Asked and AnsweredAt my closing, I had to reimburse the Seller for his New York State “STAR” rebate that appeared on the maintenance statement for the month following the Closing. What exactly is the STAR rebate and will I be able to obtain the rebate as well?
Yes, you will be able to obtain the “STAR” rebate, but you will have to apply for it. STAR stands for the “New York State Tax Relief” program. That program returns a portion of New York State income taxes to property owners based on a certain formula, to equalize payments made to school districts throughout New York State. There are different components to the STAR rebate program and one of them applies to owners of co-ops and condos. At the end of the day, the rebate comes out to a few hundred dollars a year. With co-ops, that rebate is reflected on the co-op owner’s maintenance statement. With condo owners, the rebate appears as a credit on the quarterly or semi-annual tax bill.
Initially, a STAR application is filled out by the co-op or condo owner and submitted to New York State by the co-op or condo, or by its managing agent, prior to February 15th in each year. Once the application is processed, the STAR rebate will be credited to the owner of the apartment for New York State’s next fiscal year.
With co-ops, there are other tax abatements received from New York State that are often offset by a corresponding assessment in order to allow the co-op to benefit from the abatement funds. When the co-op does not offset the abatement, the purchaser and seller will adjust for the reduction in the maintenance that the seller received or will receive depending upon when the abatement is credited against the seller’s maintenance. For example, if you closed in March and the seller received an abatement for the fiscal year ending the following June 30th, the purchaser would be entitled to a credit for the period commencing with the date of the closing and ending with June 30th). It may sound a little confusing, but the lawyers will figure it out at the closing table.
Because of the way the STAR rebate is calculated, co-ops never assess against the rebate that the co-op owner receives and the seller always gets reimbursed for the amount of the rebate that appears on the maintenance statement. Similarly, a credit is given to the seller when the parties adjust on the real estate taxes at a condo closing.
Residential Reality: When your attorney asks you to cut one more check to the seller at closing for the STAR reimbursement, you’ll know what it’s about.