New York City Council moves to protect religious institutions’ property

Churches and synagogues have been facing tax liens for bills they didn’t owe.

Members of the Protect Our Places Coalition celebrating passage of Intro 245, the bill to protect places of worship and other not-for-profit owned properties from the city’s annual tax lien sale.

Members of the Protect Our Places Coalition celebrating passage of Intro 245, the bill to protect places of worship and other not-for-profit owned properties from the city’s annual tax lien sale. Oscar Perry Abello

The Devoe Street Baptist Church sits on a prime 11,250 square-foot lot in Williamsburg, Brooklyn. The property is zoned for residential use, with a maximum floor-to-area ratio of 2:1, so that’s 22,500 square feet of potential luxury apartments that could be built at that location.

The church, founded in 1904 as an Italian-American congregation that later became predominantly African-American, recently came close to losing the property and the Romanesque Revival brick sanctuary that sits there, which it built in 1940. That would have been a huge loss to the community, according to Councilmember Antonio Reynoso, who represents the area. 

On Thursday, the New York City Council unanimously passed a bill to close the bureaucratic loophole that has put community gardens, senior centers, religious organizations like Devoe Street and other not-for-profit organizations at risk of having their properties repossessed on the basis of incorrectly accrued property tax bills. 

Afterward, at a celebratory rally on the steps of city hall, Elisha Fye, a deacon who has been a Devoe member since 1958, stood with other church leaders, mosque leaders and members of other community-based organizations to thank the council and the Protect Our Places coalition of community and legal aid groups for working with the administration to finally get the bill passed after several years of trying.

“Ask anyone in my district about the Devoe Baptist Church, they all know them as education advocates, doing backpack giveaways, teaching young kids how to fix their own bikes,” Reynoso said to City & State in an interview on February 12. “They do so much – they’re a pillar in my community and we could have lost them over a technicality.”

The technicality was a tax lien – the right to collect a debt owed on a property, including property taxes as well as municipal water department fees. If property owners don’t pay up or resolve their debt somehow, the investors can initiate foreclosure proceedings. Starting 1996, New York City has sold tens of thousands of tax liens to investors in an annual sale process – most property owners eventually pay, but 1-2 percent end up in foreclosure. The city justifies the tax lien sales as a way to ensure property owners comply with paying their property taxes while shifting some of the burden of foreclosing and re-selling delinquent properties to investors. 

Properties being used for charitable purposes are technically exempt from paying property taxes under state law, but the city had managed to sell one tax lien and nearly sold a second on the Devoe Street Baptist Church property. As a small grassroots nonprofit suddenly on the hook for $203,000 on a tax lien that it doesn’t legally owe, foreclosure was a looming possibility. 

Devoe Street Baptist Church narrowly avoided that fate, working with a legal aid group to get the city to wipe out the debt that it never should have assigned to the property in the first place. But the church has not been alone in facing that situation. In 2019, the city sent a 90-day notice to 610 property owners that it was planning to sell a tax lien on their property, despite the fact that the Department of Finance’s own records show those properties had previously been exempt from property taxes at some point within the previous five fiscal years. The city ultimately ended up selling 27 of those tax liens – although six have successfully resolved the debts so far and staved off something worse.

So it’s not a huge number of charity-owned properties that are at risk every year, but Reynoso says they often have meaningful stories behind them, and it’s understandable for communities like his to draw their own connections between how the city treats deeply rooted community-based organizations and how it treats other, more cash-flush and politically connected organizations. “When it comes to developers, the city’s willing to bend over backwards to make sure they get help,” Reynoso said, “but smaller organizations don’t even get what’s due to them.” 

Reynoso drafted the just-passed legislation to protect the city’s 13,000 charity properties from the city’s annual tax lien sales, so charitable organizations like Devoe Street Baptist Church are less likely to get caught up in the annual tax lien sale. The bill requires the Department of Finance to exclude automatically from future tax lien sales any properties that have had a charity property tax exemption in the previous two fiscal years. Reynoso’s legislation also excludes from the tax lien sale any properties not currently covered by a charity property tax exemption that have applied for exemption but have not yet heard back from the department, and any properties whose charity owners or users were previously denied a property tax exemption but are currently in the process of appealing those denials.

In anticipation of Reynoso’s bill passing, the Department of Finance has already instituted those rules for this year’s tax lien sale process.

Although the city started selling tax liens in 1996, charitable organizations weren’t systematically getting caught up in the sales until much later, in part due to bureaucratic turnover and in part due to 21st Century technological changes.

Until 2006, the Department of Finance required charitable organizations to renew their not-for-profit property tax exemptions on an annual basis. The city would mail annual reminders to charitable organizations with exemptions that they needed to renew those exemptions for the following year. But in 2006, the Department of Finance suspended its annual renewal requirement and stopped sending renewal reminders. 

“The new (Department of Finance) commissioner decided it was a waste of money and time getting groups to renew their annual property tax renewals,” says Marcia Eisenberg, director of legal assistance for Jewish organizations at the Jewish Community Relations Council of New York. “So, for several years, they didn’t send out notices for renewals.”

Some were alarmed at first, thinking they’d lost their exemptions. “For a while I got panicked calls from those 200 or so (Jewish organizations) whom I had trained to be worried about it – since they got burned the first time,” Eisenberg says.

The “first time” started back in the mid-1980s, before the tax lien sales, when the city was simply repossessing properties with back taxes or water bills, including charity-owned properties that had failed to renew their property tax exemptions. Eisenberg says she spent 1991-1992 fighting the city to get titles back for around 200 synagogues and yeshivas – and she trained them to be vigilant about renewing every year when the city sent their renewal notice in the mail. When the renewal notices stopped coming in 2006, people were worried they had lost their exemptions again. “Things were mostly quiet for a few years, I just told everybody to keep doing what they were doing,” Eisenberg says.

According to Eiseberg, when the Department of Finance reinstated the annual renewal process in 2011, somehow – and it is not clear how – the department ended up with the wrong addresses for about a third of the 15,000 or so properties eligible for a not-for-profit property tax exemption at the time. In New York City, as in many cities, it is not uncommon to have two or more addresses attached to larger lots, such as those that contain larger buildings – including churches or other community facilities. 

As a result of the address discrepancies, the Department of Finance started sending renewal notices to undeliverable addresses. Even though the renewal process moved online, the department’s system required usernames and passwords – sent by mail to those same undeliverable addresses. Eventually the department started sending tax bills and later tax lien notices to those same undeliverable addresses. 

“You would send things to a side door that doesn’t have a mailbox on it and nobody uses that door. It was a debacle,” Eisenberg says. “It’s much better now, but I spent 2013, 2014 and 2015 dealing with just the Jewish properties. It was clearly because of the address mess.”

Eisenberg credits the Department of Finance for making a lot of progress over the past few years, doing outreach to charitable organizations, updating its records and getting the right addresses. 

“The Department of Finance understands that nonprofit organizations are an integral part of our community and often provide essential services for some of New Yorker’s neediest residents,” Department of Finance Spokesperson Miranda Marcy wrote to City & State in an email. “Over the past several years, DOF has worked to improve its communications with nonprofits and build important relationships to make sure the agency does its part to support the work of these organizations. We do not take lightly the responsibility of putting any property on the tax lien list, and we fully support the new legislation that would help protect nonprofits from landing on the lien sale list.”

The new law also mandates that the city must notify any property owners that aren’t receiving a property tax exemption currently but are technically eligible for one. “We also might have a lot of nonprofits that are eligible for a property tax exemption but don’t know and are paying taxes or others that don’t know that they have to renew,” Reynoso said. 

Reynoso’s bill still does not protect charity properties from having tax liens placed against them for water department arrears. It’s the Department of Environmental Protection, not the Department of Finance, which administers charity exemptions for those charges, which must be renewed every two years. As a result, there are still 150 charity properties at risk of getting caught up in this year’s annual tax lien sale because of water and sewer arrears. In addition, there are 56 additional charity properties on the lien sale notification list for property tax debts that do not fall into any of the protected categories – for example, the department’s lien sale notification list looks back at properties that have been covered by a not-for-profit tax exemption in the past five years, but the law only automatically protects those that have had such an exemption in the past two years.

There’s a small chance that this year’s tax lien sale is the city’s last, or at least that there will be a chance to further reform the tax lien sale process before the end of the year. The tax liens are not authorized as an ongoing yearly activity; they have to be periodically reauthorized. This year is the last tax lien sale under the last reauthorization, which occurred in 2016. The City Council will need to reauthorize them again to continue the tax lien sales next year.

The 2016 reauthorization bill, which was approved 50-1, made several key reforms to the tax lien sale – including the automatic exclusion of limited-equity cooperatives, which provide homeownership opportunities for low-income households throughout the city. The 2016 reauthorization bill also required the Department of Finance to publish lists of vacant properties and charity properties slated to be in that year’s tax lien sale, giving advocates a better chance of finding groups like Devoe Street Baptist Church and saving them from a tax lien sale. 

At the rally Thursday, Paula Segal, senior staff attorney at TakeRoot Justice, a legal aid group that is part of the Protect Our Places coalition, suggested that the city might consider not reauthorizing the lien sale, and instead revert to repossessing properties so that no one, not just charitable properties, would have to fight off claims from investors on debts they technically owe to the city or not at all.

“The new law passing is good because what’s happened so far has been dependent on the individual commissioner wants to do, which can change from commissioner to commissioner,” Eisenberg said. “You can’t assume what’s happening now was happening a long time ago. You have to understand where things came from and how things came about. Laws change, they’re not static and thank goodness they’re not static.”