out how the city might assess a property once that hole in the ground turns into a dazzling tower of glass and steel. (Mr. Korngold, a partner at the Manhattan law firm Tuchman, Korngold, Weiss, Liebman and Gelles, did not advise Barrett Design on the Atlantic Avenue condo, but he has advised the company on other projects.)
Predicting the future, of course, is not a simple task. A tax lawyer or tax consultant prepares an opinion letter that calculates what taxes would likely be the first year the building is operational, often two or more years before a condo opens. But a lot can change in two years, particularly in a neighborhood where dozens of new residential buildings are popping up around the same time. First-budget-year taxes, which are what you see in the Schedule A, can also be surprisingly low because there is a good chance that the property was under construction for part or most of that time and therefore not assessed as a fully operational condo.
Walk into an open house and the brochure you pick up will include the Schedule A tax estimate, not a bad number to use if you’re trying to sell an apartment. Brokers “want to sell the units,” Mr. Korngold said. “They want to show low taxes.” So brokers work with the information in the Schedule A. For a fuller picture of what you will eventually owe, you or your lawyer have to thumb through the offering plan to find that tax opinion letter.
But the letter predicts taxes only for the first year that the building is fully operational. After that first year, a buyer is on his or her own. The city, meanwhile, reassesses properties every year and assessments and taxes usually only go in one direction — up.
In a small condo with 10 units or fewer, like the one on Atlantic Avenue, tax increases are limited to up to 8 percent a year, or 30 percent over five years. Larger condos have no such limits.
“No one can 100 percent predict what the Department of Finance is going to do and the sponsor doesn’t make any guarantees,” said Pierre E. Debbas, a Manhattan real estate lawyer. He said tax estimates are usually accurate. “But every now and then there’s an outlier that could be off.” Out of the hundreds of deals handled by his firm in the past year, Mr. Debbas has received complaints from three buyers, a small number unless you are one of them.
Yes, taxes rise, but the letter in Mr. Reimer and Ms. Ljungkvist’s offering plan, prepared in 2013 by Metropolitan Realty Exemptions, a Brooklyn company, seems to have left out some details. For example, on the 421a abatement, the letter said any increase in assessed value “shall be exempt from property taxes.” Yet, the tax exemption only covers around $84,000 in assessed value, so anything over that would be subject to regular taxes. While most of the other apartments in the building are assessed at around $84,000, the home of Mr. Reimer and Ms. Ljungkvist has been assessed at $135,505.
The letter also calculated $17,853 in residential taxes for the entire building, based on a projection of how the city would assess the property once construction finished. But two years later, Mr. Reimer and Ms. Ljungkvist are on the hook for more than that amount just for their one unit. In other words, the estimate was really low compared with reality, and neither the couple, nor their lawyer, saw a red flag.
Calls to Metropolitan Realty Exemptions for comment were not returned.
Certainly, we live in a buyer-beware world, and it is up to the person buying the apartment to do the homework — that’s why you hire a lawyer. “The developer quotes you a price, but you have to have your eyes wide open,” said Dr. Sheron Latcha, 49, a nephrologist who is under contract to buy a one-bedroom apartment in One Waterline Square, a Richard Meier-designed tower on the Upper West Side. “If you didn’t read the fine print, that’s on you.”
But sometimes the fine print is not enough. For Mr. Reimer and Ms. Ljungkvist, the information they received did not prepare them for reality. The couple are now concerned that as the tax abatement dwindles, so, too, will the equity in their home. “If we had known” that the taxes would rise so high, Ms. Ljungkvist said, “we never would have bought this place.”